Pricing is one of the building blocks in any market. Price may be defined as the “monetary value of a good or service.” Every business, whether formal or informal, invests with an expectation of some profit. The profit is directionally proportional to the price of the goods. However, sometimes, the sellers hike the price unreasonably because certain circumstances favour them. The best example is the recent hike in the price of vegetables particularly green chili as high as Nu 700 per kg from Nu 200 overnight.
With no price ceiling, the Office of the Consumer Protection (OCP) remained toothless even with numerous complaints on the price-related issue. Section 7 of the Consumer Protection Act (CPA) mandates that a “person shall not mislead the consumers on the price of the goods and services.” Section 8 provides various situations where prices can be considered as misleading. Further, Section 9 requires that “goods displayed for sale and, wherever applicable, services shall have the price affixed conspicuously.” The requirement under S.9 is to ensure that, prices must be fair and not a mere display of prices. How does the OCP respond to such challenges even when the price is displayed?
Many Bhutanese often look at Maximum Retail Price (M.R.P.) not realizing that OCP has no jurisdiction to enforce M.R.P. in Bhutan. M.R.P. is an Indian concept under Indian law introduced in the 1990s to control the price but and has no legal force once it exits the Indian market.
Price regulation is a complex issue in the free market today which is based on Invisible Hand Theory. This means “the market will find its equilibrium without government or other interventions forcing it into unnatural patterns.” Though this is also in line with the freedom of contract, a fundamental principle in consumer contracts, this is not always true. Thus, sometimes it is necessary for the state to regulate the price of goods and services.
Government regulation of price is based on the normative theory the “application of the respective pricing rules can be justified by some higher-order value judgments as formally expressed by social welfare functions.” Bhutan as a democratic state guided by GNH is a true welfare country and hence price regulation must be preferred over the laissez-faire approach. There are many countries where price regulation exists even during normal times including most capitalist nations like Unites States, European Union, India, Singapore and Australia where some required clear display of prices and others have verification tools to ensure the price is not exorbitant or misleading. Today, Bhutan is going through an extraordinary situation and state intervention is necessary.
If we do not come up with a strategy to regulate prices through price ceiling, Bhutanese consumers will continue to suffer at the hands of some greedy sellers taking advantage of the situation. When our economy is suffering at an unknown rate, it is high time that we come up with price ceilings for all essential goods including vegetables. Price ceilings will help stabilize the economy, ensure that “essential goods are financially accessible to the average person.” It is the responsibility of OCP to ensure consumer confidence so that, there will be no hoarding. Without price regulation, laws pertaining to the price would remain redundant, hoarding continues and OCP a mere spectator. Our sellers must profit but not at the cost of the nation’s economy by charging unreasonable prices.