Price Conversion to Euros: The Government Threatens Traders with an Empty Gun

Every responsible authority should clearly and unequivocally explain to citizens the impact of new circumstances on their daily lives and propose, if possible, ways to mitigate the harmful consequences of such circumstances on their lives. Any different approach borders on populism and instills a false sense of security that the authorities are protecting their citizens at all times.

It would be incorrect to say that the Government was surprised by the consequences of introducing the euro as the official currency in the Republic of Croatia on the prices of retail products. It is more accurate to say that the Government was unprepared for the emergence of such consequences, as experts had already claimed from the dual display of prices in public that one of the main negative consequences of the euro would certainly be the increase in food prices in stores.

What is the oversight

Thus, the legislator adopted the Law on the Introduction of the Euro as the Official Currency in the Republic of Croatia, which defined the principle of consumer protection, according to which a consumer must not be in a financially worse position than they would be if the euro had not been introduced. This principle is realized only through the correct conversion of kuna to euro using a fixed conversion rate. The law also defined the principle of prohibition of unjustified price increases, which prohibits, among other things, all business entities from increasing the price of goods or services to consumers without a justified reason when introducing the euro.

The definition of the term ‘justified reason’ was omitted, and, more importantly, the imposition of a misdemeanor penalty for violating that principle was also omitted. This clear oversight by the legislator means that no inspection within the State Inspectorate can even initiate an inspection procedure against a business entity that has unjustifiably increased the price of its product because, simply put, no misdemeanor penalty is provided for such an act.

The Consumer Protection Act does not prescribe sanctions for ‘unjustified’ price increases, but regulates the issue of unfair business practices, which particularly include misleading and aggressive business practices, and provides for a misdemeanor sanction for a trader who applies unfair practices. However, it is highly questionable whether, in potential inspection procedures, the increase in product prices can even be classified under the concept of unfair business practices as defined by existing regulations, including the concept of misleading practices.

Conclusion without real power

Probably aware of these facts, the Government adopts a Conclusion on the Implementation of the Principle of Prohibition of Unjustified Price Increases, which is not a regulation of binding normative power because it expresses only the Government’s positions on the implementation of a particular policy, in accordance with the Government Act. The conclusion, which came into force on January 5, 2023, orders business entities to revise the retail prices of their services so that they are set at most at the amount that was on December 31, 2022.

This primarily raises the question of placing certain traders in a worse position than other traders who raised their prices before that date. The conclusion also orders state bodies to exercise powers already prescribed by various laws, thus only creating the impression that these bodies are being ‘called to order’. But the Conclusion also has no prescribed sanctions for business entities – because it cannot have any. After all, it does not have a stronger legal force than the law, so its existence is pure populism.

Please manage on your own

It should be clearly stated to citizens that there is currently no legal provision that would limit a trader’s right to raise product prices due to the introduction of the euro, except that they are limited to increasing the prices of those products covered by the Decision on Exceptional Measures for Price Control of Certain Food Products adopted on September 10, 2022. And due to the failure to adopt a better law, the Government is powerless. It should also be clearly stated to the Government that the Regulation on the Removal of Disturbances in the Energy Market currently in force prescribes the price of energy for all entrepreneurs, without prescribing any special conditions.

The threat of abolishing the ‘privileged’ energy price for those entities that do not revert retail prices to the amount of December 31, 2022, raises the question of whether this will cause a new price increase, now justified by the fact that energy costs are no longer regulated, as well as the question of whether this will apply to all who unjustifiably raised prices throughout 2022 or those who did so on January 1, 2023, which again may raise the issue of unequal treatment and placing business entities in an unequal position.

Thus, it is clear that currently every threat to traders due to price increases of products is an empty threat from which citizens will gain no benefit. It will be interesting to see how (and if) the Government will react to the announcements of telecommunications operators about raising the prices of their services precisely due to inflation.