Background of the Case:

M/s Digital Research Labs (Pvt.) Ltd. sent a complaint to the Commission regarding USC’s tender dated 19 May 2016 inviting bids for the purchase of an ERP Software and related hardware implementation services.

According to the complaint, unfair terms and conditions had been imposed through certain clauses in the Request for Proposal (RFP) to exclude, discriminate and restrict fair participation of local vendors in the bidding process.

On the recommendations of the enquiry report, a show cause notice was issued and hearings were held in the matter.

The Commission after hearing the parties at length and considering the likelihood of serious damage being caused to the public interest, found it imperative to issue an interim order under Section 32 of the Act to prevent the award of the contract in question till conclusion of the proceedings and the final order of the Commission. Therefore, the Respondent was directed that it may carry out its internal bidding process and tenders received thus far; however, it would not proceed with the ward of procurement contract till the conclusion of the proceedings and the final order of the Commission.

Order:

The Commission in response to the Respondent’s assertion that it is not an undertaking as per the Competition Act, noted that the Respondent is primarily engaged in bulk purchasing and retail sales of household items targeting the lower strata of society, which is sufficient to determine that the Respondent is an undertaking. The Complainant also noted that the Complainant, contrary to the Respondent’s assertion, is an undertaking as it is engaged in the provision of a variety of IT based software services.

The Commission also held that the relevant market in the instant matter is the market for the procurement of ERP Solutions for large scale retail outlets in Pakistan.

The Commission observed that Respondent was the dominant player in the market for procurement of customised ERP solutions for large scale retail outlets in Pakistan by virtue of operating the largest retails chain of stores providing household commodities, which enabled it to act independently of its suppliers and it is possible for the Respondent to favour one or certain suppliers over the others by imposing unfair, discriminatory or exclusionary conditions.

The Commission held that the pre-qualification criteria laid down in the RFP tender was unwarranted, unreasonable, discriminatory and exclusionary in effect and also appeared to favour particular bidder(s) in defiance of the provisions of Section 3 of the Competition Act.

The Commission also observed that if every procuring agency / organization was to stipulate such technical, financial and performance thresholds, and certification history as a mandatory condition in its pre-qualifying criteria, no existing or new market player would be able to forge any grounds in the relevant market, and therefore, such conditions cannot e allowed for the purpose of fair competition and growth of competition in the market.

The Competition Commission of Pakistan (CCP) has passed an order declaring a tender issued by the Utility Stores Corporation of Pakistan (USC) for the procurement of Enterprise Resource Planning (ERP) in violation of the Competition Act, 2010 and directed the USC to hold fresh bidding after addressing the competition concerns.

The CCP’s enquiry report into the matter saw prima facie violation of Section 3 of the Competition Act in the USC’s tender and identified certain anti-competitive clauses in the RFP to the disadvantage of local vendors as against the international ones. It further stated that the mandatory pre-qualification criteria designed by USC focused on experience in managing cloud services, which was only a small part of the project. Similarly, two clauses of the Solution/Product Evaluation Criteria placed local vendors at a competitive disadvantage.

Declaring the USC’s RFP null and void for being in violation of Section 3 of the Competition Act, the order stated that the USC may re-advertise the RFP and start the bidding process afresh, ensuring a fair opportunity for prospective bidders. In view of the compliance by USC with the CCP’s interim order of January 2017 into the matter, no penalties have been imposed. Referring to the procurement laws of Pakistan and international standards, the order stated that the technical specifications by procuring agencies must allow widest possible competition in the bidding process.

CURRENT STATUS:

USC filed appeal before CAT challenging the order. Appeal was dismissed as withdrawn.