CCP fines association Rs50m for cooking oil price manipulation

Association fixed prices of cooking oil in violation of law.


Express July 06, 2011

ISLAMABAD:


The anti-trust watchdog has imposed a fine of Rs50 million on Pakistan Vanaspati Manufacturers Association (PVMA) for collectively fixing the prices of vegetable ghee and cooking oil.


The clause 4 of the Act prohibits individual companies and associations from entering into agreements for restricting competition in the market. The PVMA was also found involved in abuse of its dominant position.

A two-member bench of the Competition Commission of Pakistan (CCP) comprising of chairperson Rahat Kaunain Hassan and member Abdul Ghaffar passed the order on Wednesday.

The CCP also directed the PVMA to cease the practice of price discrimination between its members and commercial importers. PVMA has been directed to submit its compliance report within a month of issuance of the order. Failure to comply with this direction shall make PVMA liable for a penalty of Rs1 million for each day default.  The CCP had carried out a study which identified competition vulnerabilities which may have object or effect to prevent, restrict or distort competition in the sector.

The study revealed that within a short period of four months, starting from December 2010 to February 2011, price hiked four times in a parallel manner in different categories and brands of cooking oil.  It was also noticed that the price increase was often referred to a collective decision of all manufacturers or PVMA as their association, resulting in simultaneous increase in price.

The CCP observed that the PVMA has played a significant role in fixing the price of ghee and cooking oil. The prices were regularly discussed in the meetings of the PVMA. Costing was also prepared by the PVMA and then active negotiations were made by the association with the government to fix the price around its own costing. However, the Bench held that there is nothing on record to prove involvement of government in price fixation in this case.

Once price was fixed, it was communicated to all of its members to follow the decision of the PVMA. The Bench also reiterated the view of the CCP taken  in number of its orders already passed that it is not the mandate of an association to deliberate on commercial sensitive information and engage into such activities of costing and taking decisions on pricing of commodities manufactured by its members.

Published in The Express Tribune, July 7th, 2011.

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