CCPs regulatory breakthrough

It takes a strong person to say sorry, and an even stronger person to forgive. In a phenomenal achievement that literally marks a historic moment in the antitrust arena of Pakistan, the Competition Commission of Pakistan (CCP) became the stronger person, after granting leniency to Siemens Pakistan in response to their leniency application whereby the company acknowledged it had colluded in a cartel of power distribution equipment suppliers.
CCP had earlier initiated enquiry against the Pakistan Electrical Power Equipments Manufacturers Association (PEMA) for collusive bidding, and found them guilty of offense.
According to a press release issued by the CCP, "In terms of the enquiry report, electric power manufacturers have formed groups under the umbrella of the PEMA...to discuss and decide upon the prices and quantities to be quoted in response to tenders issued by DISCOs."
In September last year, a show cause notice was issued to the companies involved, in response to which, Siemens Pakistan filed for leniency in exchange for admitting to the offence and committing to renounce any involvement in such activities in the future.
The fact that a leniency application was filed only a year after the Competition Act was enacted in 2010 highlights the efficiency of the CCP as a regulatory body.
"Even in developed countries like those in the EU and US, leniency applications were not filed as swiftly as in this case after the drafting of the respective regulations, and I attribute this achievement to my remarkable team and the excellent quality of evidence and enquiry report produced," CCP Chairperson, Rahat Kaunain Hassan lauded her teams efforts.
In accordance with the leniency regulations, CCP has acquiesced to granting immunity to Siemens to the extent that the entire financial penalty for the company has been waived off.
But this isn a present merely given to the company on a platter: Siemens also provided additional evidence consisting of over 230 documents which validate the prevalence of collusive practices with respect to two products, switchgears and transformers. And if the company dare breach any commitments and conditions of the law, its grant will be revoked.
The fact that mainly distribution companies (discos), a majority of which is state-owned, use these products (90 percent of the demand for transformers originates from discos) makes it brazenly evident that a collusion of this nature was indirectly eroding on the already scant national kitty.
Therefore, the magnitude of this achievement cannot be overplayed. For the CCP, which has often received criticism for several of its cases awaiting decisions in courts, a conclusive decision of this nature is nothing short of a milestone.
This sets a precedent not only for other companies and industries in Pakistan, but for the countrys antitrust policies in general as collusion and non-transparent and anti-competitive activities have become common among many industries.
Rahat Kaunain had been explicit in highlighting the importance of the leniency regulations in helping achieve this end. "A cartel is a virus and leniency is the anti-virus to detect and prevent the harm," emphasised Kaunain at the press conference held on Tuesday.
In general, a leniency regulation not only encourages insiders to disclose pertinent information, but also potentially weakens the cartel by undermining internal trust relations that hold a cartel together. "The ultimate goal of leniency is to break the cartel," the CCP Chairperson told BR Research.
In this case, the fact that the market leader with a market share of over 29 percent has come forward with a confession makes the case for disabling future collusive practices in the industry stronger.
Only last month was the CCP nominated for an award by the Global Competition Review (GCR) - a London-based antitrust and competition law journal and news service. And such achievements go to show why the regulator was the only institution chosen as an award nominee from South Asia.