National Reference Group Meetings

PHASE-I CULMINATION MEETING

7-8 September 2001, Goa, India

National Reference Group (NRG) Meeting

2nd NRG MEETINGS

1st NRG MeetinGS

LAUNCH MEETING

7 Up Project, December 20-21, Jaipur, India

Kenya, 31st October 2001, Nairobi

Tanzania, 5th November 2001, Dar-E-Salaam

Sri Lanka, 2nd November 2001, Colombo 

Zambia, 22nd November 2001, Lusaka

Pakistan, ,10th December 2001,  Islamabad

INDIA, 7th December 2001, New Delhi

South Africa, 26th November 2001, Johannesburg

2nd National Reference Group Meeting: PAKISTAN

Second Meeting of National Reference Group on Competition law & Policy

Organized by TheNetwork for Consumer Protection in Pakistan

December 8^th, 2001

TheNetwork for Consumer Protection has organized the second meeting of National Reference Group on Competition Law & Policy on December 8^th, 2001. The meeting was held in the meeting room of the Network office. TheNetwork was successful in ensuring that the participants were from different backgrounds, representing various civil society organizations, relevant government departments and ministries.

The meeting comprised half day of intense discussions on the situation of mergers and acquisitions and related issues with a focus on Pakistan. Ms. Kishwar Khan of Monopoly Control Authority presented her paper “Mergers in theory and practice: With special Reference to Pakistan”.

In the beginning of the program Mr. Aziz ur Rehman briefly introduced the idea behind the meeting and the subject matter of the day. He mentioned the salient features of the competition policy and its relationship with trade and consumer policies.

In her presentation, Ms. Khan dealt the issue at length and provided a detailed introduction of the area both from economic and legal perspective. Beside several other things she elaborated following points in depth:

1. What is a merger?
2. Concerns about mergers;
3. Why controlling mergers of different kinds, from competition and consumer’s point of view;
4. Analyzing mergers;
5. Options available to competition agencies to control mergers;
6. How mergers are being dealt within Pakistan;
7. Experience of developed countries to draw some guidelines.

She noted that a firm’s exercise of market power can harm consumers and other producers, through higher rather than competitive prices, reduced output and poor quality products. The rationale for merger control is simple: it is far better to prevent firms from gaining market power than to attempt to control market power once it exists. Most mergers pose little or no threat to competition in any market. Many are simply investment by firms with available cash. Others seek the fuller use of an under-use enterprise resource (e.g. an enterprise that has developed expertise in the marketing of some products may believe that it could use its expertise to market other products as well, or an enterprise that has developed a new technology may seek new applications for that technology).

She further explained that how do horizontal mergers hurt competition in the market place and its unilateral and coordinated effects. During her presentation, she focused on the process of analyzing a merger and gave a detailed account of proceedings in this regard. The foremost step is to determine whether the merger raises any competitive concerns. This can be achieved without the full analysis and in most cases the competition authorities don’t take further action. But if the possibility of competitive harm is identified, a more complete examination is required with respect to following:

1. Market definition and description;
2. Identification of firms that participate in the relevant market and their market shares;
3. Identification of potential adverse effects from the merger.

Towards the end of her presentation, she gave a brief account of mergers situation in Pakistan and how mergers are being dealt within Pakistan.

Discussion:

The presentation session was followed by discussion session. Many interesting but divergent views were emerged. Participant agreed that strong and promised competition policy and legislation can improve the current situation where consumers are suffering from unfair trade practices. The competition authority with its current powers and rule is a toothless tiger and without having a proper enforcement mechanism; it can not meet the challenges posed by mergers and mega mergers.

The participants were very keen in the process of post merger monitoring process conducted by Monopoly Control Authority. In this regard following specific cases were discussed during the sessions;

1. Exide and Automotive Batteries case;
2. Acquisition of Polka group of companies by Lever brothers Pakistan Ltd;
3. Pharmaceutical Mergers;
4. Post merger monitoring of Brook Bond Ltd. With Lever brothers of Pakistan Ltd;
5. Mergers of Polyester Staple Fiber manufacturing companies;
6. Merger of Tea marketing companies
7. Mergers in cigarette industry;
8. Treated water sector acquisition case;
9. Mobile phone sector: takeover case;
10. Merger of multinational companies.

The participants, at this stage, were not able to identify the most suitable case studies for Phase II of 7-up Project. However they were of opinion that research partner of the project should consider above mentioned cases in depth and then decide about future studies.

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