Well done, CCP!

The CCP must be more proactive rather than acting against cartels long after.


Editorial July 03, 2012

The formation of cartels creates inefficiencies that only benefit monopolists and hurt consumers. In a capitalist economy, there is a natural tendency for corporations to try and manoeuvre the system in their favour. The only way to prevent this is through strong regulation, where the punishment for cartels and monopolies is stiff enough to deter future wrongdoing. It is heartening, then, that the Competition Commission of Pakistan (CCP) fined 28 banks a total of Rs770 million for charging consumers fees for using the One-Link ATM system. Essentially, the banks had formed a cartel since the One-Link system is used by most banks in the country. They then used this power to impose an unfair financial burden on users. For this, they deserve the punishment they have received.

However, one has to wonder if a financial penalty is enough. It is unlikely that the fines, which amount to Rs50 million on each of the founding banks, Rs10 million on the other member banks and Rs50 million on One-Link Guarantee Limited, are stiffer than the amount of money they earned through this scheme. To truly be a deterrent, fines have to be punitive in nature. In addition, the government should consider pursuing criminal charges against those responsible for profiting through these means. In the US, banks that flirted with illegality continued with the same irresponsible behaviour that brought the economy to its knees until they were punished strongly enough.

The CCP, too, needs to be beefed up. The existence of cartels in Pakistan is an open secret and they are often formed with government connivance. During the last decade, a cement cartel existed that was believed to have the blessing of the Musharraf government and which deliberately increased prices by limiting supply. It was only when demand for cement had increased to the point where there was no longer any need for a cartel that the CCP took notice of the matter. The CCP must be more proactive rather than acting against cartels long after.

Published in The Express Tribune, July 4th, 2012.

COMMENTS (1)

Abdullah | 9 years ago | Reply

This is written in such a patronizing behaviour.

Capitalism breeds greed. Look at the West it is the greed that is undoing them. Barclay's CEO and Chairman both has resigned.

Pakistan need an Islamic economic system under the Khilafah.

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