Final Project

Business Law
Competition Commission of Pakistan Act 2010
MBA semester 4
Submitted to: Sir Adil Kashmiri Submitted by: Hirra Ikram and Uswa Mansoor 12/3/2011

Kinnaird College for Women

Competition Commission of Pakistan Act 2010

Acknowledgement
First of all we would thank to Allah Almighty the gracious & Merciful, Omnipresent who enables and awarded courage and helps us in every field of life especially in the completion of this project. & Secondly, our honorable teacher Mr. Adil Kashmiri, whose devotion, attention and professionalism provided us all the opportunity to get this target. He always made himself available for help. & Wish to acknowledge my appreciation to all those who assisted us in the preparation of this project.

TABLE OF CONTENTS
Page # Part 1: About CCP. 4 Description.. 4 History.. 4 Mission.. 4 Scope.... Part 2: Action and Orders.. Penalties. Rates of Penalties.. . General Information.. 4 6 5 5 6

International Activities....6 Part 3: Part 4: Relevant Market. Dominant Position 7-8 9-10

Abuse of Dominant Position10 CASES.. Part 5: 11-14 15-16

Prohibited Agreement CASES. 17-20

Part 6:

Deceptive Marketing Practices.. CASES. 23-27

21-22

Part 7:

Mergers CASES. 31-35

29-30

Comments.36 References. 38

PART 1

About CCP
The Competition Commission of Pakistan has been established to promote and protect competition in all sectors of the economy.

Description
Law enforcement, quasi-judicial, statutory organization to ensure competitiveness in the economy.

History
Before CCP Pakistan had an anti-monopoly law namely Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance (MRTPO) 1970. The Monopoly Control Authority (MCA) was the organization to administer this Law. The MRTPO, 1970 was inadequate to address competition issues effectively. They are: 1. The 1970s law was out of date for a modernizing and rapidly transforming market economy; 2. The MCA was not able to meet the expectations of businesses and the consumers at large. 3. The first generation reforms that liberalized the economy and encouraged the private sector required a competition policy framework that could promote and protect competition and innovation. The Ministry of Finance and the MCA worked with the World Bank and the Department for International Development (DFID), UK. As a result of these efforts, Competition Ordinance, 2007 replaced the MRTPO after getting approve, Competition Ordinance 2007 finally transformed into Competition Act 2010.

Mission
The Competition Act 2010 sets out the principles and norms of sound competitive behavior as well as the manner in which these norms are to be enforced. It provides a legal framework in which a business environment based on healthy competition towards improving economic efficiency, developing competitiveness and protecting consumers from anti-competitive practices is to be created. And to provide for free competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anticompetitive behavior

Scope

This law prohibits situations which tend to lessen, distort eliminate competition such as actions constituting an abuse of market dominance, competition restricting agreements and deceptive market practices. Although essentially an enabling law, it briefly sets out procedures relating to review of mergers and acquisitions, enquiries, imposition of penalties, grant of leniency and other essential aspects of law enforcement. . To maintain high standard of evidence for unearthing secret cartels, the Competition Commission has legal powers to conduct searches and inspections

Part 2
Actionand Orders
1. Abuses of dominant position require the undertaking to take actions necessary to restore thecompetition and not to repeat prohibitions and not to engage in thesimilar practices. 2. Prohibited agreement annul or amend the agreement or related practices and not to repeatprohibitions or enter into similar contract or practices 3. Deceptive marketing require the undertaking to take actions specified in the order necessaryto restore the competition and not to repeat prohibitions 4. Merger Authorize the merger subject to conditions. Authorize merger after second phase review. Prohibit merger only after second phase review.

Penalties
The CCP may pass order directing the undertaking, Director, officer or employee of the undertaking to To pay penalty after giving opportunity of being heard where the undertaking: 1. 2. 3. 4. 5. Has been engaged in prohibited activity Failed to comply with order of CCP Failed to supply with the copy of required document or information Has furnished false or inaccurate information or statement Knowingly abuses, interferes with, impedes, imperils or obstructs the process of CCP in any manner

Rates of penalties
In case of Penalty (depending upon circumstances) Contravention of -amount not exceeding prohibitions Rs.50 million; or -amount not exceeding 15% of the turnover Non-compliance of -amount not exceeding order, notice of Rs. 1 million Or requisition of CCP or failure to supply copy of agreement, document or information Continuing default of -an amount not order of CCP exceeding Rs. 1 million for every day
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after the first day

General information Members

The Commission, at present, consists of six Members including the Chairperson. The Commission, at present, consists of six Members including the Chairperson. 1. Ms. RAHAT KAUNAIN HASSAN: second and current Chairperson of the CCP since 26th July 2010.and also a ofMember (Legal and Office of Fair Trading 2. Mr. Mohammed Hayat Jasra, is appointed Secretary to the Commission on 12-11-2007 the date when the Commission was established. Mr. Jasra is Fellow Member of the Institute of Cost and Management Accountants and is also Member of the Institute of Charter Secretaries & Administrators, UK 3. Mr. Abdul Ghaffar , Member of Cartels & Trade Abuses,since 2002 4. Dr. Joseph Wilson , Member of Mergers, Acquisitions & International Affairs. 5. Ms. VadiyyaKhalil , Member of Advocacy & IT. 6. Mr. MueenBatlay , Member of Competition Policy and Research 7. Mr. ShahzadAnsar, Member of Office of Fair Trading (OFT) and Budgetary Affairs.

Press release
It has press release section from 2011 to 2008.

International activities
CCP is striving to play an active role at the international level because anti-competitive practices stemming from cross-borders may also affect welfare of Pakistani citizens. The Commission actively participates in activities of the International Competition Network, OECD, WIPO, IBA and UNCTAD. Apart from being represented at various conferences and workshops.

PART 3

Relevant Market section2

Means the market which shall be determined by the CCPwith reference to a product market and a geographic market. Product market comprises all those products or services which are regarded as interchangeable or substitutable by the consumers by reason ofthe products' characteristics, prices and intended uses. Geographic market comprises the area in which the undertakings concerned are involved in the supply of products or services and in which theconditions of competition are sufficiently homogeneous and which can be distinguished from neighboring geographic areas because, in particular theconditions of competition are appreciably different in those areas.

PART 4

Dominant position Section3

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Dominant position of one undertaking or several undertakingsin a relevant market shall be deemed to existif such undertaking(s) have the ability to behave to an appreciable extentindependently of competitors, customers, consumers and suppliersand the position of an undertaking shall be presumed to be dominant if itsshare of the relevant market exceeds 40%;

Abuse of dominant position

Abuse of dominant position is prohibited. An abuse of dominant position consists ofpractices which prevent, restrict, reduce or distort competition in the relevant market. Examples of such practices include: (a) Limiting production, sale and unreasonable increase in prices or other unfair trading conditions. (b) Charging different prices from different customers for the same goods or services without justification (price discrimination). (c) Making sale conditional with purchase of other goods or services (tie-ins). (d) Making the conclusion of contract subject to the acceptance of others. (e) Dissimilar conditions for equivalent transactions for different parties (competitive disadvantage). (f) Exit the competitor; prevent new entry and creating monopoly in the market by predatory prices. (g) Boycott, exclude other undertaking from production, distribution or sale of goods or services. (h) Refusal to deal

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Cases Case no1

CCP issues show cause notice to Pakistan Steel Mill (PSM)

PSM is the state-owned producer of long rolled steel and heavy iron products in Karachi. The PSM is the countrys largest industrial undertaking having a production capacity of 1.1 million tons of steel and there is always doubt either it is, in dominant position; or trying to create monopoly. CCP has issued a show cause notice to the PSM in what appears to be, prima facie, a refusal to deal on the part of the Mill with many consumers and buyers of low carbon steel billets. Violation of Section 3 According to an official statement, taking suomoto notice of articles in the media as well as on a complaint submitted by Frontier Foundry Pvt (Ltd), in which it was submitted much of the mills production of billets was being allocated to a few undertakings collectively known as the Abbas Group, after that CCP looked into the matter. The detailed hearing in this matter has been scheduled for May 19, 2009 in federal capital. Refusal to deal by a dominant player may amount to abuse of dominant position under certain circumstances, and thus violate section 3 of the Ordinance. ,in terms of clause (g) (h) of Section 3 of the Ordinance.

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Case no 2
CCP issues show cause to PVMA for cartelization

The Competition Commission of Pakistan (CCP) on Thursday issued show cause notice to Pakistan Vanaspati Manufacturers Association (PVMA) for alleged involvement in cartelization by fixing the prices of ghee/cooking oil. According to the CCPs statement issued here, the Commission carried out a comprehensive study in the sector of ghee and cooking oil, which identified vulnerabilities, which may have object or effect to prevent, restrict or distort competition in the sector. Based on the observations in the said study report and also information gathered from other sources the CCP took suomoto action and initiated an enquiry. An Enquiry Committee comprising MsShaistaBanoGilani, Director and Ms Nadia Nabi, Joint Director were appointed to conduct an enquiry on suspected anti-competitive activities of ghee/cooking oil manufacturers and their association i.e. PVMA. They do not synchronize their prices with the change in the input prices and set their price at a higher benchmark. Price is immediately increased when the price of edible oils goes up in the international market but they fail to reflect reduction in ghee/cooking oil price in the wake of decline in edible oil price in the international market. However, manufacturers easily maneuver the price to a lower level when government intervenes. For that forum of the PVMA is used to take a collective decision and set the price uniformly at a pre-determined level for all brands of ghee/cooking oil as the PVMAs decisions are binding on its members. Therefore, PVMA appears to be playing the lead role to negotiate and fix price with the government, prima facie, in violation of Section 4(1) and in particular 4(2) (a) of the Act. In terms of enquiry report, PVMA appears to have transgressed its mandate as an association and taken a lead role in business decision making process of its member mills. Instead of member mills having a direct business relationship with their suppliers, PVMA enters into negotiations with edible oil transporters and decides the transport rates for its member mills. Such arrangements/agreements between PVMA and edible oil transporters to fix the transport rates for

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PVMA units, prima facie, prevents and restricts competition between transporters inter se in violation of Section 4 of the Act Based on the findings of enquiry report, the CCP issued show cause notice to PVMA for contravening Section 4(1), 4(2)(a) and also Section 3(3)(b) of the Act. The hearing has been scheduled for 17th May, 2011 in Islamabad.

Case no 3
CCP issues show cause to Cinepax Tie-in case

The CCP had received a complaint alleging a tie-in of movie tickets with food coupons, i.e. the sale of cinema tickets contingent on the mandatory purchase of food coupons worth Rs50 each, thus violating of Section 3(3)I of the Competition Act, 2010 Following a preliminary investigation, CCP called a hearing on March 1, 2011 with Cinepax representatives, who submitted that the tie-in had been done to benefit the public as well as to make the price increase from Rs300 to Rs350 more acceptable. They contended that tie-in practice had lasted for a period of six months after which it was just the movie ticket sold at Rs350 and this practice stopped on April 7, 2010 before the CCP took cognizance of the matter. Cinepax also argued that they were in fact not dominant in the relevant market as there were eleven other cinemas operating in the twin cities, i.e., Rawalpindi and Islamabad Based on the findings of enquiry report, the CCP issued show cause notice to cinepax for contravening Section3 (3) c.

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Case no 4
CCP issues show cause to DHA and Wateen Telecom

The show cause notices were issued in the aftermath of an email received by CCP from a resident of DHA Phase V Lahore, complaining about the lack of choices available to residents of DHA for telecom and media services provision for a long period of thirty years. Upon preliminary probe of the matter, the Competition Commission of Pakistan found that the choices of residents are being restricted due to an exclusive agreement between Wateen Telecom and DHA effective from 1st January 2008. This agreement gives Wateen Telecom the sole and exclusive right to procure, provide, install, set up and establish telecommunication equipment/system and infrastructure within DHA Lahore. In accordance with the agreement, telecommunication and media services provided by Wateen Telecom include Long Distance and International (LDI), Wireless Local Loop (WLL), Optical Fibre Cable (OFC), Telecom Infrastructure, Hybrid Fiber and Cable (HFC) services. The Competition Commission of Pakistan further examined the contents of the exclusive agreement, which reveals that certain clauses are prima facie potentially anticompetitive having the object and effect of restricting or distorting competition in the relevant market. Apart from granting Wateen exclusivity in the area of telecommunication and media service provision the agreement also grants Wateen the last right of refusal to any competing undertaking for a period of 30 years. In its Show Cause Notice, the Competition Commission of Pakistan has stated that DHA appears to have entered into an agreement with Wateen Telecom, which prima facie violates Section 4 of the Act. DHA and Wateen have been asked to submit their written arguments and justifications for entering into the exclusive agreement within fourteen days and to appear before the Commission on 21st December 2010. It is the responsibility and obligation of the Competition Commission of Pakistan under the Act to ensure free competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anti-competitive 15ehavior. The Competition Commission of Pakistan is of the view that any or all residents of DHA having concern in this regard may contact the Commission. Based on the findings of enquiry report, the CCP issued show cause notice to DHA and Wateen Telecom for contravening Section3 (3) D and F.

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PART 5

Prohibited agreement section 4

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An undertaking or an association of undertakings shall not enter into a contract or take adecision for production, supply, distribution or control of goods or services to prevent, restrictor reduce competition in the relevant market except when granted exemption under thisOrdinance. A contract entered into in contravention of this section shall be void

Prohibited agreements include

(a) Fixing prices or imposing restrictive trading conditions for purchase, sale and distribution of goods and services. (b) Dividing market by territories, volume of sale, purchase or type of goods and services. (c) Fixing quantity of goods for production, sale or means for services (d) Limiting technical development for production and sales of goods or services. (e) Collusive tendering or bidding for purchase and sale of goods and procurement of services. (f) Applying different conditions for equivalent transactions to different parties. (g) Making conclusion of contract subject to acceptance of others

Unreasonably restrictive trade practice

Means a trade practice which has or may have the effect of unreasonably preventing, restraining or otherwise lessening competition in any manner.

Trade
Means any business, industry, profession or occupation relating to the production, supply or distribution of goods or the control of production, supply or distribution of goods, or to the provision or control of any service.

Trade practice
Means any act or practice relating to the carrying on of any trade or business.

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Cases Case no1

CCP issues show cause notice to Mobilink GSM

The Competition Commission of Pakistan (CCP) has said that Mobilink is involved in an unreasonably restrictive trade practice by not allowing its blackberry subscribers to other service providers. The CCP has passed an order on the show-cause notice, issued by the MCA to Pakistan Mobile Communications Limited (Mobilink GSM) for carrying on unreasonable restrictive trade practices. The order said that currently the Mobilink GSM blackberry customer did not have any option to switch over to another service operator whether the SIM enabled or not. According to the order, the tie-in arrangement of bundling the handset, Mobilinks telephone service and the blackberry service products through SIM locking has the effect of unreasonably preventing, restraining or otherwise lessening competition. In the Commissions considered view, locking the SIM card in the handset and preventing its replacement restricts customers from changing their service provider. With no procedures in place for unlocking, it effectively deterred the consumer choice and mobility, it said. Based on the findings of enquiry report, the CCP issued show cause notice to mobilink GSM for contravening Section4 a and d

Case no2
CCP Issues Notice to Pakistan Poultry Association

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Issued show cause notice based on consumer e-mails and news reports of high prices of day-old chicks and exorbitant increase in the prices of poultry feed, the CCP undertook an investigation of the Pakistan's poultry industry The news reports and complaints claimed that the increases were the result of cartelization among the poultry hatcheries owners and the poultry feed manufacturers. Pakistan's poultry industry comprises several sectors that are interconnected, with each having a stake in each other. The different sectors include feed manufacturers, breeders, hatcheries, broiler farms and layer farms. Feed manufacturers use agric-based produce and by-products to make various feeds which are fed as diet to chickens bred by breeders and hatcheries. Breeders use grandparent pureline stock strains to produce parent stock strains of chickens, which in turn supply eggs to hatcheries. Hatcheries use eggs provided by breeders to produce day-old chicks, which are then raised on farms for their meat and eggs and are sold to broiler and layer farms. Broiler farms purchase day-old chicks from hatcheries and raise a breed of chicken, known as the broiler, which is meant for chicken meat production. Layer farms, on the other hand, purchase day-old chicks from hatcheries and raise a breed of chicken known as the layer, which lays eggs for dietary consumption. Upon investigation, the CCP observed that prima-facie PPA served as the nerve-center that connected the different sectors of the poultry industry, including feed manufacturers, breeders, hatcheries and broiler and layer farms. The CCP enquiry team discovered that information relating to rates of various poultry products, such as chicken meat, eggs, feed etc, was being displayed on the official website of PPA and that these rates were being updated on the website on regular basis, at times even daily, that indicated towards an arrangement to fix the prices of poultry products, by misusing the platform of PPA. Such an arrangement for collective price fixing, if it exists, has the object and effect of preventing, restricting or reducing competition in the relevant market which is a violation of Section 4 of the Competition Ordinance, 2010. On the recommendation of the enquiry committee, the Commission deemed it appropriate to conduct search and inspection of the offices of PPA located in Islamabad, Lahore and Karachi under the power granted to it by Section 34 of the Ordinance in order to collect any evidence regarding the suspected violations of section 4 of the Ordinance. Based on the materials and documents impounded during the search and inspection of PPA's offices, the information available on PPA's website, and the documents and information received from PPA, Poultry Research Institute and the undertakings involved in poultry business, the enquiry committee concluded in the enquiry report that there is, prima facie, cartelization in all markets of day old chicks, poultry feed, broiler chicken, eggs and grandparent stock in violation of Section 4 (1) of the Ordinance. PPA, by deliberating, deciding, and announcing the prices and mechanism for sale of poultry feed, broiler meat, day of chicks, eggs and grandparent stock.

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Based on the findings of enquiry report, the CCP issued show cause notice to PPA for contravening Section 4(1) read with Section 4(2) (a) and (b) and (c) of the Ordinance.

Case no 3
CCP issues show-cause notices to 3 firms (FESC)

The Competition Commission of Pakistan (CCP) has issued show cause notices to three companies for prima facie indulging in collusive bidding in Faisalabad Electric Supply Company s tender to procure 3,000 units of LT TOU Meters. According to an announcement on Monday, the CCP had initiated enquiry into possible collusive bidding in Fesco s tender after reviewing details of public procurement carried out by the company in the past few years. The review was part of the CCP s Bid Rigging Detection Programme aimed at identifying and curtailing collusive bidding in public procurement. The enquiry concluded vide report dated July 18, 2011, according to which, prima facie, three companies were involved in supply of LT TOU Meters and had colluded to rig the Fesco Tender number 6, dated 4 August 2009. The Enquiry report revealed that the bidders prima facie had colluded to fix the price and divided the share of supply of LT TOU Meters deliberately and had rigged the Fesco bid in violation of section 4(2)(a),(b) & (e) of the Competition Act, 2010. The inquiry report recommended that section 4 of the Competition Act mandates the commission to look into possibilities of bid rigging - a particular form of collusive behaviour of price fixing and/or dividing the market by which firms coordinate their bids on public procurement by raising prices to uncompetitive levels. In the instant case, possibility of bid rigging may have resulted in economic harm to Fesco seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers. On the basis of information and documents available on record a, prima facie, collusive arrangement among the undertakings by offering a pre-determined price and quantity is substantiated. Bids submitted by all the three undertakings/bidders appear to have the object of preventing, reducing, restricting or distorting competition in the market of public procurement of LT TOU Meters. The companies have been given fourteen days to show cause in writing and to avail the opportunity of being heard by CCP. According to CCP, the undertakings are blowing hot and cold at the same time. On one hand they have taken the stance that capacity for LT TOU meters cannot be determined
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and then they also admit that components for manufacture of these specialised meters are bought depending on the demand from Pepco/Disco s throughout the year. It also appears to be an attempt to show that the capacity is less or under-utilised. Whereas, all three undertakings are involved in manufacturing of high tech equipment and claim to be profitable, competitive and efficient having invested in diverse portfolio as shown on their respective websites. Same reply that the capacity cannot be determined makes it further dubious that companies might have colluded, in particular, when all of the three companies offered the same quantity for identical price in the bid documents. The CCP in its earlier enforcement orders held that collusive bidding poses serious concerns for public procurement. Due to the collusion between bidders, the cost of public procurement artificially increases and the taxpayer suffers at the end. Therefore, it is concluded that the undertakings have entered into an arrangement that, prima facie, violates Section 4 (2)(a), (b) & (e) of the Competition Act.

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PART 6

Deceptive marketing practices section10

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Deceptive marketing practices shall be deemed to be continued in following circumstances: (a) Distribution of false or misleading information capable of harming business interestsof other undertaking. (b) Distribution of false or misleading information to customers lacking reasonable basis about prices, character, method or place of production, properties, suitability for use or quality of goods (c) False or misleading comparison of goods in advertising (d) Fraudulent use of anothers trademark, firm name, product labeling or packaging.

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Cases Case no 1
CCP issues notice to SC Johnson & Son (Baygon)

The show cause notice has been issued to SC Johnson & Son Pakistan Limited for making a claim in their advertisements of Baygon being No 1 in Pakistan without any reasonable basis and disseminating misleading and false information to the consumers, which is capable of harming the business interest of competing undertakings. Baygon claiming their brand to be No 1 in Pakistan which is false, deceptive and misleading. It was also alleged that the claim in the marketing campaign lacks a reasonable basis, related to character, suitability for use or quality of goods in violation of Section 10 of the Competition Act, 2010 and is capable of harming the business interest of the complainant. It was stated in the show cause notice that prima facie, the overall impression of the advertisement of the S.C. Johnson & Son Pakistan Limited is that Baygon has been awarded the Brand of the Year 2010 Award for the entire range of its products and on the basis of this award Baygon is No 1 in Pakistan for the entire range of its products and is best to fight dengue. Through the show cause notice, M/s SC Johnson & Son Pakistan Limited, has been called upon to reply of show cause in writing within fourteen (14) days and to appear and avail the opportunity of hearing before CCP on 14 November 2011 and explain as to why an appropriate order and/or penalty for the said violations be not imposed on the undertaking. Based on the findings of enquiry report, the CCP issued show cause notice to S.C. Johnson & Son Pakistan Limited for violation of Section10 (a).

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Case no 2
CCP issues show cause notice to Ufone (Uwon package)

CCP has taken a step and has passed orders on the show cause notice taken to Pakistan Telecom Mobile Limited (Ufone) on Uwon packages. The Order of CCP also lays down general guidelines in relation to enforcement of Section 10 of the Ordinance which deals with the deceptive marketing practices. In the matter of Ufone, it has been observed that, the televised advertisement of UfonesUwon Package, did not mention that the advertised rates, to call other networks, are applicable on per minute calls. Although as per the submissions of Ufone the advertisement contains a disclaimer, however, the same is in English and was neither visible nor readable. It has also been observed that, even if an express or implied representation in an advertisement is accompanied by disclaimers or qualifiers; such caveats will nullify a misleading effect only, if they appear, in such a way as to eliminate the advertisements tendency to mislead in its overall effect. Although, in the newspaper advertisement and brochures made available at sale points, it was noted that in a very small font it finds mention in Urdu text that rates are exclusive of taxes however, this has been held as an inadequate disclosure. The Order further states that, we must recognize that such information must be clearly conveyed to the customer/consumer as the advertised call rates increase, when 21 % FED are included in the advertised call rates. Furthermore, in the televised advertisement no such clarification appears whether verbal or in print. The advertisement by Ufone has also been held in violation of Section 10 of the Ordinance. Based on the findings of enquiry report, the CCP issued show cause notice to Ufonefor violation of Section10(b).

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Case no 3
CCP issues show cause notice to China Mobile Pak Ltd Zong(8 Anay per call)

CCP on September 29, 2009 has passed an Order in respect of Show Cause Notices issued to M/s China Mobile Pak Limited (Zong CMPak) & M/s Pakistan Telecom Mobile Limited (Ufone) wherein the subject advertisements by both the undertakings have been held in violation of Section 10 of the Competition Ordinance, 2007. However, owing to the conciliatory and compliance oriented approach, and the assurances given on part of both the companies through an undertaking in writing for future compliance with the provisions of the Ordinance, CCP has not imposed any penalty. Both the companies have been reprimanded that in future CCP will take a very strict view of any or all non-compliances or contraventions under the Ordinance. It has been observed that Zongs 8 Anay per call advertisement was false and misleading and in violation of Section 10 of the Ordinance. The subject advertisement is stated to lack the reasonable basis regarding the price i.e., call rates, exclusive or inclusiveness of government taxes being not specified and its character i.e., the duration of call at which the rates were applicable was not stipulated clearly. While these factors are held as misleading in some way or the other, the Order holds the statement made in the advertisement that call at 907 and say it all as an information that is false in nature; dialing 907 activated for Zongs customer/consumer the 8 Anay per call offer and subjected the customer to an automatic deduction of Rs.15 + tax thereon from the prepaid account withholding/omission of such information is held material and contrary to facts advertised. Based on the findings of enquiry report, the CCP issued show cause notice to zong for violation of Section10(b).
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Case no 4
CCP issues show cause noticeto P&G (Classic Clean Head & Shoulder Shampoo)

CCP has disposed of a show cause notice issued to M/s Procter & Gamble Pakistan (P&G) for deceptive marketing practices in terms of Section 10 of the Competition Ordinance 2009 vide its order dated February 23. A press release issued here on Thursday revealed that the order has been placed on CCPs website. The CCP took suo motto notice of the advertisements of one of the products of P&G Classic Clean Head & Shoulder Shampoo, wherein it was advertised that the product is worlds No 1 anti-dandruff shampoo suggesting that its use renders the hair 100% dandruff free. Based on the findings of enquiry report, the CCP issued show cause notice to P & G for violation of Section10

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Case no 5
CCP issues show cause notices to 16 paint companies

The Competition Commission of Pakistan (CCP) has issued show cause notices to sixteen paint companies for prima facie, violation of section 10 of the Competition Act, 2010 pertaining to deceptive marketing practices. The companies that have been issued the show cause notices are ICI Pakistan Ltd, Nippon Paint Pakistan (Pvt) Ltd, Kansai Paint (Pvt) Ltd, Berger Paints Pakistan (Ltd), Brighto Paints (Pvt) Ltd, Diamond Paint Industries (Pvt) Ltd, Mansoor Paint Industries, U P Paint Industries (Pvt) Ltd, Nelson Paint Industries, Chawla Chemical and Metal Industries (Pvt) Ltd, Brolac Paints (Pvt) Ltd, Karss Paints Industries (Pvt) Ltd, Allied Paint Industries, Sika Paint Industries (Pvt) Ltd, Rafiq Polymer Industries and Black Horse Paints. The show cause notices were issued after it was brought to the notice of CCP during advocacy sessions held with the Consumer Association of Pakistan, that paint manufacturers were hiding tokens or redeemable coupons in paint packs. Upon preliminary investigation of the matter, the CCP found the practice of putting tokens is targeted as a monetary incentive to the painter, ranging from approximately Rs 20-Rs 500 varying with the size of the paint pack and depending on the brand. Typically, the painter after purchasing the paint pack obtains the token, which is concealed at the bottom of the paint pack. The painter then en-cashes the token from a shop or company outlet while the end consumer bears the price of the paint pack without having any information in this regard. While many of the undertakings maintain that it is intended for the benefit of the end consumer. This non-disclosure of important information amounts to the distribution of misleading information as to the price of the paint packs.

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Based on these preliminary findings, in its show cause notices the CCP has stated the paint companies were misleading end consumers related to the price of the paint in terms of clause (d) of section 10 of the Act.

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PART 7

Mergers Section 11

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Mergers lessening competition [section 11 & Regulations]

Prohibition [11(1)]
An undertaking shall NOT enter into a merger which substantially lessens the competition by creating or strengthening a dominant position in the relevant market. Merger shall be deemed to have occurred if: (a) Two or more independent undertakings merge into a new undertaking and cease toexist as separate legal entities; (b) One undertaking is absorbed by another with the latter retaining its legal entity andformer ceasing to exist; (c) One or more persons or other undertakings acquire direct or indirect control of thewhole or part of one or more other undertakings; (d) The acquisition by one undertaking of the assets or a substantial part of the assets, ofanother undertaking is to place the first undertaking in a position to replace orsubstantially replace the second undertaking; (e) A collaborative arrangement by which two or more undertaking devote theirresources to pursue a common objective

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Cases

Case no 1
CCP grants extension to Fauji Fertilizer Company &Fauji Fertilizer Bin QasimLimited Case Compliance of its order

July 21, 2010 ( Balochistan Times): A three member Bench of the Competition Commission of Pakistan (CCP) disposed off the show cause notices issued to M/s Fauji Fertilizer Company Limited (FFC) and M/s Fauji Fertilizer Bin Qasim Limited (FFBL) for non-compliance of the CCPs earlier Order dated 28 April 2008.The defunct Monopoly Control Authority (MCA) had issued show cause notices to FFC and FFBL for prima facie violation of Section 3 of the Monopolies and Restrictive Trade Practices (Control & Prevention) Ordinance, 1970 (MRTPO).. The CCP directed the FFC and FFBL that no individual will be a director of both Fauji Fertilizer Company Limited (FFC) and Fuji Fertilizer Bin Qasim Limited (FFBL) with the exception of (a) Chairman, (b) minority shareholders, individual representing institutions other than the Fauji Group of Companies including but not limited to FFC & FFBL. The Chairman of FFBL will not have a second or casting vote nor shall he hold the office of the Chief Executive Officer. So long he is also the Chairman of FFC, it said adding in order to ensure good corporate governance and transparency, FFBL shall take necessary measures to ensure that there are three independent directors on its board in terms of Para 38 of the Order. The CCP order read that the Commission is agreeable to the proposed time period for the implementation of the aforesaid actions i.e., within a period of two years from the date of this Order as this appears to be reasonable. FFC & FFBL were required to report and confirm due compliance of the Order within two years from the date of the Order. Upon expiry of the two years compliance period, CCP received letters from FFC and FFBL, wherein request for an extension in the compliance period up-to 30 June 2011 was made, to CCP. However, there was no mention of any effort made by the Boards of FFC and FFBL for compliance or even achieving partial compliance of the Order; CCP did not find the request satisfactory. Hence issued show cause notices to both FFC & FFBL, for noncompliance of the Order in violation of Section 19 of MRTPO read with Section 59 of the Ordinance. FFC and FFBL were also required to file their written reply to the show cause notices and an opportunity of hearing was also provided. The Bench expressed its discontent and
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disappointment towards the non-serious approach. The unintentional delay caused in compliance of the Order was deeply regretted by the Counsel for FFC & FFBL. It was urged that the undertakings in all earnestness intended to comply and shall comply with the directions of CCP. Although the reasoning afforded by FFC & FFBL were not found satisfactory, however, keeping in view the representation made by the Counsel, his repeated assurance for the undertakings commitment to ensure compliance with the Order and taking into account the plea for a lenient treatment; asserting determination to resolve the issue and to address the concerns of CCP, a conditional extension was also granted.

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Common Objectives
Thresholds. Approval is required for transactions meeting any of the following criteria: assets of an undertaking exceed 300 million rupees and/or the value after a merger or acquisition is more than one billion rupees; annual turnover of the acquiring entity in the preceding year exceeds five hundred million rupees and/or the combined turnover exceeds one billion rupees; value of shares or assets to be acquired exceeds one hundred million rupees; or acquirer receives shares that entitle it to more than 10% of the voting shares Transactions exempted from filing pre-merger notification. The following transactions are exempt from filing a pre-merger notification: a holding company increasing its share in its subsidiary; inherited shares or those acquired by succession; and allotment of voting shares pursuant to a right issue. Pre-merger Application The format of pre-merger application has been prescribed as annexed to the Merger Control Regulations, 2007. Criteria for review of Application The CCP considers whether a merger situation is likely to substantially prevent or lessen competition, in part by looking at the following: the level of import competition; the ease of entry into the market; concentration; history of collusion; countervailing power in the market; dynamic characteristics of the market, including growth, innovation, and product differentiation; vertical integration in the market; whether business has failed or is likely to fail; and whether the merger would result in removal of an effective competitor. Two phase review PHASEI ORDER BY CCP: Whether merger is dominance [R10] Phase-I review shall entail a quick review and allow merger situation to proceed withoutdelay which do not raise competition. The CCP shall decide on receipt of completeapplication whether the transaction falls within the meaning of merger and inform the applicant if the transaction is not within the meaning of merger. The CCP shall pass an order within 30 days of receipt of application whether the intendedmerger meets the threshold and presumption of dominance. Further, the CCP may requirethe undertaking to provide additional information for a second phase review. If order is notpassed within 30 days of application, it shall mean that the CCP has no objection onintended merger. PHASEII ORDER BY CCP: Whether dominance lessens the competition [R11] If the CCP is unable to determine on the basis of phase-I review that the situation does notraise
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competition it shall carry out a phase-II review. The CCP may require furtherinformation in phase-II review. On initiation of second phase review, the CCP shall assess and give decision within 90working days of receipt of additional information whether the merger will substantially lessenthe competition by dominant position in the relevant market. The CCP may reject theapplication if the required information is not provided. If the decision is not made within 90 days, it shall mean that the CCP has no objection on intended merger.

Case no 2
CCP issues conditional NOC to FFC for merger with Agagritech

CCP issued its conditional no objection certificate to the bidding by FaujiFertiliser Company Limited (FFC) for the proposed acquisition of 75 per cent to 79.87 per cent shares of Agritech Limited by FFC. Earlier, FFC had submitted its pre-merger application for the acquisition of 75 per cent to 79.87 per cent shares of Agritech Limited. The Competition Commission of Pakistan (CCP) issued its conditional no objection to the bidding by Fauji Fertilizer Company Limited (FFC) for the proposed acquisition of 75% to 79.87% shares of Ms. Agritech Limited by FFC. The FFC had submitted its pre-merger application for the acquisition of 75% to 79.87% shares of Ms.Agritech Limited. The Commission intimated FFC vide its letter that the Commission has decided to move the case to Phase 2 Review, with the view to determine whether the merger situation is likely to substantially prevent or lessen competition in the market and to ascertain the probability that the merged entity in the post-merger market will behave competitively or cooperatively. The Commission issued its NOC for the proposed merger with the following conditions importantly requiring FFC to file its commitment within four weeks from the date of issuance of this decision to comply with all theconditions stipulated in the order, in letter and in spirit and the clearance/approval given by CCP shall only be deemed effective upon the filing of such commitments: FFC shall maintain tara and sona brands separately for two years and there shall be a price cap on the price increase of tara product by FFC for a period of one year.
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The maintenance of the two brands shall be subject to review after a period of one year or any time later but prior to two years; provided the market share of Urea acquired by FFC i.e., 6% drops from the existing market share throughdistribution or redistribution amongst existing and upcoming players in the fertilizer sector. The FFC shall maintain transparency and shall for the period of three years intimate to the CCP any price escalation along with reasons for such price increase (if any) within seven days of such increase.

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Comments

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Competition Commission of Pakistan (CCP) through the Competition Act, 2010 (the Act) is a welcome development. CCP played a significant role at legal, social and economical level. It has a skeptical approach upon the corruption that has been prevailed at any level. CCP is implementing a sophisticated communication campaign across the country that will share messages to enhance integrity and reliability.The provisions most debated related to the penalties that can be imposed by the CCP, its power of search and seizure, mechanism for appealing its decisions are indeed significant. Basically, the CCP believes that you are carrying out an anticompetitive practice; its officers can arrive at your door-step to facilitate you to dig out negative practices.

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References

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1. http://www.cc.gov.pk/ 2. 2http://archives.dawn.com/archives/172320 3. http://www.dailytimes.com.pk/default.asp?page=2009%5C05%5C01%5Cstory_1-52009_pg5_3 4. http://www.amlaw.pk/blog/tag/pakistan-competition-act-2010/ 5. http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/28Jun-2011/CCP-delegates-visit-OICCI-to-discuss-road-plan

ACT 2010 IS ATTACHED

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