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Letter of the Law: Price lists and cost estimates to be made up for “non-regulated prices”

18 Mar 2011

Edict No.72 which introduced landmark amendments to the pricing processes in the country has been actively discussed by business establishment, economic experts and lawyers for two weeks already. But as we know, now and then normative acts can be understood and interpreted in different ways by those who apply them as users and by those who supervise their observance on the part of the state. What kind of pricing for “non-regulated” goods (works / services) shall be after Edict No.72 has come into force? What shall the “tsenoviks” (price controlling authorities) inspect and what for a person may be called to account?

These and some other questions were answered by Anatoly Lenevich (Анатолий Леневич) deputy head of antimonopoly and price policy of Minsk Regional Executive Committee within the frames of “Letter of the Law”, author program of Denis Aleinikov, Senior Partner of Law Group “Argument”.

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Anatoly, some experts have expressed their opinion that in consequence of adoption of the edict Instruction on procedure of prices and tariffs formation and application, affirmed by the notorious resolution No.183 shall not be applied anymore and shall be officially abrogated. What do you think in this regard?

This resolution has been developed by Ministry of Economy, and all and any issues in connection with its amendments and maintenance shall be under authority of Ministry of Economy. So I cannot say officially that it shall be amended.

It is quite definite that the Instruction shall be applied today. Edict No.72 has a regulation which obliges to apply the laws within the boundaries not contradicting this Edict. The Instruction in itself does not contradict the Edict. However, taking the formal side hereof and reading its beginning, it becomes clear that it has been developed on the basis of provisions of Edict No.285 that has been already abrogated. Due to this point the situation turns out to have some vacuum – the Edict is abrogated but the Instruction is in effect. I believe this contradiction shall be resolved by means of development of a new instrument. But this decision shall be made by Ministry of Economy.

According to the Instruction, it is stipulated that the economic entities shall make up price lists and registers of retail prices.  Shall the economic entities be obliged today to make up such registers of retail prices and price lists for non-regulated goods, i.e. for the goods which failed to be included to the list pursuant to the Edict?

As far as the price list and retail prices register is concerned, pursuant to paragraph 52 of the Instruction, retail trading organizations shall make up retail prices registers or any other similar document. It applies to the regulated prices. As to the non-regulated prices, there is such a statement:”Organizations can make up a price list, a register or any other similar document in relation to the non-regulated prices.” In other words, the interpretation is a more independent and broadened, yet the document shall be available. This approach has been conditioned not just by the Instruction.

I would like to refer to the Law on Consumer Rights Protection. This law specifies the obligation of the legal person to reveal the information on the goods. One of the points to be revealed to the purchaser is the price. Ministry of Economy has made quite a broad interpretation in accordance with which an organization may implement the requirements of the Law on Consumer Rights protection in form of any of the documents. But the document shall be available anyway.

You are entitled to control observance of the laws on pricing. Let’s imagine the situation. You come to a company and there is no any price list or any other document. Are you able to implement responsibility today?

Generally speaking we have never had such precedents when we had to force somebody to make up this document. Everybody fulfilled the norms of the laws. As of today article 12.4 part 1 “Violation of prices formation procedure” of Administrative Code preserves responsibility which can be implemented for the lack of a price list, register or any other document. As far as the title of the article is “Violation of price formation procedure” the same phrases have been used in the Instruction’s title – “On procedure of prices formation and application”. In such a way, if provisions of the Instruction shall not be observed we can theoretically implement the responsibility stipulated by article 12.4 part1 of Administrative Codein relation to this or that official. I suppose, such a responsibility shall not be implemented because there is hope that companies and organizations shall meet the requirements of the laws in the sphere of pricing.

And what happens to economic calculations and price determination? This issue has been directly dealt with in Edict No.72. The Edict has revoked unlawful acts of realization of goods without economic calculations. Nevertheless, what do you think, has the formal obligation to make economic calculations as the norm of conduct also had been revoked thereby?

Instruction No.183 has preserved the regulation binding the economic entities to make economic calculations, calculations with detailed cost items. This obligation has been preserved by today, by the way, irrespective of whether the price is regulated or not. It’s a different story, that pursuant to the Edict, we are not able to implement responsibility in relation to the enterprise according to a respective article of Administrative Code for the lack of these calculations. But it is in keeping with the spirit of the Edict to implement responsibility for the lack of calculations with detailed cost items for regulated prices. So, it’s quite evident that regardless of such amendments the responsibility shall still remain.

Which is to say that obligation to make calculations remains both for regulated and for non-regulated prices, doesn’t it?

Yes, the obligation remains. Sure, we shall be interested in non-regulated prices least of all; we practically do not touch them at all in order to evade disturbing organizations and enterprises. Therefore, they shall meet the decision on their own and come to conclusions as far as this provision is concerned.

And what if they fail to come to conclusions and do not make any economic calculations? According to Edict No.72 no respective article of Administrative Code can be applied in this respect; can you bring such economic entities to any other responsibility?

We often have to perform checkout actions by order of law enforcement authorities and public prosecutor’s office. If we come to an enterprise and there are no these economic calculations, in accordance with our procedures we shall make a quite lawful and reasonable requirement and make an offer to make such calculations. In case these calculations fail to be made and let’s suppose we need them, there are other mechanisms for bringing to responsibility. For example, there is a whole chapter in Administrative Code “Administrative offences against administrative order”.    We had to bring to responsibility upon these articles those managers who refused to obey us as officials of the state controlling authority and to comply with our lawful requirements. We executed a protocol on an administrative offence upon article 23.4 “Disobedience of lawful order or requirement of the official in duty status”.

In what way shall the economic entities be entitled to form prices and tariffs after March 1st? No doubt the goods (works / services) which have not been included into the list are of interest. We have had a cost-based method earlier and what methodic can be applied now?

The laws effective today, including the Instruction, in particular paragraphs 5, 47 of the Instruction make it possible to form the selling price according to those principles and methods being used in western countries. Having studied a lot of literature, I have come to the conclusion that any enterprise in any country makes such economic calculations, in either case there is a problem how to do them. The legislator stipulates in paragraph 5 of the Instruction that it is the enterprise’s right to form the cost price and to determine what it shall be. It is worth saying that such a fundamental and well-grounded document titled “Basic provisions for composition of expenses”, so-called rudiment of the soviet economics, which had supported  us for a long period of time, has been abrogated since October 28, 2010.  Due to the fact that these regulations have been abolished, the enterprise has been granted the right to determine on its own what the cost price shall be. One of the options may be the following – to form the cost price which shall include just direct expenses. Considering paragraph 5, it is the same: the cost price shall include normalized costs. It has been known from the rules on economics that everything which is to be normalized, shall be classified as direct expenses – so, form the cost price pursuant to direct expenses. As far as the rest is concerned, for production, economic expenses and for profit estimates shall be made up. You can call summation of these estimates as marginal revenue.

Having formed a price in such a way, the enterprises can be more flexible in their reaction to changes in the market environment.

This brings up a question how to put it into a proper shape. And what is most important is to make amendments into own accounting policy. The legislator has specified that it is possible to issue local normative legal acts determining all regulatory procedures for prices formation.

Switching over to such pricing method is a serious step which is aimed to transform the way of thinking not only of the economist who forms these prices. The manager shall understand that point and consequently take measures to reform the system of management for the possibility of using this way of price formation.

One more question all economic entities are interested in. Shall it be possible to determine the prices for non-regulated goods (works / services) in foreign currency or basic units (b.u.) on condition that settlements shall be made in Belarusian rubles? For example, specifying in a contract that the good’s price amounts to one thousand Euros, but the payment shall be performed in Belarusian rubles according to exchange rate of National Bank of the Republic of Belarus as of day of payment.

In order to answer this question it is necessary to make clear that normative basis regulating this issue lies within civil laws, in area of banking laws. It has found its reflection in Instruction No.183. The Instruction provides the possibility, in cases established by the laws, to determine such a price in foreign currency. This possibility is available but not for everybody. It shall be specified by the legal normative acts which regulate these issues by means of direct statement. For example, there are people who come to the territory of the republic from abroad for relaxation or hunting purposes. There is a regulatory document in this regard which allows stating the voucher’s price in foreign currency. In such a way, there is a certain possibility though it has been limited. It has been settled by the laws that lawful means of payment within the territory of the republic shall be Belarusian ruble, and the laws in this regard shall be complied with. 


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According to the Edict, we have now a free price formation for the non-regulated goods, as the economic entities wish. Why can’t we then establish that the price for these non-regulated goods shall correspond to one thousand Euros or a thousand b.u.? After all, we shall perform payment via lawful payment means, in Belarusian rubles. Why has it been prohibited?

Our laws provide the possibility to insure one’s own risks against fluctuations in exchange rates without using the pricing mechanism. The Civil Code has the notion of obligations which can be stated in foreign currency, but not the good’s price.

It would be more preferable in basic units…

This is our national pride that we have the possibility to determine money relations in the national Belarusian currency.

A user has sent us a question: “Starting from January 1st, 2011 resolutions of Council of Ministers as of 09.12.2008 No.1903 “On approval of regulation on procedure of realization of goods, works, and services at the prices to be determined subject to the state of market in the territory of the Republic of Belarus” and as of 01.12.2008 No.2008 No.1834 “On procedure of realization outside of the Republic of Belarus of production at the prices to be determined subject to the state of the world market ” have ceased to be effective. What regulatory acts shall the entrepreneur follow in connection with loss of effect of the aforesaid resolutions, if he carries out wholesale and retail trade at reduced below-cost prices subject to the state of market?”

These resolutions of Council of Ministers existed in conditions when basic provisions for composition of costs existed. In this connection the notion of cost value had a specific definition and was formed in compliance with these provisions. These resolutions were objectively essential in conditions of such costs regulation.

What regulatory acts shall we rely upon today?

The possibility to implement your project on selling goods below cost price has been laid down in Instruction No.183. It determines the goods which may be sold above or below cost value. It is necessary to be governed by the Instruction and develop local legal normative acts.

What can be the name of this local regulatory act?

Regulations on accounting policy. Only the standard which has already been developed at our enterprises shall be broadened and updated: the new market pricing mechanism requires regulation of all and any steps.

How shall the economic entities see the way and the reason for such up-dating in practice? Will any courses be held or any regulatory acts be issued in this regard? How shall we understand where to go and how to up-date?

Firstly, training should be provided. We move forward to the market: if there is a demand, we are able to predict it, which means that we should offer these training services. Secondly, creative approach of the economists themselves is essential. I suppose that something will see the light in this respect.

That is to say that the economic entities themselves shall give birth to some courses which will teach them how to live further, isn’t it?

I think the problem will be resolved sooner or later: vacuum shall be filled.

Nevertheless, your inspections have not been recalled.

The inspections have not been recalled, but we won’t be interested in cost methods for non-regulated prices. The law stipulates that we shall control the norms, standards and procedures, so we won’t check up those points.

One more question from the user: “Is it possible to indicate the cost of a standard hour in the price list instead of cost of a particular type of service (the company is engaged in appraisal services)?”

A standard hour is a calculation unit, the same as a square meter or a kilogram.  Application of this calculation unit is quite wide-spread in the sphere of services.   It has been primarily caused by the market struggle for the customer, and each person is able to make an adequate estimate to what extent the service of this or that company will be expensive or moderate for him. So, the cost of a standard hour can be included in the price list and it is quite normal.

Can an organization have several standard hours? The cost of a standard hour approved by for citizens of the Republic of Belarus differs from that for foreigners.

This question has not been regulated by anything. I have not found any direct answer to it. I shall proceed from antimonopoly laws, laws taking place of the pricing laws. In this particular case if you give your preference to a certain market segment and in doing so you deprive the others, it could awake the interest of antimonopoly authorities. Therefore, you should be very cautious when applying different price lists. The way out of that situation would be application of discounting procedure which makes up the whole chapter in Instruction No.183.

Many people are thinking now that there is no need in a discount regulation due to the Edict being issued.  Or they are wrong, aren’t they?

They are, it is relevant, although we still haven’t had such acute situations connected with violation of antimonopoly laws. If someone has violated the laws, one of the instruments proving the necessity to sell to certain customers at certain prices would be this discount regulation. Otherwise another participant may say: “He drives me out from the market and deprives me of the opportunity to take part in this competition”. These issues are very delicate, so you should be very careful in your actions.

In other words, you recommend having a discount regulation even for non-regulated goods, don’t you?

Yes, discount shall be reasonable. It was written “fixed discount” earlier, but now the word “fixed” is removed, because it was misleading for some people. It was prescribed “particular conditions”, and now there is just the word “conditions” remained, so interpretation has become rather broad for you to make use of it.  

According to the Edict, a whole number of actions shall not be regarded as infringement of the law, including, probably the most important one, which is realization of goods, works and services without any economic calculations, etc.  Actually this is very pleasant. From the practical and legal point of view, what shall be done now with resolutions passed in relation to the economic entities before March 1st upon the given constituent elements? What is your reaction to these provisions of the Edict?

We have already reacted. The legal base for any reaction is Administrative Code. It has been quite clearly and briefly stated that in case of mitigating the responsibility, annulment of corpus delicti, or if the action ceases to be unlawful, the regulatory act shall have retroactive effect. In accordance with the aforesaid, from the day of coming into force of Edict No.72, specifying that certain actions, in particular, violation of limiting factors, breach of the registration procedure apart from the regulated prices and lack of economic calculations apart from regulated prices, shall not be considered as infringement of the law, and the regulations of the Edict shall have retroactive effect. By means of our own authorities, without applying to the court, we have already revoked six protocols drawn up upon administrative cases due to lack of the economic calculations.

The above mentioned provisions of Administrative Code shall be applicable for all similar regulations unexecuted by March 1st, 2011. 






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