October 05, 2009

New competition regime in Pakistan

ABDUR RAZZAQ

It is an established fact, internationally, that promoting competition enables a market economy to maximise
productivity and efficiency, while curtailed competition prevents an economy from achieving its true potential,
instead of creating inefficient monopolies and oligopolies and restricting output.

Almost every government around the world now relies on competition to deliver a more robust economy and help
drive economic growth. In view of the significance of competition in an economy, there are currently more than 100
countries that have enacted competition regimes. More than 70 mainly developing or transition market economies
have enacted new competition laws, or significantly strengthened existing competition laws in the 1990's alone, in
light of the changing domestic or international economic circumstances.

Realizing the need to strengthen its competition policies, the Government of Pakistan promulgated the Competition
Ordinance 2007 (CO-07) on 2 October 2007 and established the Competition Commission of Pakistan (CCP) on 12
November 2007, which marked the start of a new competition regime in the country. It's not that Pakistan did not
have any competition policy in the past, but the purpose of promulgating the Competition Ordinance, 2007 was to
introduce a state-of-the-art law that could enable the country become competitive in a globalizing and privatising
world.

The Competition Ordinance replaced the old Monopoly and Restricted Trade Practices Ordinance, 1970 (MRTPO),
while the CCP has replaced the MRTPO's implementing agency, Monopoly Control Authority (MCA). MRCPO was a
fairly modem piece of legislation at the time of its enactment, but it soon became ineffective due to the massive
nationalisation in the 1970's and the MCA lost its importance due to the government's outright apathy towards it.
The massive privatisation in the last two decades largely contributed to the enactment of the new competition
regime under the Competition Ordinance, 2007.

At the strategic level, an effective competition policy framework, involving a multifaceted set of initiatives, is being
pursued by the Government of Pakistan with the aim of providing equal opportunities for all capable entities to
participate in the economy. In doing so, the power of consumers will increase and confidence among domestic and
foreign investors will get enhanced. Firms now will not only be pressured to lower prices, increase the quality,
choice and availability of goods and services, but will also be encouraged to observe better standards of business
behaviour.

Such competition policy framework includes: (i) a modern enabling law, (ii) specific rules and regulations to
operationalize the law, (iii) guidance for corporate behaviour, (iv) education and empowerment of consumers, (v)
public policy advocacy and (vi) a professional, autonomous institution to enforce the law.

The new law has several key upgrades from the MRTPO and is inspired by the principles embodied in the Treaty of
Rome and draws upon instruments such as the United Nations Set of Multilaterally Agreed Equitable Principles,
Rules for the Control of Restrictive Business Practices, the OECD's Recommendations and Best Practices on
Competition Law and Policy.

Unlike the MRTPO-70, the new law does not curb or reduce a dominant position. Instead, it addresses the abuse of
dominance. It eliminates unnecessary transactions or compliance costs. For example, the requirement for
registration of agreements, undertakings and individuals that was specified in the MRTPO have been eliminated.

CO-07 specifically requires the CCP to carry out studies tot promoting competition in all important sector of the

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economy and to engage in advocacy through various means in order to create awareness of competition issues and
to promote a culture of competition.

Under the new law, the CCP can authorise its officers to enter and search any premises, using forcible entry if need
be, under appropriate safeguards provided in the law. Leniency or a reprieve, as may be merited, is also possible
under the law. These provisions should strengthen considerably the investigative capacity of the CCP. Moreover,
penalties under the new law are higher than they were under the MRTPO.

While the orders of the MCA were appealable to the High Court, the new law provides that any order of a Member
or officer of the CCP will be appealable to an appellate bench, comprising at least two Members of the CCP who
have not been involved in the original decision. Of course, judicial redress can always be sought against the final
order of the CCP.

At a time when Pakistan was in dire need of a law that could keep a check on the cartelization in various business
sectors, anti-competitive behaviours and exploitation of consumers through collusive behaviour, the Competition
Ordinance 2007 offers the best solution to all such rampant problems.

The Ordinance, regarded internationally as an excellent set of Competition Rules, is being implemented by the
Competition Commission of Pakistan albeit with limited resources. If the actions started by CCP against the cartels
in Sugar, Cement, LPG and other such sectors affecting the Pakistani citizens, are taken to conclusion, people will
take a big sigh of relief. CCP has moved very decisively against cartelization in these and other sectors, collusive
tendering, abuse of dominance, unacceptable concentrations, and deceptive marketing practices It is the
responsibility of the government, civil society, legal fraternity and media to extend full support to the Commission in
bringing the culprits its to justice.

(The writer is B. Com (Hons), FCA (Pakistan), FCA (England & Wales) ex-Member FBR.)

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