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May 13, 2021

Cartelisation of poultry feed companies unearthed

File photo.

ISLAMABAD: The Competition Commission of Pakistan’s inquiry into alleged poultry feed companies’ cartelisation has revealed some glaring facts and involvement of influential groups in collusive practices, undue profiteering and causing an unprecedented price hike of chicken and eggs.

In the aftermath of making this inquiry report public, the prices of chicken in domestic market have further gone up and now stood up at Rs300 per kg on Wednesday (May 12, 2021).

According to the CCP’s inquiry report, in post December 2020, prices of poultry products have continued on an upward trajectory with prices of chicken in April 2021 standing at Rs258 per kg as compared to Rs141 in the same month of the previous year. Egg prices in April 2021 were Rs163 per dozen as compared to Rs111 in the same period last year. These rises in poultry products may be attributable to knock on effects due to higher feed costs (on the poultry supply chain due to a number of factors including farmers quitting the business as they do not find it viable).

The sources said that the charges of cartelisation under Section 4 of the Competition Act, 2010, if proven against these companies, can result in the imposition of penalties worth billions of rupees as the CCP can impose penalty up to 10 per cent of the annual turnover or Rs75 million. Sources said that the accumulative annual turnover of 19 companies against whom the CCP has conducted the inquiry is over Rs200 billion. Thus, if the CCP imposes up to 10 per cent of their turnover as a penalty, it could be up to Rs20 billion accumulatively on all the 19 companies.

The CCP’s inquiry report, available with this scribe, revealed that during a raid on the premises of two companies, smartphone devices of their officials were impounded along with other documents.

Forensic analysis of the computer stored information of smartphone devices belonging to an official of another company revealed the presence of a WhatsApp group with the name of ‘All GMs Feeds Mills’ that was created by him on 7th October, 2020.

The participants of this group, as the name suggests, comprised marketing managers of a number of feed mills. The CCP confirmed the participants of the WhatsApp group from the Pakistan Telecommunication Authority (PTA) and the participants of the mentioned group represented some influential groups.

This group was created on 7th October 2020, which is just one to two days after the undertakings (participating in the group) announced a round of price increases simultaneously. The group was apparently created for sharing of information. Furthermore, the official price lists submitted by feed mills provide evidence that the price changes discussed on the forum of the WhatsApp group were actually implemented simultaneously by the feed mills participating in the group. A pattern emerges whereby price changes by feed mill members of the WhatsApp group are synchronised occurring either on the same day or on the next day.

The WhatsApp discussion thread dated 14th to 19th November 2020 regarding price increases was implemented by the companies either on 14th November or 16th November 2020. Similarly, the price increases discussed on 7th December 2020 were implemented either on 7th or 8th December 2020. The inquiry report has given the actual dates of price increases by these groups.

It appears that not only was the timing of the price increase coordinated but the exact quantum of the increase was also coordinated. In the price increases enacted, from 14th to 16th November 2020, the companies increased the prices across the board on all types of feed by Rs150 per 50kg bag.

Similarly, on 7th to 8th December 2020, prices were increased across the board on all feed types by Rs250 per 50kg bag. From December 2018 to December 2020, there were 11 instances where poultry feed prices were changed either on the same date or within a few days of each other. This collusive action caused prices of 50kg bag of feed to increase on average by Rs825 which is a 32pc increase from December 2018 to December 2020.

The sources said that the CCP could launch a fresh probe against poultry companies and association for recent price hike in chicken and eggs.