SHC grants stay to cement manufacturers restraining CCP

ISLAMABAD: The Sindh High Court (SHC) has restrained the Competition Commission of Pakistan (CCP) by granting a second stay order from proceeding against cement manufacturers and issuing an order in case of alleged cartelization.

It is the second stay order granted by the Sindh High Court as in the first stay order, the honorable court restrained the CCP from proceeding against those cement manufacturers falling into the jurisdiction of the Southern region.

The CCP made public its findings about the Northern region and alleged that they possessed ‘hardcore evidence’ to prove that cement manufacturers earned an unjustified additional Rs40 billion profits by establishing cartels. Once the inquiry report was made public, a cement company in Lahore approached the Sindh High Court again and obtained another stay order despite the fact that neither the cause of action (the inspections) arose in Sindh nor the defendant (CCP) has any office in Sindh. As a result, CCP is constrained from issuing show cause notices and passing the final order in the matter. The ultimate affected in the matter is the public at large as they will continue paying uncompetitive prices for cement.

It is relevant to mention here that the CCP executed inspections of the premises belonging to the All Pakistan Cement Manufacturers Association (APCMA) and three companies where APCMA representatives conducted association business. The inspections were carried out under Section 34 of the Competition Act 2010.

The reasons for conducting the inspections was to obtain evidence of cartelization for an ongoing inquiry in alleged cartelization by cement manufacturers, thereby, enforcing Section 4 of the Act. It is important to note that unannounced inspections are a vital tool to unearth secret communication and agreements between business entities aimed at fixing prices, dividing markets, fixing production and sale quotas.

During the inspections, documents, emails, and other computer stored information was impounded for forensic analysis. The inspections conducted of APCMA and DG Cement premises in Lahore in September 2020 provided extremely important evidence showing an organized scheme in which cement companies fixed prices and sales quotas and divided markets, all to the detriment of consumers. It emerged that officials of cement manufacturers used private WhatsApp groups to coordinate their behaviour.

Based on information gathered from the Lahore inspections, two more inspections were carried out in Karachi on 19 November, 2020. This unearthed further evidence of cartelization especially in what APCMA calls the South Region. The inspections in Lahore and Karachi were conducted on 24 September 2020 and 19 November 2020.

The Inquiry Committee formed by the CCP had completed its task by the first week of December and was in the process of submitting the report to the commission, when APCMA and the cement companies, realizing that they were caught, approached the honourable Sindh High Court to stop the CCP from using the evidence collected from the inspections. The honourable court passed an interim injunction against using evidence recovered from the inspections carried out in Karachi (and not Lahore probably realizing lack of jurisdiction outside Sindh in civil matters).

The CCP, in deference of court orders, excluded evidence obtained from Karachi in its inquiry report. This evidence is equally incriminating and sufficient. But now the second stay order has been granted, so the CCP cannot move ahead against the alleged cartel.