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Law to clarify State's price control powers

Update: January, 18/2012 - 09:57

The National Assembly last month began debating the draft Law on Pricing. The law aims to address limitations in the 2002 Ordinance on Pricing and create a comprehensive legal framework for price administration in the context of a socialist-oriented market economy, according to the drafting agency, the Ministry of Industry and Trade's Price Administration Department.

The National Assembly's Finance and Budget Committee has agreed that one of the important objectives of the new Law on Pricing must be that the law conforms with the structure of a socialist-oriented market economy and minimises State intervention in the supply-demand relationship. In fact, the draft law would not constitute a "new qualitative step" over the 2002 ordinance. It would continue to focus on the State role in deciding and regulating prices.

Price administration is necessary to limit negative aspects of the market but, as a law on the rights and obligations of enterprises in determining prices for goods and services, some provisions of the draft law still stress excessive intervention of the State in the supply-demand relationship, said the committee's report on the draft law.

The committee suggested the Law on Pricing be designed to reflect the role of the State as a policymaking body, inspector, and regulator. The State should adjust or directly intervene in prices by economic measures when the market sees major price fluctuations, negatively affecting the economy and the people's lives, the report said.

Discussing the draft Law at the last National Assembly session, many deputies agreed that the law rely on price administration under market mechanisms, with State intervention only in certain cases. Citing problems in recent price regulation of medicines, milk and other essential goods, many deputies said that price stabilisation measures had not been implemented properly and the law should clarify the State role.

Some asked the law's drafters to specify ranges of price fluctuation that would trigger State intervention to stabilise prices and the kinds of goods and services, natural resources and national reserves subject to control. Other urged greater transparency of sources of price stabilisation funds and stricter control over the use of these funds.

At its December meeting, the National Assembly Standing Committee agreed that the law should list those goods and services subject to price stabilisation and price fixing.

Market mechanisms

The draft law establishes two principles of price administration. The first is that the State administers pricing according to market mechanisms and respects the rights of enterprises to set prices and compete in accordance with the law. The second is that the State regulates prices through economic and administrative measures to stabilise prices and protect the rights and lawful interests of enterprises and consumers. This can be regarded as a mixed mechanism using both invisible and visible hands in price administration.

The draft law would require publication of price information by State agencies, enterprises and the mass media. Specifically, it would require State agencies to publicise State policies and measures to regulate prices and price-related decisions through press conferences, mass media or other appropriate forms. Enterprises must publish information on prices and basic technical specifications of their goods and services through price displays or other media.

Compared to the 2002 ordinance, the draft law would more clearly define the pricing-related rights of enterprises. Notably, enterprises have the right to determine and adjust prices of goods and services they produce or distribute through such mechanisms as bidding, auction, price agreement, price negotiation and other price-competitive forms in accordance with law.

The draft law would additionally grant enterprises the right to propose that authorised State agencies adjust prices of goods and services which are on the list of those subject to price fixing. It also would provide for the right of enterprises to file complaints about or report acts in violation of the law which damage their legitimate interests.

Enterprises would be obligated to comply with pricing decisions and price stabilisation measures applied by competent authorities; register, declare and display prices; and publish required information on prices. They would also be obligated to settle complaints about prices and pay damages for violations of the price law.

Since the Law on Protection of Consumer Rights already provides for the general rights and responsibilities of consumers, the draft Law on Pricing only addresses price-related issues. Consumers enjoy the right to agree on prices when selecting goods and services; to be supplied with accurate and adequate information on prices, quality, sources and origin of goods and services; and to file petitions through social organisations with competent State authorities to adjust prices of goods and services subject to price fixing by the State.

Price regulation powers of the State include price stabilisation, price fixing, price negotiation and examination of price constituents. Issues like dumping and control of prices of goods produced under monopoly, addressed in the 2002 ordinance, are not addressed in the draft law in order to avoid overlap with the Ordinance Against Dumping and the Law on Competition.

Price stabilisation

The draft law states the State will apply price stabilisation measures in two cases: (i) when the prices of goods and services see abnormal fluctuations, and (ii) when price fluctuations affect socio-economic stability. The second case is new compared to the 2002 ordinance.

When essential goods and services not otherwise subject to price fixing by the State – including raw materials, fuel, and services for production and distribution of essential goods and services such as food, clothing, housing, education, travel and medical care – undergo abnormal fluctuations or see fluctuations affecting socio-economic stability, the State will apply price stabilisation measures for finite periods of time suitable to the actual conditions at that time.

Price stabilisation measures specified in the draft law include regulating supply and demand, buying and selling inventories, controlling inventories, examining price constituents, and determining specific prices, maximum and minimum prices and price frames. These measures are the same as those in the 2002 ordinance.

Compared to the 2002 ordinance, the draft law abolishes subsidies of the prices of agricultural products because it might lead to the subsidisation of exported agricultural products, which is prohibited under rules of the World Trade Organisation (WTO).

The draft law would add some important measures, including financial and monetary measures, establishment of price stabilisation funds and price registration, some of which have already been applied by the Government and proven to be appropriate and effective.

Regarding price fixing, the draft law would introduce a criteria for identifying products and services subject to price fixing. These would include goods and services under State monopoly; goods and services of enterprises enjoying a State-sanctioned monopoly; essential goods and services of enterprise holding dominant market positions; key natural resources; and public utilities and services produced or provided under order placed or plans assigned by competent State agencies.

Under the draft law, authorised State agencies would examine price constituents when the prices of goods or services see abnormal or unreasonable fluctuations in order to ascertain that these constituents are at reasonable levels and compatible with market prices under normal conditions. The Prime Minister, ministers, and chairpersons of provincial-level People's Committees may also request such examinations.

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