Competition Commission rejoinder

ISLAMABAD (November 16 2008): This is with reference to a news item which has appeared in Friday's edition of Business Recorder under the headlines "CCP free to proceed in case against KSE". The news item is in relation to certain proceedings which were pending in the Supreme Court of Pakistan.

At the instigation of the Islamabad Stock Exchange, the Competition Commission launched proceedings against the Karachi Stock Exchange for an alleged abuse of dominant position. In fact, ISE had earlier made a business proposal to KSE seeking trading rights for its members on the latter's exchange without their having to become members of the KSE and had stated that in return they were willing to pay Rs 100 crores to KSE.

When KSE did not agree, ISE tried to obtain those trading rights free of cost through the CCP, which held an enquiry in which although comments were called from KSE, they were not given any hearing.

It was on this basis and in this manner that the show cause notice was issued to KSE. The latter, being aggrieved by the mala fide and hostile manner in which the CCP was acting, filed a petition before the Sindh High Court.

The KSE challenged the constitutionality of the Competition Commission and raised several legal issues, including the fact that stock exchanges were regulated and governed by the SECP under their own special law, the Securities and Exchange Ordinance, 1969. It was therefore a clear case of usurpation of jurisdiction by the CCP.

The SHC was pleased to stay the proceedings launched by the CCP. On the subsequent date of hearing, this order was modified by the SHC to the extent that CCP was permitted to hear the legal issues first but was restrained from passing any final order.

Thereafter, ISE (which did not chose to become a party to the SHC petition), filed two petitions before the Supreme Court, claiming to be aggrieved by the orders of the SHC. The CCP itself never appealed against the orders of the SHC. It was these petitions that were heard by the Supreme Court.

The hearing lasted over two days, and detailed arguments were presented by counsel for both sides. It was, inter alia, pointed out that the CCP had developed the deliberate strategy of imposing huge and disproportionate fines in respect of proceedings launched by it, thereby hoping to recover crores of rupees in fines, which would go in large part to finance the hugely inflated salaries of the Commissioners.

This had been done in the case of the banks also, where penalties totalling around Rs 20 crores were imposed arbitrarily, and against which proceedings are pending in the SHC, and where the CCP itself has given an undertaking that it would not recover the penalties imposed.

It was during the course of the second day of the proceedings that counsel for ISE, and the CCP (represented by the Member, Legal), made an offer that the CCP was willing to give an undertaking to the effect that if the SHC stay were lifted, and an adverse order was made by the CCP against the KSE, then that order would not be enforced till the final decision of any appeal against the CCP decision to the Supreme Court.

Furthermore, no recovery of penalties would be made until the Supreme Court finally decided the matter on the merits. It was on this undertaking, expressly given in writing by the CCP to the Supreme Court, that the Court was pleased to direct that the SHC petition be listed in the High Court on 17.11.08.

Barrister Khalid Anwer, the counsel for KSE, submitted that since the stay order given by SHC had become unnecessary because of the undertaking given by the CCP, he would request the SHC to withdraw the same.

However, the petition itself would remain pending, enabling the SHC to adjudicate on the constitutionality of the Competition Ordinance and resolve the many legal questions raised therein, including, not least, the matter of resolving the jurisdictional issues between the two regulators, CCP and SECP. It was in this manner that the Supreme Court disposed off the proceedings before it.