The federal cabinet is likely to approve on Wednesday (today) the much -awaited 'competition policy and law in Pakistan and draft Competition Bill 2007, before it is introduced in the Parliament, official sources told Business Recorder.
The sources said the Competition Commission, which would replace Monopoly Control Authority (MCA) would have powers of forcible entry into any undertaking which refuses the Commission to enter and conduct search of premises.
The MCA was set up in 1970 under the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (MRTPO) 1970 as a market regulator to control and manage monopolies, cartels and unfair trade practices.
The basic objective of this law is to regulate economic activities of private enterprises to ensure that they do not acquire undue concentration of economic power or unreasonable monopoly power or resort to unreasonably restrictive trade practices.
The sources said that current international best practices now require a new institution that would facilitate healthy competition among service providers. It is, therefore, considered advisable to enact a new competition law to replace the Ordinance of 1970 and carry out necessary institutional strengthening and capacity building of a new "Competition Commission" to replace the MCA. The proposed Competition Commission is envisaged to perform practically all functions which presently all within the jurisdiction of MCA.
A competition policy paper and the draft competition law establishing the Commission have been prepared in consultation with MCA and other stakeholders.
World Bank/United Kingdom's Department of International Development (DFID) assisted in the drafting of the Competition Law.
SALIENT FEATURES OF THE POLICY ARE AS FOLLOWS: The current economic landscape requires active policy and institutional reforms to deepen competitive forces. Adjusting from a legacy of heavy protection to an environment of increased competition both nationally and internationally is the need of the hour as the economy now relies on a dynamic and flexible private sector for growth, employment and poverty reduction.
Competing in home markets is a prerequisite for integrating effectively in international market, and as factors limiting competition at home have become increasingly important, the case for an optimal competition policy has become stronger in recent years.
In recognition of the need for higher rates of productivity throughout the economy, Pakistan's policy makers are actively deepening and expanding reforms to new and more complex areas.
Fostering healthy competition at home through an effective competition policy is supportive of a business environment which improve efficiencies, leads to allocation of resources in the best manner and in which abuse of market power is prevented through competition. Competition advocacy is the main tool of promotion of competition through means other than law-enforcement.
Once approved, the Competition Policy will be displayed on Finance Division's website. The proposed draft Competition Bill has the following salient features:-
The proposed Law seeks to prohibit abuse of market dominance, anti-competitive agreements, deceptive market practices, and mergers of undertakings that substantially reduce competition (Section 3, 4, 10, and 11). It avoids (a) procedures that may pose unnecessary transaction or compliance costs on firms; (b) obstacles to beneficial mergers and acquisitions; and (c) unnecessary on innovative horizontal and vertical arrangements among firms (Section 11)
To implement this law an operationally autonomous, quasi-judicial body called the Competition Commission of Pakistan will be established. The Commission shall be responsible for:-
i) Conducting studies for promoting competition in all sectors of commercial economic activity; promoting competition through advocacy; tendering advice on request, to undertakings as to whether any action proposed to be taken by any such undertaking is consistent with the provisions of the Act, Rules or Orders made thereunder; and conducting inquiries into the affairs of any undertaking so as to establish whether the requirements of competition are being met.
(Sections 12, 28, 29, 30, 31, 32 and 33).
ii) The Commission shall establish a fund to meet its expenditure. The fund shall mainly consist of allocations by the Government, charges, fees and penalties levied by the Commission and contributions from local and foreign donors or agencies with the approval of the Federal Government (Section 20).
v) The Commission would prepare and maintain annual accounts which shall be audited by the Auditor General of Pakistan or by a firm of chartered accountants nominated by the Auditor General of Pakistan (Section 21).
vi) The Commission shall impose penalties upto fifty million rupees or upto fifteen percent of the annual turnover of an undertaking, as the case may be, for contravention of any provision relating to prohibition of abuse of dominant position, agreements, deceptive marketing practices and approval of mergers. Similarly, non-compliance of order of the Commission would also entail penalty of upto Rs one million. Such penalties can be revised from time to time with the approval of the government (Section 38).vii) The Commission shall constitute Appellate Benches of the Commission comprising not less than two Members to hear appeals. An appeal shall lie to the Supreme Court of Pakistan in respect of an order of the Commission comprising two or more Members or of the Appellate Bench of the Commission (Section 41).
viii) The federal government shall have the powers to exempt any undertaking from the provisions of the proposed law by notification in the official Gazette (Section).
ix) The Federal Government shall, as and when it considers necessary, issue directives to the Commission on matters of policy, and such directives shall be binding on the Commission (Section 54).
x) The employees of MCA not considered for appointment in the Commission shall have the option to be discharged from service on payment of admissible dues or alternatively. Their services will be placed at the disposal of Finance Division and till absorption or retirement etc will continue to draw salary, allowances etc from the Commission. Views/comments of the Establishment Division showing their inability to absorb surplus employees of the autonomous bodies on the Surplus Pool of that Division is at Annex-Ill (Section 59).
The proposed Competition Commission of Pakistan may grant block exemption if a particular category of agreements fulfill the prescribed criteria according to a prescribed block exemption procedure. However, such provision is not existent in MRTPO, 1970.
III. If an undertaking, intends to acquire the shares or assets of another undertaking, or two or more undertakings intend to merge the whole or part of their businesses, the concerned undertaking(s) will have to obtain approval of Competition Commission so that such acquisitions/mergers may not substantially lessen competition by creating or strengthening a dominant position in the relevant market. This is not provided in MRTPO, 1970.
IV. The Commission shall be required to prepare an annual report of its activities (including investigations, advocacy activities, enquiries and merger reviews made by the Commission) within 120 days from the end of each financial year and the report would be submitted to the Federal Government who shall cause a copy to be laid before both the houses of Majlis-e-Shoora (Parliament). No such provision exists in MRTPO, 1970.
V. The proposed Competition Commission will promote competition through competition advocacy by creating awareness and imparting training about competition issues.
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