Background of the Case:

CCP on its own initiated an enquiry after reviewing the historical data related to PESCO’s tenders which raised suspicion of collusive bidding in a particular tender numbered ADB-PESCO-06-2009 LOT III for the procurement of 4759 High Tension Pre-stressed Concrete and 3678 Low Tension Pre-stressed Concrete poles. The inquiry was completed vide a report which concluded that out of five undertakings namely; Nam International (Pvt.) Limited, Amin Brothers Engineering (Pvt.) Limited, Creative Engineering (Pvt.) Limited, M.R. Electric Concern (Pvt.) Limited, and Redco Pakistan Limited entered into a joint venture agreement to collectively bid for the tender, while the fifth submitted a cover bid to give the impression of competitive bidding. On the recommendation of the report, CCP issued show cause notices to five undertakings.

In its anaylsis, the Commission repelled the argument that a determination of a relevant market was necessary to violations of Section 4. Rather it held that in cases of collusive behavior there is a presumption that all undertakings involved are operation in the same market. The Commission also outlined that certain categories of horizontal agreement do not have any pro-competitive effects and were liable to be held illegal without inquiry into its effects. Such examples of contracts between competitors included i) price fixing, ii) market division, iii) output restraints, and iv) boycott. Additionally, the Commission also reiterated that the effects also only looked into where the purpose of the agreement is not to restrain competition but in fact may affect competition. The Commission found that the JV was formed to share quantities between the members at a non-competitive price by creating a price floor.

On the issue of cover bids, the Commission found evidence to conclude that there was, at the very least, exchange of information about pricing and the pricing strategy was a result of a coordinated move between the two companies to ensure that the JV would win while giving the impression of competitive bidding process.

The Order:

After hearing all the parties, CCP issued its decision that all five undertakings have violated Section 4 of the Act, 2010 by participating in a collusive bidding arrangement to secure PESCO tender in 2009. A penalty in the sum of PKR 10 M was imposed on five undertakings (PKR 2M each) involved in collusion.

Current Status:

All the parties have filed writ petition against the Order of the Commission before the Honourable Lahore High Court, Lahore. The operation of Order has been suspended.