ISLAMABAD: Competition Commission of Pakistan (CCP) has decided to initiate legal action against Pakistan Flour Mills Association for indulging in cartelization and price fixing of wheat.
A source revealed CCP had discovered a cartel in the wheat & flour industry, reported Business Recorder.
Legal action will be commenced on recommendations of an investigation conducted against PFMA and it is reported to have been involved in sharing commercially sensitive information and fixing prices, which is a contravention of the country’s competition law.
A recently concluded inquiry by the anti-trust watchdog revealed that pricing and quantities were amongst the foremost agenda items of PFMA and its member commitments in all its executive committee meetings dating way back to 2011.
As per the investigation report, the Cartel and Trade Abuses (CTA) department of the commission had observed various news items published in different sections of the print media, talking about unusual prices of wheat on a regular basis across the country.
According to the inquiry report, the price of wheat kept on increasing and PFMA had termed it “market correction” but the common people thought it as tantamount to killing, as food inflation soared.
The CCP inquiry revealed PFMA has over 1,171 members across Pakistan. It constitutes of individual flour mills and have provincial chapters in all provinces across the country.
The headquarters of PFMA are based in Lahore and the Chairman is rotated on a yearly basis from all four provinces. The decisions are then executed by Central Executive Committee (CEC) which are then implemented by members of PFMA.
In relation to this, the office of PFMA in Lahore was also raided and CCP teams confiscated relevant documents.
CCP in a meeting held in December 2016 was informed by PFMA representatives that provincial food departments (PFDs) had fixed a maximum retail price for flour according to a formula constituted in 2008.
As per that formula, base input costs are taken into consideration and a margin for flour millers is fixed to reach a maximum ex-mill and retail price.
Till now, the same basis is being followed to set the price of flour. Wheat is purchased by flour millers from the open market, as it is low-priced compared to government’s notified price of wheat.
The flour millers start procuring wheat at government issued rates when prices in the open market rise due to dwindling supplies and the former can be purchased at a much lesser cost.
The investigation further revealed executive committee of PFMA was meeting on a frequent basis and had been sharing information and strategic data regarding pricing and deciding the price of flour between 2012 and 2016.
It acted as a conduit to help millers cooperate among themselves for fixing flour prices, whose aim was to limit and reduce competition in the relevant market.
