CCP goes after ‘cement cartel’ over price hike

Searches offices of APCMA and member company; draws association’s ire


Our Correspondent September 26, 2020
PHOTO: FILE

ISLAMABAD:

The Competition Commission of Pakistan (CCP) is probing into the activities of cement manufacturers allegedly involved in cartelisation after receiving complaints of an increase in the prices of the product.

The CCP’s investigation against the cement “cartel” comes at a time when it is also looking into the possible anti-competitive actions of sugar mills.

The watchdog searched the offices of the All Pakistan Cement Manufacturers Association (APCMA) in Lahore on Thursday as part of an inquiry launched in May this year on the basis of complaints received about a concurrent increase in cement prices in the month of April.

A CCP team inspected the main office of the APCMA. Another team another searched the office of the association’s member firms.

According to the CCP, a senior employee of the member firm is an office-bearer of the APCMA’s executive committee, representing the northern region.

It added that an inspection of the member firm’s office was essential to determine any signs of collusive arrangements for the purposes of the Competition Act, 2010.

The watchdog said there were reports indicating an increase of Rs45-Rs55 per cement bag – a decision apparently made in a meeting of the cement manufacturers held under the umbrella of the APCMA. Some media reports also quoted cement dealers saying that the leading cement companies in the northern region had collectively decided to raise cement prices by Rs55 per bag.

The CCP inquiry officers found that companies had undergone financial losses at variance because of the lower demand of cement in the first quarter of 2020. However, the increase in prices was starkly parallel, raising concerns of collective decision-making and price-fixing by the manufacturers.

Some other players of the construction industry also hinted at cement cartel in the northern region becoming active.

The CCP’s official data shows the prices of cement increased by 4% in Islamabad, 10% in Lahore and 6% in Peshawar from the second week of April 2020.

In a statement issued on Saturday, the APCMA condemned the CCP raids at the offices and the “ensuing harassment and intimidation” of its staff.

“The forcible entry of the CCP teams and subsequent action can only serve to damage the atmosphere of investment revival and growth that the present government has striven hard to create,” it read.

“Personal property, including cell phones, of the staff present at the APCMA office and at the office of a member mill, was appropriated without lawful authority and in violation of guarantees of privacy and dignity assured to every individual by the Constitution of Pakistan.”

The association apprehended that the items “unlawfully appropriated will be tampered with or used selectively, out of context, to malign chosen individuals or companies”.

“The APCMA and its member have regularly provided to the CCP all information that has been required by it. The stated basis of the unwarranted operation on is a matter of utmost concern, not only for the cement industry but for all businesses in the country.”

The association said the action was carried out because of an increase in the market price of cement since April 2020, even though the cost of some items such as fuel had fallen since then.

“The premise that market price of cement or any other item is linked to the cost of production through some simple cost-plus formula betrays a complete lack of understanding of market dynamics and the market determination of price,” it added.

“Market price is determined by the forces of supply and demand and not by variations in the cost of production alone. Cement produced by different manufacturers being a largely homogeneous commodity cannot exhibit significant difference in price across the various brands. This basic fact has also been lost sight of by the CCP.”

The APCMA said the cement industry of the country had made large investments in plant expansion and modernisation over the last five years.

“This has led to the cement industry being in a position to play a dynamic role in public interest infrastructure projects, such as Bhasha and Mohmand Dams, as well as the revival of the construction sector in general.”

The association said the action taken by the CCP and the threat posed to cement manufacturers of “continuing witch hunts and fishing inquiries is inconsistent with the effort by the government to create an atmosphere conducive to investment and growth”.

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