CCP imposes Rs375m fines on six major fertilizer makers, FMPAC

Business Recorder

2 days ago

ISLAMABAD: In a landmark decision against cartelisation, the Competition Commission of Pakistan (CCP) has imposed fines totaling Rs 375 million on six major fertilizer manufacturers and their trade association, the Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC), for colluding to fix the retail price of urea across the country.
The penalties follow a suo motu inquiry launched by the Commission, which concluded that the manufacturers — in coordination with FMPAC — had jointly issued a public advertisement setting the maximum retail price at Rs 1,768 per 50 kg bag.
The CCP found that this was not a routine awareness campaign but a coordinated act of cartelization, violating Section 4 of the Competition Act, 2010. The order was issued by a CCP bench comprising Chairman Dr Kabir Ahmed Sidhu and Member Salman Amin.
The six companies fined Rs 50 million each include Engro Fertilizers Limited, Fauji Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Fatima Fertilizer Company Limited, Fatima Fertilizer Limited, and Agritech Limited. Their association, the FMPAC, was fined Rs 75 million, bringing the total penalty to Rs 375 million. The Commission's investigation noted that despite significant differences in gas pricing, economies of scale, and input costs, all companies charged the exact same price — a clear indicator of collusion rather than coincidence.
The manufacturers attempted to defend their conduct by invoking the 'state action doctrine,' arguing that they acted under a federal government directive to educate farmers about urea prices. However, the CCP bench found no formal instructions compelling the companies to set a uniform price. Instead, the companies misused the government's communication to justify a
cartelised price-fixing strategy. The bench observed that actions taken under the pretext of public interest effectively undermined the forces of supply and demand and distorted competitive pricing mechanisms.
The Commission expressed concern that despite repeated warnings issued in 2010, 2012, and 2014 — including findings that two companies had engaged in joint advertising to influence market prices — no long-term corrective measures were taken by the companies or FMPAC. The recurrence of such behavior signaled the ineffectiveness of prior warnings and reinforced the need for stronger enforcement and deeper structural reform.
While announcing the order, the CCP reiterated that business associations like FMPAC have no legal authority to set or recommend prices. Their involvement in coordinated pricing decisions undermines market competition and consumer welfare. The Commission warned that any such action — particularly from entities that have long benefited from government subsidies — will not be tolerated.
The CCP's order also touched upon broader policy concerns. Pakistan's fertilizer sector, once heavily subsidized to promote local production, continues to operate under the outdated Fertilizer Policy of 2001. That policy had extended 20-year gas supply contracts at concessionary rates to fertilizer plants commissioned after 2001. Although these subsidies expired in July 2021, pricing across companies has remained inexplicably aligned. According to a study by the Pakistan Institute of Development Economics (PIDE), the government has been spending approximately Rs 200 billion annually on fertilizer subsidies — yet the intended benefit has largely failed to reach farmers, who continue to face high prices and supply shortages.
The Commission stressed that this uniformity in pricing, even after deregulation and subsidy withdrawal under IMF conditions, raises serious concerns about the lack of true market competition. Despite differences in technology, plant age, and gas costs, the six companies maintained identical prices, suggesting that collusion — not competition — drives pricing in the fertilizer sector.
Separately, the Islamabad High Court (IHC) has reserved its verdict in a related case concerning the CCP's direction for fertilizer companies to submit cost audit reports. As part of its investigation, the Commission had required these reports to assess pricing behavior. However, the companies challenged the directive in court, claiming that cost audit data was confidential and could not be disclosed. In response, CCP's legal representative argued that all companies
are already required to submit cost audits to the Securities and Exchange Commission of Pakistan (SECP), and questioned why the same data could not be provided to another statutory regulator. The court has now reserved judgment after hearing both sides.
It is also worth noting that in a separate case involving Dalda Foods, the Supreme Court of Pakistan upheld the CCP's jurisdiction to seek information, monitor market conduct, and conduct investigations—further reinforcing the Commission's legal mandate.
Under the Competition Act, any agreement or practice that fixes prices, limits output, or divides markets is prohibited. Violations may lead to fines of up to 10% of annual turnover or Rs 75 million, whichever is higher. Repeat violations can result in criminal prosecution under Section38 of the Act.
The CCP has urged the federal government to comprehensively review the Fertilizer Policy 2001, disengage from price coordination through trade bodies, and let market dynamics—not collusive agreements — govern the industry. The Commission reaffirmed its commitment to promoting open markets, safeguarding consumer interests, and holding violators accountable. To report cartel behavior or anti-competitive practices, members of the public can contact the CCP's Market Intelligence Unit at 0304-0875255 or email [email protected].
Copyright Business Recorder, 2025