Competition Commission of Pakistan (CCP) carried out a search and inspection of the offices of the Chairman and Vice-Chairman of All Pakistan Cement Manufacturers Association (APCMA), located in Karachi, today.
CCP undertook this inspection exercising its powers under Section 34 of the Competition Act 2010, and as part of an inquiry launched in May 2020 to investigate the possible anti-competitive activities by the cement manufacturers.
The resulting evidence suggests the possibility of a cartel or collusive arrangement between the cement manufacturers.
Two different teams entered and searched the offices of the Chairman and Vice-Chairman of APCMA located in Karachi and impounded the relevant records.
The inquiry in the cement sector was started based on the information gathered through various media reports, along with concerns and complaints expressed regarding a concurrent increase in cement prices, particularly during April 2020.
The reports indicated that an increase ranging between Rs. 45 and Rs. 55 per cement bag was apparently collectively decided in a meeting of the cement manufacturers held under the umbrella of APCMA.
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On September 24, 2020, the CCP had conducted a search and inspection of the APCMA main office and the office of the Senior Vice Chairman of the APCMA’s Executive Committee as along with the office of a senior employee of a major cement company in Lahore.
Moreover, the impounded records, including Whatsapp messages and emails, warranted conducting search and inspection in the South Zone as well for obtaining evidence relating to anti-competitive practices.
It is important to mention that various factors such as lower demand for cement in the first two quarters of 2020 along with an almost parallel increase in cement prices and the data collected from Pakistan Bureau Statistics and the cement companies, became the basis of CCP’s inquiry and the earlier search.
The sudden rise in prices by the cement manufacturers at a time when there is low demand compared to the installed capacity of the manufacturers, and considering that input fuel cost (coal and oil), transportation and interest rate have declined, raises suspicion of a collective rise in price by cement companies.
It is pertinent to mention here that the cement sector has a history of collusive activities, and they have been penalized in the past to an amount of more than Rs. 6.3 billion collectively, on account of forming a cartel, and involvement in the prohibited agreements in violation of Section 04 of the Act.
In 2012, the Commission initiated an inquiry against cement companies, however, the same could not be proceeded and concluded due to a stay order granted to cement companies by the Lahore High Court. The current inquiry was initiated in 2020.
