CCP raids offices of two cement companies

Seizes record of cement manufacturers on suspicion of role in price fixing


Shahbaz Rana November 20, 2020

ISLAMABAD:

The Competition Commission of Pakistan (CCP) on Thursday raided offices of two leading cement manufacturers on the suspicion of their role in fixing prices of cement.

The raids were conducted on the office of Azam Farooque, Chief Executive Officer of Cherat Cement and Chairman of the All Pakistan Cement Manufacturers Association (APCMA), and Syed Noman Hassan, a senior official of Lucky Cement and the vice chairman of APCMA.

“The CCP, as part of an inquiry launched in May 2020 to investigate the possible anti-competitive activities by the cement manufacturers, carried out a search and inspection of the offices of chairman and vice chairman of APCMA, located in Karachi,” said a statement issued by the anti-trust watchdog on Thursday.

Two different teams entered and searched the offices of chairman and vice chairman of APCMA and seized the relevant record, it added.

The CCP has lately become active against big cartels after spending a lot of time on small cases that did not have much impact on ensuring competitiveness in the economy and providing relief to the consumers.

The anti-trust watchdog also works under severe financial constraints as the government has failed to ensure payment of 3% fee to the CCP by five regulators.

In its meeting held last week, the Cabinet Committee on Legislative Cases (CCLC) again failed to approve a statutory regulatory order (SRO) that could have forced the regulators to pay their outstanding dues.

An SRO has been prepared under the Competition Act of 2010, which is aimed at giving a directive to the five regulatory authorities to pay 3% fee and charges collected by them through bank transfer by the 10th of following quarter and before surrendering surplus funds to the Federal Consolidated Fund.

However, the meeting observed that the proposed SRO could not have retrospective effect in the presence of various court judgements. In order to make it effective from the past, an amendment has to be made in relevant laws, according to a CCLC decision.

The Securities and Exchange Commission of Pakistan (SECP), National Electric Power Regulatory Authority (Nepra), Oil and Gas Regulatory Authority (Ogra), Pakistan Telecommunication Authority (PTA) and Pakistan Electronic Media Regulatory Authority (Pemra) are required to pay 3% of their fee and charges to the CCP to make it financially independent.

All these regulators have failed to pay the fee, which has made the CCP financially dependent on the Ministry of Finance.

The CCP has lately started taking big fish to task and recently issued show cause notices to Pakistan Sugar Mills Association and its 83 members including the mills owned by Jehangir Khan Tareen and families of Economic Affairs Minister Khusro Bakhtiar and former prime minister Nawaz Sharif.

In its statement, the CCP stated that the inquiry into the cement sector was started based on the information gathered through various media reports, and concerns and complaints expressed regarding a concurrent increase in cement prices, particularly during April 2020.

The reports indicated that an increase ranging from Rs45 to Rs55 per cement bag was apparently collectively decided in a meeting of cement manufacturers held under the umbrella of APCMA, said the CCP.

Recently, the cement manufacturers engaged a friend of a cabinet member to seek tax concessions for keeping prices unchanged at current levels, said the sources.

On September 24, 2020, the CCP had conducted the search and inspection of APCMA’s main office and the office of senior vice chairman of APCMA’s executive committee - a senior employee of a major cement company in Lahore, said the CCP.

It said that the impounded record, including WhatsApp messages and emails, warranted search and inspection in the south zone as well for obtaining evidence relating to anti-competitive practices.

The evidence suggested possibility of a cartel and collusive arrangement between the cement manufacturers, said the CCP.

“Various factors, among others, lowered demand for cement in the first two quarters of 2020, and almost parallel increase in cement prices and data collected from Pakistan Bureau of Statistics and cement companies became the basis of CCP’s inquiry and the earlier search,” said the CCP.

It said that a sudden increase in prices by cement manufacturers at a time when there was low demand compared to the installed capacity of the manufacturers and considering that input fuel cost (coal and oil), transportation and interest rate had declined raised suspicion of a collective rise in prices by the cement companies.

“The cement sector has a history of collusive activities and they have been penalised in the past to an amount of collectively more than Rs6.3 billion on account of forming a cartel and involvement in prohibited agreements in violation of Section 04 of the Act,” said the CCP.

In 2012, the commission again initiated an inquiry into cement companies, however, the same could not be proceeded and concluded due to a stay order granted to the companies by the Lahore High Court. The current inquiry was initiated in 2020.

Published in The Express Tribune, November 20th, 2020.

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