The Background:

A show cause notice to the Institute of Chartered Accountants of Pakistan (ICAP) over a directive dated 4 July 2012, issued by ICAP, advising all its members and the chartered accountancy firms to refrain from engaging trainees of other accounting bodies, particularly trainees of foreign institutes of chartered accountants or any other accounting body of similar nature such as the Association of Chartered Certified Accountants (ACCA), Institute of Chartered Accountants of England and Wales (ICAEW) and Chartered Institute of Management Accountants(CIMA).

The show cause notice states that the ICAP Directive prohibits students, pursuing membership of accountancy bodies other than ICAP, from getting training from chartered accountancy firms or members of ICAP in Pakistan, thereby, prima facie, foreclosing access to such students to a large segment of the relevant market, which appears to be in violation of Section 4 (1) of the Competition Act, 2010.

In its analysis, the Commission considered whether ICAP acted as an association. In this regard, it relied on a test which provided the “two step methodology in determining whether an association of undertakings is subject to competition law: are the members of the association/body undertakings? What is the nature of the decision of the association of undertakings?” After, inter alia, analyzing ICAPs structure and the nature of the activity, the Bench has held that the when ICAP issued the July Directive, it acted as an association of undertakings and that the July Directive was in violation of Section 4 of the Act.

For the purposes of its analysis, the relevant product market was identified as the provision of professional training to students pursuing members of domestic or foreign accountancy bodies whereas the relevant geographic market is the territory of Pakistan.

The Bench observed that the July Directive forecloses, shuts out, and precludes not only a large but the most valuable segment – the public practice accountancy firms – of the relevant market for the non-ICAP students. The order stated that it is important to recognize that training through a public practice accounting firms was a valuable form of training for accountancy students and while there were other avenues such as in-house training at commercial concerns in public or private sector, accountancy firms offered a greater exposure and experience to students on a broader range of subjects which was not substitutable to any training or experience offered by other approved employers.

The Order:

In its order, the Commission has declared ICAP’s prohibition to be in contravention of Section 4 of the Competition Act, 2010 (the ‘Act’) and, hence to be without any legal force, fined ICAP PKR 25 Million for the violation, and restrained ICAP from issuing similar directives to its members in the future. As per the order, the relevant course of action for affectees would be to pursue compensation from courts of competent jurisdictions.

Current Status:

ICAP has filed writ petition before the Honorable Lahore High Court, Lahore. The High Court has suspended the operation of CCP order. The matter is pending adjudication before the Tribunal.