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Official Citation: 2020 LHC 2274
Court / Jurisdiction: Lahore High Court
Year of Decision: 2020
Decision Date: 2020-07-16
Parties: LPG Association of Pakistan vs Federation of Pakistan etc
This judicial decision was delivered by the Lahore High Court on 2020-07-16. The matter involves proceedings between LPG Association of Pakistan and Federation of Pakistan etc, officially reported as 2020 LHC 2274. The court reviewed applicable Pakistani statutes, procedural requirements, and governing case-law authorities. The full text below contains the complete facts, arguments, and legal reasoning rendered by the honorable bench.
Case cited as 2020LHC2274
Court Name: Lahore High Court Judge(s): Ayesha A. Malik, Shahid Jamil Khan, Muhammad Sajid Mehmood Sethi Title: LPG Association of Pakistan vs Federation of Pakistan etc Case No.: WP No.9518/2009 Date of Judgment:2020-07-16 Reported As: 2020 LHC 2274 Result: Petition allowed
JUDGMENT
JUDGMENT Ayesha A. Malik J. This judgment decides upon the issues raised in the instant Petition as well as connected Petitions detailed in Schedule "A" as all Petitions raise common constitutional issue s. The Petitioners lay challenge to the legislative competence of Parliament to legislate the Competition Ordinance, 2007 ("2007 Ordinance") , the Competition Ordinance, 2009 ("2009 Ordinance") , the Competition Ordinance, 2010 ("2010 Ordinance") ("Collectively referred to as the Ordinances") and the Competition Act, 2010 ("Act") . The Petitioners also challenge the vires of Section 43, 44 and 62 of the Act for being unconstitutional and they also challenge the Ordinances and the Act on the ground that the Competition Commission of Pakistan ("CCP") exercises judicial power which is ultra vires the Constitution of the Islamic Republic of Pakistan, 1973 ("Constitution") . 2. The instant Petition has been filed by the LPG Association of Pakistan through its Chairman, on account of Show Cause Notice No.51 dated 20.3.2009 issued under Section 30 of the 2007 Ordinance, alleging cartelization and exclusionary conduct in the liquefied petro leum gas ("LPG") sector by the Liquefied Petroleum Gas Association of Pakistan ("LPGAP") and its members. They have challenged the show cause notice and the proceedings thereafter which resulted in an order dated 14.12.2009 by the CCP. By way of background the instant Petition was filed before this Court on 18.5.2009 and notices were issued for 27.5.2009. On 27.5.2009 notice was issued to the Attorney General for Pakistan ("AGP") and the operation of the impugned show cause notice was suspended. The issue of jurisdiction of this Court was raised and in terms of the order dated 2.7.2009, it was decided that the High Court has jurisdiction in the matter . Thereafter the case was taken up on 5.8.2009 with respect to the constitutional issues raised by the Petitioners as well as the objections of the Respondents on maintainability and it was directed that in the meanwhile no adverse action be taken against the Petitioners. By order dated 3.7.2015 this Petition was referred before the then Hon'ble Chief Justice for placing the matter before a Full Bench and since then arguments
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have been made before the Full Bench. In the meanwhile several Petitioners filed similar petitions, raising the same constitutional issues before this Court, which are before us on the vires of the Ordinances and the Act. 3. The Petitioners before this Court do business in different sectors and hence challenged orders of the CCP, show cause notices, inquiry proceedings, details of which are given herein below: Oil and Gas 4. Connected to the issue of the Petitioners in the same sector against the same show cause notices WP Nos.15493/09 and 14287/09 were filed. It is important to note that these Petitions have been filed against show cause notice dated 20.3.2009 under the 2007 Ordinance wherein it was alleged that the Petitioners abused their dominant position by excluding Progas from competing in the relevant market; that they formed a cartel engaged in price fixing and that they are charging premium and third party commission from marketing companies without allocations. The relevant market for the purposes of these cases is Pakistan. In the case of WP No.14287/09, the Petitioner has challenged exemption proceedings. Fertilizer 5. Similarly Petitioners from the Fertilizer Sector have challenged show cause notices alleging abuse of dominant position for which the relevant market is Pakistan. Power 6. The Petitioners from the Power Sector have challenged show cause notices where the allegation is of bid rigging as these companies procure High and Low Tension Concrete Poles. It is alleged that they intentionally reduced the price in the bidding process for the High Tension Pre-stressed Concrete Poles and Low Tension Pre-stressed Concrete Poles. In these cases, the CCP has passed order dated 13.5.201 1 which is appealable under the Act. The relevant market for this is also Pakistan. Healthcare 7. The Petitioners from the Healthcare Sector have challenged show cause notic es in which the allegation is of price fixing and cartel like behaviour under the Act and the CCP passed order dated 29.6.2012 for which appeals are pending before the Competition Appellate Tribunal ("CA T"). In these cases the relevant market is Pakistan. Cement 8. A large number of Petitions have been filed by the Cement Sector where the allegation is of price manipulation and cartel like behaviour where the relevant market is Pakistan. It is noted that in these petitions show cause notices have been challenged even though the CCP has passed the order dated 27.8.2009 under the 2007 Ordinance which is appealable. WP No.4574/12 has been filed by APCMA against inquiry proceedings with reference to its members. Oil Refinery 9. Four Petitions have been filed by oil refineries who have been issued show cause notices on the allegation of their refusal to deal with bitumen, where the relevant market is Pakistan. They have also filed petitions in relation to filing of pre-merger applications. Sugar 10. Some Petitioners own sugar mills and have been issued show cause notices for cartelization, price fixing and collusive bidding in tendering process. The relevant market is the product market where refined sugar is sold which is essentially throughout Pakistan. Telecom 11. Petitioners from the telecom sector have challenged show cause notices alleg ing violation of Section 4 of the 2009 Ordinance for price manipulation with respect to the balance inquiries services, SMS rate and call charges. The relevant market again is Pakistan, AJK and the Northern Areas where PTA has its jurisdiction as regulator . WP No.13892/12 has been filed by the PTCL wherein the matter was referred to the CCP by the august Supreme Court of Pakistan vide order dated 21.2.2013 passed in CPLA No.102-L/2013. The allegation against them was cartel like behaviour for fixing the rate of incoming traffic and quota allocation of revenues to be shared and no new entrant was allowed. The relevant market is Pakistan as it was alleged that they are disto rting competition in Pakistan not
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only amongst LDI Operators but other related markets as well. In WP No.221542/18 the Petitioner Transworld Associates (Private) Limited has challenged inquiry proceedings. Educational 12. There are some Petitioners represent ing different schools where the CCP took notice of unreasonable increase in fee by private educational institutions and also practices of bundling of uniforms and school books. Hence the allegation of abuse of dominant position were raised. In these petitions inquiry proceedings have been impugned. Paints, Infant Milk, Juices 13. The Petitioners who manufacture paint, infant milk and juices have also filed Petitions. These Petitioners are all multinationals who supply products throughout Pakistan. The allegation against these Petitioners is of deceptive marketing practices and abuse of dominant position. Show cause notices have been impugned in these Petitions. Real Estate 14. Some of the Petitioners are in the real estate business who have been issued show cause notices for deceptive marketing practices in the real estate sector . Arguments of the Petitioners 15. The common ground taken by the Petitioners in this Petition as well as in the connected Petitions is that the Act and the Ordinances are ultra vires the Constitution as Parliament lacks legislative competence to enact a statute on the subject of competition. The Petitione rs also allege that the Act and the Ordinances create a parallel judicial system in violation of Article 175 and 203 of the Constitution by creating an authority which is to exercise judicial powers but is not a court. Consequently the right of fair trial and due process and the right to access justice has been infringed, hence violative of the Constitution. In this regard, the Petitioners have also argued that the Act provides for a right of appeal before the august Supreme Court of Pakistan which is in violation of Article 185 of the Constitution which envisions an appeal to the august Supreme Court of Pakistan only against judgments, decrees and orders of the High Courts. Hence it is their case that there is nothing in the Constitution which will justify a direct appeal to the august Supreme Court of Pakistan from orders, judgments of CAT. The Petitioners have also argued that Section 62 of the Act does not save or give continuance to any of the proceedings, decisions, orders and actions taken under the Ordinances. Further that the lapse of one Ordinance cannot be extended by another Ordinance. Hence all show cause notices and orders passed by the CCP cease to exist as they were never saved by the Ordinances or the Act. Arguments of the Respondent Federation 16. Notices under Order XXVII-A of CPC were issued to the AGP to respond to the constitutional questions arising out of these Petitions. In response thereto, report and parawise comments have been filed on behalf of the Federation along with written submissions. Barrister Khalid Jawed Khan, AGP argued that constitutional goal is to provide free trade and commerce throughout Pakistan and not locally . That competition law by its very nature and scope is national in character as the geographic stretch of the market extends beyond territorial limits of any particular area or Province. He argued that a cumulative reading of several Articles of the Constitution and Entries in the Federal Legislative List in the Fourth Schedule to the Constitution ("FLL") gives Parliament competence to enact the Ordinances and the Act. That section 62 of the Act should be read in the form of a declaratory statement by the legislature to give legal cover to actions, proceedings, orders etc. by the CCP during the period 2.10.2007 to 5.10.2010 which includes the gap periods uptil the promulgation of the Act. On the exercise of judicial power by the CCP, he states that this is in line with the work of regulatory authorities, created in terms of Entry 14 of the FLL of the Constitution. He also argued that an appeal before the Supreme Court of Pakistan is permissible under Article 175 read with Entry 55 of the FLL of the Constitution against any order by CAT. Therefore he argued that Act and the Ordinances are not ultra vires the Constitution as the Parliament is competent to promulgate an Act. 17. A preliminary objection was also raised in terms of order dated 5.1.2010 passed in WP No.9518/2009 that on account of order dated 14.12.2009 passe d by the CCP, the cartel issue has been decided by the CCP and remedy of appeal is available to the Petitioner under the law, therefore the present petition is not maintainable. At this stage we were informed by the Counsel for CCP that the position is similar with reference to several Petitions before this Court where the CCP has passed an order which is appealable under the Act. It was also clarified that all
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proceedings have stopped on account of the interim orders passed by this Court. The second objection raised is that the instant Petition has been filed by an Association of LPG Dealers through their Chairman, which is not a registered body and therefore not a legal entity who can agitate the grievances of its members before this Court. This objection has been raised with respect to other Petitions as well which have been filed by Associations on behalf of their members. Reliance was placed on Anjuman Araian Bhera v. Abdul Rashi d and 5 others (PLD 1973 Lahore 500) and Pakistan Steel Re-Rolling Mills Association v. Province of West Pakistan (PLD 1964 Lahore 138). It was also argued that independent members of the Association have also filed Petitions which are pending before this Court on the basis of their independent rights, hence the Assoc iation cannot take up the matter on behalf of its members. Arguments of the Respondent CCP 18. Report and parawise comments have also been filed on behalf of the CCP along with written submissions. Learned Counsel adopted the arguments of the AGP with reference to the constitutional challenge and stated that there can be no effective regulation of trade and commerce in Pakistan unless competition is free and fair throughout Pakistan. They argued that regulation of inter-provincial trade and commerce would in itself be meaningless as a free market throughout Pakistan is at the heart of the concept of freedom of trade and commerce and its regulation, in the interest of free competition, is exactly what the competition law aims at achieving. Learned Counsel argued that CCP was establis hed by the 2007 Ordinance, continue d through the 2009 and 2010 Ordinances and was given permanence through the Act. During this time the CCP has taken effective action against anti-competitive practices in sugar , cement, telecom, banking, fertilizer , paints, automotive industry and other major sectors. Learned Counsel argued that across all spheres of commercial and economic activity , CCP acts to ensure free and fair competition. The law aims to protect consumers by prohibiting anti-competitive behaviour . Competition law checks and regulates market conduct in order to ensure that market forces allow for healthy competition to ensure economic efficiency . They explained that there are four main categories of market conduct that the Act aims to regulate: (a) Abuse of dominant position. This is covered by Section 3 of the Act. The said section offers illustrative instances of abuse of dominant position (such as unreasonable increase in prices by a dominant market actor , refusal to deal, boycotts etc) but the list of abusive conduct does not claim to be exhaustive. (b) Prohibited agreements. Section 4 of the Act prohibits collusive conduct between two or more market actors who enter into an agreement that as its objec t (i.e purpose) or effect (i.e is result), adversely affects competition. This includes but is not limited to horizontally placed market actors agreeing to engage in price fixing, limiting output, division of markets and bid rigging. Horizontally placed competitors mean those operating at the same level of the supply chain. (c) Deceptive marketing. Section 10 of the Act prohibits false or misleading information about the quality , characteristics, suitability of use, method of production etc, of goods and services. The aim is to ensure that false or misleading information does not prejudice consumer sovereignty . (d) Merger control. Unlike other provisions of the Act which kick into effect after particular conduct takes place, merger control ensures that transactions where size of the parties involved (their turnover , assets) and size of the transaction (percentage of shareholding, value of assets involved) meet certain prescribed thresholds, the market actors apply to the CCP for clearance of the transaction. 19. The Counsel for the CCP argued that competition law only comes into action when market actors violate clearly defined standards of prohibited conduct. There is no on-going regulation of daily activities and no burden is placed on market actors. However , when their market conduct falls on the wrong side of clearly defined legal provisions (Sections 3, 4, 10 and 11 of the Act) CCP conducts inquiries, issues show-cause notices, provides opportunity of hearing as well as written responses and then passes speaking orders imposing penalties which commensurate with the violation. In addition, the CCP is also entrusted with other functions to promote competition, through various means such as to conduct studies and training for promoting competition in all sectors of commercial and economic activity; to give advice to the undertakings, asking for the same, as to whether any action proposed to be taken by such undertakings is consisten t with the provisions of the Act; to engage in competition advocacy by
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creating awareness and imparting training; to review the policy frameworks and recommend amendments in the Act and other laws to the Federal or Provincial Governments, holding open hearings on any matter affecting the state of competition in Pakistan or af fecting the Country' s commercial activities. 20. Finally they explained that Pakistan is a member of the United Nations which established the Set of Principles and Rules on Competition. All Member States agreed to establish a domestic regime which would ensure free and fair competition within their systems. The Act is in line with the UN Set of Principles and similar to the regulatory regimes promoting free and fair competition around the world. Pakistan is also a member of the World Trade Organization and signatory to the Doha Declaration, the Agreement on South Asian Free Trade Area ("SAFT A") for promoting conditions of fair competition in the Free Trade Area ("FTA"). Hence in order to fulfill its international commitments the Federal Government is responsible to ensure compliance of its Federal obligations. 21. The Counsel also informed the Court that in several Petitions the Petitioners have challenged the vires of the Act and have also filed appeals against the order of the CCP. The detail of appeals is given in Schedule B, which are also pending before this Court. As per their contention which supported by the AGP, the appeals should be sent to CAT which is the competent forum to hear the appeals. That against the decision of CAT the Petitioners have the right to appeal before the august Supreme Court of Pakistan. Hence no right is prejudiced if the proper forum under the Act hears the appeals. Issues before the Court 22. Based on what has been argued before us the following issues require our deliberation: A) Whether Parliament has legislative competence to enact the Act and the earlier Ordinances? B) Whether the Act and the Ordinances create a parallel judicial system in violation of Articles 175 and 203 of the Constitution such that the CCP and CAT exercise judicial power which is in violation of the Mehram Ali and others v. Federation of Pakistan and others ( PLD 1998 SC 1445 ) (Mehram Ali Case).? C) Whether Section 43 and 44 of the Act are unconstitutional as they provide for an appeal before the august Supreme Court of Pakistan which is in contravention to Article 185 of the Constitution? D) Whether the proceedings and orders etc. under the Ordinance have been saved revived or continued pursuant to Section 62 of the Act; and whether Section 62 of the Act is unconstitutional? Opinion of the Court (A) Legislative Competence 23. The Petitioners' case is that there is no entry in the FLL which allows Parliament to enact law on the subject of competition. They argue that Parliament does not have the power to make laws on matters which are not enumerated in the FLL as all residue power is vested with the Provinces after the Eighteenth Amendment to the Constitution vide the Constitution (Eighteenth Amendment) Act, 2010 ("18th Amendment") . That the FLL does not contain any entry on the subject of competition or monopolies or in any manner with reference to anti-trust restrictions. The counsel argued that the Constitution of the Islamic Republic of Pakistan, 1956 ("1956 Constitution") contained a specific entry with reference to commercial and industrial monopolies in Entry No.10 of the Concurrent List. Furthermore the Constitution of the Islamic Republic of Pakist an, 1962 ("1962 Constitution") provided in Article 131 that the Central Legislatures shall have exclusive powers to make laws with respect to any matter enumerated in the Third Schedule and Article 131(2) of the 1962 Constitution provided that the Central Legislature can make laws in national interest in relation to economic and financial stability of Pakistan, planning or coordination or for the purposes of achievement of uniformity as required. That the Monopolies and Restrictive Trade Practices (Control and Prevention Ordinance), 1970 ("MRTPO") was promulgated specifically with reference to the powers conferred on Parliament under Article 131(2) of the 1962 Constitution. However there is no similar provision under the Constitution and in the absence of any similar Article or Entry in the Constitution, competition law is specifically and intentionally excluded from the legislative domain of Parliament. That the omission of these provisions from the Constitution is delibe rate so as to confer power on the Provinces. Hence the Ordinances and the Act are ultra vires the Constitution as Parliament does not have legislative competence to legislate on this subject. Further that Article 151 of the Constitution does not give legislative authority to Parliament as the said Article relates to the movement of goods and allows Parliament to impose restrictions on trade and commerce
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between the Provinces. They argue that on its own, it is not an independent source of legislative authority as the only source of legislative authority under the Constitution is Article 142. 24. Conversely the AGP argued that there are various legislative entries in the FLL as well as specific Articles of the Constitution which when read cumulatively empowers Parliament to legislate law which regulates and controls anti- competitive behaviour and ensures free competition. He argued that the very nature of the Act is to ensure free competition by regulating anti-competitive behaviour throughout Pakistan as the Act is national in character and in its reach. The AGP explained that the Act aims to protect consumers and the public at large and is directly related to the national economy hence falls within the domain of Parliament. He explained that historically Parliament has always legislated on the subject of competition and that throughout this time the Provinces have neither questioned the laws nor enacted one. Even throughout the history of this case the Provinces have not come forward to state otherwise. That legislative entries must be read liberally and it is not necessary that the subject matter falls in any one distinct entry but can be read into several entries. So far as the relevant legislative entries are concerned, he relied upon Entries No.3, 27, 32, 58 and 59 of Part-I of the FLL and Entries No.6, 7 and 13 of Part-II of the FLL. He also relied upon Articles 18, 142 and 151 of the Constitution in support of his arguments in favour of Parliaments competence to legislate on the subject of competition. The AGP argued that regulating anti-competitive behaviour so as to ensure free competition falls within the legislative domain of Parliament, hence the Ordinances and the Act are not ultra vires the Constitution. 25. On behalf of the CCP it was argued that the parties before the Court in many cases are Associations, who have filed petitions on behalf of their members who have business all over the Pakistan. This fact alone suggests that the argument of the Petitioners that Parliament is not competent to make law is flawed as the nature of the dispute has crossed Provincial borders and the relevant market in all the cases before this Court is Pakistan and not confined to any market within the Province of Punjab. They argued that the Constitution envisages economic unity through a national economy under Article 151 of the Constitution which requires a free market throughout Pakistan and carries a constitutional mandate to Parliament to remove barriers to free trade and commerce so as to ensure free competition. By way of Article 151(2) of the Constitution only Parliament can legislate to impose restrictions on the freedom of trade, commerce or intercourse between the Provinces. The Counsel explained that the object of the Act and the CCP is to remove all barriers to free competition and maintain free competition in all commercial and economic activity . 26. For ease of reference, the relevant provisions of the Constitution are reproduced hereunder:- Article 18 Subject to such qualifications, if any, as may be prescribed by law, every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or business: Provided that nothing in this Article shall prevent-- (a) the regulation of any trade or profession by a licensing system; or (b) the regulation of trade, commerce or industry in the interest of free competition therein; or (c) the carrying on, by the Federal Government or a Provincial Government, or by a corporation controlled by any such Government, of any trade, business, industry or service, to the exclusion, complete or partial, of other persons.…
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