The Competition Commission of Pakistan accepted the leniency application of Siemens (Pakistan) Engineering Company Limited after it voluntarily admitted to being a part of cartelization for providing electrical equipments to power distribution companies of the public sector.
According to the leniency provision, Siemens has been granted a 100 percent reduction in penalty. Siemens had filed a leniency application to seek leniency following a show cause notice No.27 dated September, 2011 was issued for, prima facie, bid rigging/collusive activities in the tenders called by electric power distribution companies to procure switchgear and transformers from the members of Pakistan Electrical Power Equipments Manufacturers Association.
Ms Rahat Kaunain Hassan chairperson of CCP said that Siemens had submitted 233 documents along with its leniency application which provide information in relation to two products ie switchgear and transformer to show collusive activities among manufacturers to win a particular tender. Siemens had accepted its involvement in wrongdoings by disclosing that the cartelization in this sector has been working for over a decade, in which all the players had joined hands to cause loss to the national exchequer.
Out of the total procurement orders of PKR 45 billion it has been estimated that this cartel must have easily causes losses worth PKR 5 to PKR 6 billion to the national exchequer in a period of 4 years, since it is generally accepted that cartelization impacts prices by 10% to 12%.
Answering a query, the CCP chairperson said that they did not find the involvement of any senior officials of the DISCOs for pitching higher prices of electrical equipments in accordance with the proof shared by Siemens during the investigation of this show cause notice.
Ms Hassan said that the leniency clause in the competition law all over the world is being used as tool to break power cartels working in various sectors of the economy. Cartelization is a norm in our business but it’s not an exception. It would pave the way for other sector players to come forward and invoke leniency clause. After accepting the application of Siemens for leniency clause, no other parties involved in this case can seek leniency; instead they would now have to face legal actions as per the law of the country.
Siemens said that would like to thank the CCP and in particular its chairperson for granting full immunity to Siemens in the proceedings initiated by the Commission against local electric power equipment manufacturers.
The Commission’s order to grant full immunity to Siemens which is the first of its kind in Pakistan vindicates Siemens’ decision in keeping with its corporate values, to cooperate with the Commission. Siemens would also like to express its gratitude to the Commission for acknowledging Siemens’ cooperation and constructive role in the matter.
The CCP bench in its order also discussed the economic impact of the cartelization in the relevant markets involved. In Pakistan, there are 12 local manufacturers of distribution transformers and the only demand for transformers comes from DISCOs which is around 90%.
Total orders issued by DISCOs during the period of 2008 to 2011 were for the value of PKR 36 billion. Further as stated by Siemens it holds market share of 29.3%, PEL holds 28.2% market share, while the rest of manufacturers occupy 42% of total market. There are 10 local manufacturers of medium voltage switchgears. It is estimated that the overall market for air insulated switchgears in Pakistan for the 2008 to 2011 was PKR 9.2 billion out of this volume, 60% to 65% approximately comprises of DISCOs.
Source - The News.com
(www.steelguru.com)
