The Competition Commission of Pakistan (CCP) has issued a Show Cause Notice to the Pakistan Poultry Association (PPA) for engaging in practices prohibited under the Competition Ordinance (2010). Based on consumer e-mails and news reports of high prices of day-old chicks and exorbitant increase in the prices of poultry feed, the CCP undertook an investigation of the Pakistan’s poultry industry. The news reports and complaints claimed that the increases were the result of cartelization among the poultry hatcheries owners and the poultry feed manufacturers. Pakistan’s poultry industry comprises several sectors that are interconnected, with each having a stake in each other. The different sectors include feed manufacturers, breeders, hatcheries, broiler farms and layer farms. Feed manufacturers use agri-based produce and by-products to make various feeds which are fed as diet to chickens bred by breeders and hatcheries. Breeders use grandparent pure-line stock strains to produce parent stock strains of chickens, which in turn supply eggs to hatcheries. Hatcheries use eggs provided by breeders to produce day-old chicks, which are then raised on farms for their meat and eggs and are sold to broiler and layer farms. Broiler farms purchase day-old chicks from hatcheries and raise a breed of chicken, known as the broiler, which is meant for chicken meat production. Layer farms, on the other hand, purchase day-old chicks from hatcheries and raise a breed of chicken known as the layer, which lays eggs for dietary consumption. Upon investigation, the CCP observed that prima-facie PPA served as the nerve-center that connected the different sectors of the poultry industry, including feed manufacturers, breeders, hatcheries and broiler and layer farms. The CCP enquiry team discovered that information relating to rates of various poultry products, such as chicken meat, eggs, feed etc, was being displayed on the official website of PPA and that these rates were being updated on the website on regular basis, at times even daily, that indicated towards an arrangement to fix the prices of poultry products, by misusing the platform of PPA. Such an arrangement for collective price fixing, if it exists, has the object and effect of preventing, restricting or reducing competition in the relevant market which is a violation of Section 4 of the Competition Ordinance, 2010. On the recommendation of the Enquiry Committee, the Commission deemed it appropriate to conduct search and inspection of the offices of PPA located in Islamabad, Lahore and Karachi under the power granted to it by Section 34 of the Ordinance in order to collect any evidence regarding the suspected violations of section 4 of the Ordinance. Based on the materials and documents impounded during the search and inspection of PPA’s offices, the information available on PPA’s website, and the documents and information received from PPA, Poultry Research Institute and the undertakings involved in poultry business, the Enquiry Committee concluded in the Enquiry Report that there is, prima facie, cartelization in all markets of day old chicks, poultry feed, broiler chicken, eggs and grandparent stock in violation of Section 4(1) of the Ordinance. PPA, by deliberating, deciding, and announcing the prices and mechanism for sale of of poultry feed, broiler meat, day of chicks, eggs and grandparent stock has, prima facie, violated Section 4(1) read with Section 4(2) (a) and 4(2) (c) of the Ordinance. The various sub-committees and wings of PPA, along with their members, related to poultry feed, broiler marketing, layer marketing, grand parent stock and day old chicks have, by deliberating, deciding, and announcing the price and mechanism for sale of their respective poultry products, prima facie, violated Section 4(1) read with Section 4(2) (a) and 4(2) (c) of the Ordinance. In its Show Cause Notice, the CCP has stated that based on its prima facie findings, the PPA appears to play a lead role in facilitating discussions, taking decisions, ensuring coordination and implementing amongst its members with respect to production and pricing of day-old chicks, the production and pricing of poultry feed, and the production pricing and sale of broiler chicken and eggs, which negatively impacts consumer welfare. PPA has been called upon to show cause in writing within 14 days of the show cause notice and to appear and avail the opportunity of hearing before the Commission on August 03, 2010 and explain as to why an appropriate Order under clause (b) of section 31 of the Ordinance may not be passed and a penalty at the rates prescribed in Section 38 of the Ordinance may not be imposed.
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