Pharmaceutical companies convicted for colluding on a Rs1.13 billion anti-competitive agreement in their industry.
The Competition Commission of Pakistan (CCP) has imposed a total penalty of Rs42 million on United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL) for violating Section 4 of the Competition Act, 2010. The companies were found guilty of entering into an anti-competitive agreement worth Rs1.13 billion, which was a non-compete pact in the pharmaceutical sector.
The agreement, which aimed to establish a protective barrier around IBL's operations, was considered an illegal market-sharing arrangement that foreclosed competition and was executed in clear contravention of the law. IBL paid Rs1.131 billion to UDPL as compensation, an arrangement that was not approved by the regulatory authorities before disclosure to the Pakistan Stock Exchange (PSX).
The non-compete agreement essentially restricted competition between UDPL and IBL, likely by preventing them from competing against each other or restricting market access. This agreement was found to undermine competitive dynamics and harm consumers.
In addition to the penalties imposed for the anti-competitive agreement, UDPL was levied an additional penalty of Rs1 million under Section 38 for making disclosures to PSX without regulatory clearance. The CCP also found that UDPL entered into a restrictive agreement with IBL that prevented UDPL from entering the distribution market of human pharmaceutical products in Pakistan for three years.
The CCP's order directed UDPL and IBL to submit a compliance report within 30 days and warned of additional daily penalties for continued non-compliance. The CCP also referred the matter to the Securities and Exchange Commission of Pakistan (SECP) and the PSX for any further action deemed necessary under their respective legal frameworks.
It is worth noting that the CCP granted exemptions to the logistics and transport sector, but this is not directly related to the anti-competitive agreement case involving UDPL and IBL. The CCP's decision to impose penalties on UDPL and IBL reflects its commitment to enforce fair competition and prevent practices that harm market dynamics and consumer interests. The case highlights the regulator's vigilance in the pharmaceutical sector to curb monopolistic or collusive practices.
The CCP's actions serve as a reminder to companies operating in Pakistan to comply with competition laws and regulations to maintain a fair and competitive market. The CCP will continue to monitor and enforce competition laws to protect consumers and ensure a level playing field for all market participants.
The non-compete agreement between United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL) was found to be in violation of the Competition Act, 2010, as it undermined competitive dynamics in the business sector, specifically the pharmaceutical industry, and financial harm was inflicted upon consumers. The Securities and Exchange Commission of Pakistan (SECP) and the Pakistan Stock Exchange (PSX) may take further action against UDPL and IBL due to their non-compliance with regulatory requirements in the finance realm.
