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Express Tribune
3 days ago
- Business
- Express Tribune
Fertiliser firms fined for price fixing
Listen to article The Competition Commission of Pakistan (CCP) has cracked down on alleged collusion in the fertiliser sector, imposing Rs375 million in penalties for creating a monopoly and extracting billions from farmers. In response, the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) has announced it will challenge the CCP order in court. Interestingly, these fertiliser barons had previously refused to pay multi-billion rupee dues on account of the Gas Infrastructure Development Cess (GIDC), instead obtaining stay orders from the courts. They had collected billions from farmers but failed to deposit these funds in the national exchequer — a matter that remains unresolved. The CCP, a watchdog for anti-competitive practices, launched a suo motu inquiry and imposed a penalty of Rs50 million on each of the six major urea manufacturers, along with a Rs75 million fine on FMPAC, totalling Rs375 million. The penalised companies include Fatima Fertiliser Limited, Fauji Fertiliser Company Limited, Fauji Fertiliser Bin Qasim Limited, Fatima Fertiliser Company Limited, Engro Fertiliser Company Limited, and Agritech Limited. According to the CCP's findings, these firms, in coordination with their trade association FMPAC, ran an 'awareness campaign' that effectively amounted to fixing urea prices nationwide. The Bench, comprising Dr Kabir Ahmed Sidhu and Salam Amin, concluded that this activity violated Section 4 of the Competition Act, 2010. While the manufacturers claimed to be setting prices independently, they failed to justify the remarkably synchronised pricing strategy. The CCP investigation revealed that the practice distorted competition and harmed farmers — particularly during the critical Rabi and Kharif seasons — by artificially inflating fertiliser prices and limiting market choices. The companies' attempt to shield themselves under the 'state action doctrine' was also dismissed. The CCP Bench found no formal government directive, or compulsion, to justify their collusive behaviour. Instead, the firms exploited a government instruction about raising awareness among farmers regarding urea prices. They used this as cover to jointly announce uniform urea prices across the country. The bench held that such "actions, taken under the pretext of complying with government instructions, effectively undermined market dynamics and distorted competitive pricing mechanisms." The CCP expressed concern that despite differences in input costs, economies of scale, market size, and gas prices, all six companies were selling a urea bag for the identical price of Rs1,768. The bench remarked that in a market where each company's production capacity and market share are publicly known, such coordinated disclosures cannot be viewed as incidental or competitively benign. Rather, the joint announcement amounted to overt collusion. Repeated directives from the Fertiliser Review Committee (FRC) also went unheeded, with companies failing to address supply imbalances. Notably, the CCP had earlier warned fertiliser manufacturers and FMPAC in 2010, 2012, and 2014warnings that did not lead to lasting change. The CCP chairman reiterated that trade associations should not serve as platforms for sharing price-sensitive information or coordinating pricing strategies. The Commission reaffirmed its commitment to ensuring competitive markets, protecting consumer welfare, and holding violators accountable. In response to the CCP's order, FMPAC issued a statement asserting it had no role in pricing decisions. It clarified that it does not determine or coordinate the pricing of urea or any other fertiliser product. As a non-commercial advisory body, FMPAC claimed it has never engaged in price-setting activities, and any implication otherwise is factually incorrect. FMPAC stated that the controversial advertisement was published under a formal directive from the federal government, communicated via the Fertiliser Review Committee (FRC). During the FRC's meeting on November 25, 2021 — held amid concerns about urea hoarding and market manipulation — it was resolved to initiate a public awareness campaign. FMPAC was directed to publicise the prevailing market price, which had already been acknowledged during the proceedings. FMPAC insisted that it acted in good faith to implement the government's directive, without involvement in setting or proposing the published price. The intent, it said, was to ensure transparency and protect farmers from exploitative practices — not to distort market dynamics. FMPAC plans to contest the CCP's interpretation and pursue legal remedy through the appropriate appellate forum. The Council expressed confidence that a fair and comprehensive review would confirm its actions were lawful and transparent.
Business Recorder
3 days ago
- Business
- Business Recorder
CCP imposes Rs375m fines on six major fertilizer makers, FMPAC
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
Business Recorder
4 days ago
- Business
- Business Recorder
CCP fines fertilizer firms, FMPAC Rs375mn for price fixing
The Competition Commission of Pakistan (CCP) has imposed penalties to the tune of Rs375 million on companies and an industry association for collusion in the fertilizer sector. According to a press statement released on Tuesday, the CCP took decisive action against anti-competitive conduct in the fertilizer sector, imposing a penalty of Rs50 million each on six major urea manufacturers. Moreover, the Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC), a leading industry association, was fined Rs75 million. The CCP bench—comprising Dr Kabir Ahmed Sidhu and Salam Amin—concluded that six urea manufacturing companies, i.e. Fatima Fertilizer Limited, Fauji Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Fatima Fertilizer Company Limited, Engro Fertilizer Company Limited and Agritech Limited in coordination with their trade association, FMPAC, 'under the guise of conducting an awareness campaign/advertisement, have effectively fixed the price of urea across the country'. IHC reserves verdict in fertiliser prices case 'Such conduct goes beyond the bounds of lawful information dissemination and enters into the realm of anti-competitive behaviour' in violation of Section 4 of the Competition Act, 2010. CCP said that despite claiming price independence, the manufacturers failed to justify their synchronised pricing strategy. 'The commission's investigation uncovered that the conduct not only distorted competition, but also harmed farmers across Pakistan, especially during the critical Rabi and Kharif season, by artificially influencing fertilizer prices and limiting market choice,' said CCP. The government body shared that the respondents' attempt to claim protection under the 'state action doctrine' was also rejected, asserting that no formal government directive or compulsion existed to justify their collusive behaviour. CCP noted that the respondents took advantage of a federal government directive regarding initiating an awareness campaign encouraging farmers regarding urea price and used it as a tool to fix the price in coordination among themselves and jointly announced the uniform price for the urea buyers/consumers. The bench also held that such 'actions, under the pretext of complying with government instructions, effectively undermined market forces and distorted competitive pricing mechanisms.' CCP shared 'with great concern' that despite significant variations in input costs, different economies of scale, size of the market, and different prices of gas, all respondents were charging an identical price for the size of the urea bag, i.e. Rs1,768 per bag. The bench also noted that 'in a market where each undertaking's production capacity and market share are matters of common knowledge, such a coordinated disclosure cannot be viewed as incidental or competitively benign. Rather, the joint announcement constitutes an overt manifestation of concerted conduct.' Moreover, repeated directions from the Fertilizer Review Committee (FRC) were given to the respondents to address their failure to manage supply imbalances. CCP informed that it had issued warnings to the fertilizer manufacturers and FMPAC in 2010, 2012 and 2014, 'which failed to produce any lasting change'.
