Day 1 Intro to CCP and Competition Law in Pakistan
2016-09-20 Strengthening Private Sector Capacities for Competition Compliance
1. COMPETITION COMMISSION OF PAKISTAN
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Strengthening Private
Sector Capacities for
Competition Compliance
S U B M I S S I O N O F T H E C O M P E T I T I O N C O M M I S S I O N O F PA K I S TA N
U N C TA D , 17 - 21 O C T O B E R 2 016
Introduction
1. Both competition and consumer protection form the bulk of the enforcement work done by the Com-
petition Commission of Pakistan. Since 2007, when it was formed, the Commission initially focused on
enforcement to establish itself in the public’s perception. At that time, it was understood that it was pos-
sible to have everything in place – a new law and a new organisation to implement it – but still have a
weak competition regime because of inadequate enforcement activity.
2. With the experience of almost a decade, the Commission realises that not only must it be a market regu-
lator but a market developer as well. This paper talks about the recent steps taken by the Competition
Commission of Pakistan in encouraging compliance by the private sector and for building their capacity
for this compliance.
Why Encourage Compliance? Challenges in Enforcement
3. Compliance has become important globally.
PwC, in its 3rd
ANNUAL STATE OF COMPLIANCE
SURVEY, says “It has become increasingly
clear that managing compliance is not only
required to maintain legal or regulatory
standing, but is essential to navigating the
global environment in order to execute the
business strategy. In particular, companies
that expand into new markets must have ef-
fective compliance programs in place in order
to navigate the complexities of operating in
multiple geographies with differing local and
regional rules and regulations. To be effective
today, compliance officers must ensure that
their compliance programs work in concert
with their organizations’ wider strategic
goals.”1
4. Encouraging compliance in companies is im-
portant for the Commission for two reasons.
First, although the Commission’s various en-
forcement actions since 2007 have resulted in
the imposition of penalties to the amount PKR
26 billion (US$ 247.62 million),2
this has failed
1 PwC’s 3rd Annual State of Compliance Survey, 2013, pg. 4,
available at https://www.pwc.com/us/en/risk-management/as-
sets/pwc-soc-survey-2013-final.pdf
to produce any compliance commitments as
these penalties are simply a price of non-com-
pliance and are pending judicial review. And
second, there is more to compliance than just
deterrence, especially when deterrence can
be delayed by the legal process. The Commis-
sion’s approach to enforcement requires re-
thinking to move beyond the traditional fines
and penalties – the market regulator role. In-
stead, an important part of enforcement
should emphasise creating pro-compliance –
and competition - cultures in companies – the
market developer role.
5. Although compliance programmes can help
mitigate fines, this is not the Commission’s
sole aim in encouraging these. Competition
law has become a global law and there is in-
creased international co-operation to improve
enforcement, especially against cartels than
span national boundaries. Given Pakistan’s
level of economic development and the chal-
lenges it faces in integrating in the global
markets, the premise behind its compliance
2 Exchange rate of PKR 105 to US$1.00
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activities is simple: help local companies un-
derstand the ramifications of violating com-
petition – or for that purpose, any other – law,
promote ethical behaviour by and between
companies, and explain the usefulness of hav-
ing internal mechanisms that reward good
behaviour and sanction that which is unac-
ceptable, locally and globally.
6. Encouraging compliance is also important for
matters of practicality. With limited human
and financial resources, the Commission can-
not handle all cases that may arise, nor can it
monitor the entire economy. Companies need
to be actively encouraged to undertake a
more central role in changing internal values,
existing ways of doing business that could be
questionable, and ensuring genuine compli-
ance efforts to supplement any enforcement
by the regulator.
Promoting Compliance in the Private Sector – Pakistan’s Strategy and
Experience So Far
7. The Commission organised a NATIONAL ROAD
SHOW ON COMPETITION LAW from 4 Decem-
ber 2015 to 30 January 2016 in 22 cities of the
country. The main objective of the Road
Show was to encourage voluntary compliance
by familiarising the business community with
Pakistan’s competition law. This was a neces-
sary first step as encouraging compliance
meant increasing awareness of the law and its
benefits for the business community.
8. Given the sequential manner and the specific
route plan in which the Commission’s teams
travelled throughout Pakistan, the Road
Show was termed the “Competition Cara-
van.” The Commission organised around 30
interactive sessions in the chambers of com-
merce and trade associations of 22 cities that
saw considerable participation of the business
community.
9. One of the objectives of the Road Show was
for the Commission to establish a channel of
communication with the business community
to encourage regular liaison with them
through their appointed focal persons and, at
the same time, set a future strategy for mu-
tual co-operation and collaboration in the
area of competition advocacy and voluntary
compliance.
10. The Road Show also helped create awareness
of the general public about the role of the
Commission in the economy. National media
helped the Commission communicate its
message through extensive coverage of the
Road Show sessions. In total, 270 news report
published by newspapers with a balanced mix
of both English and Urdu.3
11. The Road Show proved to be mutually benefi-
cial both for the Commission and the partici-
pating business community in terms of
knowledge sharing and feedback on competi-
tion issues. The information imparted to the
participants laid the foundation for helping
companies improve compliance with the law.
Promoting Compliance – the Strategy for 2017 Onwards
12. In 2012, the Commission prepared a VOLUN-
TARY COMPETITION COMPLIANCE CODE –
along with a list of frequently asked ques-
tions4
– to encourage the discussion on com-
pliance by companies and its adoption.
13. The Code, renamed as the GUIDANCE ON
COMPETITION COMPLIANCE, is being revised
to make it more accessible to the business
community and the general public. The first
part of the Guidance talks about Pakistan’s
competition law and defines concepts such as
3
The Commission’s website contains much information about
the NATIONAL ROAD SHOW ON COMPETITION LAW at
http://cc.gov.pk/index.php?option=com_content&view=arti-
cle&id=322&Itemid=226&lang=en
abuse of dominance, prohibited agree-
ments, deceptive marketing practices, and
mergers and acquisitions.
14. The second part help companies to under-
stand possible drivers of non-compliance that
include lack of importance to compliance by
senior management, unfamiliarity with legal
requirements, employee naiveté or “rogue”
employees, arrogance, and competing inter-
ests etc. Understanding what drives compli-
ance and non-compliance has important im-
plications for these companies. The relative
4
The Code can be found at: http://cc.gov.pk/images/Down-
loads/research_and_publications/vccc.pdf and the Frequently
Asked Questions at http://cc.gov.pk/images/Downloads/re-
search_and_publications/faqs_on_vcc_code.pdf
3. COMPETITION COMMISSION OF PAKISTAN
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costs and benefits of compliance could shape
the behaviour of companies and the decision
to comply (or not) with the law.
15. Different drivers can be addressed internally
through risk assessments. Such risk assess-
ment varies across companies and within a
company depending on the level of em-
ployee, industry, country, and existing norms.
This makes a one size fits all approach difficult
to implement and probably inappropriate. In
some cases, companies may not properly as-
sess the risks of non-compliance. The inability
or failure to identify such risks can impact
company behaviour and goodwill.
16. The revised GUIDANCE will be presented to
select representatives from the various cham-
bers and trade associations at an event sched-
uled to coincide with (the informal) World
Competition Day – 5 December 2016.5
The
Commission is planning this event carefully.
Any training on compliance should not be
simply the transfer of information so that em-
ployees know what is allowed and not al-
lowed but it must also be motivational.
17. These are areas of culture change and this is
one of hardest challenges for management to
change the “business as usual” approach to
operations. Changing the culture of a com-
pany involves changing the incentives to pro-
mote compliance and to promote the ethical
value of compliance. There are monetary and
other consideration that militate against such
change.
18. In the long term, the Commission would like
to see certain outcomes from its collaboration
with the private sector e.g., competition law
compliance is integrated into the ethics and
compliance infrastructure, not isolated; senior
management demonstrates support through
action, not just words; the possibility for em-
ployees to communicate misconduct safely
and protection against retaliation for those
who do raise concerns.
Conclusion
19. The Competition Commission of Pakistan recognises that promoting compliance is an important part of
its overall portfolio of work. But promoting compliance will not come at the expense of enforcement.
While enforcement remains essential and penalties will continue to have an important role to play, the
real debate with the business community is how to change normative societal values, so that competi-
tion compliance is part of good management, not because of a fear of enforcement, but rather because it
is ethically the right thing to do. The success of any enforcement activity – namely, to reduce anti-com-
petitive conduct in the market – is closely linked to the creation and effective implementation of a com-
pliance culture.
20. The Commission has, in the initial phase, begun to engage more with the business community in such
efforts to create a more visible and useful competition compliance system. The ambit of interaction in
future will include academics, the legal community, and ethics and governance professionals, all of
whom play a key role in instilling good business practices.
5 See http://incsoc.net/World_Competition_Day.htm