ISLAMABAD: The Competition Commission of Pakistan (CCP) has passed an order imposing a penalty of Rs 140 million on the Pakistan Automobile Manufacturers Authorized Dealers Association (PAMADA) for collusive price-fixing in markets for automobile body repairs & paint jobs, genuine automobile spare parts, and for restricting competition in the market for trained and experienced technical and sales staff.
The order has been issued by a bench comprising Chairperson Vadiyya Khalil, Member OFT and Advocacy Dr. Shahzad Ansar, Member Mergers & Acquisitions Mueen Batlay and Member Cartels & Trade Abuses and Legal Ikram Ul Haque Qureshi, says a statement here Tuesday.
CCP conducted inquiry in suspected cartelization by PAMADA and its members in the automobile sales and after sales markets and issued show cause notices to the association and its members for violation of Section 4 of the Competition Act, 2010.
Through the order, CCP has found PAMADA guilty of collusive price-fixing in the markets for automobile body repair & paint jobs, and genuine automobile spare parts, as well as restricting competition in the market for trained and experienced technical and sales staff in the automobile sector, in violation of Section 4 of the Competition Act that prohibits decisions by associations which prevent, restrict or reduce competition.
In the market for automobile body repair & paint jobs, it was found that PAMADA had taken decisions to fix the rates for automobile body repairs and paint jobs, which were circulated by PAMADA to all its members for implementation.
CCP observed that ‘it is not the fact of a price increase that poses a competitive concern, but rather the collective determination and fixation of prices’ and that ‘Commercial decision making by an association for or on behalf of its members, for any reason, remains prohibited under the Act.’ CCP has fined PAMADA Rs 100 Million for this violation.
In the market for genuine automobile spare parts, CCP found that PAMADA had issued a circular to a group of its members relating to one automobile manufacturer prohibiting them from giving a discount on spare parts to consumers.
Prohibiting discounts falls within the umbrella of price fixing. For this violation, PAMADA has been fined Rs 25 Million.
In relation to the market for trained and experienced sales and technical staff, CCP observed that PAMADA has imposed a policy whereby its members are to seek no-objection-certificate (NOC) from 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 thereby restricting competition in the relevant market. PAMADA has been fined PKR 15 Million for this violation.
Furthermore, PAMADA and its members have been strictly warned to refrain from cartelization\collusive price-fixing behaviour in the future at the risk of severe penal consequences.
CCP, in its order, reiterated that while trade associations can play a crucial role for the development of their industry, they must refrain from collusion\cartelization and other anti-competitive behavior.
Cartelization drives up prices and reduces choices for consumers. It makes markets less attractive for new and potential market players, driving and keeping out investment.
It is pertinent to mention here that this is the eighth order issued by CCP since December 2014, when the Federal Government appointed a new Chairperson and a Member at CCP through a competitive process, thus making it fully functional and enabling it to enforce the prohibitions against anti-competitive activities contained in the Act.
