In response to the argument that JJVL and two related companies (Lub Gas & Mehran Gas) that are separate legal entities, the Commission held that corporate entities with the same economic group can be considered a single economic entity if they pass the economic unity or actual or potential competitors test. The test required 1) a determination whether the undertakings are sufficiently integrated to qualify as a single entity and if the undertakings in question fail to aaffirm the test of integration, then 2) it is to be seen whether the undertakings are actual or potential competitors of each other. Based on various information, it held that the three companies were a single economic entity.

The Commission distinguished the definition of ‘control’ as used in company law and competition law. In the context of competition law, it was held that control means “the presence of sufficient structural or economic linkages between two undertakings that would enable one undertaking to, directly or indirectly, influence or manage the decision making of the other.”

LPGAP was held to have a dominant position on the presumption test as it enjoyed 40% of the relevant market.

The Commission analysed the concept of limit pricing. It discussed that limit pricing is not illegal if the benefit of the lower prices is passed on to consumers and the economy avoid duplicate production. However, if there is no benefit to the economy and consumers, it results in undue exclusion, then such limit pricing in illegal. In this regard, it was held that JJVL has engaged in limit pricing by creating an artificial entry barrier for importers and limited the ability of such importers to sell in the relevant market by reducing profitability.

The Commission also held that the end result of competition law is not to ensure very low prices, but to protect structures of competition in order to ensure that there is both adequate supply and a competitive price. It concluded that JJVL abused dominant position by keeping producer prices low and excluding importers from doing business and restricting competition.

With regards to prohibited agreements, the Commission found two prima facie instances of cartelization, i) one vertical cartel between JJVL and LPGAP, and ii) second a horizontal cartel amongst LPGAP marketing companies. While discussing the issue of horizontal collusion amongst members of LPGAP, the Commission noted that associations are not business decision making entities and need to be extremely cautious when they discuss issues which have commercial consequences for their members, including deliberation or decision on pricing and output. In this regard the Commission found that LPGAP unlawfully set price for LPG and actively advocated and enforced this price in the market. As such, its actions were illegal as horizontal price fixation is facially invalid notwithstanding any pro-competitive justifications that may be offered.

Additionally, on the argument that the complainant is also a member of LPGAP, the Commission held that i) a decision could have been taken by a majority, and ii) in any event, inclusion of the complainant in the collusive activity will not validate the actions of the LPGAP nor make them lawful.

On the question of the Commission’s reliance on media reports, the Commission held that the reports relied on were either verbatim reproductions of statement or voluntary statements by the LPGAP which were not retracted at any point nor have they been dispelled. As such, they could be relied upon.

On the issue of vertical cartelization, the Commission relied on an ECJ decision on the elements of collusive practice to be proved before a case of collusive behaviour can be made out. 1) to establish communication of information between undertakings to establish the existence of an understanding. 2) the anti-competitive effect/object of such communication. However, the Commission did not find sufficient linkages to find this against JJVL and LPGAP.

ORDER:

The matter was disposed off vide Order dated 14-12-2010 the Commission.A penalty amounting to 3.75% of last annual net turn-over i.e. PKR 278,087,448 (based on annual accounting statements for the year ending 30 June 2008 which records net turnover as PKR 7,415,665,289) was imposed on JJVL. JJVL is directed to cease and desist from restricting competition through limit-pricing, OGRA is strongly recommended to review its policy and implementation regarding ‘reasonable consumer price’ and is directed to take necessary measures to ensure a level playing field for all stakeholders and to ensure that no party including importers should either be excluded from the relevant market through anti-competitive measures or be allowed to create or maintain artificial entry barriers in the relevant market. Commission taking a lenient view imposes a sum of Rs 40 million as penalty on LPGAP keeping in view that LPGAP is not a repeat offender.

CURRENT STATUS:

The writ petitions filed by JJVL and LPGAP challenging, inter alia, the jurisdiction of the Commission and the vires of the Competition Ordinance along with the appeals against the Order of the Commission are pending adjudication before the Honourable Lahore High Court, Lahore.