The Com-petition Commission of Pakistan (CCP) on Friday conducted search and inspection of the offices of Pakistan Shipping Agents Association (PSAA) in Karachi and impounded documentary evidence of the association''s alleged involvement in alleged anti-competitive practices.
Sources told Business Recorder here on Friday that since assumption of charge by Rahat Kaunain Hasan as head, the CCP is continuing the bold enforcement policy through search and inspections of associations involved in cartelisation. Following inspection of Pakistan Jute Mills Association, the CCP now conducted inspection of the Pakistan Shipping Agents Association. Under her leadership, enforcement seemed to be a top priority to protect business community as well as general consumers from anti-competitive behaviour.
The search and inspection of PSAA was conducted under section 34 of the Competition Act, 2010 under which if the Commission has reasonable ground, to be recorded in writing, itvshall have the powers to authorise any official to enter and search any premises for the purpose of enforcing provisions of the Competition Act, 2010.
According to sources, the All Pakistan Paper Merchants Association (APPMA) had submitted information to the Commission against the PSAA, alleging that the association is involved in cartelisation, which is a violation of Section 4 of the Competition Act, 2010. In this connection, the CCP had received detailed information from the APPMA.
Sources said that the APPMA had alleged that the ship agents had formed cartel under the name of the Pakistan Ship Agents Association to fix, enhance terminal handling charges, delivery order charges, and insurance. It was further alleged that the ship agents refuse to issue delivery orders, and coerce importers to pay unwarranted charges.
Sources said that the All Pakistan Paper Merchants Association had submitted important evidence, collected after communications with a local shipping agent. The agent had stated that all local agents are obliged to apply the rates of ancillary charges on the basis of scale, as recommended and approved by Pakistan Ship Agents Association, and the ''collected'' ancillary charges are within the PSAA''s approved scale. Following detailed analysis of the data and other relevant information, the Commission asked the PSAA to clarify some issues. The Commission had asked the association about the services offered by ships'' agents in Pakistan and the tariff structure against the services. The Commission had also raised a question that how these tariffs/charges are determined, and what is the role of the Pakistan Ships Agents Association in this regard.
Responding to the queries of the Commission, the association said that apart from items'' delivery order (import and documentation (export), all other charges are levied on behalf of the principal. Such information is often required by PSAA to be presented to various public and private for a eg customs, chamber, federation, etc, and enables wide publicity of ships agents charges as well as allowing for a redressal mechanism in case of breach. An association can only recommend a range of charges to its members as a guideline, and cannot enforce the same, sources said.
Sources said that the PSAA distributed tariff of their charges which were also attached with the minutes of their meeting. It happened in a meeting that was held on May 5, 2008 at Customs House, Karachi, which was attended by different associations, etc.
Although PSAA insists that it only recommends a range of charges to its members as guideline, there are indications that the suggested range creates a reference of minimum and maximum prices. This range reference distorts competition as members tend to price within this range, rather than independently arriving at their prices. One member clearly stated that agents are obliged to follow the tariff set by PSAA, sources said.
Sources said that there are examples where recommending prices by association have been found to be in violation of competition law. The Competition Commission of Singapore (CCS) has recently held that recommended fees or fees guidelines by professional or trade associations are generally in violation of the competition laws. Furthermore, CCS stopped Singapore Medical Association from issuing guidelines on fees for a number of services provided by the doctors in private practice in Singapore.
Sources said that it appears that PSAA may have violated the provision of Section 4 of the Act by recommending range of prices and distribution of the same to their members. The PSAA being a designated platform for the purpose of disseminating sensitive price related information there is a high likelihood that the evidence of anti-competitive activities shall be available in the form of reports, correspondences and soft copy formats, sources added.
Meanwhile, the CCP on Friday announced that it had taken notice of the active role being played by PSAA in recommending/suggesting rates/tariffs to its member undertakings in prima facie violation of Section 4 of the Competition Act, 2010. Documentary evidence produced before the Commission in the form of letters and minutes of meetings prima facie raised suspicion as to the activities and role of PSAA with respect to ship agency services tariff/charges.
The Commission observed that the rates/tariffs recommended by PSAA prima facie indicate/suggest to its member undertakings a target range of minimum and maximum prices they can charge to their customers. Although a recommended range of charges is issued as guideline, it needs to be verified that how the association is operating in the matter and why even such recommendations are made when free economic decisions are to be encouraged on the part of its members.
The suspected price fixing through suggested/targeted range is likely to distort competition as members tend to price within this range, rather than independently arriving at their prices. CCP requested PSAA to forward copies of letters, circulars issued in last two years to the member undertakings to notify the rates of various tariff/charges in respect of ship agency services, to which PSAA did not provide any satisfactory information and provided only recommended rates/tariff for September, 2008 and February, 2010.
Hence, a search and inspection of the PSAA was necessitated by the Association''s reluctance to cooperate with CCP in providing certain necessary documents. CCP is empowered under Section 34 of the Competition Act, 2010 to conduct such search and inspections. Important data has been confiscated from the Association''s office that will be analysed by the Commission''s enquiry officers, the CCP added.