SLOVAKIA now has a so-called black list of businesses which, according to the country’s price watchdogs, have tried to impose unjustified price rises during the run-up to the adoption of the euro. The Association of Slovak Consumers (ZSS) has added restaurants, tourism-related businesses and even sports venues to the list of euro-switch abusers.
However, the association is not the only body in Slovakia to have been watching the behaviour of businesses during the pre-adoption period. The Slovak Trade Inspectorate (SOI) has been employing temporary inspectors to monitor the correctness of dual crown-euro displays or the calculation of prices in euro.
The inspectorate is also checking complaints submitted by the public. Parking services, car instructors, hairdressers, restaurants and coffee houses are the areas where citizens have focused most of their price-hike-related complaints.
The country even has a price council, an advisory body to the cabinet, which according to state officials was established to enforce popular trust in the euro adoption process, while respecting the nature of the market.
Businesses however have been rather sceptical about the effectiveness of such a board, suggesting that all the price council might do is increase administrative regulation of the economy.
Consumers catch a whiff of higher prices
The ZSS detected price hikes ranging from 30 to 180 percent by restaurants, the tourism industry and sports venues, thus exceeding the 10 percent threshold which the association defined as acceptable during the changeover.
The association said that these businesses have not been able to explain their price increases when pressed or asked to trim their prices, the SITA newswire wrote.
The Economy Ministry has given Sk3 million-worth of assistance to the ZSS to monitor the prices of selected food and industrial products and services.
According to the association, the blacklisting should serve as moral condemnation of businesses or individuals if they make unjustified price hikes.
The ZSS in fact sends the list of its findings to the SOI, which has the authority to impose sanctions for violations of fair business practices.
Indeed, the SOI has been watching business practices and prices as part of its original mission and publishes the results of inspections bi-weekly on its website www.soi.sk.
“In general, there aren’t many complaints and unjustified ones prevail,” SOI spokeswoman Danuša Krkošová told The Slovak Spectator. “Pensioners tend to complain most while pointing to different shortcomings or incorrect calculations. It’s often the case that they bought certain types of goods somewhere else for a higher price and react sensitively to any price difference.”
Krkošová suggested that businesses are well-prepared for the euro switch.
“We base this assumption on the fact that more than 90 percent of the subsequent checks have brought zero findings of shortcomings,” Krkošová said. “We have carried out 17,000 checks.”
According to Krkošová, when the more intense checks started in September there were shortcomings detected at almost every second operational unit.
In addition to the 150 full-time permanent inspectors, the SOI also recruited 60 temporary inspectors in November who will be focusing their attention on the euro until the end of 2009.
“It makes possible repeated checks which will intensify the area of control of services,” she said
.
In the first two weeks of December, for example, the SOI checked 2,574 businesses, of which 56.5 percent had not violated any rules or regulations. At 397 businesses the shortcomings were removed on the spot during the inspection, while 721 operations were asked to address shortcomings within a certain time period.
The most frequent violations were failure to display the correct conversion rate or display of an incorrect conversion rate; the failure to display the conversion rate on till receipts or having an incorrect conversion rate; absence of dual display of the final price that the customer has to pay or absent dual display of the product price. The failure to display the price in both crowns and euros on promotional materials has also been among the violations, according to the SOI.
Lawsuits might follow
The Trenčín outlet of the Kaufland retail chain, however, not only objected to being included on the list of euro-switch abusers by the ZSS but, according to the Pravda daily, might even go to court to defend its reputation. Kaufland reportedly made it onto the list for elevating the price of 1 kilogram of a type of rice by more than 180 percent between July 10 and August 25. The retail chain has denied making such an increase.
As for monitoring price hikes, the ZSS watchdog is focusing on all types of businesses, but aims to monitor mainly small ones located on city outskirts or at places where competition is not intense.
“We also focus on rural areas,” the director of the Association of Slovak Consumers, Miroslav Tulák, told The Slovak Spectator in September. “The competition between hypermarkets is really high and no extraordinary price hike is expected there. However, small shops in villages often have no competition outside the cities. For older people these shops might be the only option to do their groceries because they cannot travel to a supermarket 20 kilometres away.”
At its first session on October 29, the price council agreed that there are three sectors that require more attention due to recent price increases: dental services, charges for driving lessons and parking fees, SITA reported.
Prices in these segments rose by more than 18 percent year-on-year and the council said it wanted to examine whether there is any link to euro adoption.
The Finance Ministry stated that dental services have been on an upward curve for months, with prices rising 18.5 percent year-on-year. The prices of driving courses jumped 19.3 percent year-on-year, showing no response to the falling cost of motor fuels. The rise in parking fees is probably linked to the growing demand for parking and the limited availability of parking lots.
The state has the tools
As of November 1, 2008, a new law granted the government powers to regulate prices if it detected signs of unjustified price rises and on November 6, parliament passed an amendment to the Penal Code that would allow courts to impose prison sentences of up to 12 years on businesses found to have raised prices without justification during the euro adoption period.
The law, which takes effect on December 20, reclassifies violation of price regulations from being a civil offence to a criminal offence, and makes offenders eligible for prison sentences.
Anyone who is found to have caused “minor damage” to consumers by “breaking the price discipline set in this rule, or any other limitation of contractual pricing stemming from obligatory legal norms or a decision issued based on it” could face between six months and three years in prison, the Sme daily wrote on November 8, quoting from the amendment. The daily said the law defines “minor damage” as total gains of between Sk8,000 (€265.55) and Sk4 million (€132,775.68). For “damage” above Sk4 million, an offender could face between seven and 12 years in prison.
