Islamabad, April 2, 2024 – The Competition Commission of Pakistan (CCP) has taken decisive action against the Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) and six major fertilizer companies for allegedly engaging in price fixing practices regarding urea, a move that could have far-reaching consequences for both farmers and consumers.
The issuance of Show Cause Notices on Tuesday marks a significant development in the ongoing efforts to safeguard fair competition within the agricultural sector.
Urea prices hold significant sway over the costs associated with essential food commodities, making any arbitrary increases particularly concerning. According to a statement released by the CCP, such actions by fertilizer companies have the potential to burden farmers with higher input costs, ultimately translating into increased prices for consumers at large.
The inquiry conducted by the CCP highlighted the involvement of FMPAC and its six member firms, namely Engro Fertilizers Limited, Fauji Fertilizer Company Limited, Fatima Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Agritech Limited, and Fatimafert Limited, in what appears to be a prima facie violation of Section 4 of the Competition Act, 2010.
The genesis of the inquiry traces back to November 2021 when FMPAC issued an advertisement setting a ‘Maximum Retail Price of Urea at Rs 1,768 per 50kg bag’ amidst reports of rising prices and shortages. This move, interpreted by the CCP as an association’s decision on urea sale rates, is deemed a contravention of Section 4(2)(a) of the Act, which prohibits such collusive practices.
Moreover, the inquiry unearthed a concerning pattern of uniform pricing and price parallelism among the urea companies, hinting at potential collusion in the determination of prices. This observation is particularly alarming given that these companies benefit from subsidized feedstock gas provided by the government, albeit at varying rates for each plant. The apparent uniformity in prices raises pertinent questions regarding the cost structures and subsidies received by these entities.
From a competition law perspective, the advertisement of prices by an association, irrespective of whether they align with government-set rates, is deemed a commercial decision exceeding permissible boundaries. The CCP has consistently cautioned business associations against engaging in price-fixing or other collusive activities, emphasizing the need for adherence to fair competition principles.
The enduring prevalence of double-digit food inflation in Pakistan underscores the profound impact of urea price escalations on the broader economy. As such, the CCP’s intervention in addressing alleged price-fixing practices assumes heightened significance, underscoring the imperative of preserving competitive dynamics within the agricultural sector.
Moving forward, the onus lies on the concerned parties to provide substantive responses to the Show Cause Notices issued by the CCP, thereby enabling a thorough examination of the allegations and facilitating the enforcement of appropriate remedial measures. In doing so, stakeholders can contribute to fostering an environment conducive to fair competition, ensuring equitable outcomes for all stakeholders involved in Pakistan’s agricultural landscape.
