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February 12, 2020

Alleged cartelization for lofty profits: CCP raids Pakistan Flour Mills Association

Top Story

February 12, 2020

ISLAMABAD: The Competition Commission of Pakistan (CCP) Tuesday raided the premises of Pakistan Flour Mills Association (PFMA) in Lahore and seized around 2,000 papers and computers. The commission will conduct costaudit of the mills and also raid giant flour mills countrywide in order to ascertain their actual cost and profits.

The seized record will also help the commission to determine where the PFMA was allegedly involved in collusive practices of cartelization for fixing prices and earning lofty profits or there were just mere allegations.

However, initial findings suggest that some flour mills were allegedly involved in minting undue profits and after conducting desk based research, the CCP decided to raid the PFMA. Prime Minister Imran Khan was annoyed at the recent spike in prices of wheat, flour and sugar as well as surge in food inflation.

The overall CPI based inflation touched 14.6 percent for January 2020 — one of the highest in the last 12 years on month to month basis that was mainly contributed by surge in food prices.

“Yes, the CCP team seized over 2,000 papers and computers and it will take a few months to undertake this probe,” top official sources confirmed to The News on Tuesday. It will be an altogether different probe from the past because this time the cost audit will be accomplished in consultation with the provincial food departments, especially Passco, in order to come up with actual incurred cost and genuine profits.

According to an official statement issued by the CCP, the commission based on discovery of fresh information made available visà-vis prima facie collusion in the wheat flour sector, carried out a search and inspection of Pakistan Flour Mills Association’s (PFMA) premises.

The CCP in its recent order dated 13 December 2019, had imposed a penalty of Rs75 million on PFMA for taking decisions with respect to fixing the price of wheat flour and quantities of production of wheat and flour by its member mills.

The CCP, in its order, had issued directions to PFMA that discussions, deliberations and decisions regarding current and future pricing, production and marketing are anticompetitive and should be avoided at all costs by the associations. Despite the foregoing directions, based on the information received by CCP, PFMA and its members prima facie are involved in prohibited conduct under the Competition Act (Act).

Through its various enforcement orders, the CCP had issued guidelines with reference to conduct/role of associations in any Sector. The association may engage in activities that increase awareness of standards and technologies and may also make effort to develop consensus amongst its members regarding public policies. However, the association should not, at any cost, indulge in any activity which may violate the Act. The rule of thumb is that the association is not allowed to discuss, deliberate or share sensitive commercial information that may allow its members, who are competitors to co-ordinate business policy.

The CCP’s inspection team has impounded important documents from PFMA premises as a result of the search and inspection carried out today, the official statement concluded.