The Competition Commission of Pakistan (CCP) has imposed a record penalty of Rs. 44 billion on the sugar industry for cartelization, price-fixing, and market manipulation.
This penalty has been imposed based on the calculation of the turnover of 55 sugar mills for the financial year 2019. A penalty of Rs 75 million was imposed for each of four violations of Section 4 of the Competition Act 2010 committed by the Pakistan Sugar Mills Association (PSMA), summing up to a total of Rs 300 million.
“The penalties equal to 5% of the 2019 annual turnover have been imposed on mills located in Sindh, Khyber-Pakhtunkhwa and Punjab for collectively deciding the quantum of exports invariably affecting and controlling the domestic supply of sugar in the relevant market for the period 2012 to 2020,” the CCP statement added.
7% of the 2019 annual turnover penalties are imposed against each of the member mills located in Punjab, for sharing and discussing sensitive commercial stock information with the PSMA from 2012 to 2020.
The CCP has directed the PSMA and sugar mills to stop the violations highlighted in the order and deposit the penalty within 60 days.
The PSMA responded in a press release saying that the order of the CCP was not final as two members of the four-member bench, Shaista Bano and Bushra Naz Malik, did not find sufficient evidence, resulting in a split decision.
However, CCP Chairperson Rahat Kaunain cast her vote twice to make it a majority judgment. This might weaken the case once it is challenged in the courts by the accused parties.
The press release addressed this saying, “The chairperson of the CCP does not have the powers to cast a second vote in the proceedings as per the Competition Act.”
The CCP order states that the sugar mills were found to be collectively deciding the quantum of exports, eventually controlling the domestic supply of sugar in the relevant market during the period 2012 to 2020.
The CCP has said that the government lacks the means of cross-checking this information due to capacity constraints.
It has been observed by the commission that there was no accurate and independent information-gathering framework to provide quantitative support to the government’s price controls mechanisms for essential commodities.
A fixed penalty of Rs 50 million has been imposed on each of the 22 sugar mills for participating in the tender issued by the Utility Stores Corporation (USC) in 2010.