Background of the case:

The order was issued after disposal of proceedings arising out of the show cause issued to PEC after completion of an enquiry based on a complaint received against PEC which alleged that the body had restricted insurance coverage of public civil works to only ‘AA’ rated companies, which places other insurance companies at a competitive disadvantage.

Order:

The order finds that PEC had included provisions in its standard bidding documents, which restrict insurance companies not having an ‘AA’ rating from providing bid and performance guarantees to civil work projects in the public-sector. The practice has the effect of foreclosing the market to two-thirds of insurance providers, which also results in reduction of choice available to consumers and amounts to a restrictive trading condition in terms of Section 4(2)(a), in violation of Section 4(1) of the Act.

The requirement placed by PEC is only applicable to insurance companies and not to banks, who are also engaged in providing the same services, and thus constitutes the application of dissimilar trading conditions to equivalent transactions in terms of Section 4(2)(f), in violation of Section 4(1) of the Act.

Penalty:

CCP imposed a fine of PKR 30 Million on Pakistan Engineering Council (PEC), for restricting competition in the market for insurance coverage of public civil works, in violation of Section 4 of the Competition Act, 2010. CCP, while imposing a penalty on PEC, has further directed it to amend the standard bidding documents, to refrain from engaging in similar practices in the future and to submit a compliance report with the Registrar of CCP.

CURRENT STATUS:

PEC filed appeal before Competition Appellate Tribunal and Tribunal dismissed the appeal in favour of PEC.