The Competition Commission of Pakistan (CCP) has issued a show cause notice to JCR-VIS Credit Rating Company for predatory pricing in the bidding for rating assignment of Sukuk issue of Rs 100 billion by Neelum Jhelum Hydropower Company (Private) Limited (NJHPC).
Predatory pricing is a pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitor.
CCP acted on a complaint received from its rival company, Pakistan Credit Rating Agency Limited (PACRA) which alleged that JCR-VIS’ submission of a token bid of Rs 1,100 for a rating assignment of ten years was predatory in nature and it was meant to drive the PACRA out of the market.
Predatory pricing is a concept whereby the dominant market player prices goods and services below cost in the short run to drive or keep out competitor and reap profits in the long run.
An enquiry conducted by the CCP’s Cartel & Trade Abuses department found that JCR-VIS was dominant in the market for credit rating services in Pakistan and the submission of a token bid of Rs1, 100 was insufficient to cover JCR’s costs.
Therefore, it was determined that JCR had abused its dominant position by engaging in predatory pricing which is a violation of Section 3 of the Competition Act, 2010.
A show cause notice has been issued to JCR-VIS and the company has been called upon for hearing on a given date.
CCP is mandated under the Competition Act to ensure fair competition in all spheres of commercial and economic activity to enhance economic efficiency and to protect consumers from anti-competitive behaviour.
NBP Sukuk of Rs 100 billion
NBP, which will raise the Sukuk of Rs 100 billion, should give an opportunity to both rating agency, after the show-cause notice has been issued to JCR-VIS.