The Competition Commission of Pakistan (CCP) has issued show-cause notice to Pakistan Jute Mills Association (PJMA) for alleged cartelisation in supply of gunny bags to various government departments, including Pakistan Agriculture Storage & Supply Corporation Limited (Passco).
According to CCP's show-cause notice, issued on Wednesday, the said association committed violation of Section 4 of the Competition Act, 2010. The CCP has fixed the case for hearing on October 28, 2010. The CCP contacted various government agencies, including Passco, to provide information on the procurements made by them during last three years in order to detect cases of collusive tendering or bidding in the Public Sector Procurements.
The data provided by Passco raised suspicion about bid rigging--a type of collusive behaviour among the jute manufacturing mills, prohibited under Section 4 (2) (e) of the Act. The Commission on its own decided to initiate a formal enquiry under Section 37(1) of Act and appointed a Committee comprising of Ms Shaista Bano, Director Cartel, Monoplies and Trade Abuses, and Ms Nadia Nabi, Joint Director, Cartels, Monopolies and Trade Abuses.
Based on the information available with it and on recommendations of the Enquiry Committee, the Commission deemed it appropriate to search and inspect the office of Pakistan Jute Mills Association (hereinafter referred to as "PJMA") located in Lahore under the power granted to it by Section 34 of the Act in order to collect any evidence regarding the suspected violations of section 4 of the Act. The duly authorised officers of CCP conducted the search on July 8, 2010 and impounded valuable materials and documents from the offices of PJMA.
It was found by the enquiry committee that there is prima facie cartelisation in the market of jute bags in violation of Section 4(1) and in particular 4(2) (a(, (b) & (e) of the Act. Members of PJMA appear to have deliberately devised a mechanism in an agreement to allocate quota for jute bags tenders invited by different government departments and, prima facie, violated Section 4(1) read with Section 4(2) (b) and (e) of the Act.
Members of PJMA mutually discussed the price of jute bags after opening the tenders and appear to have had a pricing strategy before and after the tenders, thereby, prima facie, fixed the price of jute bags in violation of Section 4(2)(a) of the Act. PJMA and its committees appear to have facilitated the collusion among its members by providing a forum to discuss, formulate and settle their issues regarding quota system and implemented their agreement by making allocations. PJMA also appears to have played a major role in monitoring by entering negotiations with the procuring agencies regarding quantities, price and delivery by its member mills. PJMA and its committees have therefore, prima facie, violated Section 4(1) read with Section 4(2) (a), (b) & (e) of the Act. The case has been fixed for hearing on October 28 2010.
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