SME Chamber


The position taken by the Cabinet cannot but be considered a misinformed one. Cabinet has totally ignored the various considerations made on various committees and task forces within NECC

The position taken by the Cabinet cannot but be considered a misinformed one. Cabinet has totally ignored the various considerations made on various committees and task forces within NECC.

Consumer Education
It has been proved by the first wave countries that too long periods of dual pricing has resulted in a reduced effect. This has been evident even more in Mediterranean countries and was one of the reasons identified for people arriving not prepared to € day. In spite of this, the Executive committee of the NECC is using this as an example in order to try and justify the uninformed decision taken by cabinet.

Bad Education
With this decision cabinet shall be educating the Maltese the equivalent in Euro at the wrong rate. This is because the central parity rate may be different from the irrevocable fixed rate of exchange. With this decision, the Government is heading to create perceived inflation itself.

Bank Charges and Commercial Rates
With the introduction of the Dual Pricing, more and more tourists will expect to pay in Euros within our retail outlets. In this respect, in order to provide a better service the retailer shall have to accept Euro payments. According to the Central Bank the retailer should quote a price in Euro and then charge another one over the counter or charge an administration fee! This is due to the fact that the banks will still accept Euro deposits at commercial rates and will still have bank charges on deposits! This will damage mainly the tourist and property industry. In the latter the difference between the price quoted and the “real” will results in hundreds of Euros if not thousands.

In a scenario where the tourism industry is in a bad state, creating this negative propaganda is definitely not called for.

Extra Costs
The decisions taken by cabinet will double the costs of the retailers in the Euro adoption processes. This is not in line with what the NECC has been trying to convince over the last months. The NECC has been informing something and then different decisions are being taken.

This is even more so with respect to the Dual Display where it was continuously being discussed how to find ways how to minimise costs and educate the consumer at the same time. In this despite, the NECC has been going the opposite direction.

GRTU would like to highlight the excessive administrative burden and other overheads that the wrong decisions being taken shall create.

Cash Registers and Vending Machines
The NECC had promised that there shall not be change in cash registers. The retailers are now faced with a situation which it is more convenient for them to buy a new cash register than to adapt the old one. Need not say that this will add further costs for the businesses. The same thing applies to vending machines which need to be changed.

Dual Display and Pricing
The matter seems to have only been discussed by cabinet only on a generic basis and the different needs of the different sectors in spite of the recommendations by some committees such as .

“With respect to Dual Pricing one needs to seriously consider to give the option on whether to have dual pricing or not. When dual pricing is not applied it should be enough to mark the price in euros on the condition that the customers are provided with the conversion cards provided by the NECC. There are also other options such as the shelf edged labels and price conversion posters

The effects of Dual vs Voluntary approach to Dual Pricing should be considered and analysed.
There are significant effects on costs with respect to dual pricing.

Special Circumstances
One problem that may be caused is the slow down in sales and in service such as the public transport. One needs to consider that there might be circumstances where the customers offer part payment in Malta Liri and in part payment in Euro. In order to speed up service in certain particular circumstances it should be allowed that payment is accepted only in Euros.

With respect to Public Transport one could consider a scenario where during the first week only Malta Liri are accepted whilst from the second week only Euros are accepted.”

Price Behaviour Considerations
In taking such decision, Cabinet has failed to take into account price behaviour considerations which will impact on the perceived inflation, amongst others:

· Prices in the Euro area change rarely when compared to the US
· There is a marked degree of heterogeneity in the frequency of price changes across products. Specifically, price changes seem to be frequent for energy(oil products)and unprocessed food, while they are relatively infrequent for non energy industrial goods and services
· Price decreases are not uncommon except in services. On average 40 percent of the price changes are reductions.

· Various studies show that price changes usually occur at the beginning of the year and soon after the summer period. On the first instance it will occur with the Euro introduction and with the introduction of the Dual Pricing.
· Government dependent changes must be highlighted
· Factors affecting the probability of price or the frequency of price changes include seasonality, aggregate inflation, sectoral or product specific inflation, government induced cost/price changes, type of outlet, market and price strategy.
· Price also depends on product level, incidence of sales, temporary price offers for each product, the share of large retailers selling a particular product regulated/unregulated nature, attractive prices
· The movement of interest rates
· Fiscal Framework
· Speculation on Property
· Speculation on Interest related products
· Prices that have not changed for a long time may change in a hazard manner
· Strategic Issues
· Other market conditions.

In January 2002, Euro area retailers had to change price from the national currency to the euro. Some country studies, as opposed to others, provide ample evidence that price changes were more frequent in January 2002 or in the first quarter of 2002. This may be indication of the significant costs which induced bunching of prices during that month. Various studies show that the Euro Cash Changeover implied an increase of the frequency of price changes during a 6-month period before and/or after the conversion to the euro. It must be noted that price revisions associated with the cash changeover were not always upwards but to a significant extent also downwards.

In view of the above their should be no smoothing restrictions as the market will regulate itself. The most important thing is to manage to communicate to businesses the effects of smoothing and their strategic implications.

It must be emphasised that Government should lead by example in this scenario and should be fully prepared by € day.

Voluntary Code of Conduct
All the parties represented on the Pricing Task Force, including consumer organisations, had agreed on a voluntary code of conduct and that price orders are not the way forward. We now have seen the NECC going towards another route! The code agreed upon is hereby attached including the consumer protection considerations made.

Consultation Process
The NSO was conducting a survey agreed upon by the organisations sitting on the Pricing Task Force with the following objectives:

· The possible factors effecting pricing in the period before and after 1 January by sector
· The level of preparedness of businesses
· The perception of businesses on the changeover

In the current scenario and circumstance this process has become a futile process.

Consumer Protection during the Euro Changeover
Current Protection

§ Office of Fair Competition
§ Consumer Associations
§ Consumer Tribunal
§ National Media
§ Malta Financial Services Authority
§ Competition and other Market Forces
§ Authorities in certain markets such as MCA and MRA

Additional Protection
The Consumer organisations during the two meetings held by the pricing task force expressed their thoughts and concerns that additional protection is needed during the Euro Changeover period.

There seems however, to be consensus that no price controls and/or price orders are introduced. Malta has evolved since such systems were in place and there is a general agreement that we need to find alternative routes to ensure price stability particularly in the short term within the Euro changeover period. As determined in the first PTF meeting the major risks are during the short term namely six months pro to six months post Euro day.

A strongly interventionist approach to dealing with the risk of actual and perceived inflation would be to directly control all price increases or prices thought to be most at risk. It has been Government policy in recent years to move from direct regulation of prices towards an emphasis on action via the competition authorities to ensure that markets are working properly. There is general agreement that Government policy should remain as such.

In the euro changeover, the high degree of competition within most retail sectors, together with government publicity, price monitoring and price information provided by retailers under a euro consumers’ code (see hereunder) should be sufficient to protect consumers and direct control of prices should not even be considered.

Suggestions and recommendations received with respect to the requested additional consumer protection could be:

1. a national communication programme for the euro changeover;
2. voluntary codes of conduct specifically covering fair treatment of customers in a euro changeover;
3. provision of additional price information, particularly dual price display;
4. legislation on how dual price display must be implemented;
5. price monitoring; and
6. local coordination mechanisms.

NECC shall undertake a national communication programme that would ensure that organisations and citizens are equipped with the information they needed to participate fully in a change of currency.

This would include detail of how the consumer protection framework would be established and promoted and details of how individual consumers could gain access to information and support, for example, through a national telephone helpline.

Information would be provided about the new notes and coins and the arrangements to withdraw Malta Liri from circulation. Details of the key messages that would be delivered should be published and communicated with the stakeholders at the earliest.

In addition to the central programme of information overseen by a NECC, it would be the responsibility of each organisation to communicate with their customers or other stakeholders to ensure that they were fully informed about the approach to a changeover.

The Communication strategy should provide for information on the communication plans of key sectors and organisations and helps to ensure that communication would be coordinated across the economy.
During the changeover, businesses and other organisations would be invited to sign up to set of core principles that would ensure that consumers were treated fairly during a changeover.

1. for amounts displayed in euro and Malta Liri the two figures should be equivalent in value, and it should be clear which denominations and which methods of payment are accepted;
2. the official conversion rate must be applied and rounding rules adhered to in all dealings with customers;
3. consumers paying in euro or Malta Liri should be treated equally, although a clearly displayed rate of exchange might be applied where euro notes and coins were accepted before their formal introduction in Malta;
4. accurate, clear and targeted information should be provided to assist consumers with a changeover;
5. dual currency information for consumers should be provided, in an appropriate and agreed upon form, for at least the period from euro cash day minus six months until the dual circulation period;
6. in the operation of this code, the needs of vulnerable groups, such as older people, the visually impaired and those with learning difficulties, should be taken into account;
7. staff dealing with customers should be well trained and able to provide consumers with straightforward, accurate and relevant information about how the changeover affected the consumer’s dealings with the organisation;

Sectoral codes
In accepting the core principles, certain sectors of the economy will draw up detailed sectoral codes, which set out in detail how the core principles would be implemented

The public sector would show a strong lead to the rest of the economy by preparing and adhering to a Public Sector Consumer Code of Conduct

To be effective, the euro codes would need:

1. Wide support across each sector and across the economy;
2. Proactive promotion;
3. Wide recognition by consumers;
4. Arrangements to check that those signing up to the euro codes are facilitated to meet their requirements;
5. Incentives to adhere to the codes;
6. Consumer confidence in the euro codes; and
7. Procedures for addressing complaints about breaches of the code.

The aim of the euro codes would be to promote fairness to the consumer, and the provision of relevant and easily understood information, alongside clear and accurate display of Malta Liri and euro values. The euro consumer codes of conduct would ensure a required standard of information provision, including dual display for at least six months before and two months after E day.

An organisation subscribing to a euro code would commit itself to provide accurate information to consumers about how the changeover would be handled.

The euro codes would require that all staff dealing directly with customers are able to give straightforward and relevant information about how their organisation was dealing with the euro. However, some customers would need additional help and support from staff, particularly those from vulnerable groups, such as the visually impaired or those with learning difficulties.

There must be a commitment to business friendly monitoring. The emphasis should be on working proactively with business organisations to help them to comply with the code of conduct.

Price Information
Consumers may be concerned that organisations would use the opportunity of a currency change to disguise price rises. In the first wave euro area countries many consumers linked the euro changeover to significant increases in prices. However, the actual impact of the changeover on inflation in the euro area was estimated to have been only between 0.12 and 0.29 percentage points within an inflation rate of 2.3% (Euro stat May 2003 No 69/2003). This disparity is mainly explained by a number of significant price increases of certain frequently bought goods and services, for example prices in restaurants and cafes, recreational/sporting services. These are held to be more significant in informing consumers’ perceptions of inflation than less commonly purchased items where price rises have been more subdued or prices have fallen.

The risks of actual or misperceived price inflation could be most effectively mitigated through a combination of dual display and price information, alongside consumer education and communication about the changeover. Provision of clear price information enables consumers to make comparisons and provides an effective way of driving competition and controlling prices.
Retailers Consumers Code of Conduct
Aim and Objective
To ensure that consumers can be confident they are treated fairly, and provided with adequate, targeted and easily understood information to help them throughout a changeover from Malta Liri to euro, and that the needs of vulnerable groups, such as older people, the visually impaired and those with learning difficulties would be taken into account.
1. In accordance with the Consumers’ Code core principles, retailers should begin to provide dual currency information, in an appropriate form, from six months prior to E day. The extent of dual display would be at the discretion of individual retailers and this Code does not imply a commitment to dual price all merchandise. But, as a minimum, an approved conversion chart supplied by NECC showing the official conversion rate should be displayed in store, preferably at the point of sale.

2. From at least six months before E day, where possible and feasible, till receipts should show the total value of the transaction in euro as well as Malta Liri. The euro value may be limited to the final total (including VAT) paid by the customer. If the PoS system is unable to manage this dual price, alternative means shall be provided by NECC. This could be in the means of an approved conversion table displaying the official conversion rate or calculators.

3. Once the Malta Liri/euro exchange rate was fixed, the official conversion rate should be applied and rounding rules adhered to in all dealings with consumers.
1. From E day retailers would continue to provide dual currency information in an appropriate form, until at least the end of the dual circulation period.

2. Appropriate reference guides to Malta Liri equivalent values (e.g. approved conversion tables) should be maintained until at least the end of the dual circulation period .

3. The timing of the move to euro only pricing should be implemented once Malta Liri cease to be legal tender. Reference to Malta Liri prices after the dual circulation period would be at the retailers’ discretion.

4. From E day, retailers would accept payments in Malta Liri and euro, and give change in euro only.

5. Retailers would continue to accept payment in Malta Liri cash during the dual currency period, as Malta Liri would still be legal tender for two months after E day.

6. Staff dealing with customers would be well trained and able to give consumers straightforward and relevant information about the retailer’s approach to the euro.

7. 7 A national telephone helpline number would be shown on the tills.

8. Voluntary Sub sectoral Codes such as that for grocers, restaurants and entertainment places and services (e.g. hairdressing) would be adhered to

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