The rise in prices in cafes under the microscope of the Competition Council

The rise in prices in cafes under the microscope of the Competition Council
The rise in prices in cafes under the microscope of the Competition Council

An alleged consultation between café owners and managers calls into question the principle of free competition and raises concerns about the impact on Moroccan consumers.

The Competition Council has just issued a clear warning after having noted indications of a possible agreement on prices between owners and managers of cafes in Morocco. In a press release made public, the regulatory body claims to have information according to which “certain café owners and managers are studying a possible increase in the prices of drinks served”.

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If these facts were to be proven, the Council did not mince its words: “an investigation will be opened on this subject”. A firm reminder of the legal framework regulating free competition and prohibiting any agreement on prices was also sent.

Price freedom but no consultation

According to Ahmed Rahhou, president of the Competition Council, “Law 104.12 is clear: the setting of prices for products and services is determined by the free play of competition in the market. However, concerted actions aimed at fixing prices or distorting this free competition are prohibited.”

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This legal update underlines the complexity of the question of prices in a sector like catering. On the one hand, the free market must in theory allow a natural fluctuation of prices according to supply, demand and the costs borne by operators. But on the other hand, any consultation between players to influence these prices is contrary to the rules of competition.

“It’s a delicate balance to find,” explains a café owner. Restaurateurs of course have costs to pass on, whether raw materials, rent or payroll. But they cannot do it in an organized and concerted manner without falling into illegality.

A cost-sensitive sector

This possible generalized increase in prices in cafes occurs in a context of high inflation in operating costs. The price of food and drinks, the soaring energy bill and the increase in the minimum wage in recent months have generally increased costs.

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“Margins have been reduced considerably for many cafe owners,” underlines another owner. “A price increase is inevitable for many of us if we want to remain profitable.”

But it is precisely this type of consultation between players in the same sector that poses a problem in the eyes of the Competition Council. “Each establishment must adjust its prices independently according to its particular situation, its strategy and its positioning on the local market,” says Ahmed Rahhou.

Risk of saturation for the consumer

Beyond the legal and economic aspects, this possible general rise in prices in cafes also raises fears of an increase in the budgets of Moroccan households, already severely tested by galloping inflation.

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Coffee remains a popular and affordable leisure activity in Morocco, but too high an increase in prices could encourage many customers to restrict these outings.

A risk of consumer financial saturation which would then threaten a sector already weakened by successive crises, between the pandemic then the surge in costs. A delicate balance to find for professionals, under the watchful eye of the competition authorities.

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