A MERGER and acquisition division will be created in the proposed competition commission to ensure transparency, competition and prudent business practices.

After a delay of about two years, the government has approved the conversion of the Monopoly Control Authority (MCA) into a commission empowered to enforce proposed upgraded competition law.

The creation of the new "Mergers and Acquisitions Division" is being supported by the World Bank funding.

Chairman of Monopoly Control Authority Khalid Mirza, told Dawn that he does not enjoy much powers to deal with mergers/acquisitions. "At the moment, I cannot do much with respect to mergers and acquisitions. But the new law would provide me adequate powers to deal with these issues", he said.

Mr Mirza did not believe that the new notification was against the spirit of deregulation or the policy of least interference by the state in the business activities. All the competitive agencies in the world, he said, enjoyed powers of monitoring mergers/acquisitions and to issue no-objection certificate (NOC) to concerned business groups.

The MCA chairman expects 8-12 major cases of mergers and acquisitions in near future. There were many multinational companies registered with the stock exchanges which needed to be regulated in terms of ensuring transparency and prudent business functions.

"There were distortions in creating monopoly and cartelisation and now he same will be checked through the new law by the MCA", Mr Mirza said. He did not believe that the proposed law would create problems for businesses rather, he said, it will help them out in any crisis situation.

"They must do business in a very clean manner and our job will be to ensure it while sitting in the MCA", For the first time MCA rules are being prescribed about mergers/acquisitions.

The Authority will give its verdict or issue an NOC within 30 days of receipt of a notice or ask for further information within this period in which case the Authority will have 90 days to give its verdict. If a verdict or NOC is not issued, the acquisition/merger would be deemed as approved at the end of 30 or 90 days, as the case may be.

Every notice filed, under sub-rule (1) of Rule 3 of these Rules, shall be accompanied by a fee of Rs0.1 million in case of acquisition of shares and Rs0.2 million in case of a merger.

An official of the finance ministry said the mergers and acquisitions division will conduct merger reviews in terms of the competition law determining jurisdiction, assessing whether a merger was likely to substantially prevent or lessen competition, judging whether efficiency gains outweigh the likely lessening of market competition. The division will impose conditions,if necessary and monitor post-merger performance.

The primary analysis and negotiation will be carried out by the Merger Department, with input from the Research Department on the nature and state of competition in the relevant market, and, if necessary, with the assistance from the enforcement department on market behaviour. The department will be headed by a director-general with no subordinate divisions and consist of two economists/corporate analysts/forensic accountants, two legal experts and administrative staff.

Similarly, the proposed "Enforcement Department", as the centre of investigative activity, will be responsible for investigating contraventions and the competition law covering abuse of dominant position, prohibited vertical and horizontal agreements and deception in marketing practices. The department will review requests for exemptions under Sec 5 and entertain leniency applications under Sec 35, and would also recommend penalties and other sanctions to the commission.

As competition agencies around the world differ significantly, and there was no standard blueprint, the consultants familiar with various models will apply their knowledge to the Pakistan situation.

The World Bank is providing financial assistance for the setting of the commission and initially, it has agreed to pay about $10 million.

There are a number of regulatory bodies working with mixed experience and results, depending on their legal and political capacities. Pakistan-specific issues and knowledge will go into into the work by employing consultants.

The commission’s primary function will be to monitor competition levels and market transparency, investigate anti-competitive conduct in violation of the law, asses the impact of mergers/acquisitions on competition as part of the clearance process,identify policy-based impediments and play an advocacy role to create public awareness and help public policy address impediments.

For seamless application of competition policy across the economy, the commission will need to formally and informally interact with other government bodies/regulatory authorities.

In carrying out its law enforcement function, the commission will rigorously apply principles of due process and natural justice. In particular, it will ensure structurally and procedurally a strong culture of formal collaboration between various departments. Its investigations will follow due process and confidentiality requirements, the availability of internal appeals to a bench of two commissioners not involved in the original ruling, and a strong general counsel's office responsible for internal audit to oversee and report on compliance with the law and procedures. As a public quasi-judicial body, law enforcement decision will be subject to appeal before a High Court.

The commission is likely to consist of 5-7 commissioners, one of whom is to be appointed as chairman. It will be supported by a staff of 60-80 professionals, mostly industrial economists, commercial lawyers and forensic accountants.

Based on its functions of investigation, adjudication, policy analysis, advocacy and research, the commission will organise operational and research departments headed by director-generals. There will be a corporate affairs units to manage budgets, human resources, training and other international matters.