Cement industry: CCP flags three decades of cartelisation concerns

ISLAMABAD: Pakistan’s cement industry has, for over three decades, remained at the centre of repeated cartelisation concerns, with a consistent pattern: coordinated price hikes, regulatory intervention, and eventual dilution of enforcement through legal and administrative routes. The Competition Commission of Pakistan’s latest sector study lays out in detail how the cement industry, despite repeated findings of coordinated conduct, has largely managed to evade meaningful enforcement over the years. It traces a consistent pattern—from the era of the defunct Monopoly Control Authority to the present—where regulatory actions were either diluted, overturned, or tied up in prolonged litigation, allowing the industry to sidestep penalties and continue operating with limited deterrence. From the very outset, the sector has exhibited classic cartel-friendly traits—homogeneous product, excess capacity, and limited scope for differentiation—making coordinated behaviour easier to sustain. READ MORE: CCP identifies key drivers behind rising cement prices The first major cartel episode surfaced in 1992, soon after privatisation of state-owned units, when manufacturers capitalised on post-flood demand by simultaneously raising prices and restricting supply. The Monopoly Control Authority (MCA) confirmed collusive behaviour, but instead of strong punitive action, the response largely relied on administrative measures such as directing state entities to stabilise prices—setting an early tone of weak enforcement. The pattern repeated itself in the late 1990s. In early 1998, manufacturers attempted to form a cartel amid expectations of rising demand, though this was informally defused by the regulator. However, by October the same year, the industry moved in unison, increasing prices by around Rs100 per bag. The MCA, after detailed inquiry, rejected industry claims of rising costs and concluded that the increase was purely aimed at boosting profits through a tacit agreement. It ordered the cartel to be dismantled and prices to be rolled back. Yet, the industry largely ignored these directives. Penalties were imposed but swiftly challenged in courts, with most firms obtaining stays. Ultimately, an administrative intervention by the Economic Coordination Committee (ECC), which fixed indicative prices, effectively overtook the regulatory process, allowing the industry to avoid meaningful consequences. A similar trajectory unfolded in the early 2000s. In 2003, the MCA again initiated proceedings against cartelisation following media reports of price increases. Orders were issued in 2005 directing 18 cement manufacturers to break the cartel and reduce prices. However, compliance was not forthcoming, and penalties were once again challenged. This time, the Lahore High Court set aside the regulator’s orders, ruling that directing price reductions amounted to price control—beyond the MCA’s legal mandate. The judgment exposed fundamental weaknesses in the legal framework, significantly limiting the regulator’s ability to act against collusion. In 2007, another sharp increase in cement prices triggered fresh scrutiny. While investigations pointed to strong indications of coordinated behaviour, the MCA could not establish conclusive evidence under the restrictive provisions of the 1970 law. The absence of key enforcement tools—such as search powers, leniency programmes, and whistleblower mechanisms—meant that suspected cartel conduct once again went unpunished, reinforcing a perception within the industry that regulatory risks remained manageable. The landscape shifted with the introduction of the Competition Ordinance, 2007, which empowered the Competition Commission of Pakistan with modern investigative tools. Acting on credible intelligence, the CCP conducted a high-profile inspection of the All Pakistan Cement Manufacturers Association in 2008, uncovering documentary evidence of a formal “marketing arrangement” among manufacturers. The agreement revealed that production quotas were allocated to member companies to maintain desired price levels, with actual dispatches closely mirroring these quotas over several years. On the basis of this evidence, the CCP in 2009 imposed a landmark penalty of Rs6. 3 billion on 20 cement companies—one of the largest anti-cartel actions in Pakistan’s history. However, even this strong enforcement action followed the familiar trajectory. The case entered prolonged litigation, delaying final resolution and raising questions about the effectiveness of deterrence. Taken together, these five episodes—from 1992 through 2009—paint a consistent picture of a sector where cartelisation has repeatedly surfaced, often in similar forms, and where regulatory actions, though persistent, have struggled to deliver lasting impact. The cement industry’s track record underscores a deeper structural challenge: in sectors where market conditions favour collusion, enforcement alone—without swift legal finality—has proven insufficient to curb entrenched anti-competitive behaviour. Copyright Business Recorder, 2026

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