ISLAMABAD: The Competition Commission of Pakistan (CCP), the commission which ensures healthy competition in market, has issued a show-cause notices to Pakistan Automotive Manufacturers Authorized Dealers Association (Pamada) and its members in violation of Section 4 of the Competition Act, 2010.
The CCP issued the notice at a time when it is struggling to impose its powers due to the judicial system in the country. Most of the violators of CCP laws have stay orders on the cases by the courts.
Insurance Association of Pakistan (IAP) sent a letter to CCP informing it about Pamada’s decision of increasing the prices of paint jobs and body repairs. The CCP took a suo-moto action on the allegations against Pamada for setting prices and fixing rates of the repair jobs. Under the laws of CCP, making cartels and collusion is prohibited and violation of the laws result in hefty fines.
On May 07, after the preliminary inquiry by the commission, a warrant of search and inspection of Pamada’s premises was sanctioned and carried out under Section 34 of the Act.
According to the findings of the report, Pamada is taking decisions with respect to price-fixing of automobile paint jobs and body repairs, setting the prices of OEM spare parts, new automobile sales, and restricting inter-dealership hiring of experienced and technical staff.
Pamada is taking decisions with respect to dividing the new automobiles market and setting quotas for new sales. The association is also fixing prices of spares provided by the OEMs and strictly prohibiting any discounts offered to the end customers. The association also set the rates of paint jobs and body repairs in a collective decision. Evidence of collusion in the area of human capital was also found which restricts movement of experienced and technical human capital between the dealers.
The objectives of these arrangements between Pamada and its members are to prevent, reduce and restrict the healthy competition in the market.
The inquiry observed that cartelization and collusion are the worst forms of anti-competitive behaviour. They raise barriers to entry for new players, which further destabilizes the competition.
“When competitors take collective business decisions, the market and consumers suffer from uncompetitive prices, fewer choices, and reduced quality of products,” the notice mentions, “collusion and cartelisation also raise entry barriers, restricting entry of new players, which further stagnates competition.” the notice further added.
The automobiles sector in Pakistan is already very small stagnant, with only a few of major players competing in the market. In a situation like this any kind of cartelization and collusion in the sector will lead to a serious degradation of competition in the market, said the CCP.
What are your views about such practices by the players in the auto sector? Let us know in the comments.