IN an earnest attempt to grapple with the formidable challenges of rampant inflation and a looming economic crisis, Pakistan is showing a newfound determination to confront the influential cartels that disrupt markets, manipulate prices and undermine a level playing field for emerging investors.
This commitment was unmistakably demonstrated during a recent meeting between Dr. Shamshad Akhtar, the caretaker Federal Minister for Finance and the Chairman of the Competition Commission of Pakistan (CCP). The central focus of this pivotal meeting was to solicit policy recommendations aimed at rectifying market distortions and bolstering efficiency within the essential food commodities value chain.
Kabir Ahmad Sindhu, the CCP Chairman, underscored the regulatory body’s mandate which extends to addressing disruptions in the food supply chain, combating collusive practices of cartels and fostering an environment of fair competition. Nevertheless, the alarming lack of enforcement against cartels has the potential to exacerbate food inflation which stands as a major contributor to Pakistan’s ongoing economic woes.
Though market disruptions lead to a steep rise in prices for essential commodities, further burdening the already beleaguered populace, yet the government’s ability to address this issue effectively has been significantly impeded by the dysfunctional state of the Competition Appellate Tribunal (CAT) since July 14, 2023, following the expiration of the Chairman’s term.
The CAT holds a pivotal role in the battle against disruptions in the food supply chain and in ensuring fair competition across various industries. Regrettably, the absence of a quorum within the CAT has left a multitude of cases unresolved, with a particular focus on those involving major industries such as sugar, automobiles, poultry and cement manufacturing. This troubling situation raises legitimate concerns about Pakistan’s capacity to curb rising food prices and maintain stability in the availability of essential commodities.
It is crucial to emphasize that the CCP had previously taken decisive action against cartelization in 2021. The regulatory body had undertaken dawn raids and imposed substantial penalties amounting to Rs. 44 billion on sugar mills found guilty of engaging in such anti-competitive practices. However, these landmark decisions encountered appeals in the High Courts of Sindh and Punjab, as well as the Competition Appellate Tribunal (CAT). Consequently, the recovery of these penalties has been suspended. The continued dysfunctionality of the CAT has left pivotal cases involving sugar mills and other industries hanging in the balance, causing a severe delay in the dispensation of justice and negatively impacting consumers and the broader economy.
In a recent development aimed at empowering the CCP to act decisively against cartelization, the Supreme Court of Pakistan delivered a unanimous ruling through a three-member bench. This ruling, which came last week, upheld the statutory powers of the CCP related to information gathering and inquiries. The court affirmed that there are no restrictions on the CCP’s general regulatory authority to request information, as stipulated in Section 36 of the Competition Act, 2010. Furthermore, the apex court emphasized the obligation of businesses to fully cooperate with the CCP’s directives for information provision.
Moreover, the Supreme Court clarified that the CCP is not bound to provide detailed reasoning before initiating an inquiry under Section 37 of the Act. This judgment builds on a precedent set in 2020 when the CCP sought information from cooking oil and ghee companies, with Dalda Foods being the sole entity challenging the regulator’s authority in the Islamabad High Court. Initially, the High Court had set aside the CCP’s information requests and inquiry initiation, imposing stringent requirements on the CCP’s regulatory and inquiry powers. Subsequently, the CCP appealed this SC decision, leading to the recent ruling in favour of the CCP.
Pakistan has taken a significant step toward improving the investment climate in Pakistan to let in new investors by establishing the Special Investment Facilitation Council (SIFC), designed as a ‘One-Window’ platform, to expedite decision-making processes and encourage Foreign Direct Investment in the country. However, substantial market distortions remain a major obstacle, deterring both domestic and international investment. Even governments friendly to Pakistan, that have been invited to invest in promising economic sectors, have emphasized the importance of implementing structural reforms to establish a genuinely competitive business environment.
The protracted delays in resolving cases related to cartelization not only hinder the cause of justice but also have a detrimental impact on consumers and the overall economy. Cartelization and market abuses obstruct competition, dissuade new market entrants and discourage foreign investment. These factors ultimately culminate in higher prices for consumers across Pakistan and impede economic growth. Urgent and robust corrective measures are vital to prevent this worrisome scenario from becoming the new norm and to foster a more competitive, stable and prosperous economic environment in Pakistan.
Pakistan’s resolve to confront cartels and address inflation is a crucial step toward economic stability and growth. The recent Supreme Court judgment, which has strengthened the CCP’s authority to initiate enquiries against cartels, is important for creating a competitive investment climate. However, the dysfunctionality of the Competition Appellate Tribunal remains a significant hurdle that must be overcome to fully realize the potential benefits of the initiative like the establishment of SIFC.
—The writer is politico-strategic analyst based in Islamabad.
Email: [email protected]
