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Anti-profiteering laws, while crucial for protecting consumers, face several challenges in practice.
What constitutes profiteering may be too vague, making it difficult to distinguish legitimate price increases from unfair exploitation. A possible solution is to clearly define “unreasonable price increase” in legislation, considering factors such as percentage increase exceeding a specific threshold (for example, 20 per cent within a short timeframe), disproportionate price hikes compared to cost increases, and significant deviation from average industry profit margins.
Second, establishing a business’ true cost structure and profit margin can be difficult, hindering effective enforcement. A possible solution is to implement mandatory cost reporting requirements for specific industries or businesses exceeding certain market share thresholds. For example, the UK requires businesses to provide the Competition and Markets Authority (CMA) with cost information relevant to their investigation of potential anti-competitive practices.
Third, stringent anti-profiteering regulations can discourage businesses, potentially hindering economic growth and innovation. A possible solution is to implement a tiered approach, focusing on essential goods and services while allowing for more flexibility in non-essential sectors.
Fourth, regulations could be implemented requiring companies to set and achieve specific social impact goals, such as providing affordable goods and services, in addition to financial goals. This would incentivise companies to prioritise social benefits over maximising profits. Tax breaks or other incentives could be offered to companies that demonstrably prioritise social impact and lower prices. This would financially reward companies that align with public interest goals.
In Singapore, the Consumer Protection (Fair Trading) Act 2003 (CPFTA) prohibits a range of unfair trade practices, including misleading pricing and price gouging. Businesses found violating the CPFTA can face significant penalties.
The Competition and Consumer Commission of Singapore (CCCS) investigates and enforces competition laws to prevent anti-competitive conduct and ensure fair pricing in the market. The CCCS has issued the Guidelines on Price Transparency for businesses to promote transparency in their pricing practices.
It might be worth considering if the CPFTA could be amended to introduce the definition of profiteering to include factors beyond misleading pricing, such as unreasonable price hikes exceeding a specific threshold and sudden and substantial profit increases.
The CCCS could be empowered to directly investigate and prosecute cases of profiteering, not just anti-competitive conduct. This would allow for a more comprehensive and targeted approach. A system could be established for government agencies to monitor prices in key sectors, especially those providing essential goods and services, to identify and address potential profiteering practices.
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