Fleecing consumers: CCP imposes Rs140 million fine on PAMADA

Anti-trust watchdog penalises association for cartelisation practices.

ISLAMABAD: In what was its latest action in a series of orders in the past few months, the anti-trust watchdog has imposed a fine of Rs140 million on the Pakistan Automobile Manufacturers Authorised Dealers Association (Pamada) after it established that the body was fleecing consumers by fixing prices of their products and services.

The Competition Commission of Pakistan (CCP) on Tuesday passed the order against Pamada for cartelisation in the three relevant markets of body repairs and paint jobs, genuine automobile spare parts, and trained and experienced sales and technical staff, according to a handout issued by the Commission.

The order has been issued by a bench, headed by Vadiyya Khalil, the chairperson of the Commission. After an inquiry, the CCP had served show cause notices to the association and its members for violation of Section 4 of the Competition Act, 2010 that bars collusion in commercial activities.

Sector-wise breakdown

It was found that Pamada had taken decisions to fix rates for automobile body repairs and paint jobs, which were circulated by the association to all its members for implementation.

The CCP observed that it was not the price increase but the collective determination and fixation of prices by the association for or on behalf of its members, for any reason, that remains prohibited under the Act. The CCP has fined Pamada Rs100 million for this violation.

In the market for genuine automobile spare parts, the CCP found that the body had issued a circular to a group of its members, relating to one automobile manufacturer, prohibiting it from giving a discount on spare parts to consumers. Prohibiting discounts fall within the definition of price-fixing. For this violation, Pamada has been asked to pay Rs25 million fine.

In the sales and technical staff, the CCP observed that Pamada has imposed a policy whereby its members are to seek NOC from the previous employer before hiring a former employee of a fellow automobile dealer. This way, the movement of experienced and trained staff between automobile dealers has been curtailed by Pamada, restricting competition in the relevant market. The association was fined Rs15 million over this action.

Additionally, Pamada and its members have been strictly warned to refrain from cartelisation and collusive behavior in the future, the order added.

It is the eighth order issued by the CCP since December 2014, when the federal government appointed a new chairperson and members through a competitive process.

Published in The Express Tribune, April 15^th,  2015.

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