PSM fined Rs25 million for violating competition law

ISLAMABAD: The Competition Commission has fined the Pakistan Steel Mills (PSM) Rs25 million for abusing its dominant position in the low-carbon steel market by refusing to deal with customers like the Frontier Foundry (FFPL).
The commission held that the PSM had abused its position by refusing to deal with customers in violation of Section 3(3)(g) of the competition law.

It said that in a country like Pakistan, state-owned enterprises must take extra care to ensure that competition was not distorted because of their actions or omissions.

“Entry barriers for competitors to the PSM are extremely high and there are no plans in the foreseeable future for the establishment of a competing steel mill in the country,” the order said.

The order issued by CCP Chairman Khalid Aziz Mirza and members Rahat Kaunain Hassan and Dr Joseph Wilson said cartelisation was generally considered the most egregious violation of competition law and abuse of dominant position could have equally deleterious effects on competition and the consumers.

“It is pertinent to point out that although the duration of the infringement was not very long, it did continue till the commission intervened in the matter.” Therefore, a corrective conduct appears to be a result of proceedings initiated by the commission rather than independent efforts by the PSM, it said.

It said CCP investigators had taken into account not only the specific circumstances but also the general context of the infringement. “In this regard, it is particularly relevant that this infringement was born out of the conduct of a state-owned enterprise, indeed a state-owned monopoly in the relevant market, which was fully aware of the extent of the economic dependence on it of undertakings operating in the downstream market.

“Therefore, it behoves an undertaking in PSM’s dominant position to take whatever steps necessary to promote fairness, transparency and a reliable process in allocation of its coveted products.”

The CCP observed that all entities that had a dominant position in any product or service had more responsibility to avoid engaging in a monopolistic or exclusionary manner, and particularly for those products that would otherwise need to be imported.

It said the infringement would not have occurred without the active participation of the senior management of the PSM.

“Without prejudice to the aforesaid, we acknowledge that the conduct of the PSM has been cooperative since the change of its management in August 2009 and that has also been a relevant factor taken into consideration.

“It is our considered view that Rs25 million would be an appropriate penalty to be imposed on the PSM in this case.“The CCP has refrained from imposing a higher penalty which ordinarily would have been appropriate considering the gravity of the offence and instead imposed a relatively moderate fine, taking into account the fact that the abuse occurred for a period of three months and pertained only to SAE 1080 and SAE 1010 billets which comprise a very small portion of the annual production at PSM, and that all the abuse occurred under the leadership of a chairman who has since been removed.”

The commission warned the current and future PSM managements against engaging in anti-competitive conduct.