Carving up cartels.

The vitality of capitalism is premised on markets that do not exhibit distortionary behaviours, such as cartel behaviour and mass tax evasion. Yet recent examples from two major Pakistani industries, sugar and cement, indicate that they are not acting in ways conducive to vibrant markets. Major players in the sugar industry have been found to conceal the majority of their sales for tax evasion purposes, while the cement industry has been found guilty of widespread cartel behaviour.

For the cement industry, the Competition Commission (CCP) has found 'hardcore evidence' that the industry, as represented by the All-Pakistan Cement Manufacturers Association (APCMA), has been acting as a cartel that fixes cement prices through unlawful processes. Such cartel behaviour has netted APCMA members gross profit jumps in the past cycle of anywhere between 100 percent and a wild 800 percent. According to the CCP, cement manufacturers conspired to raise prices to the Rs45-50 per bag range, thus gouging consumers for up to Rs40 billion in the past year alone. This cartel-scheming occurred despite two important government steps to facilitate the industry. First, the government removed lockdown restrictions on the construction industry to keep it going through the pandemic, which kept cement sales buoyant. Second, the government reduced the federal excise duty on cement by 25 percent, which the cement manufacturers pocketed rather than passing it on consumers. As such, this anti-competitive behaviour by a major industry occurred despite public support for their profitability.

This is a telling example, in a society where everyone is quick to blame the government of the day for every imaginable ill. Yet whenever the government proceeds to provide all manner of support to private entities, the public receives short shrift from the beneficiary industries. The recent CCP revelations in fact represent the second occasion on which it has busted cartel behaviour in the cement sector, and it has come on the back of revelations in the sugar sector of serial manipulation by industry barons as well. In the sugar industry's case, aside from cartel behaviour discovered by the CCP, there has also been a major recent incidence of tax evasion revealed by the Large Taxpayers Office (LTO) of the Federal Board of Revenue (FBR). The LTO has found that nine major sugar mills had engaged in mass accounting gimmickry (reducing credit entries) to the tune of Rs220 billion. This...

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