THE Competition Commission of Pakistan last week fined the Pakistan Poultry Association for ‘influencing pricing, production and sales of poultry products’ and engaging in anti-competitive business activity.

This is the second time in the last six years that poultry industry has come under the CCP scrutiny. Last time, it was fined Rs50m in August 2010. This time, CCP has doubled the fine amount because the PPA has replicated its action in egg market as well.

The PPA placed advertisements in newspapers stating rates of live birds, chicken meat and eggs, which the CCP considered violation of anti-competitive laws. Apart from challenging the CCP for failing to ‘understand’ interpretation of the PPA on the issue, the industry needs to ponder how it has gone wrong. What are the parameters of doing business and how to stay within those boundaries?

Its timing could not be worse for the industry, if the state of its business, as portrayed by the PPA, is valid. It claims that chicken meat is being sold far below the cost of production for the last two years. Because of this falling profit, over 40pc businesses have been closed down, and more may be on their way to closure. The PPA has been pleading for official survival package: freight subsidy on exports, concessional loans and rescheduling of debts.

The industry insists that it has, through newspaper advertisements, been conveying, not controlling, chicken meat and egg prices — an explanation, which the CCP refuses to buy and calls it ‘subjective interpretation’

The industry insists that it has, through newspaper advertisements, been conveying, not controlling, chicken meat and egg prices — an explanation, which the CCP refuses to buy and calls it a ‘subjective interpretation’. Through such advertisements, the PPA is telling the market that the advertised rates have its blessings and backing. This is violation of rules, the CCP decision says. The fine slapped on the PPA would certainly be challenged by the industry in the court as it did last time and a long-drawn legal battle would follow.

But apart from the legal wrangling, the PPA needs to explain why the industry has been selling chicken below the cost of production for the last two years; why has huge over-production and low prices, according to its own claims, is taking place? Especially so when over 40pc businesses have already closed down. It is in the interest of the PPA to remove such disconnects from its public stances, which, at the end of the day, would hurt it more.

Secondly, it also needs to clarify why it has not been able to convince the CCP of its rationality.

On top of it all, the PPA should not forget that its rates’ advertisement campaign had a context, which it built publicly. Few months earlier, it had warned the government of impending rise in prices because of declining production and asked the government to announce a subsidy package for the industry to put it back on its feet. A few months down the line, the advertisement campaign started, and was noticed by the CCP.

The PPA finds itself at the dead end because it never made serious efforts to look beyond domestic market for business expansion. The industry has the world’s best gene pool, modern farming practices and hungry Gulf markets. But perhaps domestic profits were too lucrative for it to allow it overseas journey.

Published in Dawn, Business & Finance weekly, March 7th, 2016