The Supreme Court has upheld the CCP finding that the Pakistan Vanaspati Manufacturers Association (PVMA), which represents vegetable ghee and cooking oil producers, violated competition law by collectively determining prices of ghee and cooking oil.
A two-member Supreme Court bench comprising Justice Jamal Khan Mandokhail and Justice Salahuddin Panhwar upheld the findings of the Competition Commission of Pakistan (CCP) and the Competition Appellate Tribunal (CAT).
The court ruled that PVMA’s conduct amounted to prohibited price-fixing under Section 4 of the Competition Act, 2010.
However, the Supreme Court reduced the penalty imposed on the association from Rs50 million to Rs30 million and directed PVMA to deposit the revised amount.
PVMA Fixed Prices On Behalf Of Members
The case dates back to consultations between the federal government and PVMA during 2007-09, when authorities were seeking reductions in the prices of ghee and cooking oil.
PVMA participated in discussions with the government and later communicated the agreed prices to its member companies.
The CCP subsequently examined the arrangement and concluded that the association had negotiated and determined prices on behalf of competing businesses.
The commission found that the practice violated Section 4(1), read with Section 4(2)(a), of the Competition Act, 2010.
The CCP imposed a Rs50m penalty on PVMA. The Competition Appellate Tribunal later upheld the commission’s decision, prompting the association to challenge the findings before the Supreme Court.
The apex court has now upheld the substantive finding while reducing the financial penalty.
Supreme Court Says Competitors Must Set Prices Independently
In its judgment, authored by Justice Jamal Khan Mandokhail, the Supreme Court emphasised that competing businesses must independently determine their prices based on their own commercial considerations.
The court said collective price determination by competitors undermines the competitive process.
It also clarified that such conduct remains unlawful when it is carried out through a trade association rather than directly by individual companies.
According to the judgment, an association representing competing businesses cannot replace independent commercial decisions with a common price agreed on behalf of its members.
The ruling reinforces the principle that businesses operating in the same market must make pricing decisions independently rather than coordinating prices through industry bodies.
Lower Prices Do Not Make Price-Fixing Legal
The Supreme Court also addressed an important argument concerning the agreed prices.
The court noted that the prices determined through the arrangement were lower than prevailing market prices. However, this did not make the agreement lawful.
According to the judgment, lower prices are ordinarily associated with competition and can benefit consumers. In this case, however, the legal violation arose from the collective determination of prices by an association representing competing businesses.
The court therefore rejected the idea that an agreement should be considered lawful simply because it results in lower prices for consumers.
The ruling establishes that the method used to determine prices is important under competition law, regardless of whether the resulting price is higher or lower than the prevailing market rate.
Public Interest Argument Does Not Override Competition Law
The Supreme Court further held that an arrangement cannot escape competition law merely because it is intended to serve the public interest.
The government had been consulting PVMA as part of efforts to reduce ghee and cooking oil prices. However, the court found that this did not justify interference with independent price competition.
The judgment stressed that competing businesses must retain the ability to make their own pricing decisions.
Even when government consultations are aimed at providing relief to consumers, collective price-setting by competing companies can undermine the competitive process.
The ruling therefore draws a distinction between legitimate government policy measures and coordinated commercial decisions by competing businesses.
Penalty Reduced From Rs50m To Rs30m
While the Supreme Court upheld the CCP finding that PVMA had engaged in prohibited price-fixing, it reduced the penalty imposed on the association.
The original penalty of Rs50m has been reduced to Rs30m.
The court directed PVMA to deposit the revised amount.
The decision means the central finding against the association remains intact, even though the financial penalty has been reduced.
Ruling Strengthens Competition Law Enforcement
The Supreme Court’s decision could have wider implications for trade associations and businesses across Pakistan.
Industry associations often represent the collective interests of companies operating in the same sector and may engage with the government on issues such as taxation, regulation, production costs and consumer prices.
However, the ruling makes clear that such interactions cannot be used to coordinate commercial decisions among competing businesses.