A legal notice published yesterday will forbid business operators from smoothing their prices upward when pricing their products in euros during the currency transition period after 1 January, effectively eliminating a practice many had feared would have led to inflationary pricing.

The measure aims to ensure fair pricing practices in euro conversions. It applies across the board and is not intended to address any specific business sector.

Business operators found contravening the legal notice will be penalised by a flat fine of Lm750, and an additional Lm75 fine for each day on which the contravention persists.

Smoothing refers to the altering of an awkward price to a more acceptable or easily remembered round figure. The practice, which is optional, differs from rounding, which is used during the dual display period to Maltese lira set prices to the nearest euro cent.

Following the legal notice, businesses converting, for example, Lm1 to euros would end up with a figure of EUR2.33. But businesses looking for a round price to attach to a product or service will not be able to smooth the price up to EUR2.35, as most had anticipated was to be the general practice, but would rather be required to smooth the price down to EUR2.30.

The measure serves to eliminate the prospect of price abuse carried out with the pretext of smoothing – leaving businesses with the options of either smoothing their prices downward or leaving them at their true conversion rate.

The legal notice reads, “The smoothing of monetary amounts is only permitted when such smoothing results in a monetary amount in euro which is less than the equivalent monetary amount in Maltese lira prior to conversion.”

There are, however, certain exemptions to the new rule.

For example, when monetary amounts form part of a continuum, such as in the case of price brackets or thresholds, upward smoothing will be permissible to, according to the legal notice, “ensure continuity in the threshold values of neighbouring brackets to distinctly delimit the bracket in a threshold”.

A further exemption from the rule could additionally be applied for in cases of physical or technical constraints, but only after a special concession is granted by the Euro Observatory.

Such instances, which will be considered on a case-by-case scenario, may include vending or slot machines. Also included would be situations in which the non-smoothing of prices could lead to difficulties such as when there is a need to give small change to a vast number of people in a short time frame, thereby creating a public security risk.