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November 20, 2020

CCP hints at anticompetitive practices of cement manufacturers

Business

November 20, 2020

KARACHI: The Competition Commission of Pakistan (CCP) on Thursday hinted at anti-competitive practices of cement manufacturers based on records it impounded during an office inspection of their association.

The CCP carried out a search and inspection of the offices of chairman and vice chairman of All Pakistan Cement Manufacturers Association (APCMA) as part of an inquiry launched in May to investigate the possible anti-competitive activities by the cement manufacturers.

Two different teams entered and searched the offices and impounded the relevant record, the CCP said in a statement.

“The impounded record, including Whatsapp messages and emails warranted conducting search and inspection in the south zone as well for obtaining evidence relating to anticompetitive practices,” it said in a statement unequivocal in pointing out unfair practices of cement companies.

“The evidence suggests possibility of a cartel / collusive arrangement between cement manufacturers.” Previously, the association dismayed over CCP raids. Cement industry faced huge losses during the last fiscal year and the recent raids are demoralising the industry, said its spokesperson. The inquiry in cement sector was started based on the information gathered through various media reports, concerns and complaints expressed regarding a concurrent increase in cement prices, particularly in April. The reports showed that an increase ranging between Rs45 to 55 per cement bag was apparently collectively decided in a meeting of the cement manufacturers held under the umbrella of APCMA. In September, the CCP had conducted search and inspection of the APCMA main office and the office of senior vice chairman of the APCMA’s executive committee – a senior employee of a major cement company in Lahore. The CCP said various factors, including lower demand of cement in the first two quarters of 2020 and almost parallel increase in cement prices and data collected from Pakistan Bureau of Statistics and cement companies became the basis of the inquiry and earlier search.

“Sudden rise in price by cement manufacturers at a time when there is low demand compared to the installed capacity of the manufacturers and considering that input fuel cost (coal and oil), transportation and interest rate have declined raises suspicion of collective rise in price by cement companies,” it said.

In July-September, cement sales and exports increased 21.9 percent to 13.6 million tons. Domestic sales registered a healthy increase of 18.8 percent, from 9.1 million tons to 10.8 million tons. Exports also grew 35.7 percent to 2.7 million tons.

The CCP said cement sector has a history of collusive activities and they have been penalised in the past to an amount of collectively more than Rs6.3 billion on account of forming cartel. In 2012, the commission initiated an inquiry against cement companies. However, it could not continue due to stay orders by the Lahore High Court.