'Cartel’ dig irks importers worried about inflation headache

'Why this vilification, skepticism and distrust towards big business?’

Malta’s finance minister, Clyde Caruana, has had no qualms this week in standing by his description of certain Maltese oligopolies – the dominance of particular industries by major, long-standing players – as cartels. 

His is a pointed observation, meant to irk those who enjoy control over sectors in which goods are imported, but also to keep them on their toes as price inflation keeps worrying households. In a comment to MaltaToday, he says he cannot understand the big deal over his comment: “This country has been under scrutiny for so much of its progress on rule of law reforms, why should we shy away from the European Commission’s scrutiny over pricing behaviour?” 

The reference is to Labour MEP Alex Agius Saliba’s request for an EC investigation into pricing in Malta, which he illustrated with news of a massive price increase on a tomato sauce product. “People seem to be mispresenting this word,” Caruana says, glossing over the notion of collusive practices in the word ‘cartel’. “This country has a market of 500,000 with room for only a few players – the less there are, the greater the chance of certain monopolies or oligopolies.” 

Caruana says it is a typical characteristic for a small island which hosts certain industry players whose dominance also stretches generations back, having obtained their importing power early last century. “Yes, I do believe that prices in Malta are also what they are because of the size of our market,” the finance minister says. “Certainly, I have no monopoly on the truth... but I say things as I see them.” 

The CEO of Farsons, one of Malta’s largest beverage and beer producers and importers, found no favour with Caruana’s observation, calling out the “concerning generalisation” of talking about Maltese markets being dominated by cartels. 

Norman Aquilina says Caruana’s cartel assertions, by suggesting anti-competitive practices, misrepresented the actions of dominant producers and importers in Malta. “Such claims are clouding up the distinction between being dominant as opposed to being loosely tagged as a cartel, and likewise, between making a legitimate profit as opposed to profiteering... But why this vilification, skepticism and distrust towards big business? Maybe, considering the prevailing cost of living pressures it is not too surprising to hear such populist conspiracy theories.” 

Norman Aquilina
Norman Aquilina

Aquilina says being dominant does not render a business anti-competitive, singling out those big businesses who were exemplary in their ways of working despite their dominant status. “Even if realistically size remains a consideration of influence, it certainly does not determine the legitimacy or otherwise of a business. It is how it operates, sets and attains its corporate goals that distinguishes on which side of the fence a business stands,” Aquilina says. 

Pierre Pellegrini Petit, director at Attard & Co Food – another major importer of foodstuffs – thinks the government should be looking elsewhere for culprits. 

“In my view, the unfair competition may be stemming from foreign supermarkets that benefit from lower income tax rates due to foreign shareholding. This is an issue that the government should investigate and address accordingly,” Pellegrini Petit says of the low-cost ‘hypermarket’ branches in Malta whose low tax exposure gives them a competitive edge over other imported products. Even traditional street vendors, it is said, tend to eschew local producer in favour of cheaper, imported fruit and veg from Sicily and Italy. 

But back to Caruana’s comments, Pellegrini Petit says such blanket statements – and then by a minister – can be potentially detrimental. “I don’t believe it to be an accurate portrayal of the current situation. The competition in our industry is intense and fierce. We constantly negotiate with our suppliers to lower their costs to remain competitive,” he says. 

Even attributing the rise in food prices to profit-driven inflation, read “greed”, ignores what Pellegrini Petit says is a multitude of factors. “It is vital to distinguish between factors that market players can control and those they cannot.” 

Attard & Co Food currently employs over 140 workers, a fact that has cost the company an additional €50,000 in cost-of-living-adjustments in 2023 alone. Additional wage increases this year cost a further €50,000. And finding suitable store personnel, Pellegrini Petit adds, has been challenging. “We had no alternative to increase their wages to retain them.” 

Now in 2024, he foresees another €100,000 in government-mandated COLA increases. “This doesn’t even include previously agreed-upon wage increases for various personnel. Additionally, we are facing a substantial increase in warehouse facility rent, which will double in 2024, amounting to an increase of over €200,000.” 

Pellegrini Petit’s point now dovetails with Caruana’s prediction that COLA rises will be absorbed by company profits, rather than passed on in higher consumer prices. “We are projecting an increase in sales but also a significant decrease in profits for 2024. Therefore, the assertion of ‘greed inflation’ does not accurately reflect our situation,” Pellegrini Petit says. 

Pierre Pellegrini Petit
Pierre Pellegrini Petit

Another reputable food importer of long standing – who insisted on anonymity – says the ‘cartel’ insinuations are “totally unfounded… we operate in an intensely competitive market environment in foods distribution.” 

He says that after commodity prices peaked and eased off gently earlier in 2023, he now foresees yet more rises in early 2024. The government can respond – he adds – by removing any artificial hurdles and unnecessary costs that hurt consumers and business. 

One of these hurdles is the so-called Brexit duty. Not only have importers had to deal with the lasting effects of the pandemic on supply chains, the effects of war on prices, or wage inflation. The “gross anomaly” from Brexit duties is passing on new costs to consumers. 

“The latter is saddling us with costs on consumers and businesses on traditional UK food brands which, while produced in the EU are delivered from the United Kingdom,” meaning, Maltese consumers and business are actually paying duty on goods of EU origin. 

“It is frankly shameful... it’s causing artificial yet compounded food price inflation, impinging on businesses and causing pain to consumer. Clearly, the government now needs to find the political resolve in climbing over EU-imposed bureaucratic requirements that followed Brexit, essentially exempting food products from import duty at a time of unprecedent surge in food prices.”