GM, Newage Cables face CCP show-cause notices for resale price maintenance

August 23, 2024 (MLN): The Competition Commission of Pakistan (CCP) has issued show-cause notices to GM Cables & Pipes (Pvt) Ltd. and Newage Cables (Pvt) Ltd. for their alleged involvement in Resale Price Maintenance (RPM), pursuant to completion of inquiry a potential violation.

Resale price maintenance (RPM) is a contract between a manufacturer and its distributors, where the distributors must sell the product at specific prices, and if not maintained, the manufacturer may terminate business.

This practice hinders competition by restricting dealers' ability to offer lower prices, ultimately disadvantaging consumers.

The CCP initiated an inquiry after taking suo motu notice of circulars issued by both companies, which restricted their dealers across various regions from offering discounts beyond a certain percentage on credit and cash sales.

These circulars required dealers to stick to the specified rate limits, prohibiting them from selling below the designated discounts.

GM Cables and Newage Cables, which operate nationwide through an extensive dealer network and online platforms, were found to have established a resale price maintenance system through their respective circulars.

GM Cables issued a ‘Notice for Rate Control’ in August 2021, while Newage Cables introduced a ‘Retail Discount Policy’, both of which enforced strict pricing rules on their dealers.

These rules were accompanied by penalties, including fines and termination of dealerships for non-compliance, further reinforcing the companies' control over market pricing.

The CCP’s inquiry further established that this anti-competitive behavior has wide-ranging implications, as cable products are produced and sold nationwide, with sales volumes differing across regions.

As a result, these restrictive practices create a spill-over effect throughout the entire market.

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