Supreme Court confirms that collective pricing by competing businesses through a trade association violates competition law, even when agreed prices are lower.
ISLAMABAD: The Supreme Court of Pakistan has upheld the Competition Commission of Pakistan’s (CCP) finding that the Pakistan Vanaspati Manufacturers Association (PVMA) violated competition law by collectively determining prices of ghee and cooking oil, while reducing the penalty imposed on the association to Rs30 million.
A two-member bench comprising Justice Jamal Khan Mandokhail and Justice Salahuddin Panhwar affirmed the findings of the CCP and Competition Appellate Tribunal (CAT), holding that PVMA’s conduct amounted to prohibited price-fixing under Section 4 of the Competition Act, 2010.
The case relates to consultations between the federal government and PVMA during 2007-09, when the government was seeking a reduction in the prices of ghee and cooking oil.
PVMA participated in the consultations and subsequently communicated the agreed prices to its member companies.
The CCP had determined that the association negotiated and fixed prices on behalf of its members with the government, constituting a violation of Section 4(1), read with Section 4(2)(a), of the Competition Act.
The commission had initially imposed a Rs50 million penalty on PVMA, which was later upheld by the CAT.
SC declares collective pricing unlawful
In its judgment authored by Justice Jamal Khan Mandokhail, the Supreme Court held that the government’s consultations with PVMA on price reductions, conducted without involving the CCP, followed by the association’s collective determination of prices, constituted a violation of competition law.
The court observed that competing businesses must determine their prices independently based on their individual commercial considerations.
According to the judgment, collective price determination — whether carried out directly by competitors or through a trade association — undermines competition by replacing independent pricing decisions with a common price.
The Supreme Court also rejected the argument that the arrangement could be considered lawful because the agreed prices were lower than prevailing market prices.
It noted that lower prices are generally a result of competition and can benefit consumers, but the violation arose from the collective determination of prices by an association representing competing businesses.
Public interest does not override competition law
The Supreme Court further held that an arrangement cannot escape competition law merely because it is intended to serve the public interest.
The court said interference with independent price competition cannot be overlooked simply because the collectively agreed price is lower than the prevailing market price.
While affirming the CCP’s substantive finding that PVMA had engaged in prohibited price-fixing, the Supreme Court reduced the penalty from Rs50 million to Rs30 million.
The association has been directed to deposit the revised penalty of Rs30 million.
The ruling reinforces the principle that competing businesses must make pricing decisions independently and that trade associations cannot replace competitive market mechanisms with collectively agreed prices, even where the stated objective is to reduce prices for consumers.