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Q&A with Maleeha Bangash, Member Advocacy & Research, CCP

Q&A with Maleeha Bangash, Member Advocacy & Research, CCP

Maleeha Bangash has over 13 years of rich and varied international experience based in Singapore, Pakistan and Turkey in the areas of Investment and Finance. She has obtained her MBA degree with Honors from University of Chicago in Investment and Finance and MBA from LUMS in Marketing and Finance. In the private sector, Maleeha was instrumental in the success of key projects. In Singapore, as Vice President Business Development of an international investment bank she devised the bank’s positioning strategy and assisted in the establishment of its Singapore office. Upon her return from Singapore, she played a leading role in the successful launch of a leading local asset management firm and has headed its Marketing, Retail & Institutional Sales areas. She has been featured in Global Competition Review as a prominent woman in anti-trust in 2009. Currently, Member Advocacy & Research at the Competition Commission of Pakistan (CCP), Maleeha Bangash talks about the importance of creating a culture of competition and the initiatives undertaken by the CCP to enable businesses in the area of Mergers & Acquisitions. 

Can you tell us a little bit about yourself, your background and experience and about your current role in the Commission?

Maleeha Bangash: “My role in the Competition Commission of Pakistan (CCP) is that of a Member/Commissioner. I look after the area of Advocacy & Research at the CCP and also have an additional responsibility of involvement in the Merger Clearance Regime of the CCP and the supervision of the merger facilitation as head of Acquisition and Merger Facilitation Office (AMFO).
My background is that of Finance. I obtained my MBA degree (Marketing & Finance) from LUMS Pakistan and Executive MBA Honors (Finance) University of Chicago, Graduate School of Business. I have 13 years of experience based in Singapore, Pakistan and Turkey mostly in the areas of Investments and Finance.”

Could you elaborate what you do in the area of Advocacy & Research?

MB: “Well, firstly I’d like to explain the significance of Advocacy. In the Competition Ordinance, 2007, under Section 29 the role of Advocacy has been outlined, and Competition Advocacy has been given importance under the new law. Competition Advocacy is about promotion of competition through means other than law enforcement and the aim of the Advocacy is to create a culture of competition by outreach and proactively creating awareness of the law amongst stakeholders, encouraging healthy competition norms and ensuring competition law compliance amongst businesses. This is a proactive, dynamic and ongoing process which goes hand in hand with the law enforcement aspect. Advocacy is essential for creating awareness, acceptance and most importantly compliance with the law.
In May 2008, as part of Advocacy, CCP set up a Competition Consultative Group (CCG) in an effort to institutionalise its inclusive approach of seeking advice and suggestions on promoting competition in Pakistan. The CCG is an informal group and works as a sounding board and a think tank for the Commission. The CCG provides a platform for informal feedback and guidance with respect to the Commission’s ongoing activities and proposed initiatives. Seven CCG meetings have been held so far in Karachi, Lahore and Islamabad.

We have also held several seminars including two with international competition experts from the US, Italy and India entitled, ‘The Importance of a Competition Regime’. We have organised several bilateral meetings and roundtable sessions focused on specific sectors or industries. An upcoming advocacy effort is the National Conference on Competition Regime in Pakistan which we will be held in Karachi in December 2009. We have also issued Advocacy Policy notes to the government and regulatory bodies to sensitise them about several competition aspects.

I would say that CCP is quite unique as far as research goes. Again, a lot of emphasis is laid on the area of research since the CCP has taken a knowledge-based approach, and intends to use this research as a foundation for all the initiatives and actions that it will take in the future. A total of 12-15 sector Competition Impact Assessments (funded by the World Bank) are being conducted in the major sectors with a view to ascertaining competition vulnerabilities within the sector. These sectors include Energy & Power, Cement, Telecommunications, Sugar, Polyester Fibre, Packaged Milk, Drinking Water, Automobiles, Auto Parts, Aviation and Fertiliser. We have recently completed an assessment of the banking sector which will be published and disseminated widely.

These research studies will provide dynamic templates for updating and monitoring sectors. Additionally, we undertake ongoing in-house industry research and investigative analysis and report writing so as to be current on the dynamics of each sector.”

That seems like quite a lot. You mentioned that you were also involved with the Merger Clearance Regime can you explain a little about that?

MB: “Yes, that is best explained by looking at two aspects of the Competition Ordinance, 2007. One is the ex post (after the fact) aspect which is the law enforcement side and the other is the ex ante (before the fact) aspect which is the regulatory side – the Merger Clearance Regime which is Section 11 of the law is the only regulatory function of the CCP (hence it is called a quasi regulator).

The Merger pre-notification and clearance regime is a mandatory regime and we are one of 110 jurisdictions which have merger clearance. I can name a few countries which have mandatory merger notification regimes such as the United States, Canada, South Africa, Switzerland, Japan and Singapore.

The Commission makes every effort to ensure that businesses face minimum regulatory compliance cost or delays by clearly defining the process. For the benefit of the business community, the Commission has issued detailed Merger Guidelines that are available on its website.

It is important for me to explain that the term “Merger” as defined in the Competition Ordinance is very distinct and a much wider term, compared to the way it is understood in the financial sector, or the way it is defined under the Companies Ordinance. The term includes Joint Ventures, Acquisitions and Amalgamations, where two or more undertakings merge to form a new undertaking or one undertaking is absorbed into an existing undertaking.
The merger review is conducted in two phases. The first phase, to be completed within 30 days, assesses whether the merger would substantially lessen competition by creating a dominant position. If we detect prima facie evidence of distortion or lessening of competition in the relevant market post merger, or if the merging parties’ market shares increase beyond 40% then the review needs to go into the second phase.

Should it be necessary, the Phase II analysis has to be completed within 90 days and is based on detailed information provided by the undertakings viewed in tandem with prima facie evidence from the Phase I. Beyond the 90 days of Phase II, if no response is received from the CCP the merger is deemed to have been accepted and can proceed. While reviewing the transactions, the Commission considers the following factors:

• analysis of the relevant product and geographic markets;
• identification of competitor undertakings;
• calculation of market shares;
• calculation of market concentration;
• assessment of potential adverse effects of the mergers, based on market concentration and other characteristics of the market;
• assessment of market entry, that is, would it be, timely likely and sufficient enough either to deter or counteract the anticompetitive effects of the merger;
• assessment of efficiency gain, which the merger parties cannot otherwise gain but for merger; and
• assessment of likelihood, in the absence of merger, of either party to the merger to fail causing its assets to exit the market.

At all times during the review, we, the CCP applies the Rule of Reason and remains cognisant of the commercial and economic benefits of a transaction.
The work style of the Merger department is highly efficient and with quick turnaround time. So far, we have cleared 120 merger cases, all except one were completed after Phase I, with an average of around five days time taken by us. Just one went into Phase II, and that also took just 15 days for us to conclude.”

I believe that certain thresholds have been laid down for the parties who have to apply for merger clearance to CCP?

MB: “That is right. The Merger (Control) Regulations contain the down certain thresholds. These are based on the asset size and turnover of the merging parties and also on the size of the transaction. These have been set low initially and once the CCP gains  experience  in line with the practice of competition agencies internationally, the current Merger Thresholds will be revisited by CCP – may be revised upwards in the future. The following transactions shall be exempt from filing pre-merger notification:

(1) a transaction in which a holding company (whether incorporated in or outside Pakistan) increases its stake in its subsidiary or the subsidiaries thereof (whether incorporated in or outside Pakistan) increase their equity investment in each other;
(2) shares acquired by succession or inheritance;
(3) allotment of voting shares pursuant to a right issue; provided that the voting securities acquired do not increase, directly or indirectly, the acquiring person’s per centum share of outstanding voting securities of the issue;
(4) increase of stake or shareholding between subsidiaries;
(5) transactions linked to repos or repurchase agreements; and
(6) bonus shares and in specie dividend distribution.

Amendments and exemptions specific to Mutual Funds/Asset Management Companies have also been notified in October, 2009.
While the above transaction may be exempt from pre-merger notification, they may still be subject to substantive review under the Ordinance, if so deemed appropriate by the Commission.”

That sounds great. What about Merger and Acquisition facilitation, would you like to tell us about AMFO?

MB: “The Acquisition and Merger Facilitation Office (AMFO) has been set up for the assistance of undertakings for submission of pre-merger applications. This is an optional service that has been provided for parties contemplating a merger, before they actually come to CCP formally for Merger Clearance. The parties in the merger or acquisition transaction provided help with the understanding and filing of the pre-merger applications and also provided an overview of the substantive provisions of the Competition Ordinance, 2007 as well as Competition (Merger Control) Regulations, 2007. The main objectives of the creation of the office were:

• facilitating the parties involved in the transaction, in submission of pre-merger applications;
• providing available pre-emptive identification of the key and potential competitive concerns that may arise due to the proposed transaction. The parties, after they have approached the ‘AMFO’ will be informed in advance and through an informal mechanism to ensure that all competition concerns are addressed;
• encouraging parties who are proposing an acquisition or merger to come directly to the Commission, thus avoiding lengthy legal procedures and advisory fees. The aim is to reduce time and cost of compliance of acquiring / merging parties;
• providing a confidential service whereby complex transactions can come to the CCP for a preview. Through this process merger remedies can also be indicated and will also be already accepted by the parties involved in transaction. This approach will provide a win-win situation for all the concerned parties, involved in the acquisition/merger transactions, and the Commission.
Services of AMFO have been availed so far by corporate lawyers, financial firms involved in investments, actual merging/acquiring corporations and third party consultants. AMFO has also provided formal advice to undertakings who applied for the opinion of the Commission with respect to their intended merger transactions.”

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