Summary:

The Commission, upon taking suo moto notice of suspected cartelization by the Pakistan Automobile Manufacturers Authorized Dealers Association (PAMADA) and its member undertakings (the ‘Respondents’), initiated an enquiry into the matter in terms of Section 37 (1). During the enquiry, the premises of PAMADA were searched and inspected, and relevant documents impounded.

Pursuant to the findings of the enquiry report, 44 show cause notices (‘SCNs’) were issued to the Respondents for prima facie violation of Section 4 of the Competition Act 2010 (the ‘Act’). Violations by the Respondents were primarily alleged in four different relevant markets i.e. (i) the market for new automobiles in Pakistan, (ii) the market for automobile spare parts in Pakistan, (iii) the market for automobile body repairs and paint jobs, and (iv) the market for experienced sales and technical staff at authorized automobile dealers in Pakistan.

Order

In its order, the Commission addressed the legal concerns raised by the Respondents with regards to the constitution and membership of an ‘association’ under the Act, the demarcations of the relevant markets as well as the violations alleged in the SCNs.

The Commission dealt with the liability of PAMADA separately from that of its member undertakings and found that PAMADA had issued two circulars fixing the rates of automotive body repairs and paint job services offered by it, one circular fixing the prices of genuine spare parts supplied by its member undertakings by strictly prohibiting them from offering discounts and lastly, a circular restricting the movement of human resources between automobile dealers. The issuance of these circulars was found to amount to decision-making by an association, which is prohibited under the Act.

With regards to a violation in the market for sales of new automobiles, the Commission did not find the evidence available sufficient to hold PAMADA liable.

Finally, in consideration of the responses submitted by the member undertakings during the course of hearings, and upon the evidence available, the Commission did not find them to have implemented the decisions taken by PAMADA in violation of Section 4 of the Act.

Remedy and Penalty

In view of the violations made out, the Commission directed PAMADA to cease its collusive practices and imposed the following penalties:

(i) Rupees Fifty Million each for two violations in the market for body repairs and paint jobs;

(ii) Rupees Twenty Five Million for a violation in the market for genuine spare parts; and

(iii) Rupees Fifteen Million for a violation in the market for human resources.

PAMADA is therefore liable to pay a total sum of Rupees One Hundred And Forty Million. Furthermore, PAMADA and its members have been strictly warned to refrain from cartelizationcollusive behaviour in the future at the risk of severe penal consequences.

CURRENT STATUS:

PAMADA filed appeals/Suit before Competition Appellate Tribunal, Islamabad High Court and Civil Court and the matter is pending before the Courts. CAT dismissed appeal in favor of CCP.