ISLAMABAD, Aug 31 Accusing cement manufacturers of having formed a cartel, the Competition Commission of Pakistan imposed a fine of over Rs6.35 billion -- the highest-ever in the country's history -- on 20 leading units.
Some of the units which are owned by political families have been penalised for their alleged anti-competitive practices and for robbing consumers by mutually agreeing to raise in prices.
According to the commission's detailed judgment, the penalties have been slapped after examining the seven-month record of the cement manufacturers recovered from the premises of their association in March this year.
The penalty comes to more than Rs6.352 billion at the rate of 7.5 per cent of each company's turnover. The fine could have been as high as Rs12.704 billion if the commission had imposed penalty at the highest rate of 15 per cent. According to the decision, the following penalties had been imposed Rs1.272 billion on Lucky Cement, Rs933 million on D.G. Khan, Rs586 million on Maple Leaf, Rs562 million on Bestway, Rs405 million on Pakistan Cement, Rs374 million on Attock, Rs366 million on Pioneer, Rs345 million on Dewan (the merged entity of Dewan Cement and Dewan-Hattar Cement), Rs266 million each on the Fauji and Cherat, Rs233 million on Askari (Wah), Rs187 million on the Askari (Nizampur), Rs174 million on Fecto, Rs103 million on Kohat, Rs87 million on Al Abbas, Rs74 million on Mustehkam, Rs42 million on Dandot, Rs39 million on Gharibwal, Rs28 million on Dadabhoy and Rs12 million on Flying Cement.
It may be mentioned that the penalties were finalised following the Lahore High Court decision of Aug 24, which vacated a stay order allowing the commission to pass the final order in this regard. The judgment said that by virtue of the rules of the Cement Manufacturers Association, members could fix quotas with respect to production and supply of cement to maintain the desired price level. The agreement facilitated its members to engage in practices, which “prevented, restricted and reduced competition within the cement industry”.
It said the data showed that, individual association members effectively restricted the output.
It was observed that the percentage share of each unit between 2003 and 2008 closely matched with the percentage share of member undertaking in the total production capacity, demonstrating the existence of an agreement, closely adhered to by individual units.
The first cement cartel emerged in 1992 when re-construction and rehabilitation work started after floods that year. This was followed by another instance when cement manufacturers raised the per bag price from Rs135 to Rs235.
The third instance was in 2003 when the price was increased by Rs35 a bag overnight.
In all these cases, the former Monopoly Control Authority (MCA) intervened and resolved the issue to some extent.