The Competition Act, 2010
The Competition Act, 2010 (CA ’10) is a state of the art modern law which gives the Competition Commission of Pakistan legal and investigative instruments and powers to engender free competition in all spheres of commercial and economic activity, enhance economic efficiency, and to protect consumers from anticompetitive behaviour.
The Act applies to all undertakings in Pakistan regardless of their public or private ownership and to all actions or matters that can affect competition in Pakistan. Although essentially an enabling law, it briefly sets out procedures relating to review of mergers and acquisitions, enquiries, imposition of penalties, grant of leniency and other essential aspects of law enforcement.
Briefly, the law prohibits situations that tend to lessen, distort, or eliminate competition such as actions constituting an abuse of market dominance, competition restricting agreements, and deceptive marketing practices.
- Abuse of Dominant Position. §3 of the Act prohibits the abuse of a dominant position through any practice that prevents, restricts, reduces, or distorts competition in the relevant market. These practices include, but are not limited to, reducing production or sales, unreasonable price increases, charging different prices to different customers without objective justifications, tieins that make the sale of goods or services conditional on the purchase of other goods or services, predatory pricing, refusing to deal, and boycotting or excluding any other undertaking from producing, distributing or selling goods, or providing any service.
- Prohibited Agreements. §4 of the Act prohibits undertakings or associations from entering into any agreement or making any decision in respect of the production, supply, distribution, acquisition or control of goods or the provision of services, which have the object or effect of preventing, restricting, reducing, or distorting competition within the relevant market. Such agreements include, but are not limited to, market sharing and price fixing of any sort, fixing quantities for production, distribution or sale; limiting technical developments; as well as collusive tendering or bidding and the application of dissimilar conditions. The Commission is authorised, however, to issue either individual or block exemptions under §5-9 of the Act.
- Deceptive Marketing. The Act prohibits deceptive marketing practices, in other words, any advertising or promotional material that misrepresents the nature, characteristics, qualities, or geographic origin of goods, services or commercial activities. An Office of Fair Trade (OFT) has been created within CCP specifically to oversee consumer protection issues under §10 of the Act.
- Approval of Mergers. The law prohibits mergers that would substantially lessen competition by creating or strengthening a dominant position in the relevant market. The Act requires prior notice of proposed mergers or acquisitions that meet the notification thresholds stipulated in §4 of the Competition (Merger Control) Regulations 2007. If the Commission determines this to be the case, it can prevent mergers or acquisitions, set conditions or require divestitures. The Act does not distinguish between horizontal and vertical mergers. The term merger in §11 also covers joint ventures, therefore they are subject to the Commission’s approval provided that they meet the notification thresholds.
§28 of the Act states that the functions and powers of the Commission are to: (a) initiate proceedings and make orders; (b) conduct studies for promoting competition; (c) conduct enquiries; (d) give advice to any undertaking which has asked for it in relation to the consistency of its proposed actions in relation to the law; (e) engage in competition advocacy; and (f) take all other actions necessary for implementing the Act.
§30 establishes rules for proceedings in case of contravention, stipulating that before making an order the Commission shall: (a) give notice of its intention stating reasons; and (b) give the undertaking(s) involved an opportunity to be heard and to bring before the Commission facts and material in support of its (their) contention.
§31 deals with the Commission’s orders in cases pertaining to abuse of dominant position, prohibited agreements, deceptive marketing practices, and mergers. The Commission has the power to issue interim orders if the final decision will take time and the actual or imminent situation can cause harm.
§33 establishes that the Commission shall, for the purpose of a proceeding or enquiry, have the same powers as are vested in a civil court for: (a) summoning and enforcing the attendance of any witness, (b) discovery and production of any document as evidence, (c) accepting evidence on affidavits, (d) requisitioning of any public record form any court or office, and (e) issuing of a commission for the examination of any witness or document. Any proceeding before the Commission shall be deemed to be a judicial proceeding and the Commission shall be deemed to be a civil court for the purposes of offences relating to documents given in evidence.
§34 grants the Commission the power to enter and search premises and should any undertaking refuse without any reasonable grounds, §35 grants the power of forcible entry.
§38 empowers the Commission to direct any undertaking or individual to pay by way of penalty a sum specified in an order, if it determines that such an undertaking or individual has been found to have engaged in any prohibited activity, has failed to comply with an order of the Commission, has failed to supply documents and information to the Commission, or has furnished any document or information believed to be false, inaccurate or that knowingly and negatively interferes in the work of the Commission.
§39 permits the Commission to be lenient and impose a lesser penalty on an undertaking that is alleged to have violated the law if it has made a full and true disclosure in respect of the alleged violation. There is also a possibility of a full exemption. Leniency is possible only for the first undertaking that makes a full disclosure. The Commission, though, may revoke leniency in case of failure to comply with the leniency conditions or false evidence.