CCP warns firms of Rs75m fine for unapproved vertical agreements

ISLAMABAD: The Competition Commission of Pakistan (CCP) has issued a cautionary notice to undertakings that enter into prohibited agreements without seeking prior exemption, warning of financial penalties up to Rs75 million or 10pc of annual turnover.

The CCP observed that certain agreements between undertakings and their wholesalers, dealers, agents, and retailers may constitute a refusal to deal with non-dealers and often include restrictive provisions that could violate Section 4(2) of the Competition Act, 2010.

These potentially anti-competitive clauses may include resale price maintenance, market division, non-compete obligations, or other conditions that restrict competition. Such vertical agreements — those between parties operating at different levels of the supply chain — are void ab initio as they prevent, restrict, or distort competition, unless specifically exempted by the CCP under Section 5 read with Section 9 of the Act.

Exemption applications submitted to the CCP are evaluated using the criteria in Section 9 of the Act. Agreements that promote production or distribution, encourage technical or economic progress, or result in efficiency gains that outweigh any adverse impact on competition may be granted exemption.

The CCP has strongly advised all undertakings to apply for an exemption under Section 5 before entering into any such agreements to avoid potential sanctions.

Under the Competition Act, 2010, the CCP is empowered to ensure free competition across all sectors of the economy, aiming to enhance economic efficiency and protect consumers from anti-competitive practices such as abuse of dominance, cartelization, deceptive marketing, and mergers that may reduce market competition.