PFMA slapped with Rs75m fine for ‘manipulating flour prices’

ISLAMABAD: The Competition Commission of Pakistan (CCP) has imposed Rs75 million fine on the Pakistan Flour Mills Association (PFMA) for being involved in “anti-competitive market practices”.

According to a statement issued by the commission on Monday, “PFMA violated Section 4 of the Competition Act, 2010, by ‘fixing the price of wheat flour’, providing a platform to share commercially sensitive information and fixing the quantities of production.”

Taking notice of various media reports that signalled towards an unusual price hike in the prices of wheat flour across the country, the CCP had carried out dawn raid of PFMA premises, the statement read.

“The inquiry in the matter concluded that PFMA is providing a platform to its members to settle wheat flour prices so that any form of competition could be avoided. This is in violation of Section 4 of the Act.”

As per the details, a CCP bench, comprising its chairperson Vadiyya Khalil and members Dr Muhammad Saleem and Dr Shahzad Ansar, passed the above-mentioned order after hearing the parties.

In its order, the CCP observed that under Article 38 of the Constitution, the state is responsible to ensure the provisions of food and basic necessities at fair prices along with other social and economic benefits to its citizens.

Accordingly, provincial food departments set a maximum cap of the wheat flour price under the foodstuffs (Control) Act, 1958, as wheat is Pakistan’s dietary staple used by consumers belonging to all socioeconomic groups.

Wheat flour currently contributes 72pc of Pakistan’s daily caloric intake with per capita wheat consumption of around 124 kg per year, one of the highest in the world.

The CCP observed that having a maximum cap in essential food items benefits the consumer to bargain for a lower price and prevents retailers from overcharging consumers. This also enables retailers to offer discount on their product in order to increase sales.

“PFMA, in complete derogation of the aforesaid objective, deliberately fixed the rates of wheat flour by conducting meetings and discussing the prices as well as the quantities to be produced and supplied by flour mills in violation of Section 4 of the Competition Act,” the CCP stated.

The commission further observed that fixing of prices by competitors is one of the most egregious and serious violations of the competition law. “In fact, it disturbs the central nervous system of the economy, hence cannot be tolerated at all.”

Disposing off the matter, the CCP, with reference to the role of associations, observed that rule of thumb is not to allow discussion, deliberations or sharing of sensitive commercial information that may allow members, who are competitors, to coordinate business policy.

“Further, it is not the association’s role to ensure that each and every member of the association has a profitable business.”

The CCP also observed that discussion, deliberation and decisions regarding purely business concerns, like current and future pricing, production and marketing, are anti-competitive and should be avoided at all costs by the associations.

“Associations have a responsibility to ensure that their forum is not used as a platform for collusive activities,” it said. “Given the seriousness of the violation as discussed above and the importance of wheat flour in our daily life and the continued practice of price-fixing since 2009; a maximum fine of Rs75 million was imposed on PFMA.”

The CCP is mandated under the Competition Act to ensure free competition in all spheres of commercial and economic activity, to enhance economic efficiency and to protect consumers from anti-competitive practices including prohibited agreements.

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