Fertiliser firms fined for price fixing

CCP slaps Rs375m in penalties over cartel behaviour; FMPAC to challenge order in court

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ISLAMABAD:

The Competition Commission of Pakistan (CCP) has cracked down on alleged collusion in the fertiliser sector, imposing Rs375 million in penalties for creating a monopoly and extracting billions from farmers. In response, the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) has announced it will challenge the CCP order in court.

Interestingly, these fertiliser barons had previously refused to pay multi-billion rupee dues on account of the Gas Infrastructure Development Cess (GIDC), instead obtaining stay orders from the courts. They had collected billions from farmers but failed to deposit these funds in the national exchequer — a matter that remains unresolved.

The CCP, a watchdog for anti-competitive practices, launched a suo motu inquiry and imposed a penalty of Rs50 million on each of the six major urea manufacturers, along with a Rs75 million fine on FMPAC, totalling Rs375 million. The penalised companies include Fatima Fertiliser Limited, Fauji Fertiliser Company Limited, Fauji Fertiliser Bin Qasim Limited, Fatima Fertiliser Company Limited, Engro Fertiliser Company Limited, and Agritech Limited.

According to the CCP's findings, these firms, in coordination with their trade association FMPAC, ran an 'awareness campaign' that effectively amounted to fixing urea prices nationwide. The Bench, comprising Dr Kabir Ahmed Sidhu and Salam Amin, concluded that this activity violated Section 4 of the Competition Act, 2010.

While the manufacturers claimed to be setting prices independently, they failed to justify the remarkably synchronised pricing strategy. The CCP investigation revealed that the practice distorted competition and harmed farmers — particularly during the critical Rabi and Kharif seasons — by artificially inflating fertiliser prices and limiting market choices.

The companies' attempt to shield themselves under the 'state action doctrine' was also dismissed. The CCP Bench found no formal government directive, or compulsion, to justify their collusive behaviour. Instead, the firms exploited a government instruction about raising awareness among farmers regarding urea prices. They used this as cover to jointly announce uniform urea prices across the country. The bench held that such "actions, taken under the pretext of complying with government instructions, effectively undermined market dynamics and distorted competitive pricing mechanisms."

The CCP expressed concern that despite differences in input costs, economies of scale, market size, and gas prices, all six companies were selling a urea bag for the identical price of Rs1,768. The bench remarked that in a market where each company's production capacity and market share are publicly known, such coordinated disclosures cannot be viewed as incidental or competitively benign. Rather, the joint announcement amounted to overt collusion.

Repeated directives from the Fertiliser Review Committee (FRC) also went unheeded, with companies failing to address supply imbalances. Notably, the CCP had earlier warned fertiliser manufacturers and FMPAC in 2010, 2012, and 2014—warnings that did not lead to lasting change.

The CCP chairman reiterated that trade associations should not serve as platforms for sharing price-sensitive information or coordinating pricing strategies. The Commission reaffirmed its commitment to ensuring competitive markets, protecting consumer welfare, and holding violators accountable. In response to the CCP's order, FMPAC issued a statement asserting it had no role in pricing decisions. It clarified that it does not determine or coordinate the pricing of urea or any other fertiliser product. As a non-commercial advisory body, FMPAC claimed it has never engaged in price-setting activities, and any implication otherwise is factually incorrect.

FMPAC stated that the controversial advertisement was published under a formal directive from the federal government, communicated via the Fertiliser Review Committee (FRC).

During the FRC's meeting on November 25, 2021 — held amid concerns about urea hoarding and market manipulation — it was resolved to initiate a public awareness campaign. FMPAC was directed to publicise the prevailing market price, which had already been acknowledged during the proceedings.

FMPAC insisted that it acted in good faith to implement the government's directive, without involvement in setting or proposing the published price. The intent, it said, was to ensure transparency and protect farmers from exploitative practices — not to distort market dynamics.

FMPAC plans to contest the CCP's interpretation and pursue legal remedy through the appropriate appellate forum. The Council expressed confidence that a fair and comprehensive review would confirm its actions were lawful and transparent.