The Competition Commission of Pakistan (CCP) has issued an order imposing a fine of Rs100 million on the Pakistan Poultry Association (PPA) for price fixing of poultry products, in violation of Section 4 of the Competition Act, 2010.
The order has been passed by a bench comprising Ms. Vadiyya Khalil, Chairperson, Dr Shahzad Ansar, Member Office of Fair Trade & Advocacy, and Ikram Ul Haque Qureshi, Member Cartels & Trade Abuses, and Legal.
Sources said that the order against the PPA clearly indicate CCP's constant monitoring and analysis of market data/trends of sectors where penalties were imposed in the past, but non-compliance has again being witnessed by such sectors.
The order disposes off the proceedings arising out of the show cause notice issued to PPA after CCP took notice of a series of advertisements published in various daily newspapers by PPA regarding prices of live broiler chicken; broiler chicken meat (collectively boiler chicken) and chicken eggs from 6th Oct, 2015 to 12th Oct, 2015.
The order finds that by notifying the prices of poultry products under the banner of the association, PPA has taken an anti-competitive decision in violation of Section 4(1) read with Section 4(2) (a) of the Competition Act. It further states that PPA's actions have the potential of influencing pricing trends in the market and manipulating the behaviour of market players.
The order reiterates that while trade associations play an important role in the development of industries, exchange of any commercially sensitive information, including mere discussion of pricing-related matters is strictly prohibited under the Competition Act.
The order said that the PPA has in its defence submitted that the rates of poultry products are set by the market committees of local governments and therefore there is no liability on it. The CCP find this defence untenable. Actions of trade associations are scrutinised for competition concerns because of the ease with which legitimate objectives can spill over into illegal co-ordination. Correspondingly, while discussions between undertakings regarding the role of government over a specific industry would not fall within the ambit of anti-competitive behaviour, the discussion, approval or advertising of prices by an association of undertakings clearly does. The role of associations has been clearly and repeatedly demarcated by the Commission through multiple decisions, including a previous order against the PPA in The mater of notice issued to Pakistan Poultry Association dated 16 August 2010.
Coming back to the matter at hand, PPA can through such advertisements, influence the pricing trend in the overall markets. Its standing as an association ensures a certain authority which has the implicit effect of manipulating the behaviour of players in the relevant markets. It also constitutes the exchange of data which encourages more uniform prices than might otherwise exist.
At the same time, even if CCP was to accept the PPA's defence to the extent that the rates have been set by local governments, by advertising prices under its own name, the PPA is still signalling to both consumers and undertakings in the poultry market that these prices have the approval of PPA, and constitute an optimum rate to be followed, it said.
The CCP, therefore, find that PPA is in violation of Section 4(1) read with Section 4(2) (a) of the Act in each of the two relevant markets. During the course of the proceedings, PPA submitted an undertaking essentially stating that it had nothing to do with the fixing of poultry prices. The undertaking cannot in any manner be construed as an offer of a commitment to remedy the violations that have taken place. The undertaking has no admission on behalf of PPA and does not provide any substantial remedy to remedy the violation. Therefore, there is no reason for the Commission to consider it.
It is pertinent to recall that PPA was previously fined an amount of Rs 50 million by the CCP for violation of the same provisions of the Act in August 2010. It was also severely reprimanded from engaging in price-related discussions, and warned that the Commission would not take a lenient approach towards anti-competitive behaviour in the future. In view of the current violation, CCP, while imposing a cumulative penalty of Rs 100 million on PPA, has further directed it to cease and desist from advertising the rates of poultry products, and to submit a compliance report with the Registrar of CCP. The penalty imposed is as follows: Rs 50,000,000 for the violation in the market for broiler chicken and Rs 50,000,000 for the violation in the market for chicken eggs.
PPA is also ordered to immediately cease and desist from advertising the rates of poultry products as an association, the CCP added.
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