Competition law, also known as antitrust law, promotes or maintain market competition in a free market economy by enforcing anti-competitive regulations to prevent firms / companies involving in abuse of dominant position, deceptive marketing practices, indulging in anti-competitive agreements and prohibited mergers that would substantially lessen the competition.
In nutshell, competition law is the body of legislation intended to prevent market distortion caused by anti-competitive practices on the part of businesses.
The purpose of competition law is ensuring a fair marketplace for consumers and producers by prohibiting unethical malpractices designed to garner greater market share than what could be realised through honest competition. The effects of anti-competitive malpractices include not just difficulty for smaller companies entering or succeeding in a domestic market, but also higher consumer prices, poorer services and limited innovative ideas.
ANTITRUST OR COMPETITION LAW PRACTICE IN PAKISTAN
Competition and antitrust laws around the world are rapidly evolving and companies face new risks and challenges in keeping up with the complex and changing law reforms. The penalties for failing to comply can be severe. A need of both local and global platforms is essential for managing competition and antitrust law risks. With a team of over 20 competition and antitrust lawyers in major cities of Pakistan, IZYANLAW & ASSOCIATES can advise on all aspects of competition law including multinational mergers and clearances, cartels, abuse of dominance, international investigations, compliance and the significant area of competition law litigation.
Competition law in Pakistan was previously regulated under the Monopolies and Restrictive Trade Practices Ordinance (MRTPO) 1970, which was designed specifically for breaking up cartels in Pakistan. At present, the Competition Act 2010 is the prime legislation that governs the prohibitions of anti-competitive conduct, and unlike its predecessor, covers a broader range of anti-monopolistic practices rather than just focusing on decartelization. The Act is further supplemented by numerous rules and regulations promulgated by the Commission from time to time, along with case laws of similar jurisdiction, such as the European Union, United Kingdom and the United States. Our team is well versed in the overlapping complexities of the laws of different jurisdictions that the Commission often draws guidance from when making decisions on cases, inter alia, of excessive or anti-competitive pricing.
We provide commercial solutions that will withstand scrutiny in all major competition or antitrust law jurisdictions. Our lawyers are qualified in many jurisdictions and practice before courts and Competition Commission of Pakistan (CCP). Wherever our clients are located, our advice draws on the depth and breadth of this domestic as well as of international experience.
A core part of our competition and antitrust law practice is our competition law litigation team, which includes dedicated lawyers with experience across well-established and emerging centre for competition law litigation. Our competition law litigation team has deep experience in competition and antitrust law, combined with robust and commercially-focused litigation skills.
Our areas of work include:
- Competition and antitrust litigation and disputes;
- Cartel investigations;
- Compliance and risk management;
- Criminal investigations / anti-competitive conduct;
- Distribution and agency;
- Economic regulation, including liberalisation, licensing, network access and price control;
- Intellectual property and technology licensing;
- International trade law;
- Market investigations and studies;
- Merger control;
- Pricing strategies;
- Public procurement;
- State aid; and
- Market recognitions.
THE COMPETITION COMMISSION OF PAKISTAN (CCP)
The Competition Commission of Pakistan (CCP) was first constituted under the Competition Ordinance 2007, and continues to operate under the Competition Act 2010, with a wide range of discretionary powers. This includes the CCP’s ability to forcibly search the premises of companies and businesses, and seize documents and / or devices for the purposes of investigating anti-competitive conduct. Over the years since its inception, the Commission has imposed penalties of up to PKR 75 million for abuse of dominance and deceptive marketing practices, annulled anti-competitive contracts and even reversed certain monopolistic mergers. For its efforts, the Commission has been lauded by the international community, including the United Nations as a “crucial entity leading Pakistan’s economy towards competition-oriented markets.”
The CCP prohibits abuse of dominant position in the market, certain types of anti-competitive agreements and deceptive market practices. It also reviews mergers of undertakings that could result in a significant lessening of competition.
THE COMPETITION ACT, 2010
The Competition Act, 2010 is a state-of-the-art modern law which gives the Competition Commission of Pakistan legal and investigative instrumentalities and powers to stimulate free competition in all spheres of commercial and economic activities, enhance economic efficiency, and to protect consumers from anti-competitive behaviour.
The Act is applicable to all undertakings in Pakistan regardless of their public or private ownership and to all actions or matters that can affect competition in Pakistan. Although essentially an enabling law, it briefly sets out procedures relating to review of mergers and acquisitions, enquiries, imposition of penalties, grant of leniency and other essential aspects of law enforcement.
Briefly, the law prohibits situations that tend to lessen, distort, or eliminate competition such as actions constituting an abuse of market dominance, competition restricting agreements, and deceptive marketing practices.
ABUSE OF DOMINANT POSITION
The Act prohibits the abuse of a dominant position through any practice that prevents, restricts, reduces, or distorts competition in the relevant market. These practices include, but are not limited to, reducing production or sales, unreasonable price increases, charging different prices to different customers without objective justifications, tie-ins that make the sale of goods or services conditional on the purchase of other goods or services, predatory pricing, refusing to deal, and boycotting or excluding any other undertaking from producing, distributing or selling goods, or providing any service.
The Act prohibits undertakings or associations from entering into any agreement or making any decision in respect of the production, supply, distribution, acquisition or control of goods or the provision of services, which have the object or effect of preventing, restricting, reducing, or distorting competition within the relevant market. Such agreements include, but are not limited to, market sharing and price fixing of any sort, fixing quantities for production, distribution or sale; limiting technical developments; as well as collusive tendering or bidding and the application of dissimilar conditions. The Commission is authorised, however, to issue either individual or block exemptions under the Act.
The term “Prohibited Agreements” includes both horizontal and vertical agreements. Horizontal agreements take place between competing business. For example, if companies A and B sell the same product within the same geographic market, and decide that they will not sell their product below a certain price, they may be liable for collusive trading or price fixing under the Act, through a horizontal agreement. Vertical agreements on the other hand take place along the supply distribution chain. So, for instance, if company A signs an exclusivity contract with its suppliers or dealers, stating that they will not give their services or products to any company other than company A for the duration of the contract, then the same maybe violative of Sec. 4.
The Act prohibits deceptive marketing practices, in other words, any advertising or promotional material that misrepresents the nature, characteristics, qualities, or geographic origin of goods, services or commercial activities. An Office of Fair Trade (OFT) has been created within CCP specifically to oversee consumer protection issues under the Act.
Deceptive marketing practices further includes trademark infringement, whereby Company A uses the logo of Company B to sell its products, without the prior consent of Company B.
APPROVAL OF MERGERS
The law prohibits mergers that would substantially lessen competition by creating or strengthening a dominant position in the relevant market. The Act requires prior notice of proposed mergers or acquisitions that meet the notification thresholds stipulated in Sec. 4 of the Competition (Merger Control) Regulations, 2007. If the Commission determines this to be the case, it can prevent mergers or acquisitions, set conditions or require divestitures. The Act does not distinguish between horizontal and vertical mergers. The term merger also covers joint ventures; therefore, they are subject to the Commission’s approval provided that they meet the notification thresh