Alleged involvement in RPM: CCP issues show- cause notices to GM Cables & Pipes, Newage Cables

ISLAMABAD: The Competition Commission of Pakistan (CCP) has issued show cause notices to GM Cables & Pipes (Pvt) Ltd and Newage Cables (Pvt) Ltd for their alleged involvement in Resale Price Maintenance, pursuant to completion of enquiry a potential violation of Section 4 of the Competition Act, 2010.

Resale Price Maintenance (RPM) is a contract between a manufacturer and its distributors, where the distributors must sell the product at specific prices, and if not maintained, the manufacturer may terminate business. This practice hinders competition by restricting dealers’ ability to offer lower prices, ultimately disadvantaging consumers.

The CCP initiated an enquiry after taking suo motu notice of circulars issued by both companies, which restricted their dealers across various regions from offering discounts beyond a certain percentage on credit and cash sales. These circulars required dealers to stick to the specified rate limits, prohibiting them from selling below the designated discounts.

GM Cables and Newage Cables, which operate nationwide through an extensive dealer network and online platforms, were found to have established a resale price maintenance system through their respective circulars. GM Cables issued a ‘Notice for Rate Control’ in August 2021, while Newage Cables introduced a ‘Retail Discount Policy’, both of which enforced strict pricing rules on their dealers. These rules were accompanied by penalties, including fines and termination of dealerships for non-compliance, further reinforcing the companies’ control over market pricing.

The CCP’s enquiry further established that this anti-competitive behaviour has wide-ranging implications, as cable products are produced and sold nationwide, with sales volumes differing across regions. As a result, these restrictive practices create a spill-over effect throughout the entire market.

Copyright Business Recorder, 2024