WHATEVER the outcome of the current political turmoil, in the long run, the future of the democratic political system depends on the strength of institutional framework and the quality of the market economy.

Fragile institutions and fractured markets facilitate special interests to abuse power and peddle selfish ends that may not necessarily converge with the interests of citizens, both in their capacity as voters and as customers.

The political dimension of the issue is beyond the scope of this article but history repeatedly shows that the mere desire for a democratic political order has been insufficient for a viable, stable, and representative order.

To create the capacity for the establishment of constitutional democracy, a dynamic market economy is crucial. However, for markets to deliver freely and fairly, competition is necessary.

A CCP inquiry concluded last month found that some paint manufacturers indulged in vertical cartelisation, where a company colluded with its dealers or retailers to subvert competition, causing loss to consumers

“The fissures in the political system are discussed widely in the country. However, despite their importance, the drivers of market imperfections that compromise open competition fail to get the attention they deserve”, commented a market expert associated with a policymaking body.

“Elsewhere success in business is celebrated but in this country we underplay our achievements and prefer to stay below the radar. If somehow we succeed in satisfying tax men, there are many other bodies who find an excuse to demonise succeeding businesses and businessmen”, a frustrated CEO, who heads a private sector think- tank, commented privately.

A senior expert dismissed the plea of what he calls a private sector apologist and appreciated the role of the Competition Commission of Pakistan (CCP) in this regard. In his view CCP champions the cause of free market by enforcing discipline in the private sector.

“We are not against success but against the abuse of dominant position”, remarked a former head of market regulator.

Responding to a Dawn query on role, scope and performance, CCP Chairperson Vadiyya Khalil responded: “The Commission is one of the youngest anti-trust agencies in the world but despite its youth, in a short span of time, has passed several judgments against some well-entrenched cartels in the telecom, banking, cement, insurance, automobile, chartered accountancy, oil and ghee, ports and shipping, power, media, and poultry.

“This is evidenced from the fact that more than 50 per cent of the total penalties of approximately Rs27 billion imposed by the Commission have been on cartel offences. The Commission is watchful against anti-competitive activities and continues to be a powerful voice for both consumers and businesses in Pakistan.”

The CCP last month concluded an inquiry that found some paint manufactures indulging in vertical cartelisation where a company and its dealers/retailers entered into an agreement subverting competition and causing loss to consumers.

It was learnt that show-cause notices have already been issued to a paint company and 10 distributors found at fault.

The relevant inquiry report, a copy of which was obtained by Dawn, stated that the written deal between the company and dealers fixed the maximum discount that a dealer may offer to the customers. The report found it to be a violation of Section 4 of the Competition Act, 2010 that forbids collusion and price fixing.

Expressing her vision on collusion Ms Khalil mailed her response. It reads: “Cartelisation is the most egregious violation of competition law and the Commission is cognisant of the serious harm cartels inflict on the growth of an industry and thereby the economy as a whole.

Effective balanced regulation and effective regulator can be a real force for good, delivering tangible benefits for both consumers and businesses. The law creates a level playing field ensuring ‘a fair and square deal to one and all, big and small’.”

Last week, the research and inspection team of CCP struck again simultaneously in Karachi and Lahore. They were acting on information regarding vertical collusion in the electronic home appliances sector. The issue appeared to be similar to the case of paints.

People in know of the affairs told Dawn that the top management of the companies visited cooperated perfectly with the regulators. Attempts were made to reach the relevant people in the companies involved but they declined to come on record at this point.

“From all I know they actually cooperated and handed over copies of all relevant record and hard drives of personal computers of key executives demanded by raiders”, an insider said.

When CCP comments were sought on rumours regarding cheating by top brands, it declined to comment. According to details, major electronic companies are using compressors and other unmarked parts imported in the garb of scrap.

The CCP spokesperson confirmed to Dawn that the issue has so far not been taken up. There are reports that in Karachi, customers suspect deception in the market of split air conditioners.

The current edition of the Global Competition Review reported the case of paint manufacturers in which the regulator alleged retail price fixing in the region of Multan. The said case, in CCP’s view, will “prove to be crucial” in detecting other similar violations.

Commenting on the issue, an economist asserted that the progress of economic and political rights depend on the outcome of the consistent struggle between two conflicting sides. On the one side, there are “productive” activities, including wealth creation and the protection of the rights of customers.

On the other, there are “unproductive” activities, including rent-seeking, corruption and crime. The final outcome, to a great measure, depends on the rules of the game and their enforcement.

Published in Dawn, The Business and Finance Weekly, March 5th, 2018