Responding to a question raised by the opposition in the national assembly back in 2014, the then finance minister Ishaq Dar conceded the prevalence of collusive behaviour and cartelisation in many industries and sectors of the economy.

According to him, the government had found different sectors of the economy operating as cartels to take economic advantage at the expense of the consumers and the economy. He also listed several industries/sectors that the Competition Commission of Pakistan (CCP) had investigated for collusive behaviour, cartelisation, use of their dominant market power and price-fixing, and fined to the tune of billions of rupees during its early years from 2008 to 2013.

But the prevalence of the collusive practices, the abuse of market dominance, and the formation of cartels across the different sectors of the economy is believed to have increased over time in spite of numerous inquiries conducted by the CCP. Even imposition of heavy fines has failed to deter the market players from different sectors of the economy from colluding to form cartels for abusing their power to take an undue economic advantage at the cost of competition. The industries like sugar, cement, poultry, etc, which the CCP has investigated and punished more than once through the imposition of big fines continue to indulge in these anticompetitive practices to decide production cuts, retail prices, and so on.

‘Cartelisation is made a criminal offence in other countries like the US, the UK and Australia. Unless the executives of companies involved in anticompetitive behaviour are put in jail, you will not get the desired results’

It was in October 2007 that Pakistan had adopted the state of the art competition law aligned with international best practices. The new law and creation of the CCP is Pakistan’s second attempt at developing a modern antitrust framework for regulating the markets and encouraging free competition to improve economic efficiency, develop competitiveness and protect consumers from monopolistic practices in the economy. The country had first sought to curb anti-competitive trends in the economy in 1970 when it adopted the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance and established the Monopoly Control Authority (MCA) to enforce it.

The MCA nonetheless failed to deliver owing to a lack of powers to proceed against any sector or industry, and enforce its findings. Thus, the promulgation of the new competition law to replace the previous one had raised hopes that it would protect the consumers and the economy from the high handedness of the cartels, boost economic efficiency, and help attract foreign direct investment. Yet it seems that the country’s latest attempt to check anti-competitive activities and practices has not paid off as cartels continue to thrive.

Why is that so?

Cartelisation in Pakistan remains a civil offence punishable with a maximum penalty of up to Rs75 million in fines or 10 per cent of the annual turnover of the undertaking.

“Cartelisation is made a criminal offence in other countries like the US, the UK and Australia. Unless the executives of companies involved in anticompetitive behaviour are put in jail, you will not get the desired results,” Khalid Mirza, the first CCP chairman, tells Dawn. But the problem in Pakistan is that the criminal justice system doesn’t work just like the civil side of the justice system, he added.

The CCP has powers to issue a range of orders varying from issuing behavioural directions to obtaining undertakings or commitments from the companies involved to imposing penalties as required by the circumstances of the case in respect to anti-competitive activities. While enforcement of behavioural directions has been relatively more successful, the Commission has never been able to recover penalties it has imposed. A senior CCP official told this correspondent that only a few million rupees had been recovered from the guilty parties in the last almost 14 years of the commission’s existence.

“It is primarily because of frequent, undesirable interventions by courts that issue restraining orders against the CCP without calling us and listening to our viewpoint,” he argued.

The court interventions started soon after the CCP commenced its operations with the parties affected by its orders challenging those before different courts across Pakistan. “In many cases, the courts approached by the aggrieved entities or persons do not have jurisdiction to hear the competition appeals. Yet they allow stay orders and stop the CCP from recovering the penalties,” he said. “The courts have not decided these petitions — mostly on weak grounds, which means that the majority of the restraining orders issued against the CCP still remain in place. Even the case challenging the existence of the competition law and the CCP was decided after a decade.”

The CCP officials support the aggrieved party’s right to appeal against its decisions but want the courts to set a time frame for concluding these petitions. “Courts just don’t act. We are restricted by the courts. For 10 years they challenged the legality of the CCP law and courts didn’t decide. Now the court has raised objections to the formation of the competition appellate tribunal. That wastes our efforts. When it is about political cases they move swiftly. How can we enforce antitrust law if we are restrained by the judiciary and are unable to recover penalties from the guilty parties?

“Unless they are made to pay penalties, we can’t eliminate collusive practices or bring about behavioural changes,” the CCP official concluded.

Published in Dawn, The Business and Finance Weekly, May 17th, 2021