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MGT611 Business & Labor GDB Solution Fall 2013

Company Background

Unilever Limited, a leading multinational company, is a fast moving consumer goods (FMCG) company that operates in different locations all across Pakistan. Initially it produced soaps and margarine produced from oil and fats. Its operations in the country continued to expand further into the food industry and also increased investment in research and development for further growth. Although, It is now one of the world’s top companies, but continues to focus its portfolio, and rationalize its businesses to focus on core products and brands.

The Case

Unilever sold its oil business to M/s Dalda Foods (Pvt) Limited for Rs 250 million in 2012. Later on both the companies made an agreement of non-competition. According to the agreement, Dalda Foods restricted Unilever to compete with it in oil businesses for the period of five years. Monopoly Control Authority of Pakistan issued a show-cause notice to the Unilever Pakistan Limited and termed this agreement as a violation of monopoly laws but Unilever Pakistan ignored this order and filed an appeal in the High Court.

REQUIREMENT:
You are required to discuss:

  • The kind of contract took place between the Unilever Pakistan and M/s Dalda Foods (Pvt) Limited. (10)

Solution: A non-compete clause (often NCC), or covenant not to compete (CNC), is a term used in contract law under which one party (usually an employee) agrees not to enter into or start a similar profession or trade in competition against another party (usually the employer). As a contract provision, a CNC is bound by traditional contract requirements including the consideration doctrine. The use of such clauses is premised on the possibility that upon their termination or resignation, an employee might begin working for a competitor or starting a business, and gain competitive advantage by exploiting confidential information about their former employer’s operations or trade secrets, or sensitive information such as customer/client lists, business practices, upcoming products, andmarketing plans.


  • The act committed by the Unilever Pakistan in reference to the Monopoly laws. (10)

Solution:

The history of competition law in Pakistan dates back to the 1970s when Pakistan promulgated the
Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970. The Monopoly Control
Authority was established to enforce this law. However, considering the changed economic conditions and various limitations of this legislation, the Government of Pakistan completely overhauled its competition regime in 2007 by enacting a new legislation, namely the Competition Ordinance of 2007 – a modern competition law essentially based on the European Legal principles. The Ordinance also established the Competition Commission of Pakistan (hereinafter referred to as the Commission) to implement the new competition law. The Ordinance of 2007 was enacted as an Act of Parliament in October 2010.
Briefly, the law prohibits actions that tend to lessen competition such as abuse of market dominance, agreements that restrict dominance, and deceptive marketing practices. The law sets out procedures relating to review of mergers and acquisitions, enquiries, imposition of penalties, grant of leniency, and other essential aspects of law enforcement.

he Competition Act, 2010 “extends to the whole of Pakistan”, and applies “to all undertakings and all actions
or matters that take place in or outside Pakistan and prevent, restrict, reduce or distort competition within
Pakistan.




The Act prohibits:

1. Abuse of dominant position;
2. Anti-competitive agreements;
3. Deceptive marketing practices;
4. Mergers and acquisitions that substantially lessen competition.

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