2022 CLD 790 is a seminal judgment by the Competition Commission of Pakistan concerning anti-competitive practices in the aviation sector, specifically focusing on the exclusive rights granted to a consortium by the Pakistan Civil Aviation Authority (CAA) for fuelling facilities at Jinnah International Airport, Karachi (JIAP).
Below is a detailed commentary and its implications for future legal and economic scenarios:
Commentary on the Judgment
This case delves into whether the 1961 and 1994 agreements between the CAA and a consortium of oil companies violated the Competition Act, 2010, by creating monopolistic conditions in the aviation fuel market. The agreements conferred exclusive operational and maintenance rights over fuelling facilities, thus effectively barring competitors.
The Competition Commission identified that:
Exclusivity and Market Closure: The agreements hindered competition by granting the consortium dominance over the fuelling system and preventing new entrants. This was deemed a breach of Section 4 of the Competition Act, which prohibits agreements that restrict market competition.
Necessity of Concession Agreements: While recognising that concession agreements are vital for infrastructure projects of national importance, the judgment emphasised the need for compliance with competitive practices. Concessions must demonstrate pro-competitive effects that outweigh any anti-competitive distortions.
Regulatory Boundaries: The Commission refrained from overstepping its jurisdiction into land allocation disputes between the CAA and the complainant. Its focus remained firmly on restoring competitive market conditions.
Retrospective Application of Competition Law: The Commission clarified that while pre-2007 agreements might not fall under its purview, any continuing anti-competitive impact post-2007 could be scrutinised.
Importance of the Case
This decision is a cornerstone for Pakistan’s aviation and energy sectors for several reasons:
Market Liberalisation: The judgment mandates the opening of critical aviation facilities to competition, potentially reducing monopolistic practices in other sectors.
Legal Precedent: It establishes that concession agreements, while essential, are not above competition laws. Future agreements must incorporate provisions for transparency and non-exclusivity to avoid similar challenges.
Consumer Welfare: By addressing monopolistic practices, this decision safeguards consumer interests, ensuring fair pricing and improved services.
Implications for Future Cases and Policy
Stringent Review of Agreements: This judgment sets a standard for the review of public-private partnerships (PPPs) and concession agreements in Pakistan. It will likely compel regulators to draft agreements with explicit provisions to prevent anti-competitive outcomes.
Enhanced Role of the CCP: The Commission’s assertive stance in this case positions it as a critical watchdog for competitive practices in Pakistan, encouraging stakeholders to align with its requirements proactively.
Guidelines for Infrastructure Projects: Projects involving exclusivity clauses, especially in mega-infrastructure, must now balance investor interests with competition laws, which may lead to a reshaping of policies governing PPPs and related agreements.
Sectoral Impact: The aviation and energy sectors could witness a shift toward more competitive practices, potentially attracting foreign investors wary of monopolistic frameworks.
This case reinforces the principles of free competition as a cornerstone of economic efficiency and consumer protection, establishing a robust framework for addressing monopolistic practices in Pakistan’s evolving market landscape. [end of response]
Laws Cited in the Case
The judgment in 2022 C L D 790 refers to several provisions of laws and prior case precedents. Here is a detailed breakdown:
Competition Act, 2010
Section 4: Prohibited agreements, especially those restricting competition.
Section 5 & 8: Exemptions for certain agreements under specific conditions.
Section 9: Criteria for granting exemptions.
Section 37: Enquiries and investigations by the Competition Commission.
Section 62: Validation of actions and prohibition of abuse of dominant positions.
Constitution of Pakistan, 1973
Article 12: Prohibition against retrospective punishment.
Article 4: Right of individuals to be dealt with in accordance with the law.
Article 5: Loyalty to the state and obedience to the Constitution.
Judicial Precedents
PLD 2020 SC 641: On the presumption of prospective application of statutes.
PLD 2011 SC 997: On adversarial vs non-adversarial systems in legal proceedings.
2020 CLD 1232 (PHC): On the regulated nature of trade, business, and professional freedoms.
2019 CLD 164 (NFC Employees Housing Society): On the jurisdiction of regulatory authorities.
2019 CLD 1285 (Oil Companies Advisory Council): Discussing anti-competitive agreements.
2015 CLC 493: Explaining the concept of prima facie evidence.
2021 CLD 214 (LPG Association of Pakistan): On the quasi-judicial role of regulatory commissions.
Other References
Black’s Law Dictionary: For definitions of “prima facie” and “opinion.”
Maxim: Nova Constitutio Futuris Formam Imponere Debet, Non Praeteritis (new law regulates future acts, not the past).
Full Facts of the Case
Background:
The complainant, Hascol Petroleum Limited, alleged anti-competitive practices at Jinnah International Airport, Karachi (JIAP), related to fuelling facilities managed under agreements between the Civil Aviation Authority (CAA) and a consortium of oil companies (PSO, Shell, and Total Parco).
These agreements included:
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- The 1961 Agreement: This was a concession agreement among oil companies for owning and managing storage and hydrant facilities. The agreement was indefinite, allowing third parties to use the facilities at the discretion of existing participants.
- The 1994 Agreement: This granted exclusive operational rights over the hydrant fuelling system at JIAP to the consortium for 30 years, preventing other oil marketing companies (OMCs) from supplying fuel to airlines through the system.
Key Allegations:
- The agreements effectively barred competition by conferring exclusive rights to the consortium for refuelling aircraft, violating Section 4 of the Competition Act, 2010.
- The exclusivity restricted other OMCs, like Hascol, from operating at JIAP, leading to an unfair advantage for the consortium.
Procedural History:
- The Competition Commission initiated an enquiry following Hascol’s complaint and issued show-cause notices to the CAA and consortium members.
- The enquiry report concluded that the agreements in question contravened Section 4 of the Competition Act by restricting competition.
Arguments by Respondents:
CAA:
-
- Asserted that the existing fuelling facilities were sufficient to meet demand and did not restrict competition.
- Stated that land allocation for new facilities fell under its sole discretion, not within the Commission’s jurisdiction.
- Argued that the agreements were executed before the Competition Act was promulgated and should not be retrospectively scrutinised.
PSO, Shell, and Total Parco:
-
- Claimed the agreements were not inherently anti-competitive and allowed for competition within the consortium.
- Maintained that alternative fuelling systems (tankers/bowsers) could supplement the hydrant system, thus not excluding competitors.
- Asserted that exclusivity clauses were lawful and necessary for the viability of such projects.
Findings of the Commission:
Anti-Competitive Agreements:
The 1961 Agreement’s clause granting access to third parties at the discretion of existing members was deemed a mechanism for exclusion.
The 1994 Agreement explicitly prohibited competitors from using the hydrant fuelling system, creating a monopoly for the consortium.
Exclusivity and Market Distortion:
The agreements collectively created barriers to entry, limiting Hascol’s ability to compete and serve airlines at JIAP.
Concession Agreements and Exemptions:
Recognised that concession agreements might be necessary for large infrastructure projects, but they must comply with competition laws.
The consortium failed to apply for exemptions under the Competition Act for restrictive clauses.
Jurisdiction:
Rejected the argument of retrospective application, noting that the Competition Act applies to ongoing conduct post-enactment.
Final Orders:
- Directed the respondents to amend agreements and open the fuelling system for competition after the expiry of the 1994 Agreement in May 2022.
- Recommended the consortium apply for retrospective and prospective exemptions under the Competition Act, failing which exclusivity clauses would be void.
- Declined to intervene in CAA’s land allocation processes but upheld its authority to regulate competition in the aviation fuel market.
This judgment serves as a landmark decision in enforcing competition laws within Pakistan’s aviation sector, addressing monopolistic practices and promoting fair market access. Let me know if you’d like further breakdowns or clarifications. [end of response]
Key Quotations/Notable Law Quotes from the Judgment :2022 C LD 790
[Competition Commission of Pakistan]
Before Ms. Shaista Bano and Mujtaba Ahmad Lodhi, Members
SHOW CAUSE NOTICES ISSUED TO MESSRS PAKISTAN CIVIL AVIATION AUTHORITY AND OTHERS: In the matter of File No. 146 / HASCOL / C&TA / CCP / 2017, decided on 17th March, 2022.
On the Presumption of Prospective Application of Laws:
“Every statute is presumed to be prospective in nature based on the principle of nova constitutio futuris formam imponere debet non praeteritis, which means ‘a new law ought to regulate what is to follow, not the past,’ unless it was given retrospective operation either by express or necessary implication of the legislature.”
On the Purpose of Competition Law:
“The Commission is mandated to prohibit and rectify any instance in which the realm of freedom of trade, business or profession is being used as an avenue for the distortion of competition, irrespective of whether it is being done intentionally, unintentionally or negligently.”
On the Role of Public Interest Proceedings:
“Public interest proceedings are always inquisitorial in nature, where an authority may engage in fact-finding for the promotion of public interest.”
“The Commission is a regulatory body bestowed with a mantle purposed for the adoption of a proactive approach to bring all matters and activities distorting competition law in line with the provisions of the Act.”
On Concession Agreements in Infrastructure Projects:
“The underlying principle justifying the grant of an exemption to an agreement containing restrictive clauses is that pro-competitive effects which the agreement results in will outweigh any distortion to competition law brought about by the same and, in turn, the public at large will benefit.”
On the Definition of Relevant Market:
“The objective of defining the relevant market is to identify both the product and areas within which businesses are competing with each other, which helps in the determination of market share for purposes of Section 3 – Abuse of Dominance.”
On the Nature of Prima Facie Evidence:
“Prima facie evidence means sufficient to establish a fact or raise a presumption unless disproved or rebutted; based on what seems to be true on first examination, even though it may later be proved to be untrue.” (Citing Black’s Law Dictionary).
On Rights and Responsibilities in Trade:
“Rights and duties are two sides of the same coin, meaning that they both go side by side. Any right of a person protected by any statute corresponds to an inherent obligation i.e., to recognise the same right for others.”
On the Quasi-Judicial Role of the Commission:
“The Commission is established to carry out the administrative function of the executive to ensure economic efficiency and promote consumer welfare, and in doing so, it discharges quasi-judicial functions with the sole objective to regulate anti-competitive behaviour.”
On the Interpretation of Agreements and Anti-Competitive Conduct:
“While undertakings remain free to enter into legally binding contracts, the agreements themselves and the conduct of the undertakings, in all instances, will be subject to the provisions of all the respective governing laws.”
On Market Exclusivity Clauses:
“The exclusivity clauses in the 1961 and 1994 agreements confer exclusive rights on the Consortium for ownership, operation and maintenance of fuel farms and hydrant facilities, thereby excluding competitors for refuelling purposes and violating Section 4(1) and (2) of the Competition Act.”
On the Nature of Competition Law Violations:
“The date of execution of any agreement is irrelevant if the effects of the understanding continue to distort competition after the promulgation of the law.”
These quotations highlight the legal reasoning, principles of statutory interpretation, and the importance of maintaining fair competition as underscored in the judgment.
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