ISLAMABAD, April 30: The Competition Commission of Pakistan (CCP) on Tuesday directed the Fauji Fertiliser Company Limited (FFC) and Fauji Fertiliser Bin Qasim Limited (FFBL) to submit undertakings within three weeks, assuring transparent business practices and due compliance with the order of the commission.
Furthermore, the undertakings are also required to report and confirm due compliance within two years from the date of this order.
According to the order issued to the media, no individual would be a director of both FFC & FFBL with the exception of (a) the chairman, (b) minority shareholders (c) individuals representing institutions other than the Fauji Group of Companies including but not limited to FFC & FFBL.
The FFBL chairman will not have a second or casting vote nor shall he hold the office of the chief executive officer, so long he is also the chairman of FFC.
In order to ensure good corporate governance and transparency, the FFBL shall take necessary measures to ensure that there are three independent directors on its board in terms of paragraph 38.
The commission is agreeable to the proposed time period for the implementation of the aforesaid actions, within two years from the date of this order as this appears to be reasonable.
The show-cause notices issued in August 2007 by the Monopoly Control Authority were finally disposed of by the CCP.
The FFC has assured the commission to implement the plan of action mutually agreed between the two during their discussion.
As a result of initiation of the proceedings and FFC & FFBL’s interface with the commission during the course of hearings eventually led the parties to come forward with a proposal that substantially addressed the concerns of the commission for bringing transparency in the functioning of the associated undertakings to protect and enhance competition in the relevant market.
The order issued by the CCP said: “For reasons recorded in the order, the show-cause notices Nos. 14 & 15 of 2007-08 issued to FFC & FFBL are to be disposed of in terms of the following:
The FFC, engaged in manufacturing, purchasing and marketing of fertilisers and chemicals, including investment in other fertiliser and chemical manufacturing operations, is an undertaking within the meaning of Section 2(1)(m) of the Monopolies and Restrictive Trade Practices (Control & Prevention) Ordinance 1970.
“The FFBL is an associated undertaking of FFC and is also engaged in manufacturing, purchasing and marketing of fertilisers. Their combined market share was ascertained to be 47 per cent in phosphetic and 49 per cent in nitrogenous fertilisers which was more than one-third of the fertiliser’s product market and as such situation, prima facie, constitutes unreasonable monopoly power as defined under clause (a) of sub-section (1) of Section 5 of the Ordinance. Show-cause notices Nos. 14 & 15 of 2007-08 (primarily similar in substance) were, therefore, served on the undertakings on Aug 30, 2007 and they were required to show cause in writing by Sept 17, 2007.
The show-cause notice in its relevant part reads as follows:
“and whereas, the combined market share of the undertaking and its associated undertaking is ascertained to be 47 per cent in phosphetic and 49 per cent in nitrogenous fertilisers; and whereas, the share of the undertaking and its associated undertaking is more than 1/3rd of the fertiliser’s product market; and whereas, such a situation, prima facie, constitutes unreasonable monopoly power as defined under clause (a) of sub-section (1) of Section 5 of the Ordinance; and whereas, unreasonable monopoly power is prohibited by the provisions of Section 3 of the Ordinance; and whereas, the Monopoly Control Authority is satisfied that unreasonable monopoly power is injurious to the economic well-being, growth and development of the country and it is necessary in the public interest to make appropriate order under Section 11 read with section 12(1)(b)(i)&(iii) of the ordinance;
“Now therefore, you, M/s Fauji Fertiliser Company Ltd, are hereby called upon to show cause in writing by Sept 17, 2007, as to why appropriate action under Section-11, read with Section 12(1)(b)(i)&(iii) of the ordinance may not be taken against you.”