CCP hearing on suspected collusive pricing by fertilizer manufacturers

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ISLAMABAD, /DNA/ – The Competition Commission of Pakistan (CCP) has commenced hearing in collusive pricing case, wherein the Fertilizer Manufactures of Pakistan Advisory Council (FMPAC) had issued an advertisement on 21st November, 2021, on behalf of its member undertakings.

The hearing was fixed after show cause notices were issued to FMPAC and its six leading fertilizer manufacturing companies for, prima facie, violating Section 4 of the Competition Act, 2010.

The CCP initiated an inquiry following the FMPAC’s advertisement published in November 2021 announcing a ‘Maximum Retail Price (MRP) of Urea’ during a period of rising urea prices and reported shortages.

Pursuant to the publishing of advertisement by FMPAC, which is a ‘by object’ violation of the Competition Act, 2010, the inquiry conducted by CCP noted a pattern of uniform pricing and price parallelism among fertilizer manufactures in various districts, irrespective of size and market share of manufacturers, suggesting potential collusive activity.

The inquiry further noted that despite having different costing structures owing to varying rate of feedstock or fuel stock input gas, which is the major component in manufacturing, the MRP of all players remained fixed.

From a competition law perspective, the announcement of prices by an association is considered a commercial decision beyond permissible activities. CCP has repeatedly directed business associations to refrain from engaging in price fixing or other collusive practices. The CCP’s investigation concluded that the advertisement contents were seen as a decision by an association on fixation of urea MRP, constitute, prima facie, violation of Section 4(2)(a) of the Act.