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ISLAMABAD: Amid an unprecedented increase in poultry prices in Pakistan, the Competition Commission of Pakistan’s (CCP’s) enquiry has found “cartelisation” among the poultry feed companies, exposing the “nexus” between the collusive practices by feed mills, and the chicken and egg price rise.

The enquiry report of the CCP reveals glaring facts and the involvement of some influential groups in collusive practices, undue profiteering, and the resultant historic price hike of poultry products, chicken and eggs.

Sources told Business Recorder that the charges of cartelisation under Section 4 of the Competition Act, 2010, if proven against these companies, can result in the imposition of penalties worth billions of rupees as the CCP can impose penalty up to 10 percent of the annual turnover or Rs75 million.

Sources said that the accumulative annual turnover of 19 companies against whom the CCP has conducted enquiry, is over Rs 200 billion. Thus, if CCP imposes up to 10 percent of their turnover as a penalty, it could be up to Rs 20 billion accumultively on all the 19 companies.

The CCP has also shared the enquiry report with the provincial chief secretaries for any necessary action at the provincial level, officials added. Sources said the CCP could also begin a fresh probe against the poultry companies for the recent unreasonable price hike of chicken and eggs.

The poultry products have continued to rise since December 2020 with the prices of chicken in April 2021 standing at Rs258 per kg as compared to Rs141 in the same month of the previous year.

Egg prices in April 2021 were Rs163 per dozen as compared to Rs111 in the same period last year.

These rise in poultry products may be attributable to knock on effects due to higher feed costs (on the poultry supply chain due to a number of factors including farmers quitting the business as they do not find it viable).

The CCP’s enquiry report reveals that during a raid on the premises of “Sadiq Feeds” and “National Feeds”, smartphone devices of the officials of these companies were impounded along with other documents.

Forensic analysis of the computer stored information of smartphone device belonging to official National Feeds revealed the presence of a WhatsApp group with the name of “All GMs Feeds Mills” that was created by him on 07th October, 2020.

The participants of this group, as the name suggests, comprised marketing managers of a number of feed mills.

The CCP confirmed the participants of the Whatsapp group from Pakistan Telecommunication Authority (PTA) and the participants of the mentioned group represented some influential groups including GM National Feeds (Group creator), Supreme Feeds, Asia Poultry Feeds, Zubair Feeds (brand name Avian Feeds), SB Feeds (brand name Fajr Feeds), Sadiq Feeds, Jadeed Feeds (three employees are members of group), Islamabad Feeds, Mukhtar Feeds, Hi-tech Feeds, Sharif Feeds, Sabir’s Group (represented by Multan Feeds), SS Feeds, Mahmood Feeds, Kausar Feeds, Qadir Feeds, Suncrop, Royal Feeds, and Al-waris Industries (Star Feeds).

This group was created on 7th October 2020, which is just one to two days after the undertakings (participating in the group) announced a round of price increases simultaneously.

The group was apparently created for sharing of information.

Furthermore, the official price lists submitted by feed mills provide evidence that the price changes discussed on the forum of the WhatsApp group were actually implemented simultaneously by the feed mills participating in the group.

A pattern emerges whereby price changes by feed mill members of the WhatsApp group are synchronized occurring either on the same day or on the next day.

The WhatsApp discussion thread dated 14th to 19th November 2020 regarding price increases was implemented by the below mentioned companies either on 14th November or 16th November 2020. Similarly, the price increases discussed on 7th December 2020 were implemented either on 7th or 8th December 2020.

The enquiry report has given the actual dates of price increases by these groups.

It appears that not only was the timing of the price increase coordinated, but the exact quantum of the increase was also coordinated.

The price increase enacted, from 14th to 16th November 2020, companies increased prices across the board on all types of feed by Rs150 per 50kg bag. Similarly, on 7th to 8th December 2020, prices were increased across the board on all feed types by Rs250 per 50kg bag. As per the details in the enquiry report, Asia Poultry Feeds, Zubair Feeds, Fajr Feeds (SB Feeds), Islamabad Feed, Jadeed Feed Industries, National Feeds, Sadiq Feeds, SS Feed Mills, Supreme Feeds, Mahmood Feeds, Hi-tech Feeds, Qadir Feeds, and Suncrop, increased the price per bag at Rs150 in November 2020 and Rs250 in December 2020.

While Mukhtar Poultry Feeds increased the price from 150 in November 2020 to Rs268 in December 2020, and Sharif Feeds Mills from Rs67 to Rs269.

From December 2018 to December 2020, there were 11 instances where poultry feed prices were changed either on the same date or within a few days of each other.

This collusive action caused prices of 50kg bag of feed to increase on average by Rs825 which is a 32 percent increase from December 2018 to December 2020.

Cumulative average change in price of poultry feed suggests that National Feeds increased the price of 50kg bag by Rs444 in 2020 and Rs840 since 2018 (32 percent), Saddiq Feeds by Rs458 in 2020 and Rs839 since 2018 (32 percent), Hi-tech by Rs429 in 2020 and Rs841 since 2018 (33 percent), Islamabad Feeds Rs453 in 2020 and Rs744 since 2018 (28 percent), SS Feeds Rs450 in 2020 and Rs844 since 2018 (32 percent), Sharif Feeds Rs307 in 2020 and Rs781 since 2018 (33 percent), Mukhtar Feeds Rs440 in 2020 and Rs788 since 2018 (32 percent), Supreme Rs448 in 2020 and Rs846 since 2018 (33 percent) and similarly, other feed mills have the same pattern.

Copyright Business Recorder, 2021