Competition Commission Position Paper

Iqra University

Position Paper on

The Competition Ordinance 2007

January 2008

PREAMBLE

On October 2, 2007, the President of Pakistan promulgated the Competition Ordinance 2007, in the words of the Ordinance "… to provide for free competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anti competitive behavior."

This Ordinance replaces the old Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 and took three years to draft. Unusually Pakistani business and industry was not consulted during its preparation. This lack of input is reflected in an Ordinance with provisions that can affect domestic as well as international competitiveness of Pakistani business, if not made more succinct

This Position Paper prepared for the Pakistan Business Council presents the viewpoint of Pakistani business on the Competition Ordinance 2007. It not only highlights the issues but also suggests, based on best international practices, the changes / additions / clarifications in the recently promulgated Ordinance that will not only help strengthen the spirit of competition, but also lead to a set of Laws which are clear, so better implementable. Support to the PBC for preparing this Position Paper was provided by the International Finance Corporation (IFC) in the form of technical expertise through its Access-2-Business Support Program.

The Pakistan Business Council is a business policy think tank setup by 14 of Pakistan's largest business groups for promoting evidence based advocacy. The Council aims to bring about changes in macro policy which will have the widest positive impact on the Pakistani business environment. More information on the objectives of the PBC, its members and areas of activities can be found on its website: www.pbc.org.pk

Introduction

The main objective of any competition policy and competition law is to preserve and promote competition as a means of ensuring the efficient allocation of resources in an economy. This should lead to lower prices and adequate supplies for consumers and, it is hoped, faster growth and a more equitable distribution of income.

Pakistan's first laws to regulate competition were framed in 1970 when the Monopolies and Restrictive Trade Practices (control and prevention) Ordinance, 1970 was promulgated. Under the Ordinance, the Monopoly Control Authority (MCA) was assigned the role of regulating competition in the country. Neither the law nor the working of the MCA underwent any significant change in the next 37 years.

In the wake of rapid globalization and liberalization of the economy, the need was felt for having in place a competition policy and a set of competition laws which would not only protect domestic consumers but also lead to increased competitiveness of Pakistani businesses. Unlike other counties of the World where competition laws followed a well debated competition policy, Pakistan opted for a Law without having a competition policy in place. In framing the Competition Laws, advisory and financial support was provided by the World Bank and the Department for International Development (DFID).

The Pakistan Business Council (PBC) and its members are supportive of having a modern competition policy and its supporting law in place.

The PBC believes that the Law, both in its content and its implementation would have benefited from discussions with the stakeholders. In the Council's opinion, aspects of the Ordinance, in its present form may serve as an impediment to the development of scale in business, with repercussions for the competitiveness of Pakistani businesses.

The Ordinance would need clarification with respect to the following critical issues arising from the proposed legislation.

A. Relevant Market and Market Shares

B. Abuse of Dominant Position

C. Prohibited Agreements

D. Deceptive Marketing Practices

E. Approval of Mergers

F. Powers of the Commission