Background of the Case:

Ghee and cooking oil sector study carried out by CCP and information collected through other sources indicated anti-competitive practices by PVMA and its members. Based on the information available to CCP it deemed appropriate to search and inspect the offices of PVMA. Two teams of officers authorized by CCP raided PVMA’s offices situated in Islamabad and Karachi for potential evidence of violations of the Act. Thereafter, to examine the impounded material and conduct a formal enquiry, CCP appointed an Enquiry Committee to prepare a detailed Enquiry Report under Section 37 of the Act. The Enquiry Committee submitted its Enquiry Report on 25 April, 2011 which concluded that PVMA has been involved in fixing the price, prima facie, in violation of Section 4(2)(a) of Act and has also discriminated between its members and commercial importers by charging two different rates of invoice verification in, prima facie violation, of Section 3(3)(b) of the Act. Based on the findings of Enquiry Report, CCP issued show cause notice to PVMA.

On the issue of whether there was a violation of Regulation 45(2) of the Competition (General Enforcement) Regulations 2007, the Commission found that there was no such obligation.

On the issue of price fixing, the Commission determined the relevant product market as cooking oil and ghee and geographic market as Pakistan. Moreover, the purported “advice/recommendations” by PVMA were actually price fixation through active negotiation.

On the issue of whether the arrangement entered into by PVMA with respect to fixing rate of transportation was a violation of Section 4, the Commission found that no determination can be made unless all the parties concerned are probed on this account.

On the issue of whether charging two different rates for the same service is in contravention of Section 3(3)(b), the Commission noted that price discrimination is sanctionable where i) the discrimination relates to equivalent transactions; and ii) it puts customers at a competitive disadvantage vis-à-vis his customers. In this regard, the Commission found that PVMA failed to apply/demonstrate any objective criterion while charging two different rates.

The Order:

The Bench observed that PVMA has played a significant role in fixing the price of ghee and cooking oil. Prices were regularly discussed in the meetings of PVMA. Costing was also prepared by PVMA and then active negotiations were made by PVMA with government to fix the price around its own costing. Once price was fixed, it was communicated to all of its members to follow the decision of PVMA. The Bench reiterated CCP’s view taken in number of its orders already passed that it is not the mandate of an association to deliberate on commercial sensitive information. The Bench maintained that government’s engagement with PVMA instead of individual manufacturers to discuss price is against the norms of competition law. However, the Bench held that there is nothing on record to prove involvement of government in price fixation in this case as has been portrayed by PVMA. The demand on behalf of government for reduction in price, in wake of decline in prices of edible oil used as raw material in manufacturing of ghee/cooking oil seemed legitimate. The Bench emphasized that government did not fix the price rather urged the manufacturers to reduce the prices.

On the other issue of charging two different rates to manufacturers (PVMA members) and commercial importers (Non-members) for invoice verification in respect of same product i.e. edible oil, the Bench held that objective justification offered by PVMA for such discrimination is not satisfactory. This justification could have been valid where the services provided were originally part of mandate of PVMA as an association. Whereas, the services in question are those allowed to PVMA by a third party i.e. Customs Authority.

The Bench found PVMA guilty of violating section 4 of the Act and imposed on them a penalty of PKR 50 Million. The bench also found PVMA guilty of violating section 3 and directed to cease the discriminatory behavior with immediate effect. In the case of non-compliance the bench would hold them liable to pay a fine of PKR 1 Million for each day of default.

Current Status:

PVMA filed an appeal before the Honourable Islamabad High Court, Islamabad. The Honourable Islamabad High Court suspended the operation of the Order of the Commission. The matter transferred to Cat, pending adjudication before CAT.