Pakistan: Competition Commission of Pakistan

The Competition Commission of Pakistan (CCP) is an independent statutory organisation that was formed in October 2007 to administer the Competition Act, 2010. The promulgation of competition law in Pakistan, among other reasons, is in fulfilment of the UN Resolution 35/63 of 5 December 1980. The CCP is exclusively mandated to ensure free competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anti-competitive behaviour. Under the law, CCP is empowered to take action against situations which lessen competition such as:

• abuse of dominance;
• prohibited agreements;
• mergers and acquisitions that could restrict competition by leading to a position of dominance or cartel-like behavior; and
• deceptive marketing practices.

2014 has been a busy year for us, where in addition to our enforcement activities we continued with the ambitious task of over­hauling and reforming our regulations and processes as some of these were still based on the Competition Ordinance of 2007, despite the enactment of the Competition Act 2010. In 2014, this reform agenda was in full swing and we were able to revise the following regulations:

• the Competition (Leniency) Regulations, 2013;
• the Competition (Exemption) Regulations, 2014; and
• the Competition (Reward Payment to Informants) Regulations, 2014.

We currently are in the process of revising our Merger Regulations and General Enforcement Regulations.

In 2014, we cleared 53 mergers, acquisitions and joint ventures cases, granted exemptions to 54 undertakings, and began investigating a number of cases relating to cartelisation and trade abuse.

An important activity for us during the year has been our advocacy drive with the public and private sectors. While enforcement actions aim at curing individual anti-competitive practice only advocacy, seeking to rectify an anti-competitive policy, on the otherhand, makes a broader macro-level impact. Our advocacy with the public sector involves reviewing government policies and regulations, and providing non-binding policy advice to rectify anti-competitive provisions. During the year, we issued five policy notes, and we believe that the government has been receptive to our advice. These notes include:

• a note to the Federal Board of Revenue recommending the abolition of an anti-competitive capacity tax on the beverage industry;
• a note to the Oil and Gas Regulatory Authority regarding the non-issuance of flare gas licences;
• a note to the Higher Education Commission regarding its masters degrees equivalence standards;
• a note to the federal government on the discriminatory levy of Gas Infrastructure Development Cess (GIDC) on selective fertiliser plants; and
• a note to the federal government recommending the withdrawal of exemptions to public sector construction companies.

Recommendations of our policy note regarding the non-issuance of flare gas licences were taken into consideration by the Oil and Gas Regulatory Authority and amendments were made in the process. The CCP considers this a success as it has had a maximum impact on consumers at a time when Pakistan is facing an energy crisis. Our advice regarding the discriminatory levy of GIDC was taken into consideration by the government and this cess will be levied equally on all fertilizer plants. Our estimates suggested that this discriminatory levy had resulted in consumer loss of 28.1 billion rupees in 2013 and 9.356 billion rupees in the first quarter of 2014. Again, this will have a positive impact on the prices of urea and ultimately the prices of agricultural commodities and food prices.

As part of our advocacy strategy, in 2014 we initiated advocacy sessions with the business community to sensitise them to the provisions of competition law. Our primary point of contact has been chambers of commerce, and we have reached out to chambers in smaller cities across Pakistan where the Commission has not yet reached. These exchanges with the business community have been fruitful and we will continue this effort into the next year.

The Commission also received international recognition for its advocacy efforts and won the World Bank’s 2013 Competition Advocacy Contest in the category of ‘Successfully promoting pro-competition market reforms, opening of markets, and infusion of competition principles in other sectoral policies’. We won the contest for conducting advocacy to increase competition in the crucial segment of Pakistan’s air transportation market – the route between Pakistan and Mecca and its recommendations were implemented by the Civil Aviation Authority, resulting in two new airlines entering the market and a decrease in the cost of air travel for consumers. We estimate that as a result of this action consumers have saved a total of 6 billion rupees.

A major success for the Commission came when the government decision withdrew the controversial International Clearing House (ICH) agreement in June 2014. In 2012, the Commission highlighted the serious competition concerns in the agreement and recommended its withdrawal. The CCP held that the ICH was anti-competitive as it fixed prices, reduced choice, foreclosed the market, removed incentives for better quality of service and incentives for investment in improvement of infrastructure, and was thus a clear threat to consumer welfare. This withdrawal was a vindication of our stance, and had our advice been heeded to earlier there would have been less harm to consumer welfare and the economy.

One of the major constraints we face is prolonged litigation with over 300 cases pending in the courts. A solution for the speedy disposal of cases was the Competition Appellate Tribunal; however, that also remains dysfunctional. In view of this situation, the Commission has adopted a strategy of compliance through persuasion whereby we convince companies to comply with the provisions of the law without going through formal legal proceedings. We have achieved success in this, especially in cases concerning deceptive marketing with the rate of compliance achieved in such cases being over ninety percent.

To facilitate businesses, we decided to open a regional office in Karachi – the economic hub of Pakistan – and we hope that the office would be functional by the start of the new year. As we take on an ever increasing and challenging workload, we felt that there was a need to increase the ratio between our professional and administrative support staff from 1:2.5 to 1:1, and to achieve this we have begun a recruitment drive.

The Commission is a collegiate body composed of between five and seven members. Currently the Commission is operating with only three members (including chairman) managing multiple portfolios. We hope that the federal government appoints the remaining members in an expeditious manner in order to ensure the effective functioning of the Commission.

Our priorities for 2015 include:

• to continue with the process of reviewing and revising our legislation and processes;
• the launching of a full disclosure campaign targeting businesses, to curb deceptive marketing practices;
• the inauguration of our regional office in Karachi and making it functional;
• advocacy sessions with chambers of commerce in smaller cities;
• holding our fourth international conference;
• boosting our human resource capability; and
• continued robust law enforcement.

Here’s to a challenging and exciting 2015!