Sunday, July 19, 2009

TUC, Għaqda tal-Konsumatur u Regolaturi

Nirreferi għall-ittra ta’ Michael bit-titlu ‘TUC u Għaqda tal-Konsumaturi’ li dehret fil-ħarġa tal-Ħadd 12 ta’ Lulju. F’din l-ittra hemm tliet punti li huma magħqudin flimkien. L-ewwel hemm l-idea ta’ TUC.


Jien wieħed minn dawk li nemmen li għandna bżonn TUC - għaqda bejn il-unions f’pajjiżna. Hemm ħafna raġunijiet għal dan. Biss nemmen ukoll li għall-futur qrib dan mhux possibbli peress li ċerti mexxejja ta’ unions diġà ddikjaraw pubblikament li ma jemmnux f’din l-idea. Hi sfortuna, iżda, dik hi l-verità.


It-tieni idea magħquda mal-ewwel waħda hi li TUC għandha tifforma għaqda tal-konsumaturi. M’hemm xejn ħażin f’idea bħal din għax għaqda bħal din ikollha r-riżorsi u l-motivazzjoni li tħares l-interessi tal-konsumaturi. Il-unions għandhom interess li dak li jiksbu permezz ta’ ftehim kollettiv, ma jintilifx permezz tal-għoli tal-ħajja. Barra minn hekk, jekk wieħed iħares lejn ċerti għaqdiet tal-konsumaturi f’pajjiżi Ewropej isib li dawn żviluppaw mill-unions u li dawn jaħdmu mill-qrib.


Iżda anki din mhix possibbli. Għaqda bħal din ma tkunx rikonoxxuta fl-Unjoni Ewropea u lanqas fil-Consumers’ International. Dan għax hi ta’ importanza kbira li Għaqda tal-Konsumaturi ma tkunx affiljata mal-unions. Ir-raġuni hi sempliċi. Għaqda bħal din jista’ ma jkollhiex indipendenza f’ċerti setturi li union ikollha interess speċjali.


Hemm it-tielet punt – dak li r-regolaturi jaħdmu sew. Nemmen li llum dan hu l-fulkrum biex f’Malta jkollna ħarsien sew għall-konsumaturi. Illum kulħadd jammetti li parti mill-għoli tal-ħajja ġej minħabba li m’għandniex kompetizzjoni jew m’għandniex biżżejjed. Anki f’dawk l-oqsma bħal komunikazzjoni bit-telefon fejn hemm kompetizzjoni, xorta m’għandniex biżżejjed għaliex il-prezzijiet tagħna huma xorta mill-ogħla fl-Ewropa.


Jekk fejn jidher li għandna kompetizzjoni, xorta għadna lura, aħseb u ara fejn m’hemmx. Dan ġej minħabba li, bħalma qal Michael, ir-Regolaturi f’Malta fallew. Hemm diversi raġunijiet għal dan. Fost dawn insibu li dawn ir-Regolaturi ma tantx jistgħu jkunu indipendenti.


L-ewwel għandek il-liġijiet li waqqfuhom li jxekklu l-indipendenza tagħhom. It-tieni, ir-rwol mogħtija lil xi wħud hi waħda mħawda. It-tielet, għalkemm dawn ir-Regolaturi għandhom nies kapaċi, xorta ma jistgħux iħarsu l-interess tal-konsumaturi għax id-direzzjoni li jirċievu hi żbaljata u indirizzata biex taqdi l-gvern u mhux l-interessi tal-konsumaturi.


Dan għax min imexxi qed jintgħażel mhux minħabba l-kapaċità, il-ħeġġa u l-istamina li jħares l-interessi tal-konsumaturi, iżda minħabba l-kuluri. Ir-raba’ raġuni għaliex mhux qiegħdin jaħdmu tajjeb, għax dawn mhux kontabbli.


Minħabba f’hekk il-konsumaturi Maltin qiegħdin jaqilgħuha darbtejn. L-ewwel darba minħabba l-għoli tal-ħajja u nuqqas ta’ livelli u t-tieni minħabba t-taxxi żejda li qed ikollhom iħallsu għar-Regolaturi li ma jiswewx karlin.

Published in it-Torca 19th July 2009

Friday, July 17, 2009

Absent again – the MRA

Some weeks ago we had a power-cut. It was a long power-cut but one which was easily dismissed as something for which there could be no guarantee that it will not happen again. Enemalta’s Chairman also dismissed the idea that Enemalta should pay any compensation.

In the majority, the press reviews stopped there. The matter seemed to have been nothing out of the ordinary and the discussion stopped there. If it had not been for the MEP Professor Scicluna who had tried to quantify the damage to the economy, we would probably have only read a small paragraph about it, unless somebody didn’t try to label the whole thing as sabotage!

For me there was something amiss. The Malta Resource Authority (MRA) was conspicuous by its absence and silence. I was surprised for two reasons that the regulator in this area kept silent. First, it is its responsibility to ensure that the provider supplies a continuous service. Second, it is its responsibility to ensure that the Enemalta Corporation compensates the consumer.

Let’s consider the first responsibility. In this time and age it is simply not on that a country goes through a complete blackout for several hours. It is MRA’s responsibility to set standards. Several years ago, when I was leading the Consumers’ Association, I wrote to the Chairman of MRA asking if the Authority had set up any standards re power cuts. Needless to say, the MRA never answered, in spite of several reminders. To date I cannot find any reference of any standards set in this area.

The MRA should immediately set standards as this is basic. Once these standards are set, the provider is then bound to meet those standards. If these are not met, then those running Enemalta should be responsible. The argument then crops up. If Enemalta is to pay up, aren’t the consumers themselves who will be paying for the lack of management? At first glance and as things stand, yes. But is that the way it should be?

If people are accountable, the matter should take a different turn. If the people who are running Enemalta, its management and the Board of Directors become accountable then they should pay for their inefficiencies. We, consumers, are paying them good money to run the Corporation efficiently. If they are inefficient they should pay for their inefficiency.

There seems to be two versions, though not necessarily conflicting, for the power-cut, if one dismisses the "series of coincidences" harboured by the Prime Minister.

The first version is that put forward by the Chairman of Enemalta who gave a detailed technical explanation the day after the power-cut. He is reported to have said that a boiler at the Marsa power station tripped in the morning, having a domino effect on the remaining boilers that could not take the added load. The situation was exasperated by the fact that two boilers were undergoing a scheduled overhaul and another two had been subject to maintenance.

If one adheres to this version, a number of questions arise. Who took the decision to overhaul and maintain four boilers at the same time? I am sure that such a decision is not taken lightly and that the top management was aware. If this is so, who is going to assume the responsibility?

There is however, another version. In spite that it was known to management that the capacity of the present system could not meet the increasing demand, no new investment was made. Who is going to carry this responsibility? If the present management and Board of Directors found such a situation, are the previous ones going to assume the responsibility of the present situation? Who is going to pay for these inefficiencies?

And this brings us to the second point. The fact that the Enemalta’s Chairman dismissed any compensation does not mean that nothing can be done. Those who suffered damages can sue Enemalta.

But should we take this approach? Litigation is both expensive and lengthy. Thus it works in favour of those economically strong – in this case Enemalta. Surely if we adopt this approach, the consumer will come out the loser.

What about the Malta Resource Authority? Why can’t it facilitate matters by investigating each payment request and then decide whether compensation should be paid or not? Why can’t it take its responsibilities more seriously? Why does it need to be evident through its inactivity?

The MRA also needs to explain another matter which arose just before the June European Parliament elections. It was reported that Minister Gatt was having second thoughts about his decision to introduce the high utility rates last October. But what about the MRA, which finally approved these rates? Is it still maintaining that it took the right stand when it approved the rates proposed by Government?

In order to justify its position, it commissioned an accounting report. Does it still maintain that this report was valid? And if it still maintains that, can it inform us on what basis it accepted the new rates which became applicable since April? Did it base its calculations on the same principles as on the previous occasion? Why did it not publish a report to show the basis for the rates applicable in April?

Could it be that even on this occasion the MRA just followed the Government who found it expedient to reduce the tariffs at that time? And if it did that, was it acting as a Regulator should?

The Regulatory system was set up to ensure that the consumers would absorb the benefits of the market system. As most of our Regulators are failing in their responsibility, the consumer is finding itself in a worse situation – it is paying higher prices on the market and paying for useless Regulators. It is high time that we tackle this problem

In fact this is something that the new MEPs should take up while in Brussels. I believe that it is high time that DG Competition should take a deep look at our regulatory system. This is especially needed as there is no local political will to ensure that the regulators are truly independent both of the Government and the producers, and act in the interests of both competition and the consumer.

Published in Maltastar.com on 15th July 2009

Lidl crazy

Much has been written about a video which had been placed on the YouTube showing Maltese consumers, on the 27th April, ‘storming’ the Lidl store at Safi to get a bargain.


Yet in spite of this, very few commentators pointed to the real issue. Some said that Maltese consumers recognise a bargain when they see one. Others commented that our behaviour showed the worst of the Maltese. But few pointed to the real issue - the lack of competition in the local retail market.


Why are many Maltese Lidl crazy? Simply because the prices for which many products are offered compare very favourably to the prices set by the rest of the local market structure.

I’m pointing to the local market structure. The reason is simple. In overseas market structures the prices that Lidl is offering are not that exceptional. Other traders, in other European countries, are offering bargains similar to Lidl. Thus Lidl, for overseas consumers, is not the exception but the rule.


To make matters worse for the local consumers, the prices offered by Lidl are such that they are even attractive to small shopkeepers – easily recognizable by the large amounts of the same product they buy from Lidl. Again the prices offered by Lidl to the local consumers are better than the ones offered to shopkeepers by the local importers. Thus the competition for Lidl special offers is quite high. The products offered become scarcer by the fact that the best of the crop is sidetracked by the people working there – both shop assistants and security people.


But Lidl offers two important aspects - aspects that are virtually non-existent in the rest of the market but which need to be emulated by the other competitors to have a truly competitive market. The first aspect is the way prices are shown. Lidl, both in its advertising and shelf prices, gives two prices for products which are quantified either by volume or weight. In such cases, the two prices given are the price of the product and its price either per litre or per kilogram. The latter price helps consumers to compare the prices of similar products.


This is a great help for discerning consumers as the weight or volume of the same product differs according to different producers. In cases like pasta, where the products offered are in standard sizes, the consumer can easily compare prices. But in other cases, such as meat or drinks the consumer is confronted by different weights or volumes. In such cases it is virtually impossible for the consumer to compare prices, there and then.


The second aspect is that a consumer can return a product within a period of thirty days and a full refund is given. This is something that consumers who had travelled abroad always yearn to have. Unfortunately, it is disappointingly absent in the local market.


The above aspects are characteristics of intense competition – aspects that are missing from the rest of the local market. The unfortunate thing is that the Lidl aspect constitutes only, up till now, a very small part of the market.


The fortunate side of the coin for consumers is that the local market at present is suffering from a downturn and this coupled by the competition that Lidl offers is bringing about a change. Retailers who want to survive are already changing their strategy. Instead of accepting the price set by the main local agents, they are importing certain products themselves with the result that the price difference between their prices and Lidl’s has contracted considerably.


But in order to understand the full significance of the above to the local consumer, one must look at the local inflation. Inflation or cost of living, as is more generally known, reflects changes in prices. The following graph (NSO, RPI April 09 publication) shows how inflation varied during the last 3 years. One would note that inflation fell drastically when Malta had to meet the Maastricht criteria to join the Euro. No wonder there have been continuous cries to set up an agency similar to the one then operational!


Another table (April 09 RPI) published by the NSO shows the changes in the prices by different product groups.


If one were to disregard the exorbitant increases in Water, Electricity, Gas and Fuels group, the table shows that the largest % increases have been in the Food and the Beverages and Tobacco groups – products where Lidl’s pricing compares very favourably with the rest of the market.


No wonder the Maltese consumers are Lidl crazy! They yearn to see more competition in the local retail market!


Published in Maltastar.com on 3 June 2009.


Resident Parking

A recent court of appeals decision regarding the above subject raised two important issues. The court decided that the Pieta’ local council acted ultra vires when it introduced a residents’ parking scheme without the necessary permit from public authorities.

Two issues which come out of such a decision. First, that public authorities can issue permits to such schemes while the second raised the issue of the fines collected illegally by the Pieta’ local council.

From newspaper reports it was the first court which dealt with this problem. It pointed out that such schemes, though justified under certain conditions, would in themselves give preferential treatment to local citizens.

At first sight, there is nothing wrong in giving preferential treatment to citizens in the locality in which they reside. But if this is applied to all localities, we would end up in restriction of movement in Malta. The implications are serious not only to business and consumers but also to all citizens.

If such schemes become widespread, business will become localized again. The implications are that costs increase because certain economies of scale could not be implemented. The implication for consumers is that their choice will be limited as they would find it difficult to shop in another locality.

Citizens will find that they are really living not in Malta but in their home locality. The unfortunate thing is that because of local politics, at present there are already 19 localities which were given permission to introduce such schemes. Thus we find that those living in Balzan, Fontana, Floriana, Hamrun, Iklin, Mellieha, Msida, Mosta, Naxxar, San Gwann, St Julians, St Paul’s Bay, St Venera, Sliema, Swieqi, Ta’ Xbiex, Valletta, Victoria, and Vittoriosa are being given preferential treatment over the rest of the citizens because while they can park freely in other localities, they find their parking reserved when they return home.

The way forward is not to make such schemes more widespread but to do away with such schemes. They should only be introduced because of security or humanitarian reasons. When such schemes are approved, the authority issuing the permit should make a public announcement giving the specific reason for restricting the freedom of movement of the other citizens. These permits should only be issued after clear criteria are defined and issues. It is pathetic that while we are giving such importance to the Eurpean Parliament elections, we are permitting that one of the four freedoms, that of movement, on which the EU is based, is being tramped upon by the local authorities who seem to disregard such freedom with impunity as there is neither transparency nor accountability.

The second issue is what is going to happen to the fines illegally collected. Should they be returned to their rightful owners? A similar controversy cropped up when the government was put under pressure due to the controversial, for many illegal, VAT collected on car registration.

Those supporting the Government’s position found that they could not justify such a position and thus they reverted on an argument that if it was found that the VAT collected was mot done legally, the taxes collected should not be returned to their rightful owners as this would create an outflow in the government’s finances when we least could afford it.

But is such a position tenable? I don’t think so as otherwise the same argument could be used to justify any position taken, legal or not, by any authority in collecting money under the pretext of taxes, fines, administrative charge or any other name, with impunity. The reason is that even if the authority is found acting ultra vires, there will be no need to refund the money illegally collected. Its duty would be just to stop charging the illegal fee.

Would Mr Citizen accept the position that if the Inland Revenue Department has been found to be acting illegally as it is charging him a high income tax rate, this Department will only have the duty not to continue charging him this high rate but will not have any right to be refunded the illegally collected taxes?!