The laissez-faire economic principle implies that market forces of demand and supply coupled with the profit motive of commercial entities guide and determine economic activity, stimulate growth, spur innovation and reduce wastage of resources with a view to offering end consumers a wide array of choices available at competitive pricing.

A fair competition is the natural outcome of finely tuned balances between the burden borne by producers and the benefit transmitted to consumers. The burden usually comes in the shape of an applicable legal regime — such as a law of contract, product liability regime and other regulatory confines, including inter alia fiscal and monetary policies of the state.

The benefit, on the other hand, is often characterised by the welfare of the consumer, which in turn includes dispersed control over access to economic resources and a wide range of choices available to consumers, free from arbitrary dictates of anti-competitive practices.

When this fine balance is disturbed or when commercial entities find it hard to do business and struggle to remain competitive, they switch to unfair practices, resulting in a market failing to accommodate fair competition. In such scenarios, the large producers, such as oligopolies, tend to get ahead of the competition by forming cartels and abusing their dominant position.

The Constitution of Pakistan, 1973, does not fully embrace laissez-faire and rather adopts a mixed economy system in line with Islamic principles of social welfare. Article 18, read with Article 151 of the Constitution, entitles every citizen to conduct any lawful trade or business and allows for free trade among provinces subject to reasonable restrictions imposed by law for regulation of trade, commerce or industry in the interest of free competition. Under this constitutional mandate the Competition Act 2010 (the Act) was enacted.

The Act mandates the Competition Commission of Pakistan (CCP) to ensure a level playing field so that business entities are allowed to compete amongst themselves within a non-discriminatory and rule-based economic order devoid of unnecessary government interventions in the economic activity and shield end-consumers from the harms of anti-competitive behaviour, including inter alia cartels and market abuse.

Since its inception in 2007, the CCP’s performance has faced various hurdles, ranging from constitutional challenges to its jurisdiction to delays in the institution of the Competition Appellate Tribunal (CAT), a weak investigations mandate and limited enforcement powers, as well as a general lack of awareness in the business community about this nuanced domain of competition law.

A competitive market can only function under certain structural and behavioural preconditions maintained by a sound legal framework

Nonetheless, the CCP under its current leadership has recently made great strides towards becoming an active as well as effective industry regulator. Despite clinching 82 favourable judgements from the CAT and superior courts, a backlog of around 567 litigation cases still entraps approximately Rs73 billion worth of potential penalties. It is despite levies of a whopping Rs44bn penalty imposed on 81 sugar mills in 2020-21; the sugar crisis still persists in the country, and cartels in other sectors have not been deterred from engaging in anti-competitive practices.

A competitive market can only function under certain structural and behavioural preconditions, and the maintenance of these conditions is the prime function of a robust competition law regime. To this end, it is pertinent to examine whether the parent legislation, ie the Competition Act 2010, has so far proved to be an effective legislative tool in achieving the ends of competition policy with a view to safeguarding public interest.

First and foremost, section 2(1)(e) of the Act, while defining the expression ‘dominant position’, puts a numerical upper limit of 40 per cent market share for any undertaking to come within the mischief of abuse of a dominant position. No legislation in other foreign jurisdictions puts a definitive numerical percentage in the language of the statute.

It is rather an indicator of relative market power, which, if it exists with other economic factors like overall size and strength, barriers to entry, opportunity cost, product differentiation, superior technology and deep pockets, may allude towards a substantial market power. Therefore, the said sub-section needs to be suitably amended, enabling the CCP to cast a wider net around wrongdoers with ‘substantial market power’ engaging in market abuse.

Secondly, section 3(2) of the Act requires prior proof of harm or anti-competitive effect on the market. However, this provision, when compared with international jurisdictions, requires no proof of harm where it is determined that abusive conduct is either exploitative or anti-competitive with the object to prevent or distort fair competition. Further, section 3 does not empower the CCP to order structural and behaviour remedies, without which actions of the Commission lack deterrent effects on the undertakings concerned, leaving room for future harmful behaviour.

Thirdly, section 38 (2) (a) only prescribes a civil penalty to the tune of 10pc of the annual turnover of the undertakings found in violation of Chapter II of the Act, which is a minuscule fraction of their after-tax profit annual return. This needs to be supplemented with the imposition of criminal sanctions/penalties coupled with a director ban to multiply the deterrent effect over undertakings.

Fourthly, section 34(1), which deals with investigation powers, needs to include a ‘Notice’ requirement detailing the purpose of the investigation, possible civil and criminal consequences and the time, place and manner of the production of documents. Section 35(1), which deals with search and seizure power, needs to equip the investigating officer with certain powers under the Code of Criminal Procedure, 1898, and a necessary warrant of arrest from the area magistrate to carry out his lawful duties.

Fifthly, with the advent of emerging technologies such as artificial intelligence and blockchain, it is imperative to introduce digital markets legislation along the lines of the UK and the European Union jurisdictions to prevent anti-competitive practices in the digital market space in Pakistan.

Last but not least, it is equally significant to educate the government to shun excessive interventions in the commercial and business domain and let the markets function by their own dynamics.

The author is a corporate lawyer

Published in Dawn, The Business and Finance Weekly, June 30th, 2025