CCP slaps Rs1.1 billion penalty on two home appliances firms

Companies had entered into resale price maintenance arrangements with dealers

KARACHI:

The Competition Commission of Pakistan (CCP) has imposed a fine of Rs1.1 billion on two home appliances firms for violation of section 4 of the Competition Act, 2010.

According to a statement issued on Monday, both companies entered into resale price maintenance (RPM) arrangements with their dealers.

“This is a form of price-fixing under section 4(2)(a) of the act and by object an anti-competitive practice,” it said.

The bench comprised CCP Chairperson Rahat Kaunain Hassan and Member Mujtaba Ahmad Lodhi.

In the judgement, CCP held that the contravention is a hard core restriction and serious violation of competition law and imposed the following penalties.

CCP restricted the penalty amount on DEL/Dawlance to Rs100 million as the firm changed in management, which discontinued the RPM agreement/practice. Moreover, it voluntarily committed to refund the penalties to its dealers and had a cooperative and compliance-oriented approach throughout the proceedings, the order said.

CCP, therefore, held that the conduct, circumstances, approach and the duration of the contravention did not justify the same treatment for both parties.

On the flip side, Haier was ‘blowing hot and cold’ throughout the proceedings, it said.

Nevertheless, although its conduct called for a much higher and stricter penalty, considering the violation is a case of first instance for Haier and in order to promote a compliance-oriented approach, with good faith, CCP restricted the penalty amount to Rs1 billion.

Briefly, by way of background, the commission had initiated an enquiry under section 37(1) of the act into the alleged contravention of section 4 of the act by “electronic appliance manufacturers, distributors/dealers and their respective trade associations”.

To gather evidence, search and inspections were also carried out at both Haier’s and DEL/ Dawlance’s premises under section 34 of the act.

CCP found evidence of price circulars sanctioning dealers and price control policies in place through which both firms had restricted their dealers from selling below a certain price, provide any discounts or package deals and imposed penalties/sanctions on their dealers to monitor and implement their respective pricing policies.

The parties had also not obtained any exemption from CCP for its RPM agreements under Section 5 of the act on account of any efficiency grounds specified under section 9 of the act, ie, that the agreements substantially contribute to improving production or distribution, promoting technical or economic progress, while allowing consumers fair share of the resulting benefit, or the benefits of the agreements clearly outweigh the adverse effects of absence or lessening of competition.