The Competition Appellate Tribunal has upheld the decision of the Competition Commission of Pakistan to penalize United Distributors Pakistan Limited (UDPL) and International Brands (Private) Limited (IBL) for entering into an anti-competitive non-compete agreement, in violation of Section 4 of the Competition Act, 2010.

The Tribunal confirmed that the agreement between the two companies constituted a prohibited market-sharing arrangement that restricted competition. It noted that the parties themselves had acknowledged the arrangement as a non-compete agreement and agreed with the CCP’s assessment that it unlawfully limited market participation.

The case originated after UDPL disclosed to the Pakistan Stock Exchange that it had signed a non-compete agreement with IBL. Under the arrangement, UDPL agreed to stop distributing human pharmaceutical products in Pakistan for three years in exchange for a payment of Rs. 1.131 billion from IBL.

The CCP found that the agreement effectively removed UDPL from the relevant market, reduced competition, and created barriers to entry. The payment was deemed a financial incentive designed to ensure UDPL’s exit and protect IBL from competitive pressure.

Although the agreement required regulatory approval, neither company obtained prior exemption from the CCP. Applications for exemption were submitted only after show-cause notices were issued. The CCP rejected those applications, concluding that the agreement did not qualify for exemption and that the violation had already been committed.

Consequently, the CCP imposed penalties of Rs. 20 million on each company under Section 38 of the Competition Act, 2010. The Tribunal upheld both the findings and the penalties, ruling that the fines were justified and warranted, and maintained the cumulative penalty of Rs. 40 million.