Money Matters

Fighting monopolies

Money Matters
By Mehtab Haider.
Mon, 10, 20

The incumbent Pakistan Tehreek-e-Insaf (PTI) led regime has assigned the Competition Commission of Pakistan (CCP) the task of launching an offensive against influential cartels of sugar, cement and many other sectors under the ambit of the Competition Act 2010.

The incumbent Pakistan Tehreek-e-Insaf (PTI) led regime has assigned the Competition Commission of Pakistan (CCP) the task of launching an offensive against influential cartels of sugar, cement and many other sectors under the ambit of the Competition Act 2010.

When Monopoly Control Authority (MCA) was converted into CCP in 2007, an ordinance was promulgated to introduce new competition law, under which uncompetitive and deceptive practices related offences were brought under the tight scrutiny of law. With the abolishing of the toothless MCA, it was desired to replace it with a powerful anti-trust watchdog, which was granted administrative and financial autonomy.

Later on, this law was approved by the Parliament in 2010 so it became Competition Act 2010. This law envisaged payment of three percent fee and charges by five regulatory bodies to the CCP Under Section 20 (2) (F) of The Competition Act, 2010. Those five regulatory bodies were National Electric Power Regulatory Authority (NEPRA), Oil and Gas Regulatory Authority (OGRA), Securities and Exchange Commission of Pakistan (SECP), Pakistan Electronic Media Regulatory Authority (PEMRA), and Pakistan Telecommunication Authority (PTA).

It is an irony that the regulators of the five sectors that are supposed to place rules of the games for ensuring compliance in accordance with the rules and procedures are themselves violating the law of the land under different pretexts since 2007. It should be noted that so far, the outstanding amount against them has ballooned to Rs5 billion.

After the enactment of the CCP Act 2010, three different elected regimes ruled over the country including Pakistan Peoples’ Party (PPP), Pakistan Muslim League-Nawaz (PML-N) and now PTI. But so far, no one could succeed in resolving this issue amicably. The Ministry of Finance and Ministry of Law had always supported payment of three percent fee in favour of the CCP; however, this support could not be translated into action in terms of forcing the regulators to comply with the law.

The basic objective of the Competition Act 2010 is to ensure free competition in all spheres of commercial and economic activity, to enhance economic efficiency, and to protect consumers from anti-competitive behaviour. Considering these objectives, the legislators had rightly envisaged CCP’s financial autonomy, independence and financial sustainability through funding/contribution of three percent fee and charges levied by the other five regulatory bodies. This was especially important considering that the CCP was not a licensing or registration authority, having limited ability to generate its own financial resources.

The parliament through inserting Section 20 in the Act allowed for creating the CCP Fund consisting of, inter alia, “a percentage of fees and charges levied by other regulatory agencies in Pakistan”. Exercising power conferred by clause (f) of sub-section (2) of section 20, the federal government prescribed a charge of three percent on the fees and charges levied by the five (5) regulatory agencies vide Finance Division’s Notification dated December 23, 2008.

In exercise of powers conferred by Section 55 of the then-Competition Ordinance, 2007 (Currently Section 57 of the Act) read with Section 20 (2) (f) thereof, the Commission, with approval of the federal government, made rules titled “Competition Commission (Collection of Fees and Charges) Rules, 2009” duly approved by the federal government. Rule 3 and Rule 5 clearly describe the methodology of payment ie, the three percent of fees and charges will be credited and transferred to the designated account of the Commission to become part of the CCP Fund.

Despite hectic efforts made by the CCP, the five regulators did not pay any heed towards paying the three percent fee to the CCP, barring partial payment by SECP.

The Public Accounts Committee (PAC) in its meeting held on November 28, 2019, while discussing audit para 14.4.7 of the Audit Report for the year 2017-18 (Financial Year 2016-17) relating to non-recovery of the fee and charges levied by regulatory agencies, directed the regulatory bodies to pay the outstanding fee to the CCP. Furthermore, the PAC also directed the Ministry of Finance to deduct the amount at source as Federal Adjuster.

Therefore, in accordance with the PAC directive, the CCP on January 27, 2020 requested Finance Division to authorise recovery at source by instructing the commercial banks that maintain the accounts of these five regulatory bodies, in line with the methodology of the Federal Adjuster.

The Finance Division, vide its letter No F6 (2)-GA/2020-58 dated February 26, 2020, directed all the regulatory bodies to settle CCP’s outstanding dues within a month ie, by March 25, 2020. The Finance Division also categorically said it would proceed to comply with the PAC’s directive in case this was not done.

The CCP has also requested the Finance Division, vide its letters ref: 59/SY/CCP/2019 of October 24, 2019 and January 27, 2020, to issue a fresh SRO, under Section 20 (2)(f) of the Competition Act 2010, giving directions to the regulatory authorities to make the payment of three percent of their fee and charges to the CCP prior to surrendering their excess funds to the FCF.

The regulatory agencies contested that the payment of three percent of the fee and charges was not provided for in their respective laws. The matter was, therefore, referred to Law and Justice Division for legal opinion. The Law and Justice Division has clarified that the December 23, 2008 notification issued by the Finance Division is perfectly legal and has the force of law. The Division also said that the Competition Act had an overriding effect over the laws of these regulatory bodies. Thus, all of them were under a statutory obligation to contribute the prescribed charge of three percent of fees and charges levied by all of them to the CCP Fund.

Some senior CCP officials told the News that PTA, SECP, and OGRA have made provisioning in their annual reports to give three percent of their fee and charges to the CCP, hence acknowledging their liability. Practically, after the provisioning, the funds provisioned can neither be used nor surrendered in the surplus funds to the federal government.

The issue of non-payment of three percent of the fee and charges by the regulatory bodies was also taken up by the Senate Standing Committee on Finance and Revenue on numerous occasions. The Senate Standing Committee submitted its special report (dated October 3, 2017) to the upper house of the Parliament, which, in turn, adopted the report and directed the Ministry of Finance to co-ordinate with the Cabinet Division and Ministry of Information and Broadcasting to bind the five regulatory bodies into paying the requisite three percent of their fee and charges to the CCP, as described in the Competition Act.

Subsequent to this direction by the Senate of Pakistan, a meeting, chaired by the Secretary Cabinet, was held on December 22, 2017 to break the impasse. The PTA, OGRA, NEPRA, and PEMRA recycled the same old objections, ie the CCP does not provide any service to these bodies. The provision for payment of three percent of their fee and charges does not have legal cover in their respective laws. Their surplus funds were surrendered to the Federal Consolidated Fund in any case.

Why should the 5 regulators pay three percent directly to CCP and not from FCF?

The CCP thinks that it should get the funds as fee directly from regulators as envisaged under the Competition Act 2010, rather than these first being surrendered to the government and then being routed to CCP as asserted by a few bodies. Otherwise it would undermine the CCP’s autonomy.

Secondly, the legislature’s wisdom needs to be respected which is above any legal opinion or any other arguments adopted by the regulators.

Ministry of Finance and Ministry of Law have been supportive throughout. However, the federal cabinet and the ministry of finance have to execute and implement this provision. This government is very much against cartels, which are very powerful lobbies. Therefore, it is hoped that the present government will extend its full support to CCP in ensuring its financial autonomy.

It is important to recognise that CCP’s regulatory oversight was applicable to all undertakings, irrespective of the sector in which they operate. It is a globally recognised and accepted fact that competition is necessary for public welfare and economic growth of the country. There is symbiotic relationship between the sectoral regulators and the CCP. The objective of sectoral regulators would remain incomplete if it is not complemented by the regulatory role of the CCP ie to create level playing field, promote competition and to work for enhancing economic efficiency.

To the objection by these regulatory agencies that there is no provision in their laws for such a contribution, it is said that Section 59 of the Competition Act 2010 states that the provisions of this Act has an overriding effect over the laws of other regulatory agencies. This has been duly endorsed by the Law and Justice Division. In short, all five regulatory agencies are under statutory obligation to make the defined contributions to the CCP Fund.

These facts make it clear that it is a statutory obligation of regulatory agencies to pay the three percent of the fees and charges directly to CCP for credit to the CCP Fund.

The current CCP Chairperson Rahat Kaunain Hassan soon after joining took up the matter with the Ministry of Finance in July, 2020 requesting support and to help the Commission achieve financial sustainability. Acceding to the request, a meeting was scheduled by the Ministry of Finance in this regard in early August, 2020 that was attended by the representatives of the five regulators. Subsequently, in consultation with the five regulatory bodies, a summary has been forwarded for approval of the Cabinet committee for Disposal of Legislative Cases for issuance of the SRO. It requires implementing the payment due to the Commission by the five regulatory bodies prior to surrendering the surplus to FCF.

The CCP chairperson believes that the government is supportive and vocal in busting cartels which are powerful lobbies; therefore, helping CCP achieve financial autonomy will manifest the government’s commitment to truly empower CCP in discharging its mandate effectively.

The writer is a staff member