Background of the Case:

The Commission issued a show cause notice to JCR-VIS Credit Rating Company for prima facie predatory pricing in the bidding for rating assignment of Sukuk issue of PKR 100 billion by Neelum Jhelum Hydropower Company (Private) Limited (NJHPC). The Commission acted on a complaint received from the Pakistan Credit Rating Agency Limited (PACRA) which alleged that JCR-VIS' submission of a token bid of PKR 1,100 for a rating assignment of ten years was predatory in nature and it was meant to drive the PACRA out of the market.

Predatory pricing is a concept whereby the dominant market player prices goods and services below cost in the short run to drive or keep out competitor and reap profits in the long run. An enquiry conducted by the CCP's Cartel & Trade Abuses department found that JCR-VIS was dominant in the market for credit rating services in Pakistan and the submission of a token bid of PKR1 100 was insufficient to cover JCR's costs. Therefore, it was determined that JCR had prima facie abused its dominant position by engaging in predatory pricing which is a violation of Section 3 of the Competition Act, 2010.

Order:

The Commission held that the final bid submitted by the Respondent reflected a predatory pricing strategy and the Respondent had failed to provide a viable commercial sense or any objective justification in terms of efficiency gains for same. The Commission further held that the strategy may result in harm to competition with the elimination of specific undertaking which is likely to trigger financial instability. The Commission found the aforesaid conduct to be in violation of Section 3 of the Competition Act.

The Commission imposed a fine of Rs. 500,000/- on the Respondent. The Commission also directed NJHPC to cancel the impugned big and file a compliance report with the Registrar of the Commission within 14 days of the date of the order.

CURRENT STATUS:

JCR filed appeal before CAT challenging the order.