Following on from yesterday morning's post re the new trade law in Hungary re closure of unprofitable supermarkets (below), it is obvious that the Hungarian competition authorities have evolved a very effective way of neutralising some of the scale-power of major retailers.
A new model in the management of anticompetitive behaviour
Unlike more 'sophisticated' markets where a set of rules is established, and transgression is detected, proven and penalised, the Hungarian authorities have identified the ways in which large companies can exercise scale-power and are taxing such uses in order to neutralise their impact on smaller players, fast.
This is a much simpler process that does not need the help of whistle-blowers to make a case.
Details are given in the posting below of the steps already taken in taxing large companies' ability to cross-subsidise unprofitable store locations, ways of promoting (advertisement tax), provision of food services (food supervisory fee, from 0.1% of sales) and forbidding the sale of some categories (tobacco).
Application of the process to trade credit abuse
It follows that when they come to the issue of trade credit, the Hungarian authorities will not - unlike UK legislators - miss the point of trade credit abuse by penalising breaches in 'on time' payment of invoices i.e. the customer is entitled to negotiate a period of their choice - 45 to 90+ days on a 'take it or leave it basis' and be in breach only if the agreed time period is breached.
Instead, if they follow their current approach, the Hungarian authorities will calculate a method based on transfer of value time-period, plus say 5 days handling to allow for banking system 'efficiencies' which in the case of weekly deliveries would work out at approximately 15 days from date of delivery.
The authorities would then simply apply a commercial rate of tax - say 5% minimum p/a - on any period in excess of 15 days, thus neutralising the scale power of the customer re credit period. Monies collected in this way could be then re-cycled to subsidise smaller players...
Credit period was never intended to morph from covering the gap between receipt of goods and payment by the customer's customer, to becoming a source of free credit or working capital, at the expense of a supplier too powerless to object...
A new model in the management of anticompetitive behaviour
Unlike more 'sophisticated' markets where a set of rules is established, and transgression is detected, proven and penalised, the Hungarian authorities have identified the ways in which large companies can exercise scale-power and are taxing such uses in order to neutralise their impact on smaller players, fast.
This is a much simpler process that does not need the help of whistle-blowers to make a case.
Details are given in the posting below of the steps already taken in taxing large companies' ability to cross-subsidise unprofitable store locations, ways of promoting (advertisement tax), provision of food services (food supervisory fee, from 0.1% of sales) and forbidding the sale of some categories (tobacco).
Application of the process to trade credit abuse
It follows that when they come to the issue of trade credit, the Hungarian authorities will not - unlike UK legislators - miss the point of trade credit abuse by penalising breaches in 'on time' payment of invoices i.e. the customer is entitled to negotiate a period of their choice - 45 to 90+ days on a 'take it or leave it basis' and be in breach only if the agreed time period is breached.
Instead, if they follow their current approach, the Hungarian authorities will calculate a method based on transfer of value time-period, plus say 5 days handling to allow for banking system 'efficiencies' which in the case of weekly deliveries would work out at approximately 15 days from date of delivery.
The authorities would then simply apply a commercial rate of tax - say 5% minimum p/a - on any period in excess of 15 days, thus neutralising the scale power of the customer re credit period. Monies collected in this way could be then re-cycled to subsidise smaller players...
Credit period was never intended to morph from covering the gap between receipt of goods and payment by the customer's customer, to becoming a source of free credit or working capital, at the expense of a supplier too powerless to object...
1 comment:
the distribution structure has changed drastically in Hungary. alrhough its favorable for consumers the vested interest of traditional suppliers are damaged, also the bigger scale domestic chains(CBA and COOP). the probem is that Hungary cant handle free competition, usually were vested interest negociated in a for consumers not transparent way.its negative for the consumers.
Post a Comment