ISLAMABAD: The Competition Commission of Pakistan (CCP) has issued show-cause notices to Pakistan Automotive Manufacturers Authorised Dealers Association (Pamada) and its 44 members for prima facie cartelisation in violation of Section 4 of the Competition Act, 2010.

The CCP took suo motu notice of the allegations against the association for fixing rates of automobile repair and paint jobs.

Consequent to an inquiry conducted by the commission, a search and inspection of the premises of the association was also carried out under Section 34 of the Act on May 7.

According to the findings of the inquiry report, collusion took place in four relevant markets. These included new automobiles sales, genuine automobile spares, automobile body repairs and paint jobs and the experienced sales and technical staff hiring market.

With respect to market for new automobiles, the association appears to have taken decisions regarding the division of the market and allocation of quota with respect to new automobile sales, the CCP said.

The CCP said that the association apparently fixed prices of genuine spares supplied by the automobile manufacturers by strictly prohibiting its members to offer discounts. In the area of body repairs and paint jobs, the association took collective decisions regarding rates of automotive body repairs and paint job services offered by its members, especially for insurance companies.

Finally, the evidence of collusion was found in the area of human resource where association took collective decisions to restrict movement of human resources between automobile dealers.

The report has also highlighted that these arrangements between Pamada and its members apparently have the object and effect of preventing, restricting or reducing competition in the relevant markets.

On the basis of the findings of the inquiry report, Pamada and its 44 members were issued show cause notices. CCP’s inquiry observed that collusion and cartelisation are the most egregious forms of anti-competitive behaviour.

“When competitors take collective business decisions, the market and consumers suffer from uncompetitive prices, fewer choices, and reduced quality of products,” the notice said, adding, “collusion and cartelisation also raise entry barriers, restricting entry of new players, which further stagnates competition.”

The CCP had earlier issued a policy note on the auto sector where it was highlighted that automobiles sector in Pakistan is a relatively small one, with just a handful of major market players competing in the market.

In this situation, any collusion in the sector, like the instances highlighted in this inquiry, will lead to a serious degradation of competition in the market.

Published in Dawn, October 21st , 2014