Can a boycott lower prices in stores?

While unions and civic activists are calling for an organized boycott of retail chains due to high prices on Friday, January 31, the Government is partially supporting the boycott, but not to include domestic producers, and is also announcing a continuation of last year's "limited price" campaign.

Minister of Economic Development Nick Djelosaj He told "Vijesti" yesterday that this action by the Government and traders has had an impact on stabilizing prices of basic foodstuffs, that it has not jeopardized supply or the work of traders, so his Ministry will propose at the Government session on January 30th to continue this action for another three months, or until April 30th.

However, yesterday, an initiative to boycott shopping in retail chains was launched in public through social networks and unions, in order to influence high prices in supermarkets, preserve the standard of living of citizens and reduce margins. Boycotts of retail chains have been organized in several EU countries in recent months with different scenarios, from calls not to trade on certain days to boycotts of certain retail chains for a longer period.

Citizens, whom "Vijesti" spoke with in the center of Podgorica, are divided on the issue of boycott. Some wholeheartedly accept the idea and believe that traders are agreeing on prices among themselves, while others believe that only those who are unemployed have time for such a form of protest.

Regarding this initiative, Đeljošaj said that politicization and populism are not good, and that during the boycott, only domestic products should be purchased.

"I encourage citizens to spend their money in our stores and buy only domestic products. I suggest that the focus of non-governmental organizations and all social actors be a boycott of imported products in stores and that we organize as a society to designate one day a week (e.g. January 31) or more days a month, so that we can be united and united in buying only domestic products in our stores," he said.

The Prime Minister also gave the green light for this boycott on the X network. Milojko Spajic, but he did not clarify in what form. "Vijesti" sent responses to Spajić's cabinet regarding support for this idea and specific measures to reduce prices, but the responses did not reach the end of the issue.

Citizens of neighboring Croatia launched a boycott of retail chains and gas stations a few days ago to fight against high prices and megamarkets that are shutting down domestic production. They received support from unions, consumer associations and politicians, and some retailers have already announced big discounts the next day.

Fined 66 thousand euros

The Ministry of Economy stated that the Government's decisions based on the Law on Temporary Measures for Limiting Prices of Products Important for Human Life and Health had an impact on reducing prices and protecting the living standards of citizens, and that when creating the list of items, care was taken to ensure that citizens felt the benefits and did not jeopardize the work of companies.

They emphasized that the Market Inspection Directorate conducted 1 inspections between August 170 and the end of December, during which 12 irregularities were identified due to non-compliance with the measures, and 12 decisions were issued to eliminate irregularities. 24 misdemeanor orders were also issued to companies and those responsible, while fines in the amount of 66.000 euros were imposed.

"Based on Eurostat data, Montenegro is among the countries with the lowest inflation rate. According to their data, higher inflation rates than Montenegro are found in, for example, Germany, France, Spain, Greece, Croatia... Considering the comprehensiveness of the action, as well as the fact that it applies to wholesalers and retail chains, and that it is applied in more than 80 percent of all retail establishments, it is certain that the "limited price" action has had an impact on stabilizing prices of basic foodstuffs and, without compromising the continuity of supply, has led to the expected desired results, while the economic activity of traders was not endangered. The Ministry will propose to the Government at its session on January 30 to continue the action in the same scope, as it has been so far, during the next three months until April 30 of this year," the ministry said.

The “Limited Prices” campaign was launched on September 6th and is scheduled to last until January 31st, and after a recent change, margins have been limited for 67 food and hygiene products in wholesale and retail stores. In addition to these, a measure to limit margins on six basic foodstuffs is also in force, namely sunflower oil, granulated sugar, flour types 400 and 500, table salt and cow's milk in bags.

"Vijesti" asked several retail chains about the state action and boycott, including "Voli", "Hard discount Laković", "Domaću trgovinu" and "Mercator". By the time the issue was published, only Budva-based "Megapromet" had responded, and they did not dispute the boycott because citizens have the right to their own views and opinions.

"We would like to point out that inflation has affected the entire world, and that as an import-dependent country, we are particularly affected. What we can responsibly claim, on behalf of our company, is that all our prices are formed exclusively on the basis of supplier prices. The decision on the continuation of "limited prices" should be left to the competent authorities, since they made the decision, we believe that with defined goals that this decision should fulfill. If the goals are met, we believe that the action will continue. In any case, we will join any initiative that will help improve the standards of citizens," they stated.

"Megapromet" also pointed out that the action had a negative impact on the average margin, which was also reflected in a decrease in the profit rate, and that from their perspective it is difficult to assess the effect, but that they hope that citizens have felt the benefits.

The Agency for the Protection of Competition (AZK) told "Vijesti" that based on the information they have collected so far, they have not found evidence that large retail chains in Montenegro are fixing prices. AZK initiated this procedure in August 2023.

Prices like in Germany

However, some citizens are not convinced of this, and among them are Žarko Vuković from Podgorica who told "Vijesti" that prices are high, that traders negotiate them, but that he does not support the suspension of purchases.

"Prices are high, I am against these boycotts. Those who do nothing are boycotting, I who work and produce - I am not boycotting. If we are going to talk seriously, there is also a problem of inactivity because people would not have to spend so much. The boycott is mostly by unemployed people who do not want to work, and there is work for anyone who wants to. Some order can be introduced and I think there is chaos and great disorder among them," said Vuković.

His fellow citizen Gojko Dajkovic announced that he would participate in the boycott if it happens, and believes that the burden will not be great because, as he says, he survived the 1990s and can go a day or two without going to the market. He pointed out that the "limited prices" have an effect, but that the products on the shelves are unstable and that retailers do not respect the measures.

"The prices are catastrophic, it's a shame, they change prices more than if they were in dinars and not euros. I see market workers spending more time changing prices every day than they do other things. "Limited prices" have an effect, but they know how to remove these products, I noticed that there are no sardines, somewhere it's 89 cents, somewhere they don't exist, and then someone limits them and someone doesn't. The authorities simply don't carry out these controls, so we should stand up as citizens. There has been a wage increase, but when it's leveled out, it's a figure that sounds nice, but when you enter the market - it's very sad," said Dajković.

On the other hand, Dalibor Djordjevic stated that prices in Podgorica are similar to those in Germany, but that prices are not high given that Montenegro imports everything and does not produce it. He emphasized that the markets there also have catalogs with prices a few days in advance, so he goes shopping on weekends and knows what he will buy, which is lacking in the domestic market.

"Eggs here are two euros and ten cents, in Germany they cost the same. Bread is 80 cents, not much... I heard that a boycott happened in Croatia, I would support it. We will not trade and I have no problem with that, we can even come in front of the market and not go in," emphasized Đorđević.

A pensioner confirmed that going to the market is expensive even for the elderly. Miloš Ivanovic who emphasized that large chains are taking advantage of the opportunity and agreeing on prices, and that all customers know this. He also announced his support for a boycott, if there is one.

Yesterday, the Alternative for Montenegro also called for a boycott of retail chains on January 31. They announced on Facebook that they want the same boycott as in the region, that prices are high, that retail chains are negotiating prices so that citizens cannot feel the increased pensions and salaries.

A similar call came from the executive board of the Union of Free Trade Unions (USSCG), which stated that they have repeatedly called on the Government to take concrete measures and protect citizens from being exploited by retailers through unfoundedly high margins that were not formed on the right basis, but due to the increase in salaries and pensions through the "Europe Now 1 and 2" program. They stated that the protest could last several days, which would cause damage to supermarkets through a lack of sales of perishable goods.

The consulting firm "Fidelity Consulting" announced that Spajić is calling for a boycott, while the same companies have simultaneously received financial support through the "Europe Now 2" program and a reduction in contributions, which were previously paid into the Pension and Disability Insurance Fund. They pointed out that citizens are being told not to shop in supermarkets, which, like all companies in Montenegro, have received a part of their future pensions.

Slovaks started, many follow

Slovakia is the main driver of measures aimed at limiting the power of large supermarkets in the European Union, and they have also received support along the way from Bulgaria, Croatia, Hungary, Lithuania, Romania and Slovenia...

Slovak Minister of Agriculture Richard Takac This group of countries also states that deeper changes are needed to combat dominant buyers and create fairer conditions for weaker companies in the chain, reports Politiko.

This group, in a letter before the meeting of EU agriculture ministers in Brussels, states that large companies are lowering prices and thus "shutting down" small shops.

"First, it is necessary to increase the protection of farmers, but also producers. It is also important to protect end consumers from abuses by dominant companies," the letter states, noting that previous reforms have reduced food prices and thus endangered the businesses of farmers and small businesses.

A one-day boycott of shopping in supermarkets has already begun in neighboring Croatia, and similar steps have been announced by Bosnia and Herzegovina.

Competition leads to lower prices

A professor at the Faculty of Economics told "Vijesti" that the best mechanism for influencing price levels is increased competition, and thus an increase in supply. Maja BacovicShe also explained that if the Government wants to reduce the prices of certain products, it should use taxes (including excise duties) and subsidies.

Baćović emphasized that by limiting margins, the state directly interferes in the operations of companies, which is not in line with the concept of market operations.

As he claims, by reducing the VAT rate or excise duties and other fiscal burdens on certain product categories, the selling price is also reduced, but without affecting business operations, while through subsidies the Government can take over the financing of certain costs incurred by trading companies, that is, by reducing business costs, selling prices can be reduced.

"The analysis of the business operations of trade companies, presented in a study conducted by the Faculty of Economics team for the needs of the Chamber of Commerce in the first half of 2024, showed that gross margin rates in the trade sector are at a level that ensures economic efficiency, and that any significant limitation of them would have a negative impact on business, especially in the micro-enterprise sector. In the case of prices formed on the free market, business costs are covered by revenues. Limiting prices can cause a scenario in which costs are not covered by revenues, which leads to negative business operations. The analysis showed that the average unweighted gross margin rate for trade companies in Montenegro in 2023 was 17,9 percent, which makes it lower than all countries in the region except for BiH," said Baćović. When the "Limited Prices" campaign was launched last September Đeljošaj said that it was preceded by an analysis by the market inspection, which showed that Retailer margins high.