CAT upholds Rs40m fine in pharma case

The Competition Appellate Tribunal (CAT) has upheld a cumulative penalty of Rs40 million imposed by the Competition Commission of Pakistan (CCP) on United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL) for entering into an anti-competitive non-compete agreement in violation of Section 4 of the Competition Act, 2010.

According to a statement issued on Tuesday, the Tribunal, in its order, affirmed that the appellants had, through their own conduct, acknowledged the arrangement as a non-compete agreement and endorsed the CCP's conclusion that it restricted competition and constituted a prohibited market-sharing arrangement.

The CCP initiated proceedings after UDPL disclosed to the Pakistan Stock Exchange that it had entered into a non-compete agreement with IBL. Under the agreement, UDPL committed not to distribute human pharmaceutical products in Pakistan for a period of three years in return for a payment of Rs1.131 billion from IBL.

The commission found that the agreement effectively eliminated UDPL as a competitor in the relevant market and restricted competition. The payment was viewed as a financial incentive designed to ensure UDPL's exit from the market, shielding IBL from competitive pressure and creating barriers to entry.

Although the agreement contained a clause requiring regulatory approval, both companies failed to obtain a prior exemption from the CCP and applied for exemption only after the issuance of show-cause notices. The CCP rejected the application, concluding that the agreement did not qualify for exemption and that the violation had already occurred.

Consequently, the CCP imposed a penalty of Rs20 million each on UDPL and IBL under Section 38 of the Competition Act, 2010, for entering and giving effect to the anti-competitive agreement.

The Tribunal upheld the CCP's findings and agreed that, following the rejection of their exemption application, the companies did not pursue any further legal remedy.