The government’s battle for “greed inflation” is multifaceted.

The audits of five more multinationals are about to be completed, two of which are facing stiff fines, as happened in the cases of the two multinationals that are required to pay 1 million euros each.

Multinational consumer product groups are scrutinized to justify their pricing policy and whether they are complying with legislation preventing unfair profiteering.

According to information from APE-MPE, the fines for the two multinationals may have concerned cleaning products and personal hygiene items, but the fines that are “coming” concern food, where the biggest inflation problem is currently focused.

The fines imposed on P&G and Unilever are the most severe ever imposed and this will be repeated if necessary, as the Ministry of Development informs the market, reminding almost on a daily basis that controls are continuous for the whole range of products and services.

The two multinationals in question have their objections to the fines imposed on them and are preparing their line of defense to go the legal route (while still paying the fine) and have already hired mathematicians and expert technocrats to prepare their “legal armoury”. , questioning the methodology used for the audits.

Market players comment to APE-MPE that when a product now reaches the shelf it is much more difficult to maintain accuracy compared to beating it in the first stages of its emergence. Control and the taking of measures and decisions are decisive factors as soon as they are taken (eg for raw materials, logistics, transport etc.), as the same actors comment. That is, just as the entrepreneur makes a forecast for the future in order to calculate costs and profits, so the control mechanisms must show quick and strict reflexes.

However, the Ministry of Development – as the Minister of Development Kostas Skrekas has stated – expects the companies that were fined to immediately correct the prices on the shelf and to participate with their products in the “Permanent Price Reduction” initiative. One multinational company has already announced that it is participating in the initiative, while the second is expected to participate as well. In the following days, the minister is expected to call the representatives of multinational companies to a meeting.

More generally, as far as the initiative is concerned “Permanent Price Reduction”, as announced by Mr. Skrekas, the goal set for at least 500 product codes with a reduction of at least 5% for at least 6 months has already been exceeded. He has emphasized that gradually, with the government’s initiatives, competition will be stimulated and prices on the shelf will begin to decrease for the benefit of households.

KEPE: To create a new “toolbox” by extending its application to other sectors of the economy?

At the same time, the Center for Planning and Economic Research emphasizes in its four-monthly magazine on economic developments that effective measures for the radical treatment of inflation as well as accuracy in Greece are the ones that strengthen the functioning of competition.

As mentioned, the persistent presence of inflation in the Greek economy and the high accuracy prompted it to check its root causes. The analysis shows that in the 2021-2022 period, which is characterized by strong exogenous inflationary pressures mainly in the energy sector, earnings increased their contribution to domestic price increases.

Additionally, the drivers of earnings growth were fueled by increases in corporate net operating surplus and unit gross income. These conditions provide evidence that companies have chosen not to absorb increases in energy costs by passing them on to product prices and at the same time have strengthened their net operating surplus.

The results of the analysis come to be added to a series of works for other countries, the Eurozone and the USA. Various interpretations have been given to this phenomenon. Some businesses may raise their prices to protect their profit margins.

According to another interpretation, some businesses are boosting their profit margins to recover losses from previous years. Another possible cause lies in the attempt to create “cushions” in an environment of high uncertainty. Finally, another interpretation focuses on “seller inflation,” that is, the ability of some companies with a large market share to raise prices. In any case, the point is to radically tackle inflation and accuracy.

As the president of KEPE Panagiotis Liargovas notes “the government has from time to time announced various measures both to compensate for the losses in the standard of living of the many and to reduce the basic items of consumption (e.g. market pass, wage and pension increases, etc.) .a).

While helpful, the above measures are not enough to make a significant and lasting dent in inflation and accuracy. This is probably because recent inflation is linked to business behaviour.

Inevitably, KEPE notes, the question returns as to whether competition in Greece works effectively and fulfills its task of self-regulation in a market often dominated by a small group of single-digit players. In many ways, the concentration of an industry in the hands of a very small number of companies is not good for consumers.

“Greed inflation” is fueled by oligopolies, whose inherent characteristics include limited competition, barriers to entry, price rigidity, and “strategic” behavior by their members to maintain higher prices and profits.

In this regard, effective measures to radically tackle inflation as well as accuracy in Greece are those that strengthen the functioning of competition. In the past (2012, 2014, 2016), strengthening the competitive functioning of markets has been promoted through the ‘OECD toolbox’. The “OECD toolbox” examined competitive conditions in 13 sectors of the Greek economy that represented 30.7% of gross value added in the country and 35.2% of employment, from tourism to trade, the food industry and specific branches of manufacturing.

2,312 laws and regulations were evaluated, 1,276 of those limiting competition were identified and 775 proposals were formulated.

The KEPE concludes with a question, is it time to create a new “Greece’s toolbox” with the extension of its application to other sectors of the economy, for which there are serious indications that competition does not work and healthy entrepreneurship is hindered?