CCP Penalizes Fertilizer Companies, Association for Collusion

The Competition Commission of Pakistan (CCP) has levied fines totaling Rs375 million on several entities, including companies and an industry body, for engaging in collusive practices within the fertilizer market.

A press release issued on Tuesday stated that the CCP has taken strict measures against anti-competitive behavior in the fertilizer industry, imposing individual penalties of Rs50 million on six major urea producers.

Additionally, the Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC), a prominent industry association, was fined Rs75 million.

The CCP panel, consisting of Dr. Kabir Ahmed Sidhu and Salam Amin, determined that six urea manufacturers—Fatima Fertilizer Limited, Fauji Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Fatima Fertilizer Company Limited, Engro Fertilizer Company Limited, and Agritech Limited—in conjunction with FMPAC, had effectively manipulated urea prices nationwide under the guise of an awareness campaign.

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According to the CCP, this conduct exceeded the boundaries of legitimate information dissemination and constituted anti-competitive behavior, thereby violating Section 4 of the Competition Act, 2010.

The CCP noted that despite asserting independent pricing strategies, the manufacturers failed to provide justification for their synchronized pricing approach.

The commission’s investigation revealed that this conduct not only skewed competition but also adversely affected farmers throughout Pakistan, particularly during the crucial Rabi and Kharif seasons, by artificially influencing fertilizer prices and restricting market options, the CCP stated.

The regulatory body also dismissed the respondents’ attempt to seek protection under the ‘state action doctrine,’ asserting the absence of any formal government directive or compulsion to justify their collusive actions.

The CCP observed that the respondents exploited a federal government directive regarding an awareness campaign on urea prices to collaboratively fix prices and jointly announce uniform prices for buyers and consumers.

The bench further stated that such actions, purportedly in compliance with government instructions, effectively undermined market forces and distorted competitive pricing mechanisms.

The CCP expressed significant concern that despite notable differences in input costs, economies of scale, market size, and gas prices, all respondents were charging an identical price of Rs1,768 per bag of urea.

The bench also pointed out that in a market where each entity’s production capacity and market share are widely known, such coordinated disclosure could not be considered incidental or benign. Instead, the joint announcement overtly demonstrated concerted action.

Moreover, repeated directives from the Fertilizer Review Committee (FRC) were issued to the respondents to address their failure to manage supply imbalances.

The CCP stated that it had issued warnings to the fertilizer manufacturers and FMPAC in 2010, 2012, and 2014, but these failed to produce any lasting improvement.