The Competition Commission of Pakistan (CCP) has imposed a total penalty of Rs 23 million on Pakistan Jute Mills Association (PJMA) and its 10-member mills on the charges of caramelised behaviour and malpractices. The Commission is also carrying out a study of advertisements and the tangible services provided by the cellular companies in the country to ascertain the potential of deceptive tactics and the report would be disclosed next week.
The CCP Chairperson Ms Rahat Kaunain Hassan revealed this while talking to Lahore Economic Journalists Association here Thursday. About the jute mills case, she said the Commission has detected bid rigging in public procurement, sought information from many public procurement agencies, including Pakistan Agriculture Storage and Supply Corporation Limited (Passco) regarding tenders and bidding in the last few years. Scrutiny of the information received from Passco revealed that the Jute Mills provided Passco jute bags at the same rates over the last three years, thus raising suspicion of bid rigging prohibited under Section 4 of the Competition Act.
The Commission, taking suo motu notice of the information, initiated an enquiry and then on the recommendation of the enquiry officers and in view of the information on record, authorised its officers to conduct a search and inspection of PJMA's office in Lahore under Section 34 of the Competition Act. As a result of the search and inspection conducted on 8 July 2010, important material was impounded for review.
The CCP issued show cause notices to PJMA on 13 October 2010 and the Jute Mills on 21 October 2010. These Jute Mills, included Thal Limited, Crescent Jute Products Limited, White Pearl Jute Mills Limited, Amin Fabrics Limited, Sargodha Jute Mills Limited, Pioneer Jute Mills Limited, Indus Jute Mills Limited, Suhail Jute Mills Limited, Madina Jute Mills Limited, Habib Jute Mills Limited. The principal issue in this case is whether PJMA has taken any decision, or the Jute Mills have entered into any agreement, with respect to production, pricing and tendering of Pakistan Grain Sacks (PGS) to public procurement agencies, in violation of Section 4 of the Competition Act, 2010.
The legislative mandate entrusted to this Commission is not limited to detection of anti-competitive practices and imposition of penalties on violators of the law. It is also about achieving corrective behaviour so that an enabling environment for a free, fair and competitive market is established for the greater benefit of all, particularly the businesses and their consumers. Such an environment can only become a reality if businesses, relevant regulatory bodies, intermediary organisations and all others concerned espouse attitudes conducive to such environment. Considering that the PJMA and the Jute Mills have assured corrective behaviour in the conduct of their respective businesses, the Commission welcomes this initiative and takes a lenient view, as prayed. Hearings were held and ample opportunity was afforded to the parties to submit their arguments.
The agreement constitutes a fixing of prices for sale of PGS, division of the supply of PGS and the setting of production quantities of PGS, and amounts to collusive bidding for tenders floated by PPAs in unambiguous terms, which is in violation of the Competition Act.
The CCP took a lenient view of the situation and fixed the amount of penalty keeping in view the peculiar circumstances that there are mitigating factors, including the role of the PPAs, the anti-competitive environment in which the jute industry operates, the disclosure and admittance of PJMA and the Jute Mills as well as their willingness to file commitments for future compliance.
She said that there was a huge distortion in the terms and conditions in tenders that benefited the supplier through anti-competitive practice. She said that there was no justification of negotiations between the procurement agencies and the jute bag suppliers, particularly after completion of the bidding process.
The CCP found collaboration among the jute mills that paved the way for Cartelisation while the procurement agencies, in their terms and conditions had demanded jute bags with a capacity of 100-kg due to which the international parties could not take part in the bidding process, as they supply bag having capacity of 95-kg weight, she said and added the Commission has directed the procurement agencies to amend weight size requirement to facilitate international bidders as well.
Rahat Kaunain Hassan, however, commended the role of the parties involved in the case who candidly confessed the guilt on their part and assured to bring transparency in procurement and supply of jute bag process. She said that that the Association had admitted the wrongdoing and given a pledge to reform themselves in line with competition laws. The CCP was obliged for their co-operative behaviour and willingness to reform, she added. She termed the CCP decision in the jute mills case as a landmark in the history of the commission.
The Commission doesn't want to square the businesses rather it wants to correct the business practices to promote free trade in the country, she added. The procurement agencies have also been directed to submit compliance report in the instant case, she maintained.
Responding to a question, she said cartelization was a criminal offence everywhere in the world and the commission had to impose some penalty. Referring to the jute mills case, she pointed out that the commission had imposed a token penalty on jute millers when compared with penalties imposed on other cartels exposed by the CCP.
Regarding the fate of many high profile cases in which businesses have been highly penalised, CCP Chairperson said that these penalised parties had exercised their right to appeal, which was a common practice world-wide. She said the Commission always tried to pursue all cases diligently, but the litigants were using every facility available in the law to drag the cases that could take several years. However, the final decisions of these cases would leave impact on the competition and fair trade practices in the country. To a question regarding providing exclusivity to the some transport companies for plying buses on specific routes, she said that such agreements need to be exempted by the Competition Commission of Pakistan under Section 4 read with Section 5 and 9.
Comments
Comments are closed.