Dairy Cartelization and Milk Price Fixing in dairy sector, CCP inquiry
Dairy Cartelization and Milk Price Fixing in dairy sector, CCP inquiry reveals | کمپٹیشن کمیشن کا ڈیری سیکٹر میں کارٹیلائزیشن کا انکشاف . The Competition Commission of Pakistan (CCP) has completed its investigation into alleged cartelization and anti-competitive activities of dairy farmers associations in the dairy sector. The inquiry report has revealed, based on solid evidence, that three major dairy associations of the country’s largest city, Karachi, are prima facie involved in cartelization and price fixing.
Dairy and Cattle Farmers Association President Shakir Umar Gujjar said in his various media statements that this is a unilateral action of the commission which is affecting our reputation. The price of milk is fixed by the Commissioner Karachi. Despite the increase in cost of production, when a notification of change in price is not issued, we demand an increase in milk price in protest. Shakir Umar said that we demand our right, we cannot be intimidated by such government measures.
Milk Price Fixing and DCFA Stance
If the price of milk is not increased, we have the right to go to court. On the other hand, the Competition Commission further said that the inquiry was initiated in the light of a letter written to the Commission by a prominent consumer association against the alleged collusion of the Dairy Farmers Association (DFA) in increasing milk prices and media reports.
Dairy Cartelization and Complaint against Associations
The complaints alleged that the President of DFA Karachi had announced an increase in milk prices in Karachi and milk was now being sold at Rs 120 per litre as against Rs 94 fixed by the Commissioner Karachi. Since the price of milk fixed by the government was Rs 94 per litre while the association sold it at Rs 120 per litre in collusion, this resulted in a loss to the consumers of about Rs 130 million per day and Rs 47 billion per year. On the other hand, the lack of competition on prices affected the market and the consumers had to pay fair prices irrespective of the quality of the milk.
The Commission constituted an inquiry committee to probe the allegations, which stated that the milk supply chain consists of three stages, including dairy farmers, wholesalers and retailers. Milk is sold to retailers through a contract called ‘annual bandhi’ in which the notified price was not implemented due to the role of various dairy farmer associations.
Evidences of Dairy Cartelization
In February 2021, an informant provided some video footage as evidence to the Commission in which representatives of various dairy farmer associations fix the wholesale price and also the retail price. If a retailer refuses to buy milk at the rate fixed by the bandhi, the association stops the supply of milk to it and sells the milk in the market located in the wholesale market.
Furthermore, a review of milk prices between Karachi, Lahore, Islamabad and Rawalpindi revealed that only Karachi has seen a uniform increase in milk prices, while prices in all other cities are different. This uniformity in prices indicates price fixing by various dairy associations, which is a violation of Section 4 of the Competition Act.
Conclusion of Inquiry Committee on Milk Price Fixing
In light of the evidence, the inquiry committee concluded that the decision to fix prices in the relevant market in July 2020 and February 2021 was primarily taken by the Dairy and Cattle Farmers Association Karachi (DCAF). Soon after, two other dairy farmer associations, namely Dairy Farmers Association Karachi (DFAS) and Karachi Dairy Farmers Association (KDFA), also fixed prices, which led to an increase in milk prices in the relevant market.
The Inquiry Committee observed that the increase in milk prices in the relevant market could not have been possible without the collusion of the three dairy associations. Therefore, the decision to fix prices in the relevant market is a violation of Section 4(1) and Section 4(2)(a) of the Competition Act. In light of these findings, the Inquiry Committee recommended to the Commission to initiate proceedings under Section 30 of the Act against the Dairy and Cattle Farmers Association Karachi (DCAF), Dairy Farmers Association Karachi (DFA), and Karachi Dairy Farmers Association (KDFA).
کمپٹیشن کمیشن، کارٹیلائزیشن اور ڈیری ایسوسی ایشن ۔۔ مضامینِ نو، ڈاکٹر محمد جاسر آفتاب
