By Roger Field
With the scrapping of the UAE’s infamous agency laws now a distinct possibility, the country’s distributors are once again under the spotlight.
|~||~||~|With the scrapping of the UAE’s infamous agency laws now a distinct possibility, the country’s distributors are once again under the spotlight. Since the agency rules first appeared some 60 years ago, retailers have often complained of prices set artificially high by distributors concerned only with looking after their own backs.
Rules that could encourage price fixing and warp market prices rarely make sense, and that is most likely the reason why the World Trade Organisation is calling for the agencies’ abolition. Furthermore, it is not just the WTO and retailers that are making a stand against what they see as unfair rules. In October, the UAE Cabinet stepped in to allow traders to directly import 14 basic products, including milk powder, canned vegetables and meat, without exclusive agency rights.
The move, which was apparently in response to some distributors’ attempts to inflate prices in a bid to profit from a rise in public sector pay, highlighted the importance of allowing the market to best decide prices. But regardless of how the agency rules stand against free-market theories, it is important to assess the impact they have on the people who are most affected by them — the manufacturers, distributors and retailers.
Furthermore, while it seems some distributors are concerned about the sudden appearance of competition if and when the laws are changed, this is unlikely to happen — in the short term at least — as Naser Ali Odeh, general manager of distributor GulfCo, told RNME this month. Hubert Lobo, of marketing information specialist ACNielsen, also feels the effect of repealing the law is likely to be limited, although he predicts some prices may fall and that “the distributor will have to work harder to prove that he is the right partner for his manufacturer or his principle.”
What do you think about the agencies handling distribution? Do they wield too much power over prices? Do you think repealing the agency laws will have a significant effect on the FMCG sector? E-mail me on: email@example.com
Roger Field, EditorE-mail: firstname.lastname@example.org||**||