Chairman Competition Commission of Pakistan Khalid Mirza has said that the CCP has issued show cause notices to five leading fertiliser companies for, prima facie, linking sale of Urea with other fertilisers like Diammonium Phosphates (DAP) or its substitutes.
Talking to reporters here on Tuesday he said that the CCP has expressed concern over the practice of tie-in in the sale of Urea with other fertilisers like DAP by fertilisers'' producing companies.
"These companies were ready to sell urea only in cases where DAP has also been purchased along with this item. Thus, the sale of urea was made conditional on a supplementary obligation to purchase DAP or other fertilisers. The show cause notices have been issued to all fertiliser manufacturers under section 30 of the Competition Ordinance," Mirza added.
According to the show cause notices, these companies, prima facie, appears to have abused its dominant position through engaging in the practice of tie-in in the sale of Urea with DAP and/or its comparable fertiliser, forcing customers to purchase unrelated products with different usages, required at different times of the year, thereby acting in contravention of Section 3(1) of the Competition Ordinance read with Section 3(3)(c) of the Ordinance.
Owing to the fact that all the fertiliser producers cannot meet the total demand of Urea in the country despite over utilisation of capacity and the fact that only meager 10 percent of total requirement has to be imported, in terms of the enquiry report, this clearly exhibits the fertiliser producers'' ability including that of the undertaking, to behave to an appreciable extent independently from customers, consumers and suppliers in the relevant market.
The undertakings holds a dominant position in terms of the enquiry report because the fertiliser market is a seller''s market; hence, a captive market. The companies may, therefore, be deemed to hold a dominant position in the relevant market. The complaints regarding the practice of tie-in of the sale of Urea with DAP and its substitutes, were received by the Province of Sindh, which were forwarded to CCP by the secretary (Agriculture).
The inquiry report said that the dealers informed the CCP that the fertiliser companies do not entertain booking orders for Urea alone and ask the dealers to book the proportionate amount of DAP or other fertilisers. These companies also seem to have devised a way of flouting collection of evidence in this regard.
As per the information made available to us by the dealers, the companies take booking for Urea and DAP jointly, however, invoice is issued only for the Urea fertiliser and invoice for DAP fertiliser is issued at later stage so that the tie-in in the sale of DAP and Urea cannot be traced.
The undertakings prima facie appears to have abused its dominant position by imposing unfair trading conditions on its customers by subjecting dealers to unilateral changes in price from the booking to delivery time and blocking the funds of dealers during the time period for which delivery is not made. Thereby acting in contravention of Section 3(1) of the Ordinance read with Section 3(3)(a) of the Ordinance.
As per the enquiry report, these companies, prima facie, appears to have abused its dominant position by making the sale of Urea conditional on a supplementary obligation to purchase DAP or other fertilisers, thus making the conclusion of contracts subject to the acceptance of supplementary obligations which by their nature have no connection with the subject of the contract, thereby acting in contravention of Section 3(1) of the Ordinance read with Section 3(3)(d) of the Ordinance.
It is the responsibility and obligation of the Commission under the Ordinance to ensure free competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anti-competitive behaviour. In view of the foregoing, the Commission is satisfied that there has been and/or is likely to be a violation of sub-section (1) of Section 3 of the Ordinance in terms of clauses (a), (c) & (d) of sub-section (3) of Section 3 of the Ordinance.
Therefore, the CCP has provided an opportunity to the fertiliser companies within 14 days of the issuance of show cause notice and to appear and place before the commission, facts and material in support of your contention and avail the opportunity of being heard either in person or through an authorised representative on December 4, 2009.
If no reply to the show-cause notice is received within the stipulated period or the companies fails to appear before the Commission on the appointed date, the CCP shall proceed in the matter as provided under the law.