ISLAMABAD: The Islamabad High Court (IHC) set aside Competition Commission of Pakistan’s letters to Dalda Foods Limited seeking information regarding excessive pricing of vanaspati ghee.
The CCP (respondent) received certain complaints regarding excessive pricing of the cooking oil from the government of Punjab as well as the Federal Government. The Federal Ministry of Industries and Production on 8th June 2020 wrote to the CCP that despite reduction in palm oil prices, the retail prices of vegetable ghee in the market have not shown a declining trend and requested that the CCP to intervene in such situation under Sections 3(3)(a) and 37 of the Competition Act, 2010.
The CCP issued the request for information to all players and stakeholders within the ghee/cooking oil industry including the Dalda Foods Limited (petitioner), which resisted.
Many other undertakings who received requests for information from the CCP furnished the information requested and after such preliminary fact-finding exercise, the respondent ordered a formal enquiry under Section 37(1) in the matter of price increase of ghee/cooking oil to determine prima facie contravention of Sections 3 and 4 of the Act.
Having found the petitioner to not be in compliance with the request for information under Section 33 of the Act, the special order under Section 36 of the Act for provision of information through notice dated 7th September 2020 was issued to the petitioner.
Aggrieved by the initiation of enquiry, the affiliated request for information under Section 33 and the special order, the petitioner filed the instant petition.
The judgment, authored by Justice Babar Sattar, said the enquiry can at best be deemed to be an enquiry ordered under Section 37(1) of the Act by the CCP suo motu.
However, even then such enquiry falls foul of the law laid down in the National Feeds as the CCP has, (i) not determined whether it is in possession of facts that prima facie establish a plausible case of for breach of a provision of the Act, and (ii) not passed a reasoned order stating that the requirements of Section 37(2) stand satisfied, while identifying the suspected infraction of provisions of the Act and the factual basis of such finding, in relation to which information has been sought from the petitioner.
The IHC said Section 37 of the Act; however, neither makes any special allowance for a sectoral enquiry nor prescribes a test for such purpose different from one prescribed in relation to individual undertakings.
The petitioner with approximately three percent of the market share, admittedly, does not enjoy a dominant position in the ghee/cooking oil industry and can thus, not be liable for any breach of abuse of dominant position under Section 3 of the Act, as alluded to by the Ministry of Industries in its missive to the CCP.
In case of a prohibited agreement, Section 4 seeks to hold an undertaking as well as an association of undertakings independently, liable for being party to such agreement. Thus, the fact that the CCP is seeking to indulge in a sectoral enquiry to consider a breach of Section 4 is no basis to be excused from satisfaction of the test prescribed under Section 37(2).
Where the object of the enquiry is to investigate cartelisation or entry into a prohibited agreement, the enquiry in most cases would naturally end up being sectoral in nature.
In such situation too, undertakings cannot be roped into an enquiry indiscriminately and mindlessly merely because they are members of an association or function within a certain sector that is suspected of having engaged in a prohibited agreement.
The CCP must first satisfy itself that there exists a plausible case for enquiry based on prima facie evidence, as required by section 37(2), before initiating an inquiry against an association of undertakings, or an individual undertaking, or both, as the case may be.
The judgment said that the impugned enquiry has been ordered by the CCP for a collateral purpose without satisfying the requirements of Section 37 and the enquiry order has been passed in breach of provisions of the Act, and is therefore void.
The subsequent orders seeking information from the petitioner for purposes of the enquiry and the Section 36 order reiterating the demand for information being contingent upon and rooted in a void order are also not backed by lawful authority.
The judgment said this decision does not, however, prohibit the CCP from exercising its authority under Section 37 of the Act, to the extent that materials already received from the federal and provincial governments and/or from undertakings in the ghee/cooking oil industry make out a plausible case for initiation of an enquiry against the petitioner for breach of Section 4 or any other provision of the Act, through a reasoned order satisfying the requirements of Section 37(2) of the Act.
Copyright Business Recorder, 2021