Competition Commission of Pakistan ( CCP ): The Appellate Bench of CCP, comprising of Mr. Khalid A. Mirza, Chairman and Ms. Rahat Kaunain Hassan, Member (Legal) while deciding the Appeal filed by ICAP has upheld the finding given by the single Member Dr. Joseph Wilson that fixing of minimum hourly charge rates for audit engagements violates Section 4 of the Competition Ordinance, 2007 (the “ Ordinance ”). Such an arrangement between the ICAP and its Members is also upheld by the Bench to be void in terms of sub-section (3) of Section 4 of the Ordinance. ICAP has been directed to withdraw ATR-14 from the Members' Handbook no later than 15 days from the date of the issuance of this Order and barred from prescribing or enforcing minimum fee or fixing of fee for audit engagements in any manner whatsoever with immediate effect. A nominal fine of Rs.1 million on the Appellant has also been imposed. The CCP proceeded suo moto against ICAP by issuing a show cause notice for the violation of Section 4(1) of the Competition Ordinance, 2007 (the Ordinance). ICAP had issued ATR 14 that had fixed the minimum remuneration for conducting the audit of companies by the members of ICAP. After issuance of the show cause notice, due opportunity of hearing was provided and on December 04, 2008 the single member passed his order thereby declaring ATR 14 void, directing ICAP to withdraw the same from the ICAP Member's Handbook, and to publish notice of such withdrawal in two news papers on or before December 19, 2008 failing which ICAP was held liable to pay a penalty of Rs.300,000/- for per day of infringement. Being aggrieved by the said order, ICAP preferred an appeal before the Appellate Bench of the Commission under Section 41 of the Ordinance. The Appellate Bench has observed that the single Member adjudicating the matter at the original stage had taken a lenient view the fine imposed being related to non-compliance with the directive to withdraw ATR-14, the Appellant's continued insistence on maintaining ATR-14 without any justification at all leads us to conclude that a nominal fine is called for. The Bench has held that collusive price fixing is a serious violation in all modern competition regimes that should not be left unpunished unless there are cogent reasons to do so. Accordingly, a fine of Rs.1 million on the Appellant has been imposed. In addition the Appellant will pay a fine of Rs.300,000 per day of infringement commencing from 15 days from the date of issuance of the Order, in the event of non-compliance with the directives given under the Order. It has been held by the Appellate Bench that decisions/agreements that fix prices are prohibited because the aim and result of every price fixing agreement, if effective, is elimination of one form of competition. It involves power to control market forces and to fix the prices, be it reasonable or unreasonable – ‘the reasonable price of today may become the unreasonable price of tomorrow'. It is for this reason that “ the anticompetitive potential inherent in all price fixing agreements justifies their ‘facial invalidation' . In the Appeal, ICAP's thrust of argument was that fixing minimum audit fee levels ensures quality and prevents undercutting. In this regard, the Bench observed that the nexus between quality and a minimum fee structure has not been demonstrated by the Appellant. When ICAP was asked, it could not provide any reason why poor quality of audits could not co-exist with a minimum fee structure or how an improvement in audit quality necessarily follows the stipulation of minimum audit fees. Avoidance of undercutting through fixing minimum fees has been found even less convincing by the Bench. The Bench held that while it is axiomatic that the fee cannot be reduced below the minimum fee prescribed, any fee above the minimum fee can be undercut as far down as the minimum fee level.
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