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Pakistan’s new competition law originally came into effect as the Competition Ordinance, 2007, and was subsequently enacted by Parliament as the Competition Act, 2010 (the Act). The Act aims to encourage competitive forces in all spheres of commercial and economic activity; to enhance economic efficiency and to protect consumers from anti-competitive behaviour.
The scheme of the Act is inspired by the principles of the Treaty on the Functioning of the European Union (the Treaty of Rome) and collates best practices from instruments such as the United Nations Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, and the OECD’s recommendations and best practices on competition law and policy.
The Act prohibits situations that lessen, distort, prevent or restrict competition. These range from actions that constitute an abuse of market dominance, agreements restricting competition, and deceptive marketing practices. In addition, the Act provides for a mandatory merger control regime. The merger review is conducted in two phases: Phase I is to be completed within 30 days; if the merger transaction poses serious competition concern, the Phase II review process is initiated, which is to be completed within 90 days. The Act also sets out procedures relating to investigations, imposition of penalties, grant of leniency, advocacy and other essential aspects of law enforcement. With the provisions on deceptive marketing practices, the Commission acts both as a competition law enforcer as well as part consumer protection agency.
The Commission is a collegiate body composed of between five and seven members. The members are appointed for a term of three years. The functions and powers of the Commission categorise it as the ‘integrated agency’ wherein a single specialised agency undertakes investigative, enforcement and adjudicative functions.
Pakistan continues to face challenging economic conditions. In such a context, ensuring competitive markets and a level playing field for national and international players is extremely important to attract investment. This involves strong advocacy with the government from introducing any measures that distort competition. For the competition culture to embed in Pakistan, it necessitates a top-down approach: first creating awareness among government departments to keep their policy competitive neutral if not pro-competitive. The Commission has had success in its advocacy measures where the government agreed to its recommendations related to competitive neutrality and removing barriers to entry for new entrants. Sound advocacy requires independence: both political and financial independence. People must not perceive the competition law as a tool of those in power to serve their benefit and the competition advocate must not be silenced by controlling its finances.
The Commission cannot be this voice without financial autonomy. The Act provides for independent funding through tied sources that will form part of the Commission’s Fund but this is still forthcoming. This funding is imperative as it has a direct impact on our operations.While the government has been supportive, the Commission has been operating under severe resource constraints, human resources in particular. The Commission’s professional staff strength has remained fixed both in terms of numbers and expertise – we are critically short of trained economists – while the quantum of activities requiring sophisticated economic analysis has increased.
In the six years since the Commission’s establishment, one of the major challenges is the effective disposal of the cases – that is logical closure of cases after going through all the appellate and review processes. While the Commission adjudicates on cases in an expeditious manner, the appeals before the courts prolong endlessly. There are presently more than 200 cases of the Commission pending in various courts. We need to come to closure on these and move forward. In this regard, we welcomed the establishment of the Competition Appellate Tribunal in July 2011, in the hope that timelines for resolving competition matters would be reduced and would not allow anti-competitive behaviour to prevail for any longer than it should.
Unfortunately, the appointment process at the Competition Appellate Tribunal has rendered it dysfunctional for most of its existence. It was only between May 2012 and April 2013 that the Tribunal had all three of its members appointed, and in its two-and-a-half years the Tribunal has decided on only one appeal. Unless the Tribunal becomes more effective in giving its decision on appeals, the orders of the Commission, which are appealed against, will have no bearing or impact on the economy.
The issue of appointment of members is not limited to the Tribunal alone. The Commission itself is, and will continue to be, facing this problem. During 2013, the term of two members’ terms came to end, which left the Commission with only three members (including the chairman) from its initial five. Two members’ terms will expire in January 2014; if these members are not reappointed or replaced immediately, the Commission is likely to become dysfunctional, as the quorum for a Commission meeting is three members. So having these positions filled in a timely fashion is both a challenge and an utmost priority.
As the Commission enters into its seventh formative year, our priorities for 2014 are:
- to revise our Regulations and processes, which are still based on the Competition Ordinance of 2007 despite the promulgation of the Competition Act in 2010;
- to enhance the strength of staff responsible for the enforcement of law – the ratio between professional and administrative support staff must be brought to 1:1 (currently it is 1:2.5);
- to work towards ensuring the financial and administrative independence of the Commission;
- active advocacy both with the public and private sectors;
- robust law enforcement; and
- to launch measures to improve the staff’s technical expertise.
We look forward to a challenging and eventful 2014!