BACKGROUND:<?h5>

The Competition Commission Of Pakistan took suo moto notice of the news items published on 12, 13, 14 February 2009 in “The NEWS’ that most allocations of critical raw material known as steel billets were being allocated to a particular entity known as the ‘Abbas Group’ and the remaining users of steel billets were not getting these in time or in the quantities required by them. The Commission conducted an enquiry which was concluded on April 10, 2009. It was found that the undertaking, prima facie holds a dominant position in terms of clause (e) of sub-section (1) of Section 2 of the Ordinance being inter alia the sole domestic manufacturer of the product and in terms of its finding prima faateecie violations of clauses (g)&(h) of sub-section (3) of Section 3 of the Ordinance. The undertaking was therefore served a Show Cause Notice on April 29, 2009 and it was called upon to show cause and appear before the Commission.

For the purposes of its analysis, the Commission was low carbon steel billets (excluding high carbon steel billets). The relevant geographic market was the entire country of Pakistan. On the question of dominant position, the Commission found that PSM held 100% of billets of the grade in question and the presumption of dominance was satisfied.

The Commission also dealt with the concept of ‘refusal to deal’. It stated that refusal to deal could occur vertically where an undertaking refuses to supply to a customer, or horizontally where the undertaking refuses to deal with or supply its products to its competitors. It also noted that a refusal to deal may also take place when a dominant firm supplies less than the full amount requested, supplies irregularly or with long delays, or by offering to supply only at a different or variable level of quality i.e. constructive refusal to deal.

In order for a refusal to deal to be violative of competition law, the general conditions were held as follows:

1. The refusing firm must have a dominant position in the market of the product or service it is refusing;

2. The product or service that is being refused must be an objectively indispensable input, with no actual or potential substitutes (the Commission held meant that an input is indispensable when there is no actual or potential substitute on which competitors in the downstream market could rely so as to counter in the long run the negative consequences of the refusal);

3. The refusing firm must not be willing to sell or supply at terms and conditions that would be considered appropriate or reasonable, part of the industry standard or in the ordinary course of business;

4. Such denial of service must have a material impact on competition in a related market to the detriment of customers;

5. The denial of dealing, supply or service must be without objective commercial justification; and

6. It is necessary that a remedy may be crafted that ensures that the relevant product is provided on an ongoing basis, at appropriate terms and conditions.

Based on the aforementioned parameters, the Commission found that the PSM had abused its dominant position by refusing to deal.

ORDER:

CCP vide its Order dated 22-03-2010 disposed off the matter. A penalty of Rs. 25 million was imposed on Pakistan Steel mills for its abuse of dominant position. PSM was also reprimanded for abusing its dominant position and was cautioned that any future infringement of the Ordinance would be viewed most adversely by CCP and would justify the imposition of a far higher penalty.