QUESTIONS

Questions



Questions

Question 1

Unreasonable monopoly power shall be deemed to have been brought about, maintained and continued if - (Binger 2008: 20-26)

(a) there has been created or maintained any such relationship between two or more undertakings as makes them associated undertakings where they are competitors in the same market and together produce, supply, distribute or provide not less than 1 [one third] of the total goods or services in such market;

(b) there has been any acquisition by one person or undertaking of the stock or assets of any other person or undertaking, or any merger of undertakings, where the effect of the acquisition or merger is likely to create monopoly power or to substantially lessen competition in any market, including any acquisition which creates any such relationship as is referred to in clause (a);

(c) any loan is granted by a bank or insurance company to any of the associated undertakings of amounts greater or on terms more favourable than for loans made available to other undertakings in comparable situations, or any loan is granted by a bank or insurance company to a person or undertaking not associated with it on the condition or understanding that the borrower or any of its associated undertakings will make any loan to a person or undertaking associated with the lender.

Competition agencies (CAs) seek to identify and prevent such acquisitions and mergers which may increase the possibility of abusing a dominant position by a single enterprise and certain restrictive agreements by two or more market players. Horizontal mergers are the most suspect in this regard, since by definition, they reduce the number of independent competitors in a particular market. (Binger 2008: 20-26)

Here I would like to point out that the MCA was created in 1971 and by the time it became operative in 1972, the 'phenomenon' that this organization was to regulate, entered a state of fundamental change. Beginning early in 1972, there followed the widespread nationalization of the 1970s. These developments considerably reduced the scope of the private sector. However, in the late 1980s, a pro-market shift lead to privatization, deregulation and liberalization. These policies gave boost to the private sector and in recognition thereof the Government separated the MCA from Corporate Law Authority in 1994 (of which it was working as a Wing). In this background, the case law is not so rich in Pakistan, however, a review of selected cases is presented in the paragraphs to follow.

Pencils manufacturer's case

Facts of the case: Crescent Pencils Limited and Indus Pencils Limited both had market share exceeding the threshold limit.

Analysis of the facts: Prima facie it was suspected that associated undertakings had more than threshold market share. Upon deep probe, the undertakings were able to establish that the legal requirements for dominance were not met.

MCA's Order: MCA agreed in its Order that the Directors of the two companies, though were related to each other but were not the same 'persons' as required in the definition of the associated undertakings in the MRTPO, ...