Cartelization: CCP raids offices of two tractor manufacturers


Web Desk
As a part of an investigation against tractor manufacturers for the a violation of competition laws, the Competition Commission of Pakistan (CCP) has raided and searched the premises of Millat Tractors Ltd (MTL) Lahore and Al-Ghazi Tractors Ltd (AGTL) Karachi.
According to a spokesman of the cCP, the search inspections were carried out under Section 34 of the Act. Both the undertakings fully cooperated by providing the relevant record, documents, meeting minutes and computer-stored information to the two CCP search teams. Some critical data has been impounded during the search and inspections.

The CCP initiated the enquiry upon receiving concerns through the Pakistan Citizen Portal about a drastic increase in the prices of tractors at different points in time despite subsidy relief given by the government on sales tax and a great extent of localisation in the tractors industry. The complainants also alleged that the tractors being manufactured were of substandard built quality resulting in a frequent breakdown.
The tractor industry in Pakistan appears to have a duopoly market structure, which makes it more susceptible to collusive activities. Among the three manufacturers, Millat Tractors has a 70 per cent market share (in FY2020-21), and Al-Ghazi Tractors has a 29 per cent market share (in FY 2020-21). The duo has a collective market share of 99 per cent.
The CCP’s preliminary investigation shows that both the tractor manufacturers sequentially increased their prices in 2021, and the quantum of percentage increase was approximately similar in the case of alternative products, i.e. tractors. Such a sequential price pattern was also observed in the years 2018 – 2020. Millat tractors increased prices by 1 – 5 per cent in October 2018, 7 – 13 per cent in July 2019, 2 – 3 per cent in March 2020, and 5 – 7 per cent in July 2020. Similarly, Al-Ghazi Tractors increased the prices of its various models by 3 – 5 per cent in October-November 2018, 5 – 10 per cent in August 2019, 1 – 4 per cent in March 2020, and 5 – 7 per cent in July 2020.
The tractor industry is over 90 per cent localised, and there is hardly any technological advancements by the tractor manufacturers. Thus, the price increases by the market leader, i.e. Millat Tractors, followed by the second biggest market player, i.e. Al-Ghazi Tractor, in close succession, and similar quantum indicate the possibility of price coordination between the tractor manufacturers.
The investigation so far reveals that the Provisional Booking Order Forms (PBOs) of Millat and Al-Ghazi also appear to be similar, unreasonable, and exploitative in terms of the Act and indicate the possibility of collusion.
The CCP is also investigating the possibility of Resale Price Maintenance (RPM) by one of these two companies. Through RPM, a supplier pressures a business not to sell products below a specific price; hence it is detrimental to competition.
The search inspections have been carried out to see if the tractor manufacturers are involved in the alleged anti-competitive activities such as collusion and collective decision making with respect to price hike of tractors, undue shortage despite of excessive capacity, identical clauses in the PBOs of both companies, and RPM.
The CCP is mandated under the Act to ensure free competition in all spheres of commercial and economic activity to enhance economic efficiency and protect consumers from anti-competitive Behaviour.


Please enter your comment!
Please enter your name here