PSMA, other sugar mills directed to deposit 50pc of respective penalties in sugar cartelisation case

ISLAMABAD – The Sindh High Court (SHC) has directed the Pakistan Sugar Mills Association (PSMA) and 26 other sugar mills to deposit 50 percent of the respective penalties imposed upon them by the Competition Commission of Pakistan (CCP) in the sugar cartelisation case.

In 2021, the CCP conducted an inquiry against PSMA and its member undertakings for the prima facie violation of Section 4 of the Competition Act, 2010. As part of the enquiry, the CCP also conducted search and inspections at two premises of PSMA and of one of the sugar mills and impounded the proofs of their involvement in cartelisation. The enquiry report concluded that PSMA and its members have breached Section 4(1), 4(2) and 4(2)(c) of the Act, which was followed by the issuance of show cause notices and extensive hearings into the matter.

A full four member bench of the commission was constituted in the instant matter, comprising of, namely: Ms Rahat Kaunain Hassan (Chairperson) and three members: Ms Shaista Bano, Ms Bushra Naz Malik and Mr Mujtaba Ahmad Lodhi.

All the four members of the commission were unanimous in their view and arrived at an unqualified consensus on background facts, formulation of issues, determination of preliminary/technical objections, the determination of the relevant market and the spill-over effect, and the determination of Issue VI (ceasing of sugarcane crushing) as addressed in the opinion of Rahat Kaunain Hassan and Mujtaba Ahmad Lodhi dated 6 August 2021.

However, two members, Shaista Bano and Bushra Naz Malik recorded a different opinion dated 12 August 2021 on other issues, thus, the commission was faced with a deadlock situation. Therefore, having duly considered the overall purpose and intent of the Act, the attending public policy framework and consideration and the general public interest that the Act seeks to protect and enforce, the chairperson exercised her second and casting vote as envisaged under the Act to break the deadlock. This was the first time the commission passed a split decision.

The penalty imposed by the commission, which is the highest to date, was approximately Rs44 billion (approximately above $265 million) (based on the calculation of 55 mills’ 2019 turnover figures, including consolidated turnover figures for same group mills, available with the commission).

Enquiry report concludes PSMA and its members have breached Section 4(1), 4(2) and 4(2)(c) of the Act, which was followed by issuance of show cause notices and extensive hearings into the matter

After the CCP’s decision, four suits were filed against the decision in the Sindh High Court, by different sugar mills and Pakistan Sugar Mills Association. The Sugar Mills Association and other sugar mills also filed applications for interim injunction to restrain the competition commission from implementing the above-mentioned decision. The CCP, in response to the interim injunction application, requested the Sindh High Court that interim relief may only be granted, subject to deposit of respective penalties imposed upon sugar mills and Pakistan Sugar Mills Association by the commission.

On 13th June, 2022, the Sindh High Court, after hearing the parties granted the interim relief to Sugar Mills Association and other sugar mills only to the extent of casting vote decision of chairperson, and mentioned that chairperson’s casting vote decision shall remain suspended till the final disposal of the suit. However, the Sindh High Court also accepted competition commission’s request that the interim relief will only be granted on the condition that the parties must deposit 50 percent of the respective penalties imposed upon them by the competition commission with the Nazir of the Sindh High Court through a bank guarantee in two weeks’ time. With this condition, the injunction applications in the above terms are allowed, chairman/chairperson’s casting vote decision/ opinion shall remain suspended till the final disposal of the suit subject to furnishing above bank guarantee whereas applications under order XXXIX Rule 4 stand dismissed.

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