Consumer protection – will maximum prices be introduced?

by Anastazja Niedzielska-Pitera

27 August 2020

The act of 31 March 2020 has introduced an option to set maximum prices, retail and wholesale margins for goods and services significant for the protection of human health and safety, as well as the costs of household maintenance. Read this article to find out who will take the decisions and what goods and services will be covered by the new restrictions.

What is the maximum price?

The maximum price is an officially set rate above which a given product or service cannot be sold. By setting the maximum prices the state interferes in the economy and the intention behind that is to protect consumers against price speculations. If the maximum price is too low, there may be not enough goods on the market. As a result, the product or service will not be available to everyone. An additional consequence of the price regulations may be worse quality of the goods for which the maximum price is set.

What goods may be affected?

Pursuant to the act, the restrictions may apply to goods and services “significant for the protection of human health and safety, as well as the costs of household maintenance”. In the current situation, the goods significant for the protection of human health obviously include:

• medicines,
• face masks,
• disposable gloves,
• sanitisers,
• or other PPE for medical staff.

However, the goods and services significant for the costs of household maintenance are far more problematic. The description provided for in the act gives room for broad interpretation of that term. So it can be concluded that food, utilities and cleaning supplies make up a significant part of the costs of household maintenance so their prices may be subject to the restrictions.

Who sets the maximum prices?

Pursuant to the new regulations, the maximum prices are set by the Minister of the Economy in consultation with the Minister of Health and the Minister of Agriculture. The prices are set by way of a regulation. When setting the maximum prices, the authorities should take into consideration prices applicable before the epidemic emergency, but also reasonable changes in the costs of production and distribution. However, the act does not specify additional factors and thus it allows the authorities considerable latitude in determining the maximum prices.

How to prevent high prices?

It needs to be remembered that during epidemic prices increase for various reasons, among others, due to increased costs of raw materials or transport. Reprofiling the business of some entities (for example from alcohol production to production of disinfectants and sanitisers) also generates additional cost, which is reflected in prices. It needs to be noted that the government has various tools which may prevent price increase. In the event of higher demand for certain products, e.g. face masks or gloves, the government may commission their extra production. Setting maximum prices is not the best way to prevent speculative pricing. Despite very high fines for exceeding the limits (up to as much as PLN 5 million), there are no tools which would give the state full control in this regard. This means that if certain products are unavailable on the market, products priced speculatively will appear anyway but they will be available on the so-called grey market. At the same time, please remember that many responsible economic entities say that they will voluntarily keep the pricing at the same time levels as before the epidemic. This will help keep the economic balance and ensure appropriate consumer protection.

If you are interested in details, our advisers will be happy to answer all your questions.