The Competition Appellate Tribunal has upheld a cumulative penalty of Rs. 40 million imposed by the Competition Commission of Pakistan (CCP) on United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL) for entering into an anti-competitive non-compete agreement in violation of Section 4 of the Competition Act, 2010.
In its ruling, the Tribunal noted that the appellants, through their own conduct, acknowledged the arrangement as a non-compete agreement. It endorsed the CCP’s conclusion that the agreement restricted competition and amounted to a prohibited market-sharing arrangement.
The CCP initiated proceedings after UDPL disclosed to the Pakistan Stock Exchange that it had entered into a non-compete agreement with IBL. Under the agreement, UDPL committed to refraining from distributing human pharmaceutical products in Pakistan for a period of three years in return for a payment of Rs. 1.131 billion from IBL.
The CCP determined that the arrangement effectively removed UDPL as a competitor from the relevant market, thereby restricting competition. The substantial payment was viewed as a financial incentive to ensure UDPL’s exit, shielding IBL from competitive pressure and creating barriers to market entry.
Although the agreement included a clause requiring regulatory approval, both companies failed to obtain prior exemption from the CCP. They applied for exemption only after show-cause notices were issued. The CCP rejected the application, concluding that the agreement did not qualify for exemption under the law and that the violation had already taken place.
As a result, the CCP imposed a penalty of Rs. 20 million each on UDPL and IBL under Section 38 of the Competition Act, 2010, for entering into and implementing the anti-competitive agreement.
The Tribunal upheld the CCP’s findings and agreed that, following the rejection of their exemption request, the appellants did not pursue any further legal remedy—an act the Tribunal viewed as implicit acceptance of the violation. It ruled that the penalties of Rs. 20 million on each company were justified and lawful, thereby maintaining the total penalty of Rs. 40 million.