How to get away with defying the Competition Commission

It all started with two bottles of energy drinks that looked kind of similar. Suspiciously similar, thought the makers of one of the bottles. Intentionally similar, in fact. With the intention of confusing short-on-time, unsuspecting consumers, enough for them to pick the other product up in a hurry.

So the makers of Sting (Pepsico) went to the Competition Commission of Pakistan, against the makers of Storm (Mezan Beverages) and what followed was a five-year saga that still hasn’t ended.

Stealing intellectual property such as design or packaging is a crime. It reflects poorly on the competitiveness of the market, and if proven, the accused can have to pay heavy fines and strict punishments. But what if one can just kick the can down the road? Would they be reprimanded?

Toying with the same idea is Mezan Beverages, whose story goes through the pits and falls of a legal war against the Competition Commission of Pakistan. Revealing, in process, the helplessness of the body responsible to ensure a competitive market in the country. In fact, we’re using the example of the aforementioned battling sodas just as a focal point to illustrate how a huge number of companies, across sectors, are using strategic stay orders from the courts against the CCP. At stake, other than general competitiveness of the markets, consumer rights, are also a whopping Rs. 68 billion rupees worth of CCP fines that aren’t being paid.

Har cheez Mezan mein!

The Mezan group is famous for its cooking oil and vanaspati ghee but in 2016, the company with its flagship drink called “Cola Next” ventured into the strictly guarded territory of carbonated beverages.

In years to follow, Mezan Beverages would launch new fizzy drinks, some with novel flavours, while others with some “inspiration” from existing competition. Within its soft drink portfolio, Mezan came up with “Storm”.

A red coloured drink claiming to give the drinker an electrifying energy. The idea isn’t unique. In fact most energy drinks claim to somehow manage to inculcate lightning, electricity or current into their marketing campaigns. However, according to one particular competitor, not only was the idea not unique at all, it was a mimicry of the packaging of their famous energy drink brand.

The fight

This competitor was PepsiCo Pakistan and their drink was called “Sting”. When it comes to energy drinks within Pakistan, Sting is the undisputed market leader. With no considerable locally manufactured competition, Sting enjoys a significant pricing advantage. Not to mention its access to the best beverage supply chain network in Pakistan.

In August 2018, PepsiCo filed a complaint against Mezan beverages with the CCP, accusing Mezan of deceptive marketing and mimicking Sting’s packaging.

Prompted by the complaint, the CCP launched an inquiry into Mezan’s alleged involvement in deceptive marketing practices. 

On October 12, 2018, the company wielded its legal arsenal, filing a writ petition challenging the constitutionality of the Competition Act 2010 itself, under which Mezan was being investigated. This cast a two-year shadow over the CCP’s nascent investigation. What followed is a story similar to most of the cases against the CCP. 

Competing with the Competition Commission of Pakistan

The Competition Commission of Pakistan was established as an independent regulatory body in 2007 under the Competition Act of 2010. Its primary mandate is to promote and sustain competition in economic activities for the benefit of consumers, ensuring a level playing field for businesses and preventing anti-competitive practices.

Amongst its many duties is the enforcement of the Competition Act and investigations of any violations thereof.

Ever since the CCP has started going after companies, there have been quite a few questions asked about the competence, jurisdiction and statutory powers of the independent regulator.

Coming back to the Mezan case, the writ petition under which Mezan obtained its stay was different. Along with many existing petitions, it challenged the CCP’s jurisdiction to regulate competition, extending to all inter-provincial as well as intra-provincial matters. This also means that the constitutionality of the Competition Act was being challenged in this case.

Even though the stay was vacated by the Lahore High Court, later in 2018, the writ petition of Mezan Beverages was clubbed with other similar petitions, by the Lahore High Court in which the constitutionality of the Competition Act was challenged.

On 26 October 2020, Lahore High Court passed its judgement upholding the constitutionality of the Competition Act. 

The three-member bench of the Lahore High Court upheld the Competition Act to be constitutionally valid. All three judges of LHC found that Parliament has the legislative competence to enact a law on competition.In the same judgement, the LHC allowed CCP to proceed with its enquiries.

June 28, 2021, marked a critical juncture in this odyssey as the CCP concluded its exhaustive investigation, finally wielding a show cause notice on July 7, 2021 issuing it to Mezan Beverages. Mezan found itself at the precipice of regulatory action. But instead of explaining itself, Mezan chose to do what it had done earlier. Kick the can down the road.

Stalled Justice

Mezan pivoted once again, securing yet another legal sanctuary from the LHC on August 3, 2021. It obtained a stay order not on the constitutionality of the Competition Act. This time Mezan challenged the “show cause” notice under the writ jurisdiction of the Lahore High Court and obtained another stay order. A different matter, pertaining to the jurisdiction of the CCP for issuing show cause.

As the business community watched with bated breath, the Mezan-CCP saga slowly became a cautionary tale, a mere narrative etched on the walls of Pakistan’s corporate history. In this chronicle, the ultimate resolution remains elusive till date, an enigma waiting to unfold, as Mezan and the CCP continue their dance.

This is not the first time justice has been delayed at the CCP. One such famous example is that of Dalda foods. When the CCP initiated an inquiry seeking information from cooking oil and ghee companies regarding pricing. 

Dalda Foods challenged this enquiry in the Islamabad High Court (IHC), resulting in the IHC setting aside CCP’s call for information letters and initiation of the enquiry. The IHC also imposed stringent requirements on CCP’s regulatory and enquiry powers.

In response to this setback, the CCP took the matter to the Supreme Court of Pakistan in September 2023. The apex court, in a historic and landmark judgement, unanimously upheld the statutory powers of the CCP related to the initiation of enquiries and gathering of information.

Trapping the CCP in a legal labyrinth

The playbook was simple. Spin a web of legalities around the CCP, so much so that the real matter at hand gets lost in the labyrinth of constitutionality and inefficiencies in the justice system.

The same technique was employed by Dalda when it went after the CCP’s statutory powers and the same technique is being employed in this case. Unsurprisingly, this is not even the tip of the iceberg.

According to the CCP, a total of 559 pending cases scattered across various courts remain unresolved in the last one decade. This includes cases of various natures. The CCP has attempted to curb cartels and mafias and promote competition in various sectors such as sugar, wheat, cement, poultry, automobile, cooking oil, agriculture, oil & gas, ports, shipping, power, insurance, steel, and aviation. However, all of them seem to be aware of the playbook.

According to the CCP’s data, 68 billion rupees in penalties across various industries is ensnared in this web of stay orders, not to mention countless delays in rightful proceedings, similar to the aforementioned story.

Fines worth Rs. 6.3 billion in the cement sector, over Rs 11 billion in the telecom sector, over Rs 1 billion in electronic goods sector, Rs. 140 million in automobile sector, Rs. 300 million in insurance sector, Rs. 75 million to flour mills associations, and Rs. 44 billion in the sugar sector remain uncollected.

Among the 559 pending cases, 170 cases are pending in the Supreme Court, where the constitutionality of the Competition Act, 2010 has been challenged in various ways. 210 cases await resolution in the Competition Appellate Tribunal, which is dysfunctional due to lack of appointment of Chairman Appellate Tribunal. 

It is pertinent to note that after 7.5 years and 212 pending cases, the Competition Appellate Tribunal became operational on November 29th, 2023 when a caretaker federal government, finally appointed a chairman. The new chairman is Justice (Retd) Mazhar Alam Miankhel who is the former Chief Justice of the Peshawar High Court.

Even after the Supreme Court has started taking notice of the matter like in Dalda’s case, a long way is to be covered before the presumably “bigger” players start coming under the CCP’s ambit.