The Competition Commission of Pakistan (CCP) is all set to unveil long-awaited study of local auto sector very soon. The study also includes policy issues and measures to implement recently announced auto policy, well-informed sources told Business Recorder. A number of observations were received in the first study by the CCP, after which the study was withdrawn and further working had been conducted. The CCP also held meetings with the representatives of auto sector and obtained data aimed at mentioning facts in the study, the sources maintained.
"The CCP has reviewed the entire study and will issue new study soon. We are also changing terms and conditions in accordance with the new auto policy including payment of interest to the consumers on delay in delivery of cars after 60 days, etc," the sources added.
It was observed that nothing has been done with respect to enforcement of auto policy due to which the value of policy is negligible. Policy has been announced but no one is held responsible for monitoring its implementation as per the draft. An organisation should take responsibility and CCP cannot take action until a formal complaint is received from a party or a violation is reported, the sources maintained.
In 2013, the CCP revised terms and conditions in Provisional Booking Order (PBO) after which M/s Toyota started accepting partial payment. It was like a consent order as both Toyota and Suzuki amended their conditions. "We are studying international practices and analyzing data and margins of different companies in different countries vis-à-vis Pakistan and will try to highlight policy issues in the study," the sources maintained.
The CCP had conducted a study of auto sector and raised serious issues. However, the study was off-loaded from the website after the local auto parts manufactures sent an 80 page rejoinder to the Commission and termed the study flawed.
The association argued that the CCP chose to rely on second-hand studies which reflected obsolete data, fallacious conclusions and malicious intentions. As a logical result Competitive Impact Assessment Report (CIAR) is rife with factual errors, lack of originality, selective use of irrelevant figures, derivation of incorrect conclusions and proposals/recommendations with a myopic view that would have disastrous consequences for the future of the auto industry.
Parts manufacturers further argued that criticism from the CCP was a result of direct ongoing tussle between the government officials and passenger cars Original Equipment Manufacturers (OEMs). The sources said the CCP had issued show cause notice to Pakistan Automobile Manufacturers Authorised Dealers Association (PAMADA) last year. According to the show cause notice, multiple authorised dealers of Toyota addressed the allegation with the argument that M/s Indus Motors Company (IMC) allocates the quota to authorised dealers on the basis of their past record.
According to sources, PAMADA submitted that quotas are allocated by the manufacturing companies, while business entities have their 'own forecasting, keeping in view their respective volume in detail'. PAMADA also submitted that 'division of market has nothing to do with customers', who remain for example, free to purchase automobiles from any geographical area of their choice.
The CCP order had observed that authorised dealers are accorded profit margins by the manufacturer so as to allow them to set their own rates. PAMADA's decision to prohibit discounts is in direct contradiction with this policy while also being an anticompetitive practice. Interestingly, a similar view was also expressed by the counsel for PAMADA during the hearing dated 12 March 2015, who stipulated that the giving of discounts is 'the prerogative of every businessman'.
The inability of a dealership to offer discounts would in effect curtail its capability to set the rates of the spare parts, and the Commission therefore found that the above constitutes a decision by PAMADA to fix prices in the market for genuine spare parts.