Top local firms plan to withdraw their products from the co-ops over ‘prices’

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KUWAIT CITY, Dec 11: Major food companies in Kuwait are currently studying the option of withdrawing their products from cooperative societies due to the constant disregard by Ministry of Commerce and Industry and the Union of Consumer Cooperative Societies towards their requests to increase the prices of their products, reports Aljarida daily quoting informed sources.

They explained that these companies argue that their request is in line with global price fluctuations, the high prices of raw materials and the production costs, and due to the announcement made by the Competition Protection Authority (CPA) which initially distances itself from the union’s practices that are harmful and against the competitiveness norms in the market.

However, CPA later expressed its understanding of the issue, and in turn consulted the Fatwa and Legislation Department for its opinion in order to reinforce its decision that is due to be issued.

This decision would halt and ban such harmful practices, and work on enhancing the spirit of free competition and ensuring the principles of equal opportunities among competitors prevail.

The companies’ choice to withdraw their products from cooperative societies is their last compelling option, after they had gradually implemented all means to request for review of the prices for more than four years.

They see that their demand is deserving with the aim of curbing the losses they sustain.

According to the sources, the estimated losses are not less than KD one million annually for each major company. The prices at which many of its products are currently sold, after increase in costs by the country of origin, are not equivalent to their cost price, even without adding any other costs.

The companies affirmed that the price increase would provide an atmosphere of competition by leaving the option of choice to the consumer, and would preserves the quality aspect.

This is the case in all Gulf countries, and countries that follow the free economic system, as well as Kuwait which is a member of the World Trade Organization. In this regard, the companies expressed their dissatisfaction toward the response they received from the Competition Protection Authority through a letter which stated that it lacked jurisdiction in such matters.

This is despite the fact that Article No. 4 of the Law on Competition Protection No. 10/2007 categorically prohibits agreements, contracts, practices or decisions harmful to free competition, and no party may impose price stabilization and prohibit its fluctuation. In addition, Law No. 10/1979 gives Ministry of Commerce and Industry the right to supervise trade of goods and determine their prices, provided there is a public interest that requires it.

The sources indicated that, according to the law on Competition Protection, the practices of the Union of Consumer Cooperative Societies, which forces distribution companies to sell products at prices controlled by the union, restrict competition and eliminate free market mechanisms, which are in the interest of the consumer and also prevent monopoly. Meanwhile, Deputy Head of Union of Customer Cooperative Societies Khalid Al-Hudaiban revealed that a circular was sent to all cooperative societies in Kuwait concerning the mechanism for appointing illegal residents “Bedoun”, reports Aljarida daily.

Al-Hudaiban said the circular obligates the cooperative societies to register Bedoun employees in Public Authority for Manpower (PAM) in order to be granted work permits. He stressed the importance of committing to the conditions and regulations related to recruitment and appointments.

Al-Hudaiban explained that the Union of Customer Cooperative Societies received on Nov 25 a letter from Ministry of Social Affairs to appoint Bedoun residents in cooperative societies based on the recommendations of the Central System for Remedying Status of Illegal Residents (CSRSIR).

The circular stresses the need to verify the legal status of the appointed Bedoun residents to ensure they are registered at CSRSIR. Al-Hudaiban affirmed the keenness of the Board of Directors of Union of Customer Cooperative Societies to appoint Kuwaiti citizens especially in supervisory positions, indicating that the union, in coordination with Ministry of Social Affairs, has implemented the replacement policy to a large extent.

He indicated that the number of Kuwaiti employees in cooperative societies has reached an unprecedented rate. In the meantime, the Finance and Legal Committee of the Municipal Council has referred to the Executive Authority of the Kuwait Municipality – a proposal submitted by the members, Hamad Al-Mudalaj and Abdulaziz Al-Mojil – to exempt cooperative societies from the road works fees for displaying their products, reports Al-Rai daily.

After the meeting yesterday, the Committee Chairman Hamad Al-Mudalaj said, the bylaw of road works for major festivals was discussed to allow cooperative societies to organize temporary exhibitions during festivals.

The proposal has been submitted to the executive authority before its approval during the next committee meeting. The sources explained that the committee also discussed amendments of the exhibitions bylaw, and giving some facilities to the owners of these exhibitions after preparing a detailed report provided the exhibitors receive an invitation from the Ministry of Commerce and Industry.

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