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Pakistan's Competition Commission (CCP) has imposed a Rs60 million penalty on the All Pakistan Edible Oil Tanker Owners Association after establishing findings of collusion in the transportation of edible oil and ghee across the country.
The fine is split into two equal components: Rs30 million for the collective determination of freight rates among association members, and a further Rs30 million for allocating transportation business through a 'chit and turn' rotation-based system.
According to the CCP's market intelligence report, the association collectively adjusted transportation rates on 89 separate occasions over a six-year period, raising freight rates 52 times and reducing them on 37 occasions during the same timeframe.
The Commission's investigation uncovered an asymmetric pricing formula tied to diesel costs. Under the arrangement, freight rates were increased by 0.75% for every Rs1 rise in diesel prices, while reductions were limited to just 0.5% for every Rs1 drop in diesel prices. This created a 50% disparity between upward and downward adjustments in response to identical changes in fuel costs.
The CCP also documented threats issued to blacklist tanker owners who offered discounted freight rates to clients. Mills that pressed for lower transportation charges were threatened with having their edible oil supplies halted altogether. The association had moreover stipulated a separate fine of Rs500,000 to be levied on both the tanker vehicle and its owner in the event of any violation of these terms.
The Commission stated that show-cause notices were served on the association, yet a new freight-rate circular covering 81 locations was nevertheless released in August, effectively bypassing the regulatory proceedings.
Representatives of the association admitted during the inquiry that freight rates had indeed been determined through mutual agreements among members. The association's network comprises approximately 2,362 tankers operated by around 1,700 registered owners, underscoring the considerable scale of the transportation infrastructure involved.
During a search operation, CCP officials seized rate circulars, internal agreements and computer records spanning the full six-year period. The seized material provided substantial evidence relating to the collective setting of freight rates and the coordinated allocation of transportation work among tanker operators.
The Commission subsequently ordered the immediate termination of the collective fare-determination system and the rotation- and slip-based business allocation mechanisms. The CCP's enforcement action stems from its conclusion that the association's practices curtailed independent competition among operators and involved coordinated decisions on both transportation rates and the distribution of business.
The Commission has stressed that the system must be discontinued without delay, putting an end to the collective rate-setting and rotation-based allocation practices identified during its proceedings.
Source: Samaa TV