The Competition Commission of Pakistan (CCP) has started preliminary investigations into monopolistic practices by manufacturer of polyethylene terephthalate (PET) resin, PET bottles, performs and BOPET polyester film.
CCP's move follows separate complaints lodged by M/s Astro Plastics (Private) Ltd and M/s Fine Star Industries (Pvt) Ltd, duly supported by other industry players namely M/s Alhafiz Industries (Pvt) Ltd, M/s Karim Containers (Pvt) Ltd, M/s Trans Pak (Pvt) Ltd, M/s Mehran Plastics Industries (Pvt) Ltd, M/s Pak PET (Pvt) Ltd, and M/s Plaspack (Pvt) Ltd.
Complainants cited CCP's order in Pakistan Vanaspati Manufacturers Association (PVMA) case, where similar conditions had existed and a penalty was imposed on PVMA by CCP. Sources in the Competition Commission of Pakistan told Business Recorder that that the commission had started preliminary investigations, as "prime facie there are anti-competition activities which have given rise to competition concerns". After the completion of preliminary investigations, the Commission would go deep to dismantle monopolistic practices to allow space for other manufacturers in the field to compete on equal terms.
The recently set up Rs 3.38 billion plant of M/s Astro Plastics (Private Ltd, at Port Qasim is one of the two manufacturers of BOPET film (polyester films) in Pakistan. Its annual production capacity is 18,000 tons whereas annual production capacity of its competitor M/s Novatex is 25,000 tons. In its complaint M/s Astro Plastics has highlighted that M/s Novatex is indulging in flagrant abuse of its dominant position in PET resin and polyster film market in violation of Section 3 of Competition Act 2010. Furthermore, Federal Board of Revenue (FBR) has made a decision of imposing a tariff structure which falls under the definition of "prohibited agreement" as per Section 4 of the Competition Act, 2010
Similarly M/s. Fine Star Industries (Pvt) Ltd duly supported by other industry players who are manufacturer of PET performs; PET bottles and other plastic products in their complaint have highlighted that M/s Novatex group is indulging in flagrant abuse of its dominant position in PET resin, PET bottles and preforms market in violation of the same sections of Competition Act, 2010 cited above. M/s Novatex enjoys absolute monopoly in resin, preform and film business and undercuts its own buyers by dictating the price set by them.
Whereas effective duty on Novatex's raw material is 2.17%, on Astro Plastics' raw material effective duty has yet to be fixed. According to stakeholders, since two different duty structures for the same final product would render Astro Plastic uncompetitive in the market, the fair duty for import pf PET resin should be not more than 2%. Even with a 2% import duty on PET resin, Novatex would have a 15-20% advantage due to its own resin manufacturing facility, they said adding that any duty above 2% will in effect create a monopoly in the country.
Looking at the financial results of Novatex's in 2011, the sales were Rs 33 billion and profits Rs 1.9 billion. This success cannot be at the expense of fair competition, stakeholders said. Being a vertically integrated group and market leader both a upstream products (manufacturing of PET resin) and downstream products (manufacturing of polyester film, Novatex is enjoying dominant position in Pakistan' market and abusing its dominant position at both levels.
In its complaint, M/s Astro Plastics requested the CCP to look into the matter of "abuse of dominant position of PET resin and BOPET film market in Pakistan" by Novatex, with the assistance of the Ministry of Industries. The CCP has also been requested to ensure that a level playing field is available to all market players.
Similarly, M/s Fine Star Industries (Pvt) Ltd pointed out in its complaint that Novatex is abusing its dominant position in PET resin market by charging different prices to different grade of resin disregarding the fact that all grade of resin are formed from same raw material in same proportion and almost similar manufacturing process.
They further said that since it formation in 1984, Novatex group has enjoyed substantial duty protection on PET resin (bottle grade) from as high as 45% to the current level of 9%.
Over the years Novatex has grown from strength to strength which can be ascertained from its financial performance during the last three years as the topline of the company registered a profound 45% CAGR while the bottom-line notched an impressive 37% CAGR during this period. Apparently, there is no justification for providing tariff protection. They have also invited attention of the CCP to its note issued in August this year to the Ministry of Information Technology, regarding the issue of policy directive within the domain of the Ministry, but anti-competitive in nature.
Source by :
http://www.brecorder.com/business-a-economy/189/1234478/
