Background Facts:

The Competition Commission of Pakistan (the “Commission”) through this order shall dispose of the Leniency Application filed by Siemens (Pakistan) Engineering Co. Limited under Competition (Leniency) Regulations, 2007 (“Leniency Regulations”) read with Section 39 of the Competition Act, 2010 to seek leniency in respect of Show Cause Notice No.27/2011 dated September, 2011 issued for, prima facie, bid rigging/collusive activities in the tenders called by electric power distribution companies (DISCOs) to procure switchgear and transformers from the manufacturers of electrical power equipments.

Given that this was the first leniency application since the inception of the Commission itself, the Commission took the opportunity to emphasize the need and effectiveness of leniency. The Commission identified 4 primary benefits of a leniency policy as i) deterrence, ii) detection, iii) desistence, and iv) sanctioning, through the grant of immunity or reduction in financial penalty.

With regards to the purpose of and distinction between regulations 3 & 4, the Commission held that regulation 3, inter alia, requires that that the Commission should not already have the information being provided and the undertaking comes forward before the issuance of a show cause. As a consequence, the undertaking is given full immunity. Under regulation 4, the undertaking comes forward after the issuance of a show cause notice and only provides corroborative evidence.

While the objective of both provisions (Regulation 3 and 4) is to give incentive to a cartel participant for busting the cartel, their application is different in terms of enforcement of competition law. Regulation 3 operates as an effective tool to investigate by offering incentives to uncover the conspiracy and come forward to admit and implicate coconspirators and collect evidence more quickly and at a lower cost. Regulation 4 operates as an encouragement for parties to break ranks with the cartel members even after the relation is found out or established.

Order:

Considering the oral and written submissions, the Commission concluded that invoking of leniency provision by the Applicant is to be viewed as a stepping-stone and endorsement of Commission’s hard core labour for the daunting tasks undertaken and accomplished against powerful lobbies and vested interests - to deter, rectify and eliminate the anticompetitive practices in Pakistan. Given that price fixing was not alleged in the Show cause notice related to switchgear market, the Applicant brought before the Commission evidence of an independent contravention entitling the applicant to immunity. In the transformer market, the Commission had sufficient information already but the information provided by the applicant added significant value. As such, the applicant was given 100% reduction in penalty.