The Supreme Court has recognized the role of the Competition Commission of Pakistan (CCP) that the Commission is fully empowered and responsible for collecting market information from any sector/industry to understand market structure as well as to ensure effective enforcement.
A senior legal expert discussed in detail the impact of the recent SC judgment on CCP powers on the markets and sectors/industries in Pakistan. The analysis and impact of the judgment has fully explained the powers of the CCP for the understanding of different sectors, associations and industries operating in the country.
The details of the case revealed that Dalda Foods Limited (the “Respondent”) had challenged, the calling for information regarding the price of Vanaspati ghee and cooking oil and initiation of enquiry, allegedly without stating any reason, through the issuance of letters, by the Competition Commission of Pakistan (the “Commission”), before the Islamabad High Court.
The grievance of the Respondent was that the letters were issued for no justifiable reason as the Commission cannot initiate an enquiry based on vague and indefinite allegations nor can it enquire into the issue of pricing.
The expert explained that the Islamabad High Court held that the Commission must exercise discretion reasonably and that there must exist a reasonable basis to exercise its statutory authority to enquire into the affairs of an undertaking.
The Court further concluded that sub-sections (1) and (2) of Section 37 are to be read together and the applicable test for the exercise of power under Section 37 of the Competition Act, 2010 (the “Act”) is the plausibility test, meaning that, if the Commission wishes to initiate an enquiry, it must satisfy itself that there is a plausible case of contravention.
Further, while relying on an earlier judgment titled National Feeds Limited versus Competition Commission of Pakistan (2016 CLD 1688), upheld by the Supreme Court through its judgment in the case titled Competition Commission of Pakistan versus Punjnad Feeds Limited etc. (C.P. Nos. 2119 to 2123 of 2016) wherein the High Court had held that the Commission as vested with the powers under a statute cannot use or exercise such powers for the purpose of making indiscriminate, roving and fishing enquiries and that even in the case of suspicion of the Commission of an illegality, details should be provided to the party to enable it to have an opportunity to produce all the relevant documents to disclose information.
Meaning that the Commission cannot order an enquiry to merely dig out the facts on the basis of hunch or suspicion. Consequently, the enquiry ordered by the Commission as well as the letter issued by it for Call for Information were set aside for being in contravention to the mandate of the Act.
The judgment of Islamabad High Court was challenged by the Commission before the Supreme Court. Supreme Court noted that the Commission is a regulator which aims to prevent and address anti-competitive practices across markets and is empowered, under Section 36 of the Act, to call for information relating to an undertaking. The Court while dilating upon the powers available to the Commission in respect of “proceedings” and “inquiry” under Section 33 of the Act, held that such powers are not available to the Commission in exercise of its powers under Section 28 (1) (b) and Section 36 of the Act where it conducts studies for promoting competition or call for information related to an undertaking.
The Court further observed that the power to call for information is a regulatory power available to the Commission and is aimed to collect and gather information and does not fall under the ambit of “proceeding” under Section 30 of the Act. Hence, merely calling for information does not constitute a proceeding nor does it trigger any penal consequences.
The Court held that both enquiry and studies are independent tools used by the Commission to collect and assess information on market trends, and do not constitute an adverse action against the undertaking. Therefore, in terms of Section 36 and 37 of the Act, the power to call for information or conduct an enquiry or study do not constitute a proceeding against an undertaking under Section 30 of the Act.
The Court, while drawing distinction between Section 30 and Section 37 of the Act, held that Section 30 empowers the Commission to issue order under Section 31 where it is satisfied that a case of contravention of any provision of Chapter II of the Act is made out.
On the other hand, enquiry under Section 37 serves as a preliminary step to gather information and evidence, and if it reveals potential contravention of Chapter II of the Act, the Commission can then proceed. However, such enquiry is not always necessary and if the Commission is satisfied that the contravention of any provision of Chapter II has been committed or is likely to be committed, it may proceed without enquiry under Regulation 22 (2) of the Competition Commission (General Enforcement Regulations), 2007 (the “Regulations”).
The issue raised before the High Court was that for the purpose of Section 36 and 37 of the Act, the Commission has to provide reasons in writing to the undertaking, as to why it is seeking information or why it has opted to carry out an enquiry and that the Commission is to provide the material on which these actions are based, meaning thereby that the Commission must provide the material before it which forms the basis of the reason to invoke Section 36 or Section 37 of the Act.
The Supreme Court, however, differed with the judgment given in National Feeds (supra) and observed that Section 37 caters to two separate and distinct powers vested in the Commission. Under Section 37 (1) of the Act, the Commission can either initiate an enquiry suo moto or on reference made by the Federal Government, provided that it has deliberated on the matter and has produced its reasoning in writing.
As far as the question of communicating and justifying its reasoning to the undertaking is concerned, the Court held that the Commission being a regulator must always act in a transparent manner, keeping the undertaking informed of its decision.
However, the Commission is required to provide the gist of its reasons as recorded in its internal deliberations which led to the decision of initiating such enquiry. With regards to Section 37 (2) of the Act, the Court held that where Commission receives a complaint, it is required to first establish the veracity of the complaint and must record its reasons in writing, in order to ensure that it is neither frivolous nor vexatious and that there are sufficient facts provided in the complaint to necessitate an enquiry.
The mere filing of a complaint does not automatically result in an enquiry and the Commission is required to consider the complaint and determine whether it merits an enquiry. In the event that the Commission chooses to proceed with enquiry, then it must communicate the gist of the reasons of the same to the undertaking.
The expert highlighted that one of the important aspects of this judgment is the recognition of the role of the Commission by the Supreme Court. The Court, in its judgment, noted that the Respondent failed to appreciate that the Commission is a regulator and is not only empowered to but also bears the responsibility to collect market information in order to understand market structure as well as to ensure effective enforcement of the Act being administered by it.
In the absence of market information that it may seek from different undertakings from time to time, the Commission cannot carry out its functions as envisioned under the Act and the provision of such information by no stretch of imagination amounts to an adverse action against an undertaking. Therefore, undertakings are under obligation to fully comply with such orders of the Commission.
In view of the foregoing, the Supreme Court set aside the impugned judgment of the Islamabad High Court and allowed the appeal of the Commission, the expert added.
Source: Pro Pakistani