CCP Issues Warning on Prohibited Agreements

The Competition Commission of Pakistan (CCP) has released a cautionary announcement to entities engaging in prohibited agreements without seeking prior authorization. The commission warned that financial penalties could reach up to Rs75 million or 10% of their annual turnover.

The CCP stated it had noticed certain agreements among entities, their wholesalers, dealers, agents, and retailers which may represent a refusal to deal with non-dealers. These agreements often contain restrictive clauses potentially violating Section 4(2) of the Competition Act, 2010.

“These possibly anti-competitive clauses might include resale price maintenance, market division, non-compete obligations, or other stipulations that impede competition.

“Such vertical agreements – those established between parties at varying points in the supply chain – are invalid from the beginning if they hinder, limit, or skew competition, unless the CCP specifically provides an exemption under Section 5 in conjunction with Section 9 of the Act,” the commission clarified in its published statement.

Exemption requests presented to the CCP are assessed according to the guidelines outlined in Section 9 of the Act.

“Agreements which foster production or distribution, boost technological or economic advancement, or yield efficiency improvements that outweigh any detrimental effects on competition may be granted an exemption.”

The CCP has advised all entities to seek an exemption as per Section 5 before participating in any such agreement to avert possible penalties.

As per the Competition Act, 2010, the CCP is mandated to guarantee fair competition throughout all sectors of the economy. This aims to improve economic effectiveness and shield consumers from anti-competitive actions, such as the misuse of dominance, cartelization, deceptive marketing strategies and mergers that could diminish market competition.