A monopoly problem

Pakistan and India have suffered a history of violence at the hands of an abusive monopoly power. Before the British Empire began to exert direct control over the subcontinent it was the East India Company that pillaged the land. A modern-day antitrust nightmare, the East India Company held a legal monopoly over all trade between England and India. This leviathan corporation colonised one of the richest regions of the world.

Resentment towards unchecked monopoly power can even spark a revolution. David Leonhardt, in an excellent essay, described how the Boston Tea Party, a pivotal moment leading to the American Revolution, was a reaction to the Tea Act of 1773 that gave a tea monopoly in the British colonies to the East India Company, shutting American merchants out of the market.

Today the world recognises that economic power wielded by monopolistic corporations must be resisted through state intervention. A monopoly by itself may not be evil, but the abuse of monopoly power often is. The necessity for control gave birth to what we call competition or antitrust law.

Monopoly power is regulated in Pakistan by the Competition Commission of Pakistan (CCP). An institution that found itself in the eye of the storm a few weeks back when the Prime Minister described its performance as ‘poor’ over the last five years. In December last year, the Prime Minister had expressed concern over the role of the CCP, seeing it as being in the throes of apathy and ordering it to be more active. As the government wrestles with the wheat crisis, it has expressed its displeasure over the CCP’s dismal performance in controlling the flour mills cartel.

Reading these reports makes it appear that the CCP is another apathetic, mismanaged, regulator amongst many in Pakistan. This isn’t a true picture of the CCP, and it definitely doesn’t tell the full story of this institution’s battle with our ineffective court system. The CCP is one of the most responsible and proactive regulators in Pakistan. Contrary to the PM’s statement, the CCP has already imposed a penalty of Rs75 million on the Pakistan Flour Mills Association for price fixing. In fact, the CCP has stood against many of the biggest cartels in Pakistan: cement, sugar, automobile, LPG, and telecom.

The problem is that the CCP cannot enforce penalties against any of these monopolies. The reason for that goes all the way back to 2007.

The CCP was created through the Competition Ordinance of 2007. Musharraf’s removal from office and the restoration of democracy resulted in the Parliament getting rid of the Ordinances that governed the CCP and created the Competition Act, 2010 which is the current law in the field. Starting from 2007, the CCP penalised many of the mega undertakings functioning in Pakistan. The monopoly powers mobilised something of a dream team of lawyers and challenged the CCP’s constitutional authority before the High Courts throughout the country. They succeeded in getting interim relief from the courts. In effect, the High Courts ordered that until a final judgment on the issue was delivered the CCP could not take any action against those it had penalised.

There is nothing wrong with this ‘stay’ order, nor am I imputing any malicious intent behind it by the judiciary. The only problem is that the stay order was given in 2007. Today, 13 years later, the judiciary has still not decided the case one way or another, meaning that the CCP has been reduced to a toothless watchdog since its inception.

For 13 years, the CCP has been delivering its findings regarding corporations violating the law of this country. The violators merely join the proceedings pending before the High Court, get a stay order on the basis of the ones already granted, and watch the CCP struggle to get the High Court to decide the case.

And struggle is putting it lightly. The CCP has been pursuing the case since 2007. It was even argued completely by both sides once in 2015, and then again in 2017, before a full bench of the Lahore High Court. In both instances the decision was kept pending for months until the Chief Justice heading the bench was elevated to the Supreme Court. The parties were then told that the case would have to be re-argued.

This isn’t to say that the challenges raised against the CCP have no merit. Both sides have made compelling arguments that will have far reaching implications for Pakistan’s constitutional jurisprudence. However, 13 years without a decision is an indictment against our judicial system.

If an institution of the Federal Government, performing a vital economic role for the country, cannot get its case decided for over 13 years, what hope does an ordinary citizen of this country have before our courts?

The CCP’s role in a time of intense economic distress for the country cannot be overstated. Competition law seeks to control economic power so that a country can make the best use of the resources that it has. Competitive markets make sure that goods are sold in the right amount (allocative efficiency) at the lowest cost (productive efficiency). Monopolies that abuse their dominant position often create high entry barriers for new players and cause deadweight welfare loss through unfair pricing i.e. a loss to consumers caused by the inefficient allocation of resources. Monopoly power harms the consumer while lining the pockets of executives. It is capitalism at its most exploitative.

The longer the CCP’s case drags on Pakistan will not have an effective means of controlling the abuse of monopoly power. This situation benefits only one class of people, but then, our court system seems to have been built to benefit only one class of people.

Published in The Express Tribune, January 28^th, 2020.

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