PSMA, sugar mills slapped with Rs44 billion fine

CCP imposes penalties on basis of split 2-2 decision

ISLAMABAD:

The Competition Commission of Pakistan (CCP) has imposed penalties worth Rs44 billion on the country’s sugar mills association and 81 of its members on the basis of a split decision – making the case weak in the eyes of the law.

A four-member bench of the CCP was equally divided on the question of whether or not the Pakistan Sugar Mills Association (PSMA) and its members had acted as a cartel to manipulate prices and collectively decided to export the sweetener.

Of the four members, two declared that the sugar mills had acted in violation of the Competition Act but the others did not find sufficient evidence, resulting in a split decision.

However, CCP Chairperson Rahat Kaunain twice cast her vote to make it a majority judgment that might weaken the case once it is challenged in the high courts by the accused parties.

“In a historic judgment, the CCP passed an order against PSMA and 81 member mills for violations of Section 4 of the Competition Act, 2010,” read a statement issued by the CCP on Friday.

It added that the commission had initiated an inquiry to analyse “possible anti-competitive activities in the sugar industry”.

To gather evidence, search and inspections were carried out under Section 34 of the Act at two premises of the PSMA and one of the sugar mills.

Also read: PSMA manipulated sugar price hike with help of JDW Group: CCP report

“The penalty imposed by the commission, which is the highest till date, is approximately Rs44 billion or $265 million based on calculation of 55 mills’ 2019 turnover figures, including consolidated turnover figures for same group mills, available with the commission,” the statement read.

The CCP’s past decisions are pending in courts and it has never been able to recover fines in major cases like sugar, cement and fertilisers.

The PSMA has been imposed the maximum fixed penalty of Rs75 million each for four contraventions, amounting to a total of Rs300 million, having been found to be persistently and actively at the forefront of such collusive anti-competitive practice, according to the split decision.

“The penalties equal to 5% of the 2019 annual turnover have been imposed on mills located in Sindh, Khyber-Pakhtunkhwa and Punjab for collectively deciding the quantum of exports invariably affecting and controlling the domestic supply of sugar in the relevant market for the period 2012 to 2020,” the CCP statement added.

Similarly, 7% of the 2019 annual turnover penalties are imposed against each of the member mills located in Punjab, for sharing and discussing sensitive commercial stock information with the PSMA from 2012 to 2020.

A fixed penalty of Rs50 million on each of the 22 sugar mills have been imposed in case of fixing prices of a 2010 USC tender.

Besides the CCP chairperson, the three members included Shaista Bano, Bushra Naz Malik and Mujtaba Ahmad Lodhi.

However, two members, Shaista Bano and Bushra Naz Malik, recorded a different opinion, and the commission was faced with a deadlock.

The CCP said having duly considered the “overall purpose and intent of the Act, the attending public policy framework and consideration and the general public interest that the Act seeks to protect and enforce, the chairperson exercised her second and casting vote as envisaged under the Act to break the deadlock”.

This is for the first time that the commission passed a split decision.

As per the CCP’s split decision, the PSMA and the Punjab sugar mills have been found to have shared commercially sensitive stock information among themselves in violation of Section 4 of the Act.

The commission has directed the PSMA and the sugar mills to discontinue and stop the Competition Act violations and deposit the penalty within 60 days of the issuance of the order.

The PSMA, in response, said the decision was not a “majority or unanimous” order neither on the main allegations of anticompetitive behaviour against the association and its member sugar mills, nor on the issue of imposition of fines.

“The two members of the CCP have given findings in favour of PSMA and its member sugar mills by holding that contraventions could not be clearly established against any party and on one issue directed that the matter be remanded for further inquiry,” a statement issued by the PSMA read.

“The decision of the bench hearing the sugar mills matter is actually a tied or hung decision as two members have decided against the PSMA and the sugar mills and two have decided in [their] favour.”

In view of the split decision, the chairperson purportedly exercised a casting vote by relying on Section 24 and 28 of the Competition Act [which provides that decisions at a “meeting” of the CPP will be decided by the majority of votes of the members present there and that in the event of a deadlock, the chairperson may exercise a casting vote].

“However, the decision to exercise a casting vote in such a manner is legally questionable, unprecedented and unsound,” the association added.