CCP Issues Show Cause Notice to a firm of Chartered Accountants for facilitating a Cartel of Cement Manufacturers

CCP Issues Show Cause Notice to a firm of Chartered Accountants for facilitating a Cartel of Cement Manufacturers

ISLAMABAD, TUESDAY, 2 August 2010: The Competition Commission of Pakistan (CCP) has issued a show cause notice (SCN) to a partnership firm of Chartered Accountants (CA Firm) for prima facie facilitating All Pakistan Cement Manufacturers Association (APCMA) and its members to enforce an agreement to fix production quotas for cement manufacturers in violation of Sub – Section 4 (2) (c ) and Section 4(1) of the Competition Ordinance, 2010 (the ‘Ordinance’) read with Section 38 (1) (a) of the Ordinance. The said firm of chartered accountants was providing services of monitoring/verification of cement dispatches to APCMA member undertakings and for this purpose deputed its staff on the gates of cement factories.
CCP vide its Order dated 27-08-09 (Order) in the matter of show cause notices issued to APCMA and its Member Undertakings has declared that the agreement under the name and style of ‘Marketing Arrangement’ effective from 08-05-2003 was in violation of Section 4(1) of the Ordinance read with Section 4(2)(c) of the Ordinance as it pertains to fixing the quota with respect to production and supply of cement and to ensure that sale of cement is not below the target/minimum price by each of the APCMA Member Undertakings.
Various clauses of the Marketing Arrangement and other documents referred in the Order indicate that the said CA Firm was engaged to monitor cement dispatches solely for the purpose of ensuring implementation of the said Agreement. The documentary evidence also indicates that the success of marketing arrangement was not possible without monitoring of cement dispatches.
It has been alleged in the SCN that the CA Firm was engaged by APCMA for the purpose of audit, however, the monitoring and verification of cement dispatches, does not fall under the purview of ‘Audit Engagements’ as defined in the International Standards on Auditing (ISA) as adopted and practiced in Pakistan, prima facie, indicating collusive arrangement between the CA Firm, APCMA and its Member undertakings to enforce the Agreement. Such arrangement and/or practices of the CA Firm of facilitating APCMA and its members to enforce the Agreement, prima facie, are a violation of Section 4(1) read with Section 4(2)(c) of the Ordinance. The CA Firm has been asked to file its written reply to SCN within fourteen (14) days from the receipt of SCN and to appear through a duly authorized representative before CCP on 23-08-10 and avail the opportunity of hearing.
This is the first ever show cause notice issued by CCP to any CA Firm for significantly contributing towards implementation of a cartel agreement.