The Competition Commission of Pakistan (CCP) has slapped a fine of Rs10 million on Engro Vopak Terminal Limited for violating the anti-trust law by entering into an exclusive chemical-handling agreement with Port Qasim Authority.
A CCP bench comprising Chairperson Rahat Kaunain Hassan and members Vadiyya Khalil and Joseph Wilson passed an order in respect of the proceedings initiated against Engro Vopak Terminal (EVTL) and Port Qasim Authority (PQA) for entering into a prohibited agreement in violation of Section 4 of the CCP Act. The penalty was imposed on EVTL for its failure to seek exemption under Section 5 of the Act.
PQA has also been directed to take immediate action to address the competition concerns stipulated in the order within a given timeframe. CCP said failure to comply with the directives would make both PQA and EVTL further liable for a penalty of Rs1 million for each day of default.
Earlier, CCP took notice of exclusive rights granted to EVTL through a concessionary agreement between PQA and EVTL to handle and store all liquid chemicals at Port Qasim for 30 years which appeared to have an object or effect to prevent, restrict and reduce competition within the relevant market unless exemption is sought under Section 5.
Keeping in view the implications under the concession agreement, the bench also observed an apprehension that PQA has awarded all major terminals on build, operate and transfer basis for 30 years which may set a tendency for exploitative and exclusionary practices. Therefore, PQA has been directed to apply for exemption in respect of all other concession agreements which will be reviewed by CCP on case-to-case basis.
Law applies to old agreements
During the proceedings, EVTL argued that the CCP Act is not applicable to the concession agreement as it was executed prior to promulgation of the Act.
However, PQA filed an application under Section 5 to seek exemption in respect of the agreement during the course of hearing. The bench in the order held that all agreements entered into prior to promulgation of the Act but are continuing and have object or effect to restrict competition within the relevant market, fall within the purview of Section 4 of the Act and are required to seek exemption under Section 5.
The bench was of the view that competition issues need to be taken into account at various stages of a concession, including its design, the award process and its execution, as well as in the regulatory framework for the markets concerned. In the given facts and circumstances, it appeared that PQA has failed to carry out due diligence to determine the competition indicators and shortcomings of the market and also to entrust EVTL with certain obligations or impose constraints to prevent any potential abuse of dominance and to achieve the desired general economic interest.
After taking all the facts and circumstances into account, the bench granted only conditional exemption with respect to the agreement and has directed PQA to take immediate action to review the agreement and incorporate effective provisions to address competition concerns stipulated in the order.
The bench also took notice of the fact that in 2009, there was 21 per cent increase in volume of EVTL as compared to the preceding year, but profit increased by over 78 per cent amounting to Rs917 million.
Published in The Express Tribune, July 2nd, 2011.
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