The competition gap

By Amber Darr
Published in Dawn on May 28, 2023

THE promulgation of Pakistan’s first Competition Ordinance in October 2007, in the same week as the more infamous National Reconciliation Ordinance, was a legislative non-event. Not only was the country preoccupied with the increasingly vociferous calls for general elections but also the subject of competition was too opaque, too distant to attract the interest of the ordinary citizen who was only too used to having the country’s economic affairs decided behind closed doors, usually at the bidding of the World Bank and the IMF.

In the 15 years since its adoption, the Pakistani competition legislation, the composition, and priorities of the national competition authority — the Competition Commission of Pakistan — and the focus, extent, and quality of competition enforcement in the country has undergone several permutations: the 2007 Ordinance has been replaced by the Competition Act, 2010, the CCP has gone through five chairpersons and several new members, and has increasingly sought to balance between penalising violations and raising awareness of the objectives of the law.

Unfortunately, the CCP’s efforts to raise awareness have not displaced the perception amongst businesses that competition is a foreign concept which is at odds with the development growth aims of the Pakistani economy. The perception is further compounded by the fact that the Pakistani competition legislation is indeed modelled on the United States and the European Union competition regimes. However, it is also true that since 1980, more than 120 countries, many of which are developing countries, have been convinced of competition’s economic promise and have adopted some version of a modern competition law.

South Asia was introduced to the idea of competition through multilateral organisations engaged in the delivery of the second-generation reforms in the region. India became the first South Asian country to adopt a modern competition act in 2002, Sri Lanka followed in 2003, Nepal and Pakistan in 2007, Bangladesh in 2012 and the Maldives in 2021. Bhutan, though too small and too economically intertwined with India to need a competition legislation, adopted a competition policy in 2014 and revised it in 2020. Even the politically unsettled Afghanistan engaged an Indian law firm to draft the Competition Act 2011; however, this law was not enacted.

The South Asian rationale for adopting modern competition legislations was essentially twofold: to enhance domestic economic efficiency and to signal to international corporations their desirability as business partners. On the domestic front, modern competition laws were expected to help these countries break quota- or price-fixing cartels and punish the abuses of market power aimed at putting less powerful competitors out of business, while on the international front, it was hoped that a reputation for effective competition enforcement would attract foreign investment and enable the countries to integrate more fully in an increasingly globalised economy.

However, so far only India and Pakistan have made any progress towards realising the potential of these laws. Within a year of the promulgation of the 2007 Ordinance, the CCP had created a stir in the economy by taking on banks, fertiliser, cement and LPG companies. On the other hand, the 2002 Indian competition act became embroiled in a constitutional challenge shortly after enactment and it was only five years later after the act had been duly amended, that the Competition Commission of India was finally made operational. Interestingly, however, over time Pakistan emerged as the hare to India’s tortoise: while the CCP’s performance has declined (even coming to a complete halt in 2014) the ambit of CCI’s operations has only grown steadily over time.

This variation in the performance of the Indian and Pakistani competition regimes is largely attributable to two factors: the extent of governmental support available to the competition authorities and the attitude of the courts towards them. Once it had overcome the initial legal obstacles, the Indian government, remained sure-footed and simultaneously established the CCI and the Indian Competition Appellate Tribunal. However, the Pakistani government first delayed enacting the competition act, and then establishing the Pakistani Competition Appellate Tribunal. The absence of a specialised appellate forum increased pressure on the Pakistani courts that rather than deciding competition-related matters, restrained the CCP from recovering fines and thereby reduced its effectiveness.

It is no surprise that with its wings clipped by governmental and judicial indifference, the CCP appeared to lose its appetite for politically sensitive enforcement and allowed powerful sugar and wheat cartels to ravage the economy while it focused on the more easily detected deceptive market practices. There was some hope for CCP’s revival in October 2020 when the Lahore High Court in its order in ‘LPG Association of Pakistan vs Federation of Pakistan’endorsed the validity of the competition act and the CCP, and decided nearly 100 competition-related petitions that had been pending for more than 11 years. However, both the CCP and the businesses to whom it was addressed, challenged the judgement before the Pakistan Supreme Court where it remains pending.

The real twist in the Pakistani competition story, therefore, is not that it followed Western dictates to adopt a law that was inherently unsuited for its economic needs or aspirations but that the Pakistani legislature and judiciary, and even the executive that had initially championed the law, have neither supported nor facilitated the meaningful operation of the competition regime. While the extent to which Pakistan has fallen behind in this regard has become only too evident as India adopts a new competition regime this month to address the complexities of the digital economy, the real casualties of its tardiness are the entrepreneurs and innovators struggling to make space for themselves in markets that continue to be in the stranglehold of large corporate groups, and ultimately, the Pakistani consumer who deprived of choice, quality and price options remains at their mercy.

The writer is a barrister and an advocate of the Supreme Court of Pakistan. She teaches competition law at the University of Manchester.

Her book, Competition Law in South Asia: Diffusion and Transfer, was published by Cambridge University Press in February 2023.

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