Background of Case:

CCP took action on the information provided by Secretary Agriculture, Government of Sindh which expressed concern on the practice of tying the sale of DAP with Urea and initiated an enquiry by appointing enquiry officers to investigate violation of Section 3 of the Act which prohibits abuse of dominance. On the recommendation of the Enquiry Report, Show Cause Notices were issued to Dawood Hercules Chemical Limited (DHCL); Engro Chemicals Pakistan Limited (Engro); and Fauji Fertilizer Company Limited (FFC), for contravention of Section 3 of the Act through practices including tie-in, unreasonable increase in prices or imposition of unfair trading conditions and supplementary obligations.

For the purposes of its analysis, the Commission held that the relevant product market to be urea fertilizer and the geographic market was the whole of Pakistan. As regards dominant position, given that FFC held more than 40% it was deemed to hold a dominant position, whereas, despite 16% and 9% shares respectively, Engro and DHCL were held to clearly be in a position to behave to an appreciable extent independently of consumers, competitors, customers or suppliers.

While assessing whether the urea market was a captive market, the Commission relied on the following on the following essential conditions: a) purchasers are obliged through lack of alternatives to purchase a particular product, b) there is lack or absence of price competition, c) there is economic viability for the product irrespective of small market share, and d) the undertakings are in a position to dictate prices including other terms and conditions.

The Order:

The Commission in its Order dated July 23, 2010 held that no pattern emerged which could establish tie-in of the sale of DAP linked with the sale of Urea on part of the undertakings concerned. The Bench further held that even though no empirical evidence exist for tying however, FFC’ dealership agreements have a clause which empowers suppliers to tie-in different products, therefore, such anomaly should be removed in the continuing agreements.