FAQ: Price controls in Ireland
May 16, 2023
Recent increases in the cost of living, particularly food and energy, are having a significant impact on consumers. Governments around the world have been considering how to protect consumers who are struggling, especially more vulnerable consumers. There has been discussion about whether prices should be controlled for some products. This Q&A explains what price controls are, the circumstances in which they are introduced, and the CCPC’s role in pricing.
What are price controls?
Price controls are when minimum or maximum prices (a cap) are set by the Government, or a regulator, rather than by businesses. Where there is a price cap, businesses are obliged to sell the specific goods or services at or below the capped price, otherwise they will be breaking the law.
Do we have price controls in Ireland?
Ireland, like most of the world, is a market economy. This means prices are set based on supply and demand. Businesses with higher prices lose out on business to lower-priced competitors, therefore keeping prices competitive. In a market economy price controls are rarely, if ever, used; instead prices are set by individual businesses.
In Ireland, we have price controls in some regulated areas, for example tobacco products.
When are price controls used?
Price controls can be used in emergency situations, for example war or natural disasters, when consumers may not be able to access basic products. In response, governments may decide to pass laws to help consumers have access to basic goods and to preserve public order. This can involve fixing or capping the price or limiting the amounts that consumers can buy.
Price controls can also be used to protect consumers in sectors where it is more cost effective and efficient for one business to supply the entire market, such as rail transport.
Who decides whether price controls should be introduced?
The decision to introduce price controls on specific products can only be taken by the Government.
Does the CCPC have a role in price controls?
No, the CCPC does not have a role in setting or monitoring prices or price controls. Setting, monitoring, enforcing and updating fixed prices is usually managed by a sectoral regulator that is an expert in that area.
As experts in competition law and consumer welfare, the CCPC can provide views and information to the Government to help them when considering these issues. Markets benefit consumers. Introducing price controls can have significant long-term effects on the economy, including on competition and consumer welfare. For example, price controls on some products can lead to price increases in other goods that don’t have capped prices. There are practical challenges to introducing price controls here as Ireland imports a lot of its products, which would make controlling prices very complicated.
Has price capping through legislation been introduced by any other government in the EU?
High prices for grocery goods have been experienced all across the EU. Ireland currently has the second-lowest levels of food price inflation in Europe. While several countries have considered introducing price controls, in most cases these plans have been dropped because of the potential for unintended negative consequences. Just two EU countries have implemented a cap on food prices: Croatia and Hungary. To date, we have seen no evidence that these measures have succeeded in reducing prices for consumers.
Other measures such as profit controls and windfall taxes have been discussed, does the CCPC have a role in these?
Companies resident in Ireland, must pay corporation tax which is collected by Revenue on behalf of the Government. Changes to how company profits are taxed are a matter for the Government and Revenue.
What role does the CCPC have in pricing and price gouging?
For more information read about the CCPC’s role in pricing.
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