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Tag: Competition Commission of Pakistan

  • CCP raids cement manufacturers association for possible cartelization

    CCP raids cement manufacturers association for possible cartelization

    ISLAMABAD: The Competition Commission of Pakistan (CCP) on Thursday raided the central office of All Pakistan Cement Manufacturers Association (APCMA) and seized suspicious record.

    In a statement the CCP said that as part of an enquiry launched in May 2020 to investigate the possible anti-competitive activities by the cement manufacturers, carried out a search and inspection of the APCMA in Lahore on Thursday.

    It said that two different teams entered and searched the APCMA main office and a member of APCMA. “Since a senior employee of one of major cement company is also the office bearer of the APCMA’s Executive Committee, representing the north region, therefore, the commission also conducted search and inspection of the premises of member concern with the objective to gather evidence of any collusive arrangement for the purposes of the Act,” it added.

    The CCP said that the enquiry was started based on the information gathered through various media reports, and concerns and complaints expressed regarding a concurrent increase in cement prices, particularly during the month of April 2020.

    The reports indicating that an increase of Rs45 – Rs55 per cement bag was apparently decided in a meeting of the cement manufacturers held under the umbrella of APCMA. Some of the media reports also quoted cement dealers saying that the leading cement companies in the north region had collectively decided to increase the cement prices by Rs55 per bag.

    From the analysis done by the CCP’s enquiry officers to see the cement companies’ profitability trend, it transpired that due to the lower demand of cement in the first quarter of 2020, the companies had to undergo financial losses at variance, however, the increase in price was starkly parallel, raising concerns of collective decision making and price fixing by the cement manufacturers.

    “Some of the players of the construction industry also hinted upon the cement cartel in the North Region becoming active following price increase trend in northern region.”

    The official data available with the CCP indicated the cement price increase of 4 percent in Islamabad, 10 percent in Lahore, and 6 percent in Peshawar from the second week of April 2020.

    From analysis of the information obtained from the news reports, price trends and facts gathered pertaining the same, it appears that objective basis, if any, needed to be assessed and / or the correlation between increase in the price of cement and grounds presented by the representatives of cement industry.

    Sudden rise in price by the cement manufacturers at the time when there is low demand compared to the installed capacity of the manufacturers at a time when there is low demand compared to the installed capacity of manufacturers and considering the input fuel cost (coal and oil), transportation and interest rate have declined raises suspicion of a collective rise in price by cement companies.

    It may be noted that the production capacity of cement sector has increased from 44 million tons in 2014 to 69 million tons in 2020. The losses incurred by the cement sector and increase in the price of cement in a similar time period raises suspicion of collective decision of the cement companies to recover losses incurred due unutilized installed capacities.

    The CCP said that the cement sector has history of collusive activities and they have been penalized in the past to an amount of collectively more than Rs6.3 billion on account of involvement in the prohibited agreement in violation of Section 04 of the Act.

    In 2012 the commission again initiated enquiry against cement companies, however, the same could not be proceeded further due to stay order granted to cement companies by the Lahore High Court.

    The CCP said that the latest search had been carried out to gather the evidence of possible communication, arrangement, agreement, or understanding between the cement producers pertaining to the violation of the provisions of the Competition Act, 2010.

  • Competition Commission approves 59 mergers, acquisitions in 2019/2020

    Competition Commission approves 59 mergers, acquisitions in 2019/2020

    ISLAMABAD: The Competition Commission of Pakistan (CCP) has processed and granted approval to 59 merger and acquisition applications during fiscal year 2019-2020, against the annual target of 50, showing the CCP’s promising performance to facilitate the local and foreign investors despite the limitations caused by COVID-19 pandemic.

    A statement issued on Thursday out of the total 59 approvals, 51 were acquisitions, 5 mergers and 3 joint ventures applications.

    The major sectors where these mergers and acquisitions took place include automotive, household products, food, sugar, oil, power, freight, LNG, insurance, agriculture, coal mining, logistics, pharmaceutical, chemicals, petroleum, healthcare, leasing, plastics, textile, hospitality, financial services, digital payments, mobile phone, investment, IT-Hardware, wind power, and microfinance banking.

    Moreover, the CCP also processed and granted Exemptions to 43 undertakings under the Section 5 of Competition Act, 2010.

    CCP grants exemptions to notified agreements between companies from the prohibition of Section 4 of the Competition Act, on the basis of an individual assessment.

    Restrictive agreements qualify for exemption if their benefits to general welfare (product improvement, technical or economic progress, benefits to consumer) outweigh their restrictive effects on competition.

    During the outgoing fiscal year, the CCP complete 14 inquiries, issued 78 Show cause notices, and passed 15 orders. An important enquiry was concluded In the matter of alleged bid rigging in the tenders issued by Power Distributions companies for the procurement of Line Hardware material.

    Similarly, the CCP issued to the Pakistan Sugar Mills Association and its member sugar mills in 2009 for cartelization.

    These sugar mills had not challenged the CCP’s show cause notices, but legal action had not been started against them in the past.

    Even in the challenging time of COVID-19 pandemic, the CCP ensured its smooth functioning by extending facilitation to the stakeholders. An Online Merger and Acquisition Application filing system was launched to facilitate the local and foreign investors in filing merger applications online.

    Furthermore, to ensure health and safety of the respondents amid COVID-19, the parties have been allowed to respond the show-cause notices issued to them in the hearings using video conference and other online tools.

    An online application for granting exemptions has also been prepared and will be launched soon.

    The CCP issued a Policy Note to the Securities & Exchange Commission of Pakistan (SECP) asking for an immediate reinstatement of the cost audit of companies (particularly Cement, Sugar, Vegetable Ghee/Cooking Oil, Fertilizers, and Wheat flour companies), so that credible and verified cost information is available to assist in factual (rather than speculative) policy making.

    In order to curb the bid rigging in tenders and public procurements, the CCP has prepared an in-house IT-based Bid Rigging Analysis and Detection (BRAD) system to help detect signs of collusion in the bidding process.

    On the legal front, the Islamabad and Lahore High Courts have resumed hearings in the cases wherein the CCP’s constitutionality has been challenged by the undertakings. The government, through the Attorney General of Pakistan, has been extending full support to the CCP in resolving the pending issues.

    Certain other recent initiative include initiation of online webinars to help educate the business and consumers around Competition Law; launch of draft study on the Competition Concerns in the LPG Sector; and working on the State of Competition report after a pause of 10 years.

  • Investigation launched against 88 housing schemes

    Investigation launched against 88 housing schemes

    ISLAMABAD: Competition Commission of Pakistan (CCP) has initiated investigation against around 88 housing schemes for deceptive marketing practices.

    In a statement on Monday, the CCP said that it had launched the enquiry while taking notice of the widespread concerns and complaints regarding the prima facie deceptive market practices by various housing schemes in Punjab.

    The CCP said that the Lahore Development Authority (LDA) informed through a letter that 88 housing schemes in Lahore and its adjacent district of Kasur, Sheikhupura and Nankana Sahib were luring investors and the general public through print and TV advertisements to invest in their schemes, without meeting the legal requirements and in violation of the pertinent laws.

    The LDA has sought a ban on the advertising campaign of these schemes to save the citizens from financial losses.

    The CCP took suo moto notices and authorized an enquiry team to thoroughly probe the housing schemes and submit the report to the Commission.

    As part of the investigation the team had visited 62 housing schemes to see the situation on ground and was scheduled to visit the remaining housing schemes.

    The team also met the Director General LDA and other concerned officials to enlighten itself about the pertinent issues and explore the ways to cooperate and coordinate in the areas of shared interests.

    The CCP said that Section 10 of the Competition Act prohibits businesses from indulging in deceptive market practices, which also include the distribution of false or misleading information lacking reasonable basis, deceiving the consumers, and harming the business interest of the other undertakings.

    If the violation of Section 10 is proved against the housing schemes, the CCP may issue show cause notices to them, according to the statement.

    The CCP is mandated under the Competition Act to ensure free competition in all spheres of commercial and economic activity, to enhance economic efficiency and to protect consumers from anti-competitive behavior including deceptive market practices.

  • CCP imposes penalty of Rs75 million on flour mills association for anti-competitive activities

    CCP imposes penalty of Rs75 million on flour mills association for anti-competitive activities

    ISLAMABAD: The Competition Commission of Pakistan (CCP) has imposed a penalty of Rs75 million on Pakistan Flour Mills Association (PFMA) for providing a platform to share commercially sensitive information and fixing the quantities of production of wheat flour.

    The commission took the notice on reports suggesting unusual price hike of wheat flour or wheat atta across Pakistan and carried out raids on PFMA premises.

    “The enquiry in the matter concluded that PFMA is providing a platform to its members for settling of prices of wheat flour to avoid any form of competition which is in violation of the laws.”

    After hearing the parties, the CCP’s bench comprising of the Chairperson Ms. Vadiyya Khalil and Members Dr. Muhammad Saleem and Dr. Shahzad Ansar passed the order.

    The commission observed that under Article 38 of the Constitution the State is responsible to ensure the provisions of food and basic necessities at fair prices along with social and economic benefits to its citizens.

    Accordingly, Provincial Food Departments set a maximum cap of the wheat flour price under the Foodstuffs (Control) Act, 1958; as wheat is Pakistan’s dietary staple and used by consumers belonging to all socio-economic groups.

    The wheat flour currently contributes 72 percent of Pakistan’s daily caloric intake with per capita wheat consumption of around 124 kilograms per year, one of the highest in the world.

    The commission observed that having a maximum cap in the essential food item benefits the consumer to bargain for a lower price and prevents retailers from overcharging consumers. This also enables retailers to discount the product in order to increase their sale.

    “PFMA in complete derogation of the aforesaid objective, deliberately fixed the rates of wheat flour by conducting meetings and discussing the prices as well as the quantities to be produced and supplied by flour mills in violation of Section 4 of the Competition Act.”

    The CCP also observed that discussion, deliberation and decision regarding purely business concerns like current and future pricing, production and marketing are anti-competitive and should be avoided at all costs by the association.