ISLAMABAD: The Competition Appellate Tribunal (CAT) has upheld the cumulative penalty of PKR 40 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.
In its order, the Tribunal affirmed that the appellants, by their own conduct, acknowledged the agreement as a non-compete arrangement and endorsed the CCP’s finding that the agreement restricted competition and constituted a prohibited market-sharing arrangement.
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CCP had initiated proceedings after UDPL publicly disclosed to the Pakistan Stock Exchange that it had entered into a non-compete agreement with IBL. Under the agreement, UDPL agreed not to distribute human pharmaceutical products in Pakistan for a period of three years in exchange for a payment of Rs 1.131 billion from IBL.
CCP found that the agreement effectively eliminated UDPL as a competitor in the relevant market and restricted competition. The substantial payment was deemed a financial incentive to ensure UDPL’s exit from the market, thereby protecting IBL from competitive pressure and creating barriers to entry.
Although the agreement contained a clause requiring regulatory approval, both companies failed to obtain prior exemption from CCP and applied for exemption only after the issuance of show cause notices. CCP rejected the exemption application, concluding that the agreement did not meet the legal criteria for exemption and that the violation had already occurred.
Accordingly, the CCP imposed a penalty of Rs 20 million each on UDPL and IBL under Section 38 of the Competition Act, 2010, for entering into and giving effect to the anti-competitive agreement.
The Tribunal upheld CCP’s findings on the violation and endorsed CCP’s view that, following the dismissal of their exemption application, the appellants did not pursue any further legal remedy, thereby implying acceptance of the contravention. The Tribunal held that the penalties of Rs 20 million each imposed on UDPL and IBL were justified and warranted, and accordingly maintained the cumulative penalty of Rs 40 million.
