Serrari Group

France is taking proactive measures to combat inflation, with Prime Minister Elisabeth Borne revealing plans to temporarily suspend a longstanding ban on retailers selling road fuel below cost. This decision comes as the country grapples with a summer surge in pump prices, posing challenges to the government’s efforts to control consumer inflation.

TotalEnergies, a prominent energy company in France, has already extended a cap on fuel prices, and select supermarket chains have initiated promotions offering petrol at cost. However, a ban on selling fuel below cost, in place since 1963, has hindered further price reductions.

Prime Minister Borne has announced that this ban will be lifted for “several months,” marking a departure from the traditional rationale behind sales-below-cost laws, which primarily protect small independent businesses. In this case, the government’s focus is squarely on supporting consumers, even at the expense of business interests.

Prime Minister Borne emphasized, “With this unprecedented measure, we will deliver tangible relief to the French people without subsidizing fuel.”

The government has firmly rejected the idea of reducing fuel taxes, citing the need to manage the public deficit and debt. Instead, the emphasis is on encouraging large corporations to contribute to relief efforts.

Finance Minister Bruno Le Maire has expressed concerns over high petrol refining profit margins, suggesting that government intervention may be required to address the issue.

In another consumer-centric move, Prime Minister Borne announced that starting in November, companies will be obligated to clearly indicate on product labels when they modify a product’s size. This step aims to combat the controversial practice known as “shrinkflation,” where products are sold in smaller quantities without a corresponding price reduction. This practice has garnered attention and criticism in the food retail sector amid rising prices.

As France implements these measures to combat inflation, all eyes are on their potential impact on consumers and the broader economic landscape.

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By Montel Kamau
Serrari Financial Analyst
17th September, 2023

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