CCP says 2 tractor makers ‘involved in cartelisation’

Islamabad: The Competition Commission of Pakistan (CCP) Monday completed an enquiry against the tractor industry, revealing two leading tractor manufacturers are abusing their dominant position and involved in cartelisation.

Details available in the enquiry report revealed that the CCP has concluded an enquiry under Section 37(1) of the Competition Act, 2010 (the ‘Act’) in the tractor industry. The Commission’s enquiry report has found that two leading tractor manufacturers, Millat Tractors Ltd (MTL) and Al-Ghazi Tractors Ltd (AGTL), are prima facie abusing their dominant position in violation of Section 3 of the Act and have entered into prohibited agreement (Cartelization) in violation of Section 4 of the Act.

The CCP initiated the enquiry on its own, however, Commission received various concerns forwarded to it from Pakistan Citizen Portal (PCP) for drastic increase in the prices of tractors manufacturing companies at different points in time, despite various incentives given by the government and a great extent of localisation in the tractor industry.

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The complainants also highlighted the alleged substandard build quality of the tractors resulting in frequent breakdown.

As per the commission’s report, the enquiry committee during the course of enquiry sought information relating to production and price data from these units for the period three years i.e. January 2018 to May 2021.

The data shows that both the tractor manufacturers increased their prices in a sequential manner during a smaller timeframe and the quantum of percentage increase was approximately similar in case of alternative products, ie, tractors (HP has a very small differential and the prices remain more or less in the same range).

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The above mentioned sequential price pattern was also observed in the years 2018 – 2020. Keeping in view the facts available the Commission exercising its powers under Section 34 of the Act authorised teams to enter and search the premises of tractor manufacturers on September 02, 2021.

The data impounded comprised the relevant record, documents, meeting minutes and computer-stored information.

The nature of evidence impounded during search revealed that there was WhatsApp conversation between the senior officials of these companies regarding the price fixing and other anti-competitive practices.

The analysis of the Provisional Booking Orders (PBOs) of MTL and AGTL reveal that there exist exploitative and identical clauses in terms of price, specifications, delivery schedule and dispute settlement, which create a significant imbalance to the advantage of buyer’s rights and obligations arising under the contract.

Copyright Business Recorder, 2021