Tribunal Affirms Penalty on Vanaspati Manufacturers for Anti-Competitive Practices

The Competition Appellate Tribunal (CAT) has rejected the appeal from the Pakistan Vanaspati Manufacturers Association (PVMA), thus upholding the Competition Commission of Pakistan’s (CCP) ruling. The CCP had imposed a penalty of Rs50 million on PVMA for engaging in unfair competition and discriminatory actions, according to an official statement released on Friday.

PVMA, an organization representing almost 100 ghee and cooking oil producers across the nation, contested the CCP’s 2011 judgment. The decision stated that PVMA had violated Sections 3 and 4 of the Competition Act, 2010.

The case stemmed from an investigation and subsequent show cause proceedings that began in April 2011, prompted by the CCP’s observation of coordinated increases in edible oil prices, as detailed in the statement.

“The commission determined that PVMA utilized its platform to orchestrate schemes for setting prices. It was found that PVMA negotiated prices with government bodies and instructed its members to adopt uniform pricing strategies.”

Although PVMA insisted these were simply recommendations, the commission concluded that these instructions were, in reality, enforced, leading to a decline in price competition.

The CCP also determined that PVMA had established agreements with oil tanker associations and the National Logistics Cell (NLC) to set rates for transportation.

“The commission believed that these arrangements disrupted fair competition within the logistics sector and put non-member market participants at a disadvantage. PVMA was also found to have exploited its dominant position by imposing discriminatory fees for verifying import invoices, a task delegated to it by customs authorities to address concerns about under-invoicing.”

PVMA charged its own members Rs4 per metric ton for this verification service, while levying Rs10 per metric ton on commercial importers, without providing a legitimate reason for the difference.

In its defense, PVMA contended that its members paid substantial membership fees and annual dues, and that the commercial importers ultimately sold their products to PVMA’s member manufacturers.

It further argued that it lacked the legal authority to enforce any pricing agreements and had only acted under governmental pressure to stabilize prices in response to fluctuating international palm oil rates. However, both the CCP and the Tribunal dismissed these justifications.

The tribunal noted that customs authorities had delegated the verification service to PVMA for all importers and that differentiating between members and non-members when charging service fees was not justified.

The order specified that such discriminatory charges could not be justified under the concept of “objective justification,” especially when the burden of these charges ultimately fell on PVMA’s members.

While the CAT upheld the Rs50 million fine imposed by the CCP, it amended the commission’s order by granting PVMA a 15-day period to correct its discriminatory practices.

“Should PVMA fail to comply within the specified timeframe, an additional penalty of Rs1 million per day of non-compliance—originally included in CCP’s order—would be reinstated.”

The tribunal underscored that even advisory decisions made by associations can breach competition law if they result in decreased market competition.