KEY POINTS
- Appellate tribunal upholds Rs 40 million penalty on two distributors
- Agreement barred one firm from pharmaceutical distribution for three years
- Regulator ruled payment created barriers to entry and reduced competition
ISLAMABAD: Pakistan’s Competition Appellate Tribunal has upheld a cumulative penalty of Rs 40 million (approximately $140,000) imposed on two major pharmaceutical distribution companies for entering into an anti-competitive non-compete agreement
The Tribunal decision has reinforced the country’s regulatory stance against market-sharing arrangements, according to Pakistan’s competition watchdog.
The ruling affirms an earlier decision by the Competition Commission of Pakistan (CCP), which had penalised United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL) under Section 4 of the Competition Act, 2010.
The case centred on a three-year non-compete agreement under which UDPL agreed not to distribute human pharmaceutical products in Pakistan in exchange for a payment of Rs 1.131 billion from IBL.
The arrangement was disclosed by UDPL to the Pakistan Stock Exchange, prompting regulatory scrutiny.
Earlier in its decision, after reviewing the agreement, the Commission concluded that the deal effectively removed UDPL as a competitor in the relevant pharmaceutical distribution market.
The substantial payment, regulators found, acted as a financial incentive for market exit and shielded IBL from competitive pressure, limiting consumer choice and raising barriers for potential new entrants.
The companies argued that the agreement included a clause subjecting it to regulatory approval.
However, the Commission determined that neither party sought prior exemption as required under the law.
An exemption application was submitted only after show-cause notices were issued.
The regulator rejected the request, stating that the agreement did not meet the statutory criteria and that the breach had already taken place.
Under Section 38 of the Competition Act, the Commission imposed a fine of Rs 20 million on each company for entering into and implementing the prohibited arrangement.
In its latest order, the appellate tribunal endorsed the regulator’s findings, noting that the companies had acknowledged the agreement as a non-compete arrangement through their conduct.
The tribunal further observed that after the rejection of their exemption request, the firms did not pursue additional legal remedies, a factor it interpreted as acceptance of the violation.
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The tribunal concluded that the penalties were proportionate and justified, maintaining the total fine of Rs 40 million.
The decision comes amid Pakistan’s broader efforts to strengthen market oversight and align its regulatory environment with international competition standards.
Enforcement of competition law has gained prominence in recent years as authorities seek to promote transparency, attract foreign investment, and foster a level playing field in key sectors such as pharmaceuticals, energy and consumer goods.
For global investors and multinational companies operating in Pakistan, the ruling signals that non-compete agreements and market-sharing arrangements are likely to face close scrutiny, particularly where they restrict market access or reduce consumer choice.
