Prohibited agreement

Plea of the two Goods Transport Associations (Respondents) was that the revision in freight rates was based on the inflationary increase in petroleum / associated costs to run the business and the transporters followed the freight list voluntarily

Whether a collective decision by the Respondents for price fixation of freight charges was prima facie violation of Ss. 4(1) & 4(2) of the Competition Act, 2010 ('the Act')?

Held: Section 4(1) of the Act expressly prohibits the undertakings from engaging in agreements, decisions, or concerted practices that have the object or effect of preventing, restricting or distorting competition while under S. 4(2)(a) of the Act, such agreements include, but are not limited to directly or indirectly fixing the purchase or selling price or any other restrictive trading conditions

An agreement is anti-competitive if it facilitates price-fixing or other forms of collusion among competitors, whether through direct meetings or other means

The context of such communications plays a critical role in determining whether they fall within the scope of S. 4 of the Act

Market's price-setting mechanism is the central nervous system of the economy and any agreement among competitors having the purpose and effect of raising, depressing, fixing, pegging or stabilizing prices is unlawful per se

Coordinated discussions among competitors regarding pricing, whether in person or through other means, constitute a restriction of competition

In the present case, the Respondents had themselves conceded that the revision in freight rates based on the inflationary increase in petroleum /associated costs, however technically, the price negotiation should have been left to individual transporter regardless of the fuel price whereas, the Associations in concert with its members, collectively fixed and announced increased transportation charges

Collective decision making took away individual discretion which tantamount to anti-competitive practices in violation of S. 4 of the Act

Economic hardship or inflation cannot justify coordinated price rise

The proper response would be for each undertaking to independently assess and adjust its pricing strategy in response to market forces

What transpired instead was a coordinated price adjustment, a classic example of horizontal collusion, which stifles competition by aligning the pricing behavior of otherwise competing undertakings

In competition jurisprudence any form of collective pricing decision, including non-binding recommendations or association-endorsed rates, can amount to a violation where it has the effect of harmonizing market behavior

Moreover, the Enquiry Report established that the Respondents enforced the issued freight lists through coercive means

Any transporter (i.e. member of the association) who did not adhere to the rates prescribed in the freight list was subjected to threats of punitive action and social boycott, which directly undermined the Respondents' claim that transporters followed the freight list voluntarily

Documents recovered during the search and seizure operation (being part of the Enquiry Report), revealed that members (of associations/Respondents) were compelled to comply with the issued freight list; in cases of non-compliance they (members) were required to submit written apology letters along with undertakings to conform to the freight list in the future

Thus, the Respondents not only issued a uniform pricing structure for all association members, contrary to S. 4 of the Act, but also engaged in coercive practices to enforce compliance ; which conduct constituted a decision by an association of undertakings with the objective of price-fixing

Hence, the Respondents actions were in clear violation of Ss. 4(1) & 4(2)(a) of the Act

Competition Commission Bench imposed a penalty in the sum of PKR five million on each of the Respondents

Show Cause Notice proceedings were decided against the Goods Transport Associations accordingly.

Argument of the Goods Transport Associations (Respondents) was that most of the members of the associations having limited educational background were unfamiliar with the nuances of the competition law, therefore, in case of any violation, the Competition Commission should consider the same as a defence

Whether ignorance of law can be a valid excuse?

Held: A plea of ignorance of law can not be construed or sustained as a bona fide excuse

Ignorance of law is not an excuse and cannot be used as a defence

Competition Commission Bench imposed a penalty in the sum of PKR five million on each of the Respondents

Show-Cause Notice proceedings were decided against the Goods Transport Associations accordingly.

Competition Commission issued a show cause notice for prima facie violation of S. 4(2)(c) as an association of undertakings and its participating member undertakings were fixing or setting quantity of productions post-bid, despite the tender being competitively awarded to few undertakings, in an attempt to share the profits from the same

[Per Ms. Rahat Kaunain Hassan, Chairperson and Mujtaba Ahmad Lodhi, Member (Majority view): Letter from the association to procuring agency revealed that the association itself had admitted that the tender had been allotted to few participants who had quoted large quantities at the minimum rate

Association was actively found to interfere in the competitive process of awarding the tender by stating that the same was extremely unfair and that the law required that all parties who had participated in the tender to be asked to match the lowest established rate

Choice to participate in a competitive bid and the submission of bid rates were all independent commercial decisions to be made by each individual undertaking

Association's conduct negated the whole concept behind a competitive tender by advocating division of the tender amongst all participating undertakings only to take away the award of tender from successful bidders for the clear purpose of accommodating those who were unsuccessful, largely for their own financial security

Competition Commission imposed penalty on the undertakings and directed them to discontinue the violations]

[Per Ms. Shaista Bano, Member and Ms. Bushra Naz Malik, Member (Minority view): No direct evidence was available to prove that the procuring agency had itself asked for the quantity of product to be split between the member undertakings

No contravention of S. 4(1) read with S. 4(2)(c) was made out by the association or member undertakings.

Competition Commission issued show cause notice to an association of undertakings and member undertakings for making a decision regarding the sharing of stock information, a commercially sensitive information, by all member undertakings with their association and for participation in a series of meetings and communications during which the information was exchanged

[Per Ms. Rahat Kaunain Hassan, Chairperson and Mujtaba Ahmad Lodhi, Member (Majority view): Each undertaking had taken part in a concerted action together with its competitors the purpose of which was to influence conduct on the market, including collectively determining exportable surplus of stock, controlling supply thereto and to exploit as well as influence the independent commercial policy of each independent undertaking

Sharing of information had to be treated as per se violation where stock information was the ultimate factor leading to price competition in the relevant market

Competition Commission imposed penalty on the undertakings and directed them to discontinue the violations]

[Per Ms. Shaista Bano, Member and Ms. Bushra Naz Malik, Member (Minority view): Stock information classified by Enquiry Committee as "highly sensitive" was shared with the Cane Commissioners, who shared the data with other agencies and instrumentalities of the Provincial and Federal Governments

Stock information was not of a nature which was only available and known to the undertaking concerned

Enquiry Committee had failed to prove that the stock information was commercially sensitive information.

By being a member of an Association, an undertaking is deemed to have accepted its constitution and to have empowered the Association to undertake obligations on its behalf

Consequently, even where a member has not expressly approved an anti-competitive agreement concluded by the Association but has not expressly opposed it, the member may be held to have acquiesced to the agreement.

Information that can be considered as problematic includes information exchanges among competitors of data regarding future prices and/or quantities (such as future sales, market shares, territories or customer lists); information sharing on current conduct that reveals intentions on future market behaviour (outside pricing and quantity information) or cases where the combination of different types of data enables the direct deduction of intended future prices and quantities to have the object of restricting competition and any exchange of information that may not have the intention of restricting competition but may have that effect.

Factors to be considered while assessing compatibility of exchange of information, detailed.

Exchange of information can facilitate collusion among competitors by allowing them to establish coordination, monitor adherence to coordinated behaviour and effectively punish any deviations

While assessing the legality of information exchanges, competition agencies take into account the structure of the affected market, levels of concentration, characteristics/nature of the information exchanged and the modalities in which the information exchange takes place.

Information exchange is genuinely public if it makes the exchanged data equally accessible to suppliers and customers.

Information exchanges among competitors may fall into three different scenarios; as a part of a wider price fixing or market sharing agreement whereby the exchange of information functions as a facilitating factor; in the context of broader efficiency enhancing cooperation agreements such as joint venture, standardization or research and development agreements; or as a stand-alone practice, whereby the exchange of information is the only cooperation among competitors.

Label of 'decision' is not pertinent and even a letter, rules or recommendation may be considered as 'decision' for the purposes of S. 4.

Prohibition contained in S. 4 pertains to 'entering' into a prohibited agreement and the implementation of the same is not required to be established for the purposes of violation being committed.

In order to fall within the scope of S. 4(1) read with S. 4(2)(a), at the very least, in addition to direction, clear and convincing evidence of sharing of information, inter se competitor, there must additionally be clear indication that the "object" or "effect" of such exchange is of prevention, restriction or reduction of competition within the relevant market.

Term 'agreement' as conceived under the Act is very broad and encompasses the 'entering into' any/or all practices, arrangements and understandings that come within the purview of S. 4(1)

When S. 4(1) is read with the definition of 'agreement' in S. 2(1)(b) of the Act contractual elements like offer and acceptance, free consensus of parties, lawful consideration or for that matter enforceability of the agreement itself, are not relevant facts in determining whether any 'agreement' has been entered into

Prohibition under S. 4 pertains to all agreements whether these are: legally enforceable or not, with or without consideration or entered voluntarily or involuntarily.

Undertakings argued that the determination of relevant geographical market as the whole of Pakistan is erroneous due to the fact that regulatory environment is not homogenous in the whole of Pakistan

Validity

Under S. 2(1)(k), emphasis is placed on conditions of competition being 'sufficiently homogenous' and not strictly homogenous

Large buyers and industrial/ commercial consumers purchase sugar directly from the mills

Sugar wholesalers can either purchase directly from the mills or through the mill's designated broker(s) who work on a commission basis

Wholesalers can then sell sugar onwards to sub-dealers or directly to retailers

In a competitive market, mills compete with each other for business based on price and wholesales/commercial consumers lift sugar from the mill offering the most competitive prices

Sugar and sugarcane can move freely throughout the relevant market and are not restricted to one geographical location and sugar produced by a single mill can be sold throughout the relevant market.

Competition Commission initiated an inquiry into contravention of S. 4 of the Competition Act, 2010 by electric appliance manufacturers, distributors/dealers and their respective trade associations in terms of price fixing/resale price maintenance

Enquiry Committee recommended initiation of proceedings against respondents for violations of S. 4 and show cause notices were issued accordingly

Validity

Resale price maintenance arrangements, in whatever form, i.e. inter alia restricting discounts, fixing the price and/or setting a minimum or maximum price floor/ceiling, clearly fell under S. 4(2)(a) of Competition Act, 2010, amounting to a fixation of the selling price of a product/good and were to be treated 'by object' as anti-competitive as it ultimately impacted both intra-brand and inter-brand competition, in whatever form

Respondents were directed to deposit penalty amount, refund all penalty amounts imposed by them to their respective dealers and to cease such conduct.

Complainant's allegation was that the respondents had entered into contracts which had the effect of preventing, restricting, and reducing competition within the relevant market

Validity

Relevant market in the matter was provision of television audience measurement data and ratings to TV channels across Pakistan

First agreement excluded non-members of Pakistan Broadcasters Association from receiving ratings from Medialogic and included an extra criteria for non-members to obtain ratings from Medialogic

Along with that, Medialogic was also threatened with monetary consequences if they were to provide ratings to a non-member without prior approval of Pakistan Broadcasters Association

Non-members of Pakistan Broadcasters Association were also excluded from being part of Broadcasters Advertisers Council (second agreement), as there was no representation of them in their constitution, and third agreement prohibited Medialogic from providing services to non-members of Pakistan Broadcasters Association and non-members of Broadcasters Advertisers Council without prior approval from Broadcasters Advertisers Council

Competition Commission observed that the agreements between the respondents had the effect of foreclosing the market and creating barriers to entry for non-members and new market entrants

Commission issued directions of a prohibitory nature to the respondents under S. 31(b) of the Competition Act, 2010

Respondents were warned against engaging in any such activities in the future

Proceedings were disposed of accordingly.

Competition Commission received concerns raised by residents of respondent society that they were being forced to subscribe to the sole cable networks and were deprived of the choice of any alternate or competing services provided in the locality

Said residents further alleged that they were being forced to pay whatever subscription amount the "Provider" would charge, regardless of the quality of service being provided

Enquiry Committee, submitted its enquiry report with conclusion that by virtue of the exclusivity agreement arrived at between society and the "Provider", a prima facie contravention of S.4(1)(2)(a)(d) of Competition Act, 2010 was made out against the society and the "Provider"

First issue involved in the case was; whether the society was an "undertaking" within the meaning of S.2(1)(q) of the Competition Act, 2010

Society had submitted that being a co-operative society, it did not fall within the meaning of "undertaking"

Concept of "undertaking" would include every entity; whether natural or legal, as long as it was engaged, directly or indirectly in any commercial or economic activity, regardless of the legal status and way in which it was financed

Competition Act, 2010, had not classified the private economic operators or public entity differently, as long as they were engaged in any commercial or economic activity in a given market, they would fall within the definition of the term "undertaking"

Society, in circumstances, was an 'undertaking' and would remain liable for contravention of Competition Act, 2010

Second issue involved in the case was "what was the relevant market" for the purpose of proceedings

Management of society had asserted that the "Provider" was not the sole service provider, because "PTCL" was also providing similar services to the residents in the society; thereby suggesting that said two services were substitutable

'Relevant market' suggested identification of two or more products belonging to the same market

Relevant market assessment also required determining the geographic market

Business undertakings, subject to competition, must respect two major competitive constraints in terms of demand substitutability and supply substitutability

Market was considered to be competitive, if customers could choose between a range of products/services by reason of their characteristics, prices charged and intended use

Two services were not substitutable from demand side i.e. consumers' perspective

Third issue involved in the case was that, whether the exclusivity granted to the "Provider' by the society for the provisions of Cable TV Services had the object or effect of preventing, restricting or reducing Competition in the relevant market in contravention of S.4 of the Competition Act, 2010

Relevant clauses of agreement arrived at between the society and the "Provider", were; (exclusivity), whereby, during said agreement, no other competitor would be accommodated, subject to the satisfactory performance of the "Cable Network Services"

Clause for renewal of the agreement provided that on the expiry of five years, if some better offer from other cable service was received than the "Provider" Service would have to match the new offer or the society management would be at liberty to hire the services of other better party

Said two clauses had indicated that those were anti-competitive and restrictive of competition

Exclusivity granted to the "Provider" prevented, restricted and reduced competition by imposing respective trading conditions; restricting output as well technical advancement in terms of innovation and efficiencies and investment, in violation of S.4(1)(2)(a)(b)(d) of Competition Act, 2010

Agreement further regulated the future rapports between the parties to the agreement; if same was fulfilled, the "Provider" would continue to enjoy exclusivity or monopoly preventing other Cable T.V. Operators in the relevant market

Competition Commission observed that said clause of agreement had the object as well the effect of reducing, restricting and preventing competition in the relevant market as envisaged under S.4 of the Competition Act, 2010

Clauses of the agreement were violative of S. 4 of the Act and were void in terms of its S.4(3)

Authorized representative of the Society had tendered unconditional apology and submitted its commitment to amend its agreement with the "Provider" to the satisfaction of the Commission

Complainant who was also active in the business of paints alleged that respondent had fixed minimum retail price at which its dealers or distributors/retailers might sell its products and in case of non-compliance with the price so fixed complainant would suffer

Complainant also alleged that respondent had circulated to all distributors/retailers intimating that its dealers should sell the products only at its fixed retail price

Said practice had been going on for some time and the respondent had on various occasions, cut-off the supply and imposed penalties on dealers who sold at prices other than the respondent's fixed prices

Enquiry Committee, constituted by the Commission concluded that respondent was prima facie involved in imposing a vertical restraint on its dealers by maintaining a minimum sale price, which appeared to be in contravention of S. 4(3)(a) of the Competition Act, 2010

Enquiry Committee concluded that restriction imposed by the respondent on its dealers, not to sell its products to unauthorized dealers, was recommendatory in nature, hence it did not find the same to be in contravention of the provisions of Competition Act, 2010

Enquiry Committee had recommended initiation of proceedings under S.30 of the Competition Act, 2010

Competition Commission was empowered to impose a fine under S.38 of the Act and issue "cease and desist order" under S. 31 if there was violation of S. 4 of the Act

Counsel of the respondent on the basis of the acceptance by Commission amended commitment of the respondent, took the plea that a lenient view be taken in imposition of fine

Commission, while imposing fine, had taken into view the nature of violation, which in the present case, was price fixing

Alleged violation, continued for almost 3 years and was discontinued only after the issuance of the show-cause notice and during hearings before the Commission

Penalty of Rupees five million, was imposed on the respondent, which amount was liable to be deposited within 60 days from the date of order

Respondent was directed to immediately stop contravention of S. 4 of the Competition Act, 2010 and submit compliance report with the Registrar of the Commission within sixty days.

Section 4(1) read with Ss. 5 & 9 of Competition Act, 2010, allows the Commission to exempt a prohibited agreement if the undertaking seeking exemption can satisfy the Commission that the agreement substantially contributes to improving production or distribution, promoting technical or economic progress, while allowing consumers fair share of the resulting benefit or the benefits of that clearly outweigh the adverse effect of absence or lessening of competition.

Petitioner raised number of grievances including disconnection of his telephone numbers, change in the composition of the numbers, change of telephone packages by Telecommunication Company without informing the petitioner, limitation on the permissible number of SIM's, etc.

Validity

Petitioner had not raised any competition concerns

Issues raised by the petitioner either fell within the regulatory jurisdiction of Telecommunication Authority, which might proceed with the case according to its mandate and as per the applicable law and regulations, or the same, being of technical nature, were to be rectified by Telecommunication Company

Commission was bound by its mandate and would not interfere with the situations where no competition concerns were raised

Petition was disposed of accordingly.

Discussion, approval or advertisement of prices by an association of undertakings would fall within ambit of anti-competitive behaviour

Violations made despite previous warnings by the Commission

Commission issued show cause notice to Poultry Association regarding a series of newspaper advertisements whereby different prices of broiler chicken and chicken eggs had been publicized

Association contended that the rates of poultry products were set by Market Committees of Local Governments; therefore, there was no liability on their part

Validity

Association was an undertaking in terms of S. 2(1)(q) of Competition Act, 2010, as the same was an association of undertakings engaged in the poultry business, comprised of members from across Pakistan

Association had notified the prices of three different products in two relevant markets, that were broiler chicken and chicken eggs, which prima facie constituted a 'decision' for the purpose of Competition Act, 2010

Any form of conduct between the undertakings, which assisted the coordination of commercial behaviour, especially related to pricing, production and sale, was treated as importing the object of 'preventing, restricting or reducing competition'

Actions of trade associations were scrutinized for competition concerns because of the ease with which their legitimate objectives could spill over into illegal coordination

Discussion between the undertakings regarding the role of the Government over a specific industry although would not fall within the ambit of anti-competitive behaviour, but the discussion, approval or advertisement of prices by an association of undertakings would

Association could influence the pricing trend in the overall markets through advertisements in question

Association had to ensure certain authority which had the implicit effect of manipulating the behaviour of players in the relevant markets

Association also constituted the exchange of data which encouraged more uniform prices than might otherwise existed

Association while advertising the prices under its own name, was signaling to both consumers and undertaking in the poultry market that those prices had the approval of the association and the same constituted optimum rates to be followed

Association therefore, violated S. 4(1) read with S. 4(2)(a) of Competition Act, 2010 in each of the two relevant markets

Association had previously been warned by the Commission to desist from such violations

Fine of one hundred million rupees was imposed for said violations in the markets and association was directed to desist from advertising rates of poultry products as an association

Show cause notice was disposed of accordingly.

Section 4(1) of Competition Act, 2010 prohibited undertakings from entering into agreements, or in case of association of undertakings, from making decision which had object or effect of preventing, restricting or reducing competition within relevant market

Violation of S. 4 might occur through either of two methods: firstly, through an agreement of undertakings or their associations; or secondly, through a decision of an association of undertakings

Most important consideration in matter brought under S. 4 of Competition Act, 2010 was that of intention and effect

Doctrine of 'per se' stipulated that certain anti-competitive practices were so egregious as to be deemed illegal outright, and same were illegal without elaborate inquiry as to the precise harm they had caused or the business excuse for their use

Price fixing, market allocation and bid rigging were forms of collusion that had commonly been agreed to warrant treatment under the 'per se' doctrine in most jurisdictions

In case of violations which did not fall in the said list, concept of 'appreciable effect' came into play, which required examination of economic conditions prevailing in relevant market and effects of agreement on competition in said market.

For purposes of S. 4 of Competition Act, 2010, definition of 'relevant market' was not precondition to establish a violation¬¬

In cases of collusion, agreement to collude, instead of market power, was relevant

Identification of 'relevant market' in cases of collusion was merely for purpose of reference, and same was requirement for establishing an anti-competitive action

Enquiry report had limited its specification to overall market for genuine spare parts, as a market in which Member Undertakings operated and competed

Competition Commission observed that principle that 'with a technically homogenous product, it was not possible to distinguish different markets depending upon the dimensions, size or specific type of products' was applicable to present case

Enquiry report was correct in its demarcations of 'relevant market' for purposes of alleged violation under S. 4 of Competition Act, 2010.

Curtailing market for employment of experienced sales and technical staff at authorized dealers was effective restriction on free movement of skilled human resources, which constituted anti-competitive practice falling under S. 4(1) read with S. 4(2)(a) of Competition Act, 2010

Circular available with Enquiry Report was issued by President of the Association stipulated that members of Association should not have hired former employee of other members unless a 'No Objection Certificate' had been given to them by previous employer

E-mails available with Enquiry Report regarding correspondence between President of the Association and Member Undertakings showed implementation of said policy resulting in termination of employees hired in violation of said policy

Said Circular was not reactionary protective mechanism as stated by the Association

Respondents could not provide instances of alleged fraudulent conduct of employees as required by Competition Commission

Said restriction had hampered competition between members, as experienced sales and technical staff could not freely move around, which was critically important for bringing effective competition in relevant market

Commission found said decision violative of S. 4(1) read with S. 4(2)(a) of Competition Act, 2010, as same was imposition of a restrictive trading condition with regards to provision of services

Penalty of rupees fifteen million was imposed on the Association for said violation

Documentary evidence showed isolated instance of compliance of said policy by Member Undertakings

Given the isolated nature of compliance, no violation by Member Undertaking was made out in relevant market in the light of show cause notice

Member Undertakings were, nevertheless, warned that in case of future instances of similar behaviour concerned undertaking would be liable to severe penalty.

Agreements or decisions which involved assignment to particular entities of particular customers or markets had the effect of eliminating competition and constituted restraints, either vertical or horizontal

E-mail containing Minutes of meeting of car dealers available with Enquiry Report provided that allocations of new automobiles had been divided amongst dealers on basis of geography

Said Minutes of meetings also discussed rationale and mechanism behind market division in detail

Letter by a Member Undertaking to General Manager of IMC showed protest against another Member Undertaking for poaching a corporate client

From available evidence, no role of Association could be made out

Association was not found in violation of S. 4(1) read with S. 4(2)(b) of Competition Act, 2010

No cogent evidence was available to suggest that Member Undertakings had agreed to divide market amongst themselves

Actions of Member Undertakings, highlighted from documentary evidence, did not pertain to Association's forum and same, therefore, did not fall within context of show cause notice issued to Member Undertakings

Violation alleged in show cause notice was, therefore, not made out against Member Undertakings.

In case of violation of S. 4 of Competition Act, 2010, Commission is empowered to impose fine under S. 38 of Competition Act, 2010 and to issue a "cease and desist order" under S. 31

In case of multiple contraventions, penalty will be reflective of the same.

Member Undertakings of Association submitted that Association was not an incorporated entity, with requisite of legal personality to 'sue or be sued' and that there was no formal procedure behind membership and decision making process, and that representation of Association before the Competition Commission was not valid in absence of signatures on power of attorney by individual undertakings

Validity

"Association", whether constituted either formally or informally, fell under the ambit of the Competition Act, 2010

Proceedings before the Commission, being not equivalent to civil litigation, were not akin to a party 'sued'

Commission was not concerned with legal formalities of an organization or association, except with its de facto nature and the de facto actions being carried out by it

Question of formal 'membership' for purposes of violations under Competition Act, 2010 was irrelevant

Competition Act, 2010 referred to association of those undertakings which were a gathering of undertakings for a common purpose whether same was structured as a society, alliance, forum or similar

As long as undertakings grouped together for common purpose, they were, for all practical purposes, members of association

Member Undertakings, by their own admission, had conceded that Association was a platform which allowed its members to raise collective concerns

Member Undertakings were, therefore, members of Association

Commission was concerned with valid representation only, and not with the technicalities of form

For a representation to be validly made, Commission must reasonably have found same to be so made upon rational inspection of available evidence

Power of attorney submitted by counsel on behalf of Association was both signed by President and embossed with stamp of the association

Presumption was, in favour of Association's counsel

Member Undertakings had attended meetings called upon by the President of Association regarding Enquiry report of Commission

Company law was not transposable with Competition Act, 2010 on matter of representation, and aims and purposes of Competition Act, 2010 remained entirely different and therefore required different manner of dealing with technicalities

Legal maxim 'no injury is done to the willing' was applicable to the present case

Member Undertakings, having both actively and passively accepted the authority of President to act on behalf of the Association, could not contest it and claim misrepresentation.

Enquiry concluded that discussion between Member Undertakings and multiple decisions for fixing rates of services by Automobile Manufacturers Authorized Dealers Association were, prima facie, in violation of S. 4 of Competition Act, 2010

Association took plea that revision in rates was based on inflationary increase in material costs

Validity

Competition Commission's concern was with horizontal arrangement that was one between actual or potential rivals at the time of the disputed agreement had been made

Elimination of rivalry was a competition concern, and same, being one of the most pernicious forms of collusion, fell in ambit of doctrine of 'per se'

Present case was not fact of price increase that had posed competitive concern, but collective determination and fixation of prices

Inflation might unquestionably be accounted for by individual dealerships, but their Association must not take a decision to do so

Commercial decision making by Association, for or on behalf of its members, for any reason, remained prohibited under Competition Act, 2010

President of Association had addressed letter to insurance company informing about decision of the Association regarding revision in rates and requesting dissemination of said information to its Surveyors and Branch Managers

Minutes of meeting showed Service Managers' meeting regarding implementation of revised rates and also showed actual involvement of participants, as same contained names and details of participating Member Undertakings

¬Circular signed by President of the Association was issued for monitoring and implementation of policies, and same showed how the Association had a mechanism in place to ensure implementation of collusive practices

Another circular was also addressed to all insurance companies notifying them of the collective decision taken by the Association regarding increase in rates

Impugned decision of the Association was also evidenced by chain of e-mails available with Enquiry Report, which contained a draft letter sent by President of the Association in which a decision to boycott an insurance company had been taken for its not accepting the revised rates

Said e-mail exchange also demonstrated as to how the Association served as forum for its members to discuss pricing strategies and enforcement mechanisms for same

Association had not made any submissions regarding said documentary evidence

Collusion and cartelization were one of the most egregious forms of anti-competitive behaviour, which corrupted market as well individual participants themselves

Anti-competitive activities affected not just market players but general public as well

Associations of undertakings had the ability to effect advantageous changes for their members at policy level

Where any commercially sensitive information was being exchanged, undertakings are already in realm of anti-competitive behaviour

Said documents available with Enquiry Report had constituted evidence of decision taken by the Association to fix rates of body repair and painting charges, which Commission considered to be clear violation of S. 4(1) read with S. 4(2)(a) of Competition Act, 2010

Penalty of rupees fifty million was imposed on the Association for each instance

Association was also directed to cease its collusive practices

Member Undertakings, through documentary evidence, had managed to demonstrate their non-compliance with Association's decisions

No individual violations were, therefore, made out at that stage with respect to Member Undertakings in market for automobile body repairs and paint jobs.

Fixing of prices of genuine spare parts supplied by automobile manufacturers and further prohibiting members (of Association) from offering discounts

Determination

President of the Association addressed a letter to all dealers regarding its decision to implement similar rates of genuine parts at all dealership

Agreement to fix prices was per se violation of competition laws

Authorized dealers were accorded profit margins by manufacturer so as to allow them to set their own rates

Association's decision to prohibit discounts was in direct contradiction with that policy while being anti-competitive practice

Inability of dealers to offer discounts would in effect curtail its capability to set rates of spare parts, and same constituted decision by Association to fix prices in market for genuine spare parts

Penalty of rupees twenty-five million was imposed on the Association for said violation

Member Undertaking had submitted documentary evidence to support absence of implementation of said decision; no violation was, therefore, made out against members.

Term 'prohibited agreement', was applied to a wide range of practices, whereby competitions co-ordinate among themselves to prevent, restrict or reduce competition in the market

Most glaring example of prohibited agreement was co-ordination among the competitors to fix the price

Such anti-competitive agreement aimed to reduce price competition, raise price or effect price in a favourable way for the undertaking (Association of Banks in the present case) involved and certainly had the object and effect of reducing competition in the market under S.4 of Competition Act, 2010, prohibited agreement could also be exempted under S.5 of the Act

To seek such exemption, an agreement had to fulfil the criteria/ conditions laid down in S.9 of the Act

Section 9 of the Competition Act, 2010, essentially raised the question that whether there were efficiency gains of a competition restrictive agreement; and benefits were passed on to the consumers; or whether its pro-competitive benefits outweigh its anti-competitive harms

In absence of a collective agreement to standardize interchange fee, some of the members (Banks) could find incentives to increase their fee, while also expecting others to keep their fee low; in such situation of free riding, while their customers continued to enjoy ATM cash withdrawal service at cheap rates, the customers of other banks would generate greater revenue for them in lieu of a higher fee

If that trend would continue, every bank which owed large ATM networks, would find it in its interest to raise its fee at par with others in order to avoid the situation, wherefrom riding was taking place at its expenses

Free riding would threaten the very existence of the network by reducing, demand for such services and could result in fees much higher than that which was collectively set by the members (Banks)

Individually negotiated inter-change fee could have the effect of hampering production and distribution while also apparently threating the failure of a system that would contribute to economy.

Competition Commission, received information that Pakistan Ship's Agents Association, which was the sole licensed trade association for shipping, could be involved in collusive practices regarding determination of ancillary charges pertaining to shipping services by various ship agents

Competition Commission appointed Enquiry Officer, which searched the premises of the Association and reported to the Commission that prima facie, there was evidence of violation of S.4 of Competition Act, 2010

Enquiry Report recommended that Commission should proceed against the Association under S.30 of Competition Act, 2010

Enquiry Report and other communications and evidence on record had established, Association's role in developing and negotiating the range of charges for ancillary services offered by its members, which amounted to fixing the selling price of provision of a service as described in clause (a) of subsection (2) of S.4 of Competition Act, 2010

Actions and business practice of Association and its members had allegedly violated S.4(1)(2)(a) of Competition Act, 2010

Keeping in view the mitigating factors and Association's co-operative conduct and professed commitment to support the competition regime in Pakistan, the Competition commission required that Association, would pay a nominal penalty of Rs. One million under S. 38 of the Competition Act, 2010 and pass a resolution as mentioned in Para 9(a) of the present order of the commission.

If an undertaking would meet the criteria stipulated in S.9 of Competition Ordinance, 2010, Competition Commission of Pakistan could grant exemption in respect of an agreement, if agreement contributed to; improving production and distribution; promoting technical or economic progress, while allowing consumers a fair share of resulting benefits; or benefits of that clearly outweigh the adverse effect of absence or lessening of competition.

Article 12 of the Constitution did not deprive the legislature of its power to give retrospective effect to an enactment, which the legislature was competent to act.

Section 4(1) of Competition Ordinance, 2007, would apply to agreements entered into by an undertaking or decision made by an association of undertakings which had the object or effect of preventing, restricting or reducing competition within the relevant market

Matter involved, in the present case, was price fixing agreement at two levels, especially, horizontal price fixing agreements and one vertical fixing agreement; horizontal agreements were those that were entered into by the competitors at the same level of the production or distribution chain to co-operate with each other, they trigger the violation when competitors making agreements would restrict competition among themselves, such would involve two horizontal price fixing agreements; (a) fixing of minimum cover price; (b) issuance of minimum cover price formula to its members

Second type of agreements were vertical agreements, such agreements were differentiated from horizontal price fixing agreements, because of their specific nature, vertical price fixing agreements would restrict the right of alienation and involve common law theory of property rights; vertical agreements in the form of minimum resale price maintenance, had been allowed only when they would stimulate inter-brand competition among manufacturers selling different brands of the same type of the product by reducing intra-brand competition among retailers selling the same brand

Section 4(1) of Competition Ordinance, 2007, provided that the agreement must have either the object or effect of preventing, restricting competition

Term 'object' mentioned in S.4 of Competition Ordinance, 2007 did not refer to the subjective intention of the parties, but to the objective meaning and purpose of the agreement.

All Pakistan Newspapers Society/APNS, which had 292 members, created one cover price formula and issued to all its members without taking into consideration prospective market of each Newspaper

All Pakistan Akhbar Frosh Federation/Akhbar Frosh also entered into an agreement with APNS, whereby Akhbar Frosh would not distribute any Newspaper whose cover price was below the minimum price level

Commission took suo motu action against APNS and its Sub-Committee for setting the minimum price for all the newspapers

Enquiry was initiated under S.37 of the Competition Ordinance, 2007 based on the recommendations made in the Inquiry Report, the Commission initiated proceedings under S.30 of the Competition Ordinance, 2007

APNS had maintained that the formula was not obligatory for its members, however that would make no difference in determining whether the agreement between the members was unlawful

Enough evidence was available to prove collusive behaviour of members of APNS-Sufficient information regarding the price fixing was shared among the members of APNS

Publication of press release had shown that Newspaper publishers did not act independently

Such kind of collusive behaviour only encouraged inefficiency in the market

Negative effect of such collusive behaviour and resultantly inefficiency, would be on the end consumer who would have limited choice of newspaper and no price options in the relevant market

Agreement between APNS and Akhbar Frosh to enforce the decision of minimum price for newspaper, was a vertical agreement for the resale price maintenance of the newspaper

Said agreement between the APNS and Akhbar Frosh was void under S.4(1) of Competition Ordinance, 2007

Resale price maintenance agreement between APNS and Akhbar Frosh served as a tool to monitor the collusive behaviour of members

APNS through its representative, admitted the issuance of Minimum Price Formula, but according to it said Formula was meant to be just a recommendation to members and not mandatory in any way and not a directive

All three undertakings; APNS, its Sub-Committee and Akhbar Frosh, admitted that they had violated the Competition Ordinance, 2007, however they pleaded that their actions were honest mistake and they expressed their willingness to make amends

Ignorance of law was no excuse for violating the law, however to encourage compliance of law and keeping in view the approach of the Commission taking lenient view did not impose penalties for said violation

Parties were warned that in case they were found guilty of violating Competition Ordinance, 2007 in future, major penalties under law would be imposed on them without any leniency.

Complainant in his complaint filed before the Commission had assailed the legality of an exclusive agency agreement executed between the respondent and another company

Complaint had alleged that by virtue of its exclusive agency agreement, the respondent had captured the entire market of the complainant; and that the respondent was capable of imposing its own terms on the Government for the purchase of tractors

Inquiry report appraised the procurement process of tractors under the scheme and gave findings that said scheme gave the farmers discretion to select the make and model of their own choice from a wide range of tractors available in the market; in view of said report it could not be said that the respondent would be able to monopolize the scheme and impose his own terms and conditions on the Government for the purchase of the tractors by the farmers

Counsel for the complainant requested to dispose of the complaint as not pressed in view of the fact that impugned exclusive agency agreement was no more effective as period for which said agreement was valid had expired.