The former Minister of Agriculture in Kiril Vatev's office commented in the studio of “Offensive with Lyubo Ognyanov“ the announced measures by the state and the possible effects on food prices. The discussion touched on both the role of the market and the lack of coordination in the agri-food chain.
At the very beginning, Vatev formulated his main economic argument: “It is common knowledge that prices are a function of demand and supply“. In his words, when there is high demand and low supply, prices rise. When the roles are reversed, demand is weak and supply is high - prices fall.
He emphasized that the first and most important condition for lower prices is to have high productivity and high supply, expressing skepticism towards administrative interventions: “Administrative intervention in the market can lead to some short-term results, but later you press the spring and it bounces“.
However, Vatev does not completely reject legislative initiatives related to the supply chain. He believes that we need rules for supply along the agri-food chain and adds that he sees the bills as an effort to introduce such rules“. According to him, these models are borrowed from the laws of Germany and France.
The former minister expressed skepticism towards the concept of “fair price“. According to him, the price is one that someone can pay.
At the same time, Vatev emphasizes the structure of the market: “Bulgarian producers throughout the agri-food chain are individual“. According to him, this leads to a lack of negotiating power that powerful European cooperatives have.
He is critical of retail chains: “They know how to enter a new market and how to manipulate the market“. According to him, small stores have died, and the conditions for producers are improving every year only in favor of the buyer.
He criticizes the idea of strong state intervention: “We want the state to control everything that is absurd and impossible“. According to him, this is fertile ground for corruption.
As an alternative, he proposes “self-regulation between competitors“, as well as a clearer framework for industry organizations: “In an industry, there can be only one industry organization, which carries both the rights and the obligation to control fair competition“.
Vatev emphasized that for perishable products there is no fixed norm for a fair price.
He interpreted the definition of the legal framework: “An unjustified increase is any increase in the final selling price compared to the price applied by the same trader for the same product in a comparable previous period“. However, according to him, this definition is problematic and needs to be refined, because the previous period may have had a lower value of energy costs.
The question was also raised whether the new regulations will limit doubts about cartel practices by introducing the concept of “joint dominance“.
Vatev believes that this already exists as a concept - as a system of oligopolies.
Regarding the proposal to drastically increase sanctions, Vatev expressed serious reservations, Vatev believes that this will give rise to corruption. He warned that higher fines could lead to subjective application of the law.