January 21, 2007	Sunday	Muharram 01, 1428

ISLAMABAD, Jan 20: The World Bank has asked Pakistan to “track down illicit cartels” to regulate businesses aimed at attracting adequate local and foreign investment in the country.

“We understand that proven or suspected cartels have existed and many still exist in cement, sugar, ghee, autos, fertiliser and perhaps other industries which need to be investigated,” said a World Bank funded final report, the copy of which was obtained by Dawn.

The government has been advised to expedite the conversion of Monopoly Control Authority (MCA) into a proposed Competition Commission for effectively regulating businesses and preventing anti-competitive conduct. “The evidence seems to suggest a major load of cartel investigation for the new Commission,” the report said.

The report, “Establishing A Functioning Competition Commission” prepared by Maxwell Stamp PLC, said that cartels are by a long way the “chief impediment” to competition in Pakistan and that there is a need to conduct a thorough inquiry as what types of anti-competitive conduct are most prevalent in Pakistan.

“We understand that the MCA has investigated 103 cases of monopoly, including cars, batteries, tobacco, electrical, gases and chemicals. Of course this figure by itself provides no indication of abuse of monopoly position. At the very least, however, it suggests a wide field for inquiry”.

An official source when contacted told Dawn that cartels had created immense problems and the case in point was the decision of the owner of Bestway Cement Sir Anwar Pervez to set up 4-5 more cement factories in Pakistan.

However, the cement cartel had brought down the prices of cement from Rs310 to Rs150-160 per bag recently to force Mr Pervez not to invest in Pakistan. “But we were informed that the gentleman is still ready to set up new cement factories in the country,” he said.

He said that vested interest was using all the means and political pressure against the setting up of Competition Commission, the approval of which had already been given by the prime minister almost one year ago. "The file is lying on the table of law minister Wasi Zafar for the last many months but he is not clearing it despite many requests made by the concerned officials of the finance minister, the source said.

The report proposed that the Commission will need to build up an experienced capacity for tracking down illicit cartels in the country. This is partly a matter of educating informants. In many Competition Policy jurisdictions, an amnesty of whistle-blowers (or leniency programme) has been found the most powerful means of unveiling illegal agreements.

The draft bill for the proposed Commission Competition provided for Regulations to this end. The draft new law, yet to be approved by the law ministry, prohibits all anti-competition agreements but provides a possibility of exemption.

The report believed that regulations are needed to limit prohibition to genuine cartels, but when exemption is being sought for a genuine cartel, the Commission should ensure that the burden of proof to be discharged is a heavy one.

Taking about anti-competitive mergers in Pakistan, the report said that many of such mergers taking place in Pakistan are the local consequences of mergers between parent companies abroad. Pakistan’s national competition authority is fully entitled to investigation such mergers, and to demand changes if they appear to have anti-competitive effects in Pakistan.

Over the year, however, even taking account of such imported merger situations, they appears to have been no more than a trickle of significant mergers in Pakistan, in industries such as tea, ice cream and pharmaceuticals. It needs not to be assumed that all these mergers were anti-competitive, but all may have been of a size calling for pre-notification and initial review.

The draft bill, according to the report, prohibits deceptive marketing practices, including false or misleading information or comparison; and intellectual property fraud. The commission will issue Regulations specifically what type of marketing practices it considers significantly deceptive, and how it will proceed against them.

In much of its enforcement work, the report pointed out, the proposed Commission will be called upon to apply economic assessment criteria. The Commission will need, as one of its early policy decisions, to approve these criteria to publish them in the form of Regulations, so that businesses and their advisers will know the standards by which they will be judged.

This means, the report said, that among other important matters that international companies operating in Pakistan will be familiar with both the local competition law and its institutional framework. They can be expected to put their confidence in it so long as they are assured of its complete political independence.

The powers of the Commission, it said, should be in accordance with international best practices. Like competition authorities every where, however, it must be the constant concern of the Competition Commission of Pakistan to make its procedures as transparent and predictable as possible. The Commission’s enforcement procedures should fall neutrally into three parts - detection, investigation and determination.