Govt’s milk pricing mechanism flawed: CCP

Uniform fresh milk prices in violation of competition law.

ISLAMABAD:

The government is violating the law and ending competition in the market by fixing a uniform fresh milk price after consultation with relevant associations, according to Competition Commission of Pakistan (CCP) on Monday.

The anti-trust watchdog has warned the government for its involvement in price fixation.

The associations cannot negotiate selling price with Price Control Committees on behalf of its members that are otherwise required to compete with each other, said the CCP.

The Competition Commission of Pakistan issued a policy note to the federal government, all provincial governments, and the administration of the Islamabad Capital Territory, recommending that the present practice of price determination of fresh milk raised competition concerns.

The CCP gathered relevant information, and found that the officers involved in the price control work, survey markets to ascertain milk prices.  Afterwards, negotiations between members of the Price Control Committee and the respective stakeholders including associations take place and a price is agreed upon.

It said consultations among members with their respective association to reach a common agreed price, and designating their association to negotiate with Price Control Committees to approve their benchmark price tantamount to the fact that the association becomes a forum for price-fixation.

“This practice is against Section 4 of the Competition Act, 2010,” it added.

The Commission is of the view that entering into negotiation, agreement or any arrangement to reach an accord to reconcile prices of their produce is beyond the role of an association and this may have negative repercussions for competition. It added by engaging in negotiations with milk sellers associations and milk retailers association, the government itself becomes a party to a prohibited practice. Also, such agreements under the auspices of the government promote practices that are a violation of the Competition Act, 2010. Therefore, the Commission believes that the government at any level must not provide any patronage to anti-competitive practices that may encourage collusive behaviour, warned the CCP.

The policy note further recommends that any members of associations, associations themselves or any stakeholders from the marketplace must not be invited to and must not participate in any formal or informal meeting in which the price of fresh milk is decided. The Commission further recommends that the price of fresh milk must be based on careful and independent analysis undertaken by respective government officers working as the members of the Price Review Committee.

Published in The Express Tribune, April 17^th, 2012.