BACKGROUND FACTS:

A general market survey was carried out by a team of the Commission’s officers to look into the business practices of electronic appliance dealers, and during the course of the survey, some price control circulars of DEL Electronics (Private) Limited (Respondent No. 1) and Haier Pakistan (Private) Limited (Respondent No.2) were found.

Four circulars of Respondent No. 2 pertained to the imposition of a fixed price list for products and the imposition of penalties on some dealers for failing to adhere to the fixed price lists. For Respondent No.1, two similar circulars were found whereby dealers were penalized for selling appliances below the prices fixed by Respondent No. 1.

Following the discovery of the above circulars, a working paper was submitted by the Cartels and Trade Abuses Department to the Commission, after consideration o which an enquiry was initiated through the constitution of an enquiry committee. In light of the findings of the enquiry committee, show cause notices were issued to the Respondents.

ORDER:

The Commission held that the law of Pakistan is clear on the matter that RPM (resale price maintenance) arrangements, in whatever form, i.e., restricting discounts, fixing the price and / or setting a minimum or maximum price floor / ceiling, clearly fall under Section 4(2)(a) of the Competition Act, amounting to a fixation of the selling price of a product / good, and were to be treated by object as anti-competitive as it ultimately impacted both intra-brand and inter-brand competition.

Both Respondents had admitted to imposing price and other restrictions through RPM (resale price maintenance) arrangements, which was in violation of Section 4 of the Act, and any such agreements / arrangements were consequently void.

For Respondent No. 1, taking into consideration its commitment to refund the penalty amounts / sanctions to its dealers, the fact that there had been a change in management and that the practice had been discontinued as well as the cooperative and compliance-oriented approach through the proceedings, the penalty imposed was Rs. 100 Million, not exceeding 1% of its annual turnover in the last financial year. The lesser penalty was subject to Respondent No. 1 fulfilling its commitment to refund the sanctions to tis dealers within the prescribed timeline.

For Respondent No.2, although its conduct called for a much higher end stricter penalty, keeping in view that the violation was a case of first instance for the Respondent No. 2 and in order to promote a compliance-oriented approach, the Commission imposed a penalty of Rs. 1 billion not exceeding 3% of the annual turnover in the last preceding financial year.

The Commission also cautioned that RPM arrangements are by object anti-competitive in nature, a violation of Section 4 of the Competition Act, and a serious violation of competition law. Any party wishing to implement the same must notify the Commission first and seek clearance through exemption under Section 5 addressing the efficiencies outlined in Section 9. In the absence of such an exemption, such arrangements would be void.