Fertilizer Manufacturers Issued Show Cause for Price Fixing

The Competition Commission of Pakistan (CCP) has taken action against the Fertilizer Manufacturers of Pakistan Advisory Council (FMPAC) and six leading fertilizer companies for allegedly fixing urea prices, a potential violation of the Competition Act, 2010.

Urea prices play a critical role in determining the prices of essential food commodities, with any arbitrary increase posing a threat to farmers’ costs and subsequently leading to higher prices for consumers.

Following an inquiry prompted by an FMPAC advertisement in November 2021, where a ‘Maximum Retail Price of Urea at Rs. 1,768 per 50kg bag’ was announced during a period of rising prices and reported shortages, the CCP found prima facie evidence of competition law violations.

The inquiry revealed that urea prices were deregulated under the Fertilizer Policy of 2001, and the advertisement’s contents were viewed as a decision by an association on the sale rate of urea, potentially violating Section 4(2)(a) of the Act.

Additionally, a pattern of uniform pricing and price parallelism among urea companies was observed, indicating possible collusive activity.

Despite receiving subsidized feedstock gas from the Government of Pakistan, with varying rates for each plant, these companies’ prices showed uniformity in some instances, raising questions about their cost structures and subsidies received.

The CCP reiterated its stance against price fixing or collusive practices, emphasizing that associations should refrain from engaging in such activities.

The persistent double-digit food inflation in Pakistan over the past few years highlights the significant impact of urea price hikes on the broader economy. CCP’s investigation underscores the importance of ensuring fair competition and preventing anti-competitive behavior to safeguard consumer interests and promote economic stability.