The Competition Commission of Pakistan (CCP) has taken action against anti-competitive conduct in the fertilizer sector, imposing Rs. 50 million in penalties on each of the six major urea manufacturers, in addition to a Rs. 75 million penalty on a leading industry association.
The combined Rs. 375 million fines were imposed following a detailed inquiry initiated suo motu. A CCP bench comprising Kabir Ahmed Sidhu and Salam Amin concluded that six urea manufacturing companies—Fatima Fertilizer Limited, Fauji Fertilizer Company Limited, Fauji Fertilizer Bin Qasim Limited, Fatima Fertilizer Company Limited, Engro Fertilizer Company Limited and Agritech Limited—colluded with trade association FMPAC to effectively fix the price of urea across Pakistan.
Such conduct, it ruled, goes beyond the bounds of lawful information dissemination and enters into the realm of anti-competitive behavior in violation of Section 4 of the Competition Act, 2010.
Despite claiming price independence, the manufacturers failed to justify their synchronized pricing strategy. The CCP’s investigation uncovered that the conduct not only distorted competition, but also harmed farmers across Pakistan, especially during the critical Rabi and Kharif seasons, by artificially influencing fertilizer prices and limiting market choice.
The respondents’ attempt to claim protection under the “state action doctrine” was also rejected. The bench held that no formal government directive or compulsion existed to justify the collusive behavior.
Instead, it ruled, the respondents took advantage of a federal government direction regarding initiating an awareness campaign encouraging farmers regarding urea price and used it as a tool to fix the price in due coordination among themselves, jointly announcing a uniform price for urea buyers. The bench also held that such “actions, under the pretext of complying with government instructions, effectively undermined market forces and distorted competitive pricing mechanisms.”
It was also noted with great concern that despite significant variations in input costs, different economies of scales, size of the market, different prices of gas etc., all respondents were charging an identical price for a urea bag, i.e. Rs. 1,768/bag.
The bench further noted that “in a market where each undertaking’s production capacity and market share are matters of common knowledge, such a coordinated disclosure cannot be viewed as incidental or competitively benign. Rather, the joint announcement constitutes an overt manifestation of concerted conduct.” Moreover, repeated directions from the Fertilizer Review Committee were given to the respondents to address their failure to manage supply imbalances.