Cigarette trade: price restriction imposed by FBR not envisaged under law: CCP

The Competition Commission of Pakistan (CCP) has categorically said that the restriction imposed by Federal Board of Revenue (FBR) on manufacturers and other persons associated with the cigarette business for not selling cigarettes below its prescribed minimum price is not envisaged under law.
According to a landmark order issued by an Appellate Bench of the CCP comprising Members Dr Shahzad Ansar and Member Dr Muhammad Saleem, the CCP Appellate Bench was of the considered opinion that having appreciated the scheme of law, the conflict does not exist in the legal framework but rather it arises when FBR oversteps the mandate envisaged under law. The restriction imposed by the FBR on manufacturers and other persons associated with the cigarette business for not selling cigarettes below its prescribed minimum price is not envisaged under law. Thus it is the implementation and not the law that is giving rise to an anomalous situation.
It is also important to appreciate that the current imposition to print the retail price whether on cigarette packs or in newspapers is neither contributing, facilitating, improving or ensuring due collection of taxes in any manner, nor is it in compliance with the spirit of the law. Parties are, therefore, advised to stop such practice with immediate effect. The FBR, however, is empowered to intimate to the concerned undertaking as to what it shall deem as the minimum price for the purposes of levying tax on the concerned goods and collect the same accordingly, CCP bench said.
The Appellate Bench of the CCP concluded that the retail price required to be printed under law is intended to be the maximum and not the minimum price. Therefore, the FBR may require the undertakings to print on the cigarettes packs in unambiguous terms the maximum retail price. Perhaps, it is also advisable that consumers be notified that the retail price printed on the goods is the "maximum retail price."
The Appellate Bench of the CCP is in agreement with the opinion expressed by the Commission regarding fixing of minimum price by the cigarette manufacturers and reiterates that printing either the maximum and minimum retail price may have their anti-competitive effects. However, if a choice is to be made, for obvious reasons, it has to be the maximum retail price."
"In this regard we are guided by the jurisprudence of European Commission and hereby hold that same accordingly," the CCP bench said. This appeal was filed on 18th September 2017 against the order dated 18th August 2017 issued by the Director General (Exemptions) (hereinafter referred to as the ''impugned order'') whereby an extension in the exemption was granted to a cigarette manufacturer (appellant) with the following conditions:
"(i) The word maximum retail price shall be printed on the product of the undertaking and proof of that shall be provided to the Commission once materialized;
(i) This certificate shall take effect upon provision of the proof of intimation to the other party(s) to the agreement. In case, the proof of intimation is not provided to the Commission within I5 days from the date of the issuance of the certificate, the certificate shall be deemed withdrawn with immediate effect.
Thereafter, upon completion of the quorum of the Commission, the Appellate Bench was constituted in terms of SRO No 339(1)/2009, dated 15th April 2009, and a hearing in the matter was scheduled for 23rd January 2018.
Later, in pursuance of sub-rule (4) of Rule 23 of the Competition Commission (Appeal) Rules, 2007, this appeal is disposed of accordingly.
On 23rd January 2018 the appellants'' counsel along with its representatives appeared before the Appellate Bench and made submissions with respect to the chronology of the issuance of exemption and extensions issued by the Commission from time to time. The counsel for the appellant after giving the brief background, submitted that the appellant is obligated to print the retail price on the cigarette packs by the Federal Board of Revenue, however, they are willing to address the concerns of the Commission with reference to the fixation of minimum retail price and it would be addressed if the condition (i) of the impugned order is replaced/modified with the condition imposed in the exemption certificate dated 2nd May 2008.