CCP keeps up efforts to combat cartelisation

ISLAMABAD: The Competition Commission of Pakistan (CCP) is still committed to taking action against alleged cartelisation by cement manufacturers provided full legal support from higher judicial fora.

Officials told Business Recorder that given the cement sector’s history of price-fixing, market manipulation, and undue profiteering, stricter enforcement mechanisms and policy reforms are crucial. The rising cement prices in Pakistan, now touching Rs1,500 per bag, are a stark reminder of the consequences of unchecked corporate collusion and the urgent need for decisive action against cartelisation.

According to sources, the cement prices surged from Rs272 per bag in 2009 to Rs1,500 today. The CCP has repeatedly unearthed evidence of price-fixing and collusion among cement manufacturers. However, companies have obtained stay orders. This unchecked manipulation by industry not only burdens individual consumers but also stalls national infrastructure projects, driving up costs across the board.

Pakistan’s cement industry has long been embroiled in allegations of cartelisation, manipulating market forces to extract unjust profits at the expense of consumers. Despite multiple interventions by the CCP, manufacturers continue to engage in anti-competitive behaviour, increasing prices through collusion while securing legal shields through stay orders from courts.

The CCP has conducted three major inquiries into the cement industry— in 2009, 2012, and 2020—each unveiling direct evidence of price-fixing, market division, and coordinated production controls. However, legal interventions have repeatedly stalled the CCP’s actions, allowing cartelisation to persist.

In 2009 inquiry, the CCP found evidence of price-fixing agreements orchestrated by the All Pakistan Cement Manufacturers Association (APCMA). It imposed penalties totaling Rs6.3 billion on cement manufacturers and Rs50 million on APCMA. Cement firms challenged the decision, securing stay orders from the Lahore High Court (LHC) and Sindh High Court (SHC). The matter remains unresolved with the Competition Appellate Tribunal since 2020.

In 2012 inquiry, another investigation into price-fixing was launched but was halted after cement companies obtained a stay order from the LHC. The case remains pending in the Supreme Court of Pakistan.

In 2020 inquiry, the CCP’s most recent probe uncovered “hardcore evidence” of cartel behaviour. The investigation revealed that cement manufacturers collectively decided to increase prices by Rs45 to Rs50 per bag, forcing consumers to pay an additional Rs40 billion in a single year. Despite reduced production costs, firms did not pass on the benefits of a 25 per cent reduction in federal excise duty. However, proceedings were once again stopped when the SHC granted a stay order, barring the CCP from acting on evidence collected during its raids.

The CCP’s inquiry in 2020 found that cartelisation led to an abnormal surge in profits, with leading cement companies witnessing exponential gains. This unprecedented rise in profitability occurred even as global coal and oil prices declined, and the State Bank of Pakistan reduced interest rates to single digits. The CCP’s analysis indicated that cement manufacturers were deliberately restricting supply and controlling distribution through APCMA to manipulate prices. This unprecedented rise in profitability occurred even as global coal and oil prices declined, and the State Bank of Pakistan reduced interest rates to single digits. The CCP’s analysis indicated that cement manufacturers were deliberately restricting supply and controlling distribution through APCMA to manipulate prices.

The 2020 investigation uncovered a WhatsApp group named “APCMA Marketing Officials,” created in 2018, where cement companies allegedly coordinated price hikes. The inquiry also found that APCMA dictated supply allocations, enforcing regional quotas to maintain price disparities.

Furthermore, northern-region manufacturers were instructed not to distribute cement to the southern region to sustain artificial price differences. The analysis of impounded data revealed that plant-wise dispatches were controlled daily to adhere to pre-determined quota allocations.

Despite overwhelming evidence, legal barriers have allowed the cement cartel to persist. In March 2024, the CCP issued a Policy Note recommending mandatory disclosure of manufacturing and expiry dates on cement bags to improve transparency.

The CCP has the authority under Section 30 of the Competition Act to issue show-cause notices and impose fines of up to Rs75 million or 10 per cent of a company’s turnover, officials added.—SOHAIL SARFRAZ