Competition Commission of Pakistan imposes Rs140 million penalty on Automobile Dealers’ Association for cartelization

Islamabad, April 14, 2015 (PPI-OT): The Competition Commission of Pakistan (CCP) has passed an order imposing a penalty of PKR 140 Million on the Pakistan Automobile Manufacturers Authorized Dealers Association (PAMADA) for cartelization in the three relevant markets of body repairs and paint jobs, genuine automobile spare parts, and trained and experienced sales and technical staff.

The order has been issued by a bench comprising Ms. Vadiyya Khalil, Chairperson, Dr. Shahzad Ansar, Member OFT and Advocacy, Mr. Mueen Batlay, Member Mergers and Acquisitions, and Mr. Ikram Ul Haque Qureshi, Member Cartels and Trade Abuses and Legal.

After an inquiry was conducted by CCP in suspected cartelization by PAMADA and its members in the automobile sales and after sales markets, show cause notices were issued 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 and 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 and 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 PKR 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 PKR 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 an 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.

A total penalty of PKR 140 Millions has been imposed on PAMADA by CCP. Furthermore, PAMADA and its members have been strictly warned to refrain from cartelization\collusive behavior 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 behaviour. It must be appreciated that cartelization is the most egregious form of anti-competitive behaviour, and is detrimental for all stakeholders in the market and the public in general.

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. CCP remains vigilant against cartelization\collusive activities in all spheres of commercial and economic activity, including the automobile sector, and will take strict action against anyone who violates the provisions of the Act.

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.

For more information, contact:
Asfandyar Khattak
Director (Media and Communications)
Competition Commission of Pakistan (CCP)
7th Floor South, ISE Towers,
55-B, Jinnah Avenue, Islamabad, Pakistan
Tel: +92-51-9100260-3, +92-51-9100256
Fax: +92-51-9100251

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