ISLAMABAD, Dec 28: The Monopoly Control Authority (MCA) has rejected the complaint filed by English Biscuits Manufacturers (Pvt) Limited (EBM) which alleged that Danone Group of France and its associated companies had through acquisitions and mergers obtained “unreasonably monopoly power” in the brand biscuits market in Pakistan.

Recounting a story of acquisitions and mergers by various companies, EBM said it was incorporated in 1965 as a joint venture company in the name of Peak Freans (Pakistan) Limited with 25.25 per cent equity held by its UK-based sponsors and 74.65 per cent by local sponsors — House of Manji.

In 1966, name of the local company were changed to English Biscuits Manufactures Limited and that of its parent company to Associated Biscuits International Limited (ABIL), which in turn was a subsidiary of Hungley & Palmens Group UK. Its ownership again passed to RJR Nabisco of USA and then to Danone Group of France which acquired 50 per cent equity in ABIL, thus becoming a shareholder in EBM.

Before acquiring shares in EBM, Danone was already present in Pakistan with 49.5 per cent equity in Continental Biscuits Limited (CBL). Danone’s entry thus created “a conflict of interest” situation for both EBM and CBL — the principal competitor of EBM since its incorporation in 1985, according to EBM.

Ever since Danone’s entry as indirect/beneficial shareholders in EBM in early 1990, it was alleged, EBM has not received any assistance from ABIL. On the contrary, EBM stated, ABIL/Danone were out to destroy EBM through frivolous, malicious and malafide litigation on the one hand, and on the other, providing global management expertise and support to CBL to the total exclusion of EBM.

“This is because ABIL/Danone’s prime malafide motive is to strangulate EBM, take its control and establish a monopolistic hold on Pakistan biscuit market through its global muscle,” EBM contended.

After obtaining data obtained from various biscuit companies, the MCA served on January 10, 2001, show-cause notice under section 11 of the Monopolies and Restrictive Trade Practices (Control & Prevention) Ordinance, 1970, on EBM, CFL and CBL for “maintaining and continuation of such relationship which was injurious to the economic well-being, growth and development of the country” and why an appropriate action under section 11 read with section 11 read with section 12(1)(b)(I)&(vii) of the Ordinance may not be taken against them.

The final hearing in the case was held on November 30, 2002, in which Fakharuddin G. Ebrahim appeared on behalf of Danone and ABIL, while CBL was represented by Mian Safiullah and Syed Ahmed Hassan Shah.

Mr Ebrahim, contesting EBM’s contentions, argued that Danone’s share in EBM through its shareholding in ABIL was only 20 per cent. He admitted that Danone also had a 20 per cent share in Coronet Foods (Pvt) (CFL), which is 100 per cent subsidiary of EBM. In CBL, Danone’s share was 49.5 per cent.

Syed Ahmad Hassan Shah, appearing on behalf of CBL, also contested the EBM’s plea and stated that EBM’s baseless claims had put CBL through considerable inconvenience and hardship, which, inter alia, resulted in CBL incurring considerable costs and expenses.

In its order passed on December 10 — the last working day of Saleem Asghar Mian, chairman, before his retirement — said: “MCA has arrived at the conclusion that the undertakings are not associated undertakings as prescribed in the Ordinance, hence the matter does not attract the provisions of section 5 of the Ordinance.” It, therefore, withdrew the show-causes notices served on CBL, Danone and ABIL, as well as EBM and CFL.