Fertilizer Companies
ISLAMABAD: The Competition Commission of Pakistan (CCP) took action on Tuesday by issuing show cause notices to the Fertiliser Manufacturers of Pakistan Advisory Council (FMPAC) and six prominent fertilizer companies.
This action was in response to allegations of colluding to fix urea prices, a suspected violation of Section 4 of the Competition Act, 2010.
Highlighting the significance of urea prices in determining the costs of essential food items, the CCP emphasized that any unwarranted increase in urea prices could burden farmers with higher production costs, consequently leading to elevated prices for consumers.
The CCP’s inquiry was instigated by an advertisement released by FMPAC in November 2021, announcing a ‘Maximum Retail Price of Urea at Rs 1,768 per 50kg bag’ amid reports of rising prices and shortages.
This advertisement was perceived as an association’s decision on the sale rate of urea, deemed a violation of Section 4(2)(a) of the Act, considering that urea prices had been deregulated under the Fertiliser Policy of 2001.
Further examination during the inquiry uncovered a trend of uniform pricing and price parallelism among the six member firms of FMPAC, indicating potential collusive behavior.
Despite variations in subsidized feedstock gas rates provided by the government to each plant, the observed uniformity in prices raised questions regarding the companies’ cost structures and the extent of subsidies received.
From a competition law standpoint, the CCP reiterated its stance against business associations engaging in price fixing or collusive practices.
Even if conveying government-set prices, the announcement of prices by an association is deemed a commercial decision beyond permissible activities.
The statement issued by the CCP also highlighted the broader economic implications of urea price hikes, contributing to persistent double-digit food inflation in Pakistan over recent years.
This underscores the ripple effect of such pricing decisions on the economy at large, emphasizing the urgency of addressing anti-competitive practices in the fertilizer industry.
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