Lazarevic: Regulation on Margin Limitation is a temporary mechanism, Law on Unfair Trading Practices to follow

There are some anomalies in our trade system. Certain business chains have based their business model on guaranteed high revenues on the basis of which they finance their costs and ultimately have a positive balance, said Minister of Domestic and Foreign Trade Jagoda Lazarevic.

In this context, she adds, the Regulation on Margin Limitation is a temporary mechanism.

– But in two or three months, when we have a new Law on Unfair Trading Practices, some of these charges will be prohibited. We are applying the best European practice and traders will no longer be able to do anything that is not done in the European Union. They will have to adapt. Does this affect them? Certainly. But that is why they need to operate with more efficient cost management – said Minister Lazarevic, adding that the new Law on the Prevention of Unfair Trading Practices would regulate the market, which should lead to a further drop in prices.

Speaking on NewsMax Balkans, she also provided specific data on the operations of retail chains in Serbia.

– In October this year, all 29 retail chains had a 9% higher turnover compared to September, when the regulation began to be implemented. Some foreign retail chains whose concept is based on discounts, which do not have off-rebates, had a turnover growth of 15% in the same period. We are monitoring everything in great detail and we conclude that there are some things that will have to change – said Lazarevic, as reported by the ministry.

She also referred to private labels, which as a rule have lower prices than branded products.

– Looking at the corrections that took place in September, when the Regulation on Margin Limitation began to be implemented, we noticed how high the margins were on those products, which should be significantly cheaper than branded ones. It is clear how much that space was used for profit, although the brand name should be the most affordable and not just slightly cheaper – Lazarevic pointed out.

She pointed out that the biggest problem was the off-rebates, which ranged from 20 to 50%.

– They are not visible, and these are levies that were used to finance numerous costs. We also received this information from domestic retail chains, although they operate under a completely different concept, and their power is smaller and their off-rebates were lower, and even the margins for a large number were smaller. At the same time, we should not forget that some inputs have increased, such as the cost of labor and electricity, so they are also struggling to see how the increase in the minimum wage will be reflected. We heard this from them at the meeting we had, and 17 of them wrote to us in a letter about what it would mean for them to change, and everything related to off-rebates – said Lazarevic.

The permanent solution, emphasizes Minister Lazarevic, is the Law on the Prevention of Unfair Trade Practices.

– This period during the validity of the regulation is essentially a preparation for how they will operate in the conditions when Serbia finally gets a law that it does not have as one of the few European countries. Identifying those things that will affect them because some of the charges that are now required from suppliers will be prohibited and some will be conditionally permitted and will create a completely different grounds for trade itself. I believe that they will not be satisfied but they will simply have to comply, because that is what European trade is based on. This is not a matter of someone’s whim, it was passed as a Directive that was transposed into national legislation as an urgent need to primarily help agricultural producers, processors, all of them in order to strengthen their negotiating power in relation to larger players, primarily traders. That is why we are passing this law – explained Lazarevic.

She stated that there would be a ban on certain charges that had existed until then, while some would be conditionally permitted with the consent of both parties.

– I believe that such a law will also correct prices in stores because suppliers will be relieved of some charges, such as those partly due to the Regulation on Margins. A balance will be established, they will have greater negotiating power, they will be able to fight for better conditions and this should naturally regulate the market. Namely, this law is not our recipe, we are taking the best practices from the EU and I believe that it will solve the anomalies that we had. And the fact that retailers complain the most about off-discounts regarding the regulation is a guideline for us in which direction to continue. My message is that they should start adapting their business model to the new circumstances. Profitability yes, but on a sound basis – emphasized Lazarevic.

Ministarstvo unutrašnje i spoljne trgovine Republike Srbije

Ministry of Domestic and Foreign Trade

Jagoda Lazarević

Regulation on Margin Limitation

Law on Unfair Trading Practices