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The Competition Commission of Pakistan (CCP) has slapped a hefty penalty of Rs42 million on United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL), holding them liable for an unlawful non-compete arrangement that breached Section 4 of the Competition Act, 2010.
According to a detailed order issued on Wednesday, the CCP found that UDPL and IBL had entered into a restrictive agreement that barred UDPL from venturing into the distribution of human pharmaceutical products across Pakistan for a period of three years. In return, IBL paid UDPL a staggering Rs1.131 billion as compensation—an arrangement that UDPL disclosed to the Pakistan Stock Exchange (PSX) without first seeking the necessary regulatory approval.
The CCP determined that this agreement amounted to an illegal market-sharing scheme designed to shield IBL’s business interests from competition. The Commission’s order highlighted that the true intent was to “erect a protective barrier around IBL’s operations,” secured by a massive payout, effectively excluding UDPL from competing and thereby harming market competition and consumers.
Companies Sought Approval Only After Facing Regulatory Action
While the contentious contract did include a clause obliging the parties to obtain an exemption from the CCP, they only sought approval after show-cause notices were served in June 2024. The Commission ruled this after-the-fact move insufficient to address the breach.
As a consequence, the CCP penalty on UDPL and IBL included fines of Rs20 million each under Section 4(1) and 4(2)(b) for participating in and executing an anti-competitive agreement. An additional Rs1 million penalty was imposed on UDPL under Section 38 for prematurely disclosing details of the arrangement to the PSX without prior regulatory clearance.
The CCP order has also directed both firms to submit a compliance report within 30 days, cautioning that failure to do so could trigger daily penalties. Furthermore, the case has been forwarded to the Securities and Exchange Commission of Pakistan (SECP) and PSX for any supplementary action they may deem necessary under their jurisdictions.
This landmark ruling underscores the regulator’s firm stance on protecting market competition and deterring similar anti-competitive practices in Pakistan’s corporate landscape.
