BACKGROUND:

The Competition Commission of Pakistan took suo moto notice of an advertisement published in the newspapers by Pakistan Banking Association (the “PBA”) on November 5, 2007 which suggested that banks were using the platform of the PBA to, inter alia, collectively decide rates of profit, balance requirements, number of permitted withdrawals and charge on low balance introduced in the form of an Enhanced Saving Account (“ESA”). This would, inter alia, automatically convert PLS accounts with an average balance of Rs. 20,000 to the ESA, offer a 4 % interest rate for deposits of less than Rs. 20,000, and impose a Rs. 50 service charge on deposits having a balance of less than Rs. 5,000.

The Commission issued Show Cause Notices, to all member undertakings of the PBA (excluding Development Financial Institutions) on December 24, 2007 for, prima facie, violating Section 4(1) read with Section 4(2) (a), (c) and (f) of the Ordinance. It transpired that HBL, MCB, NBP, Saudi Pak, ABL, Atlas and UBL implemented the ESA scheme.

The Commission, inter alia, found i) that the ESA was a scheme introduced under the auspices of the PBA; ii) it clearly fixed the price regarding provision of banking service in respect of the ESA; iii) there was a decision to impose automatic conversion of certain PLS accounts to the ESA scheme; and iv) there was a fixed deduction charge for low balance.

ORDER:

In view thereof, the Commission held that the decision to implement the ESA scheme has the object or effect of preventing, restricting or reducing competition in the banking sector, hence a violation of section 4. It also held that “a decision of an association of undertakings reflects an understanding between its members and when such a decision is acted upon by a member” constitutes an ‘agreement’. The matter was disposed of vide Order dated 10-04-2008 whereby the Commission passed a remedial order directing PBA and certain members to discontinue this practice and not to repeat the prohibition specified. Moreover, it imposed a Penalty of Rs 30 million on PBA and 25 million on HBL, ABL, MCB, UBL, ATLAS, NBP and Saudi Pak. Other member banks that were a party to the agreement but did not implement the ESA scheme were given a warning not to violate the prohibition but no penalty was imposed.

Matter was then appealed before the Appellate Bench

Considering the written and oral submissions made by the Appellants and after due deliberation on all issues in the interest of justice the commission concluded that the appeals are liable to be dismissed and thereby upholding the Impugned Order.

CURRENT STATUS:

Case transferred to CAT from Supreme Court.