Abuse deal unveiled among Vlora bread producers

TIRANA, April 12 – The Competition Authority says bread producers in the southern city of Vlora risk being fined 10 percent of their annual turnover in case they don’t lower bread prices in the next few days following the discovery of a secret deal. This was announced on Tuesday when the Competition Authority revealed that the increase in bread prices in Vlora, the country’s biggest southern city, started on March 23, 2011, two days after a meeting among 42 local producers who decided to increase bread prices for 900 gm loaves to 120 lek and 450 gm loaves to 60 lek.
The Authority said the decision to increase bread prices by at least 20 lek at a time when in other cities the average price for the 900 gm loaf is 100 lek is a violation to the “competition protection” law by fixing prices, damaging both fair competition and consumers.
Calling on bakeries to stabilize prices, the Competition Authority warned it will impose severe fines unless bread producers end their coordinated deal.
“The announcement on the increase in bread prices had been posted in all bakeries and other points of sale and the fixed price was applied by all producers who attended the meeting,” said the Authority in a statement.
Last month, the Association of Bread Producers, part of the newly launched Business Albania lobby group, called on government to make the necessary legal changes on the licensing criteria and weight standards to regulate the market.
Producers say they often face informal competition from unlicensed bakeries and that the recent price increase is not only a result of the soaring prices in international markets.
The Association says the Agriculture and Economy ministries should intervene to set the weight standards for every king of loaf of bread and carry out tougher controls even on bakeries. As far as prices are concerned, bread producers say they can be determined only by free competition and not the Finance Ministry.
Local producers say the increase in bread prices is unavoidable as long as prices in international markets, where Albania imports 85 percent of its wheat needs, continue rising. Currently, a standard loaf of bread of 800 grams costs 90 lek (60 Euro cents) in most bakeries, up from 70 lek few months ago.
The Agri-food Traders Union has dismissed accusations of abuses, saying that the price increases were only the reflection of what’s happening in international markets. The prices can be kept at the current rates only if the 2 percent customs duty and the 20 percent VAT on wheat import is reviewed, bread producers claim.
Government says rising food and vegetable prices are a result of lower domestic production following last year’s massive flooding and increasing demand. An analysis published by the Food and Agriculture Ministry explains the increase in vegetable, potato, fruit and wheat prices with the lower production from the fertile Shkodra and Lezha regions in northern Albania and the southeastern Korca lowland which suffered massive flooding during 2010, seriously affecting domestic production.
Ministry’s data show domestic wheat production fell by 11 percent in 2010 while demand continued increasing as prices soared following lower production from the world’s biggest producers such as Russia or Australia. Another reason is that Albanian farmers are finding less interest in cultivating wheat because of high costs and no support by government which grants subsidies only for olive, fruit, and grape cultivation. Data show Albanian wheat imports increased by 35 percent in value but only 1 percent in amount during 2010 compared to 2009.