Igor Vujović (Consumer): We Are Not for Black Lists Because Retailers Have Employees to Pay

Although the Government and the Croatian National Bank have assured for months that everything is ready for the introduction of the euro and that there will be no major price increases in the first days of January, it turned out that much was not prepared as it should have been. Admittedly, examples from countries that have already adopted the euro (there are nineteen of them) and their experiences show that prices have increased modestly on average, between 0.2 and 0.4 percent. However, none of them introduced the euro during a period of extremely high inflation, so it is clear that neither the Government nor the Croatian National Bank took inflation seriously during the conversion. How many ‘breakthroughs’ in prices and consumer protection work there were for Lider, Igor Vujović, the head of Potrošač, specifies.

Almost two months have passed since the conversion of kuna to euros. How do you assess the whole situation now with some distance? The impression is that, despite the preparations, there was still price chaos.

– Yes, chaos did occur, but it happened to others as well, for example, Slovenia or Italy, which are today economically strong despite having chaotic adjustments. Unlike them, we had an initial advantage due to experience, as we exchanged Yugoslav dinars for Croatian ones, then dinars for kunas, but unfortunately, we did not know how to utilize that experience. We only utilized the panic of inflation.

This means that the biggest problem was prices, not the technical part of the exchange? Who and with what products stood out the most?

– First, we need to separate some things, as we mixed everything into one cause. Before the conversion, we had extremely high inflation that began during the corona period and the shutdown of the economy, followed by a spike in the prices of oil derivatives and gas due to the war. Retailers began to align prices with those of energy sources. Today we have a situation where the price of oil has dropped, but the prices of goods and services have not, in fact, they are still rising, and all of this has nothing to do with the conversion. We had a similar pricing situation in September last year when the Government lowered the prices of nine products, including meat, specifically pork by about 30 percent. Regardless of the Government’s decision at that time, meat prices did not really drop, and consumers did not feel the benefit of that measure. And now it happened on January 1 when we mixed everything that had previously happened and blamed the conversion for the price increase.

Isn’t it difficult to distinguish who raised prices and for what reasons? Many did not raise them earlier because the process of changing and aligning prices is complicated. Can we and how can we separate those who raised them justifiably from those who raised them unjustifiably?

– Of course, it can be done, and that is exactly what the State Inspectorate does in its inspections, during which it is clearly visible how much the input is for whom, how much the output is, and what the final price for consumers is, so whether it is, if higher, truly justified. However, we are definitely not for black lists because retailers have employees to pay, and it will be harder if a retailer ends up on some list that consumers might start to avoid, which will affect revenues, consequently also collections. This is even more so if it is not a repeated offense but the first; a warning will then be sufficient. It is another matter if it is someone who constantly breaks the rules. There are certainly such cases, as out of 280 inspections conducted in the first few weeks after the conversion, as much as 40 percent of retailers inexplicably raised prices. That is indeed not a small number. In large cities, you might have a choice and can shop elsewhere, but what can consumers in rural areas do who have one, at best two stores?

Or hairdressers, for example. As an association that protects consumers, how do you view the medieval heights of fines not only for the aforementioned hairdressers, who rounded up prices by raising them by just a few cents, even though their input costs have risen by at least double-digit percentages?

– Every craftsman or company knows what they must do in accordance with the Law when correcting prices and price lists, such as public announcements, informing consumers about new prices, and so on. We can only comment on public examples in such a way that they did not comply with the conversion and the laws of elementary school mathematics. We are definitely not for punishing on the first offense but for a warning, and in case it is not complied with and corrected within eight days, then a penalty must be imposed.

It seems that even consumers in large cities have not profited from the existence of competition, as prices are almost identical.

– Yes, the problem arises when retail chains look at each other and copy prices, and those at the end of the supply chains do not want to operate with minimal margins, so they raise them too. However, we cannot permanently limit the market and prices; we would return to dictatorship. The market will punish all those who have unjustifiably raised prices; after all, if everyone prices their product and service higher than the sum of input costs and margins, the question is who will buy at such prices. An example is coffee in cafes. The input costs are similar to those from six months ago when inflation was rapidly rising. Coffee cost nine kunas in May, at the beginning of inflation, ten in August, in November when everyone froze prices, coffee was already twelve kunas, and then when January 1 arrived, coffee suddenly cost two euros?! The price of electricity has not increased in the meantime, the price of energy sources has even fallen, so we cannot say they have higher costs. This is about excess profit.

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You say the market will decide, but how, if retailers have raised prices quite uniformly, and there we buy basic groceries? We do not have to drink coffee in cafes or have lunch in restaurants.

– That is precisely the answer. Consumers will make their own decisions about where to shop, where it is cheaper, or what they can and cannot afford. After all, who lives off whom? The consumer is the foundation of every community, every economy, even though we have turned everything upside down.

What does the field statistics say, how much have prices gone up due to the conversion?

– Public data from the State Inspectorate shows that retailers have incorrectly made the conversion in about 30 percent of the inspections conducted so far. However, I would not say that prices have gone up due to the conversion but due to fear, which retailers and service providers unjustifiably exploited at the expense of consumers and citizens. Regardless of the introduction of the euro, analyses show that due to global inflation, prices have risen between four and even 30 percent, depending on the type of products and services. The price of electricity has risen the most, by as much as 300 percent for entrepreneurs. These are data for the price increase since last May, so they have nothing to do with the euro.

Although estimates suggest that inflation will be halved this year, meaning there will be no new wave of rising input costs, what price movements do you expect?

– There is no going back to the old ways; this must be clearly stated – prices will never return to the level of two years ago. Will GDP grow, consequently raising the standard of living? Probably it will once we ‘tune in’ to the post-crisis economy, but prices will not. Thus, the question remains whether wages will follow the previous and somewhat lower future inflation growth. Even without the problem of a labor shortage, it would be economically logical for this to happen, as prices and wages usually align in economic cycles. The problem is that cycles are multi-year, while citizens and consumers live from month to month, from day to day; they need to buy and spend money every day, which is worth less and less. And when purchasing power decreases, it almost certainly leads to recession.

The entire interview can be read in the digital or printed edition of the business weekly Lider.