Islamabad: Competition Commission (CCP) has noted that the Federal Bureau of Revenue (FBR) cannot stop manufacturers, wholesalers or retailers from selling cigarettes below price determined by the FBR.

Pursuant to a public hearing, the CCP has concluded that the FBR may legally determine the minimum price for the purposes of levying tobacco tax on cigarette manufactures but the board cannot stop the sale below that price.

The CCP advised FBR and the manufacturers of cigarettes to stop mandatory publication of advertisements pertaining to minimum retail price of cigarettes with immediate effect.

The commission explained that sharing of information such as price tables may facilitate anti-competitive behaviour by potentially eliminating uncertainty as to the future conduct of market share competitors and inevitably affecting future commercial policies.

However, FBR may require manufacturers to print the maximum retail price on cigarette packs in unambiguous terms.

However the CCP stated that the printing of a maximum retail price on cigarette packs would have three-fold advantages.

As it would not in any manner impact FBR’s attempt to plug the loopholes in the current tax collection system as FBR could continue to prescribe the minimum retail price for the purposes of levying and collecting tax. Currently, the FBR taxes the manufacturers, however retailers’ cigarette prices are far above the manufacturers suggested retail price resulting in significant profits to the retailer, all the while evading tax on the price differential.

The CCP noted that the second advantage would be to prevent retailers from overcharging consumers because the price would be capped to the maximum limit at retail level.

Lastly, if at all, placing the maximum price on cigarette packs has an impact on pushing prices up, increased cost may help in deterring and discouraging consumers from the use of cigarettes, thus addressing consumer health concerns advanced by the Health Ministry.