The Competition Commission of Pakistan (CCP) on Friday imposed a penalty of Rs10 million on the Engro Vopak Terminal Limited (EVTL) for violating competition law.
A CCP bench comprising of Chairperson CCP Rahat Kaunain Hassan, Vadiyya Khalil and Dr. Joseph Wilson, passed an order in respect of the proceedings initiated against EVTL and Port Qasim Authority (PQA) for entering into a prohibited agreement in violation of Section 4 of the Act, whereby a penalty of Rs 10 million was imposed on the company for its failure to seek exemption under Section 5 of the Competition Act, 2010.
PQA was directed to take immediate action to address the competition concerns stipulated in the order regarding the agreement within a given time frame. Failure to comply with the aforesaid directions would make PQA and EVTL further liable for a penalty of Rs 1 million for each day default.
The exemption has been granted subject to the conditions imposed by CCP. Such failure would constitute a breach of conditions having the effect of cancellation of the exemption. Moreover, PQA has been directed to seek exemption in respect of all of its agreements granting concessionary rights to private undertakings. CCP took notice on its own of exclusive rights granted to EVTL through a concessionary agreement entered into by and between PQA and EVTL to handle and store all liquid chemicals at Port Qasim for 30 years which appeared to have an object or effect to prevent, restrict and reduce competition within the relevant market unless exemption is sought under Section 5. Show Cause Notices were issued to PQA and EVTL for, prima facie, contravention of Section 4(1) and 4 (2) (a) & (d) of the Act.
Despite general order issued by CCP and published in the official gazette vide SRO 51(I)/2008, which required all undertakings to seek exemption within 90 days from the date of issuance of general order, EVTL raised the objection and remained persistent throughout the proceedings that the act was not applicable on the concession agreement as it was executed prior to promulgation of the act.
However, PQA filed an application under Section 5 to seek exemption in respect of the concession agreement during the course of hearing. The bench in its order has held that all agreements entered into prior to promulgation of the act but are continuing and have object or effect to restrict competition within the relevant market, fall within the purview of Section 4 of the Act and are required to seek exemption under Section 5. Therefore, EVTL has been penalised in sum of Rs.10 Million for its failure to seek exemption under Section 5 of the Act.
The bench in its findings has acknowledged that public private partnerships fill the infrastructure gap while effectively addressing technical and financial needs of large projects and also the efficiency gains resulting in terms of economies of scope and scale and acquired synergies that are passed on to the consumers. However, concerns have been raised that exclusivity under a concession agreement sanctions an extreme market power to the concessionaire that is often prone to be abused and can have an adverse effect on economic growth if competition concerns are not taken into account.
