ISLAMABAD, July 7: The World Bank has asked the government to create a new `mergers and acquisitions division’ to ensure transparency and prudent business practices by banks, corporate giants and other companies.

Informed sources told Dawn on Saturday that the on-going mergers and acquisitions of banks and companies in Pakistan has invoked World Bank interest which wanted an early creation of the mergers and acquisition division in the proposed Competition Commission.

Senior officials of the Prime Minister's Secretariat have taken notice of recent reports which suggested that the conversion of the Monopoly Control Authority (MCA) into the Competition Commission has been shelved due to the opposition by a group of influential businessmen.

The concerned officials of the ministries of finance and law are said to have been directed to prepare the issue for the approval of the federal cabinet within this month.

The mergers and acquisitions division will conduct merger reviews in terms of the competition law determining jurisdiction, assessing whether a merger is likely to substantially prevent or lessen competition, judging whether efficiency gains outweigh the likely lessening of market competition, impose conditions, if necessary, and monitor post- merger performance.

Both the long-term and short-term effects of the merger will need to be balanced against each other to determine whether the merger should be approved, subject to conditions, or opposed.

The primary analysis and negotiation will be carried out by the merger department, with input from the research department on the nature and state of competition in the relevant market, and, if necessary, assistance from the enforcement department on market behaviour. The merger department will be headed by a director-general with no subordinate divisions and an initial staffing complement of two economists / corporate analysts / forensic accountants, two legal professionals and administrative staff.

Similarly, the proposed enforcement department as the centre of investigative activity in the competition agency will be responsible for investigating contraventions and the competition law covering abuse of dominant position, prohibited vertical and horizontal agreements and deception marketing practices.

The department will also review requests for exemptions under Section 5 and entertains leniency applications under Section 35. The department would recommend penalties and other sanctions to the commission.

“As competition agencies around the world differ significantly from one another, there is acceptance in the World Bank and in the government of Pakistan, that there is no standard blueprint. Nevertheless, the consultants will be fully familiar with various models around the world and apply this knowledge to the Pakistan situation,” says a document of the World Bank.

The bank is providing adequate financial assistance for setting of the commission. Initially, it has agreed to offer about $10 million.

At the same time, there are a number of regulatory bodies in Pakistan which have been working with mixed experience and results, depending on various legal, political and capacity issues.

The consultants will be aware of these Pakistan-specific issues and incorporate this knowledge into the work.

The new chairman of the commission will build the organisation and the consultants will need to work very closely with it as primary interlocutor and client for the work and will be expected to carry out the predominant bulk of the work.

It is expected that the consultants will make three presentations of the World Bank and the MCA, either in Pakistan or by video conference on: (i) an inception report which confirms the scope of work, the methodology and outputs within two weeks of initiating the assignment, (ii) presentation on the draft final report within five weeks of initiating the assignment and (iii) a final report within six weeks of initiating the assignment.

Two workshops will be carried out by the consultants in Pakistan: The first to present the inception report and the second to present the draft final report.

Based on the comments received during the workshops and in writing, both documents will be revised accordingly.

The Competition Commission of Pakistan's primary functions will involve monitoring competition levels and market transparency in economy, investigating anti-competitive conduct in violation of the law, assessing the impact of mergers and acquisitions on competition as part of the clearance process, identifying public policy based impediments to competition, and playing an advocacy role to create public awareness and help public policy address such impediments.

For seamless application of competition policy across the economy, the commission will need to formally and informally interact with other government bodies, regulatory authorities and business associations and individual business leaders. Therefore, it is envisioned that in carrying out its three functions -- law enforcement, research and public advocacy -- the commission will be professional and independent with such independence supported by law, funding, and stature.

The commission will carry out its responsibilities with the support of an agency with operational, policy and research capacity.

In addition, the commission will consider establishment of internal compliance and audit functions reporting directly. In carrying out its law enforcement function, the Commission will rigorously apply principles of due process and natural justice. As a public quasi-judicial body, law-enforcement decision will be appealable to the high court.