This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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COMPETITION COMMISSION OF INDIA
Ref. Case Nos. 03 & 04 of 2013
Ref. C. No. 03 of 2013
In re:
Delhi Jal Board Informant
And
1. Grasim Industries Ltd. Opposite Party No. 1 2. Aditya Birla Chemicals (India) Ltd. Opposite Party No. 2 3. Gujarat Alkalies and Chemicals Ltd. Opposite Party No. 3 4. Kanoria Chemicals & Industries Ltd. Opposite Party No. 4
WITH
Ref. C. No. 04 of 2013
In re: Delhi Jal Board Informant 1. Grasim Industries Ltd. Opposite Party No. 1 2. Aditya Birla Chemicals (India) Ltd. Opposite Party No. 2 3. Punjab Alkalies and Chemicals Ltd. Opposite Party No. 3 4. Kanoria Chemicals & Industries Ltd. Opposite Party No. 4
Ref. C. Nos. 03 & 04 of 2013 1
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CORAM
Mr. Devender Kumar Sikri Chairperson
Mr. S. L. Bunker Member
Mr. Sudhir Mital Member
Appearances: Shri Sangram Patnaik, Ms. Tehsina, Ms. Rupam and Shri Kashish Khurana, Advocates for Delhi Jal Board.
Shri Amit Sibal, Senior Advocate with Shri Samir Gandhi, Shri Rahul Rai, Ms. Kadambari Chinoy, Shri Dhrupad, Ms. Krithika Ramesh, Shri Tahir Ashraf Siddiqui, Shri Namit Suri and Shri VR Shankar, Advocates for Grasim Industries Ltd. (GIL); Aditya Birla Chemicals (India) Ltd. (ABCIL); Shri K. C. Jhanwar, Group Vice-President of ABCIL & GIL; Shri Shailendra Deshpande, Senior Vice-President (Sales & Marketing of Value Added Products) of ABCIL & GIL and Shri Mayank Sharma, Vice-President (Sales & Marketing, Chlor Alkalies) of ABCIL & GIL.
Shri Jayant Mehta and Shri Nikhil Pillai, Advocate for Shri Ajay Todi, Senior Vice-President (Sales & Marketing of Value Added Products) of ABCIL and GIL.
Shri Rajshekhar Rao, Shri Sameer Dawar and Shri Toshit Shandilya, Advocates for Gujarat Alkalies & Chemicals Ltd. (GACL) and for Shri G. S. Paliwal, General Manager (Marketing) of GACL.
Ref. C. Nos. 03 & 04 of 2013 2
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Shri Karan Lahiri and Ms. Gauri Puri, Advocates for Shri U. N. Karogal, General Manager (Marketing) of GACL.
Shri Swetank Shantanu, Advocate for Shri Mukesh Mishra, General Manager (Marketing) of GACL.
Shri A. N. Haksar, Senior Advocate with Ms. Anju Thomas, Shri Sahil Sharma, Shri Sandeep Bajaj and Shri Soayib Qureshi, Advocates alongwith Shri Pradeep Nauharia, Co. Secy. & Sr. G.M. (CO. Affairs), Shri S K Garg, Dy. Manager and Shri Ajay Pal Singh GM (Finance) for Punjab Alkalies & Chemicals Ltd. (PACL) and Shri Naveen Chopra, General Manager (Marketing) (In-person) of PACL.
Shri Manas Kumar Chaudhuri, Shri Pranjal Prateek and Ms. Nikita Agarwal, Advocates for Kanoria Chemicals & Industries Ltd. (KCIL).
Order under Section 27 of the Competition Act, 2002
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Limited (‘the Opposite Party No. 1/ GIL), Aditya Birla Chemicals (India) Limited (‘the Opposite Party No. 2’/ ABCIL), Punjab Alkalies and Chemicals Limited (‘the Opposite Party No. 3’/ PACL) and Kanoria Chemicals and Industries Limited (‘the Opposite Party No. 4’/ KCIL) alleging inter alia contravention of the provisions of Section 3 of the Act.
Facts
Ref. Case No. 03 of 2013
Ref. C. Nos. 03 & 04 of 2013 4
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and e-tenders by the Informant only the Opposite Parties come out and bid.
Ref. C. Nos. 03 & 04 of 2013 5
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quoted by KCIL and GIL were exactly the same i.e. INR 9,300 PMT.
Ref. Case No. 04 of 2013
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same price of INR 6,400 per MT. Again in the year 2012-13, ABCIL and PACL quoted the same rate of INR 9,500 per MT of liquid chlorine.
Directions to the DG
Investigation by the DG
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29.10.2015. Part I of the Report deals with the bid rigging in procurement of liquid PAC and Part II deals with the bid rigging in procurement of Liquid Chlorine.
Part I (Liquid PAC)
Part II (Liquid Chlorine)
Consideration of the DG report by the Commission
Ref. C. Nos. 03 & 04 of 2013 9
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Replies/ Objections/ Submissions of the Parties
Replies/ objections/ submissions of the Informant
Ref. C. No. 03 of 2013
Replies/ objections/ submissions of GIL/ ABCIL
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the DG to investigate the matter. However, DJB has averred erroneous facts both in the information and at the preliminary conference. For instance, in support of its allegation that ABCIL and GIL, as well as GACL and KCIL (ABCIL, GIL, GACL and KCIL collectively referred to as ‘ PAC Case OPs ’) had entered into an agreement in violation of Section 3 of the Act, DJB submitted that during the round of negotiations, the PAC Case OPs agreed to supply PAC at identical prices. Relying on the above statement of DJB, the Commission formed the prima facie view that the PAC Case OPs negotiated with DJB to supply PAC at the same rates. In fact, DJB held negotiations only with the L1 bidder, and counter-offers were made to L2 and L3 bidders to supply at L1 prices. Hence, L2 and L3 bidders were expected to supply either at L1 prices or not supply at all. Consequently, the Commission’s failure to test the allegations made by DJB by inviting the parties to offer their views at the preliminary stage itself has resulted in grave injustice to the parties, who were not granted the opportunity to present their case at the time of the preliminary conference.
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the business of a party, should disclose/ contain all the evidence and submissions made by relevant parties to the adjudicating authority, and that DG’s failure to do so vitiates the Report in entirety.
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establish the existence of any agreement or understanding between the PAC Case OPs. Having failed to gather or adduce any direct or circumstantial evidence to support the allegation of a bid rigging agreement between the PAC Case OPs, DG has relied on economic evidence, statements made by various deponents and other additional evidence to come to the conclusion that the PAC Case OPs have acted in violation of Section 3(3)(d) of the Act. It was argued that even the “additional evidence” relied upon by the DG does not support the finding of bid-rigging against the PAC Case OPs.
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(earnest money deposit, interest on overdue payments, inspection, charges for loading and unloading) that are incurred for supply of PAC to DJB.
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there were an agreement of any form amongst the PAC Case OPs (a disadvantageous position).
Replies/ objections/ submissions of GACL
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devoid of merits and unsustainable. The findings of the DG suffer from a number of legal infirmities and deserves to be set aside for nonadherence to legal and evidentiary standards laid down by the Commission and the Hon'ble Competition Appellate Tribunal.
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Further, the DG has not analysed OPs’ conduct to rule out an alternative explanation to the alleged parallel conduct.
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observations on certain aspects of tender conditions to conclude that GACL and other bidders were acting in concert.
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that GACL’s costs have not been considered at all by the DG which demonstrates non-application of mind.
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the year 2010-11, Tender No. 1 for the year 2012-13 and Tender No. 5 for the year 2013-14. Subsequently, Shri G.S. Paliwal attended the meeting in relation to Tender No. 15 for the year 2014-15. For Tender No. 7 for the year 2009-10 and Tender No. 1 for the year 2010-11, GACL was not even called for negotiation at all. Thus, it was clear that GACL was not represented by the same person in all negotiations year after year. It contends that the DG has completely glossed over this evident fact.
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dealers. Further, as the dealers are representing GACL, they also have to obtain price approvals from GACL.
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different players in the PAC business. There is no consumer harm caused in relation to the alleged collusion as there was no point where PAC supply to DJB was disrupted or stopped. Therefore, GACL submits that there can be no presumption of consumer harm in this case and, in fact, on the contrary, there has been an accrual of benefits to the consumers.
Ref. C. No. 04 of 2013
Replies/ objections/ submissions of GIL/ ABCIL
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Specifically, the failure to grant a preliminary conference has resulted into the Commission not appreciating the unique nature of the market for LC and volatile nature of demand and supply which operates in this market. Further, due to lack of a preliminary conference, the Commission was unable to appreciate the fact that it is highly onerous from a commercial standpoint to supply LC to DJB. Accordingly, the parties’ commercial consideration while supplying to DJB are unique and cannot be used to arrive at an adverse conclusion in isolation.
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it) but has also relied on instances from beyond the period of investigation to prove an allegation of cartelization within it.
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also hampers further production of the main product. In view of this, manufacturers of caustic soda are obligated to dispose of the same at the earliest and at whatever price the market can offer on that particular day. Therefore, factors such as (i) rate of production of caustic soda, (ii) market availability of LC, (iii) availability of storage containers (tonners) and (iv) geographical distance are also considered while determining the price of LC which make the prices of LC extremely dynamic and these factors change with higher frequency. However, given that prices quoted to DJB have to be firm for one year and there can be no changes in the prices, except in case of variation in statutory taxes, parties have to account for the same while quoting a price for DJB tenders. The parties are also required to transport LC in special containers called tonners. DJB has a slow tonner rotation and therefore, in order to meet the tight supply timelines, the parties need to use more number of tonners in comparison to other customers that have a higher tonner rotation.
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Further, the DG has used the following facts to come to the conclusion that GIL submitted the cover bid:
Thus, it was sought to be contended that the DG has misconstrued facts in a manner to support his conclusions.
These submissions clearly evidence that the parties independently determined their prices.
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Accordingly, the parties request that the DG Report be disregarded in its entirety and that the investigation against the parties be closed.
Replies/ objections/ submissions of PACL
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It was further submitted that the DG has adopted a theoretical approach and wrongly relied upon the economic principles of price parallelism, ignoring the facts put forth by PACL. The entire report of the DG is based on his own prejudicial perceptions about the industry rather than based on documents and data produced by PACL.
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more tonners, as that would result in the PACL suffering extra losses only to accommodate the quantity requested by the Informant. To elaborate on this, it has enclosed a copy of the financial statement of the last five years of the PACL showing the profit and loss account. Further, it stated that the DG on its own assumed the fact that tonners can be arranged as per requirement without considering the number of tonners available with PACL in the previous years.
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knowledge of the Informant that the rates quoted were only for 2100 MT. A perusal of the Report of the DG would reveal that no clarification was sought from PACL with regard to the quotation for half of the quantity of the tender. The Learned DG has on its own reached to the conclusion that there was a concerted behavior without asking for explanation from PACL. It is averred that said assumptions of the DG clearly show that the investigation has not been carried on in a fair manner and the DG has proceeded with a predetermined mind.
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factors, namely, base price, freight and taxes. It was submitted that the parties to whom PACL was supplying LC had their own arrangements for loading and unloading of chlorine tonners at their premises. However, in the case of Informant, PACL had to arrange for loading and unloading of the chlorine tonners. Hence, the cost of the same was also part of the bid prices. Therefore, the rates quoted by PACL was quoted keeping in view these ancillary charges.
Ref. C. Nos. 03 & 04 of 2013 34
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2012-2013. As stated PACL had quoted price of INR 7295 /- PMT in November 2010 to the Informant as its average price for similar consumers from October, 2009 to September,2010 was INR 8886/PACL had quoted price of INR 9500/- PMT to the Informant in November, 2011 and the average price of its similar customers for the period October, 2010 to September, 2011 was INR 8920/- PMT. However, in March, 2013, the Informant did not call for the tender. Rather it allotted the contract to GACL @ INR 8738/- per PMT without inviting the tender. If the Informant would have called the tender then as per past practice PACL would have quoted rates based on average rates of similar customers of PACL from January, 2012 till December, 2012 which was INR 3195/- PMT.
Ref. C. Nos. 03 & 04 of 2013 35
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liable for refusing to supply 50 % of the quantity when the same would affect its production.
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the production for which it will need fast tonner moving customers..
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huge import of caustic soda. The DG, instead of comparing the imports till September, 2014, sought to compare the quantities throughout the year and stated that there was no inconsistency in the statement of Shri Chopra.
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Replies/ objections/ submissions of KCIL
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Division by KCIL to ABCIL.
Analysis
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Commission observed that cartelization between the OPs seems to be there continuously in 2008-09, 2009-10, 2011-12 and 2012-13. However, the Commission highlighted the fact this opinion expressed was based on facts available to it (Commission) at the prima facie stage and directed the DG to investigate the matter for violation of any/all provisions of the Act, and not only in respect of the provisions therein. The DG was further asked to investigate the matter thoroughly for violation of any/all provisions of the Act and not only with respect to certain specific tenders. Thus, the prima-facie view does not restrict the DG and he was duty bound to carry out a comprehensive investigation. We, therefore, cannot accept this argument of ABCIL and GIL.
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under Section 3 (3) of the Act.
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organization or individual for the work without any due process, it will lead to distortion of competition in the market. Hence, it is important that transparency and fair process are maintained throughout. However, this does not preclude suppliers’ role in contributing to the said process. They play an equally important role in either encouraging the competition in the tender process or otherwise. Suppliers with their offers compete with each other to win the bid. If a set of suppliers/ bidders make arrangements amongst themselves to allocate the market, quote agreed rates or withdraw bids, display a pattern in winning and losing of the bids and the winning bidder repeatedly sub-contracts work to unsuccessful bidders, etc ., it will no doubt defeat the objective of having a competitive bidding process. Such a conduct will not only discourage proper allocation of resources which could be utilized efficiently but also impede competition in the market.
Ref. C. Nos. 03 & 04 of 2013 45
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company for contravention by its subsidiary, without having to establish the personal involvement of the parent company in the infringement. In Imperial Chemical Industries Limited v. Commission of European Communities , the subject matter of the case was the concerted practice of increasing prices of dyestuff since 1964 in the countries of the Community by its producers. The European Commission concluded that the parties had engaged in concerted action and imposed penalty on the parent entities which were not within the Community area for infringement by their subsidiaries inside the Community area since the parent company exercised decisive influence over the subsidiaries. Mausegatt v. Haute autorite [C-13/60] was a case where mining companies of the Ruhr valley had agreed to sell part of their production through a single selling agency and applied to the High Authority under the Treaty establishing the European Coal and Steel Community to authorize the arrangement. The High Authority rejected the application as the agreement excluded normal operation of competition between these mining companies. This rejection was challenged before the Court of Justice where the Opinion of Advocate General K. Romer was sought. GIL and ABCIL have sought support of an observation made in the opinion of the Advocate General in this case. Appointment by Automobili Lamborghini S.P.A of its group company, Volkswagen Group Sales Pvt. Ltd. as the exclusive importer of its cars was the bone of contention in Exclusive Motors Pvt Ltd. v. Automobili Lamborghini . Such an agreement was alleged to be in contravention of Section 3(3)(a) as they determined sale and purchase of car, Section 3(4)(c) for being an exclusive distribution agreement and Section 4 for abuse of dominance. The allegation under Section 3(3) of the Act in Kansan News Pvt. Ltd. v. Fastway Transmission Pvt. Ltd. was that three multi systems operators, who belonged to the same group, had terminated contract of retransmission of Kansan’s news channel.
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fact that they are related to each other by virtue of common shareholders, employees, etc ., if any.
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person. Under these circumstances, the DJB could not have ascertained or contemplated the possibility of the quotes of GIL and ABCIL being decided by the same persons. Being aware of the fact that both the companies are part of a business group cannot be equated with knowing the complete details of management of business. Rather it appears that before the DJB, GIL and ABCIL presented themselves to be separate entities and before the DG they took the argument of being a single economic entity.
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“group” as provided in clause (b) of the Explanation to Section 5 to the proceedings under Section 4 of the Act. This follows from Explanation (c) to Section 4 of the Act which states that “group” shall have the same meaning as assigned to it in clause (b) of the Explanation to Section 5. No such extension has been made by the Legislature in the context of the proceedings under Section 3 of the Act and, in these circumstances, it is not only futile but legally untenable for GIL and ABCIL to take recourse to such an argument. To accede to such a submission of ABCIL and GIL would not only require rewriting of the Statute but would also be subversive of the entire scheme of the Act because in as much as “group” entities would quote ostensibly “independent” and “competitive” bids to project a competitive landscape in the bidding process and at the same time, would remain, under the garb of a single entity, outside the purview of the competition law dealing with anticompetitive arrangement. Hence, such a plea is misconceived and is rejected.
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them being a single economic unit. The Hon’ble Tribunal, after appreciating the legal structure of the insurance companies and the statutory framework of General Insurance Business (Nationalization) Amendment Act, 2002 (GIBNA), observed that Central Government and the insurance companies are distinct and separate entities. It was stated that GIBNA empowers Central Government to issue directions in matters of policy involving public interest and further Section 19 thereof requires the insurance companies to be guided by such directions. Therefore, DFS which is the part of Ministry of Finance discharging functions of the Central Government, is separated by a statutory wall from the insurance companies.
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independent options for procurement. They will, under such circumstances, have to comply with the provisions of the Act in letter and spirit. Any argument by such entities to the effect that they decided to submit separate bids but the prices were decided by the same person, which fact is not known to the procurer, cannot be used to escape the provisions of law. Such a behaviour, apart from manipulating the price discovery process of public procurement, is contrary to the objective of the Act and should be condemned. Accordingly, ABCIL and GIL cannot avoid the responsibility cast under Section 3(3)(d) read with Section 3(1) of the Act under the garb of belonging to the same group.
Ref. Case No. 03 of 2013
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cost of production and basic prices charged to top customers, it was observed by DG that on some occasions, the product was sold below the cost price. The same was found to be not logical in as much as production of PAC is neither mandatory nor is it a by-product.
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Section 3(1) read with Section 3(3)(d) of the Act.
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Similarly for Tender No. 5 dated 01.05.2013, the final rates quoted by the three bidders were as follows:
| GIL | INR 11,498/- |
|---|---|
| ABCIL | INR 11,440/- |
| GACL | INR 11,599/- |
In addition, for Tender No. 15 dated 05.03.2014, the final rates quoted were:
| GIL | INR12,440/- |
|---|---|
| ABCIL | INR12,140/- |
| GACL | INR 12,099/- |
Thus, it is evident that despite the fact that the plants are located in different geographical areas and the cost as well as logistics involved will be different, rates quoted by all these bidders have remained substantially similar. The Commission observed that by its own admission, GACL has stated that since its liquid PAC plant is located farthest from DJB’s supply areas, transportation cost is a major component in its pricing for DJB, whereas the final rate quoted by GACL does not seem to take this into account as a major component, thereby contradicting the said claim.
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times that it participated in the tenders.
(b) Bombay Municipal Corporation for Panjrapole:
In the tenders floated by Bombay Municipal Corporation for Panjrapole, dealer of GACL – Heetu Chemicals, Mumbai is L2 in five out of the six tenders, while SVS Chemical Corporation (GIL’s dealer) is L1 in the four times that it participated in the tenders.
In the tenders floated by Bombay Municipal Corporation for Bhandup, dealer of GACL – Heetu Chemicals, Mumbai is L1 in five out of the six tenders (from FY2009-10 to FY2013-14), while SVS Chemical Corporation (GIL’s dealer) is L2 in these five tenders. In the tender for FY2014-15, SVS Chemical Corporation (GIL’s dealer) is L1 and Heetu Chemicals, Mumbai is L2.
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ABCIL have been continuously and throughout these tender processes, exchanging all vital information with each other whether it is sharing of the bid documents, prices to be quoted and later, even the negotiated prices to be offered. The Commission finds it paradoxical that notwithstanding ABCIL and GIL claiming to be one economic entity, they continued to submit separate bids, after exchange of information, which were purportedly and supposedly to be competitive. Their credibility comes into question since admittedly they have exchanged all the information including the pricing strategy before submitting their separate bids as competitors to DJB. If the prices were already known, it is obvious that they would know who would be left behind.
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circumstances taken in totality are sufficient enough as ‘plus factors’ and these affirm the fact that prices have been quoted as a result of concerted action as well as meeting of minds.
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provisions contained in sub-section (1) shall be void. By virtue of the presumption contained in subsection (3), any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which-(a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.
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authority. When the bids are quoted pursuant to a collusive action by the bidders, even post bid negotiations cannot guarantee lowest rates because the procurer cannot ascertain the most competitive price prevalent in the market. This causes loss to the public exchequer and, in turn, harms the public at large.
Ref. Case No. 04 of 2013
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price of LC is inversely proportional to the production of caustic soda.
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that no finding of contravention can be recorded against the bidders based on the conclusions drawn by the DG.
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the provisions of Section 3 of the Act against KCIL. The Commission is in agreement with the conclusion drawn by the DG in this regard.
ORDER
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penalties will deter the infringing undertakings. Therefore, the quantum of penalties imposed must correspond with the gravity of the offence and the same must be determined after having due regard to the mitigating and aggravating circumstances of the case.
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recorded the following reasons:
When the agreement leading to contravention of Section 3 involves one product, there seems to be no justification for including other products of an enterprise for the purpose of imposing penalty. This is also clear from the opening words of Section 27 read with Section 3 which relate to one or more specified products. It also defies common sense that though penalty would be imposed in respect of the infringing product, the ‘maximum penalty’ imposed in all cases be prescribed on the basis of ‘all the products’ and the ‘total turnover’ of the enterprise. It would be more so when total turnover of an enterprise may involve activities besides production and sale of products, like rendering of services etc. It, therefore, leads to the conclusion that the turnover has to be of the infringing products and when that is the proper yardstick, it brings home the concept of ‘relevant turnover’.
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confidentiality claim shall hold in so far as the data that might have been referred to in this order.
Sd/ (Devender Kumar Sikri) Chairperson
Sd/(S. L. Bunker) Member
New Delhi Date: 05/10/2017
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DISSENT NOTE
PER Sudhir Mital Member
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impugned conduct of GACL can be attributed to a practice in concert with GIL and ABCIL. Does the evidence amply show that GACL’s behavior defies economic rationale for an enterprise behaving independently and its actions cannot be objectively justified but for a cartel?
40) A neat and pellucid reply of Mr. Kaul, which commands acceptance, is that argument of parallelism is not applicable in bid cases and it fits in the realm of market economy. It is for this reason the entire history of quoting identical price before coming into operation of Section 3 and which continued much after Section 3 of the Act was enforced has been highlighted. There cannot be coincidence to such an extent that almost on all occasion’s price quoted by the three appellants is identical, not even few paisa more or less from each other. That too, when the cost structure, i.e. cost of production of this product of the three appellants sharply varies with each other. Following factors in this behalf need to be highlighted:
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43. “ We are here concerned with parallel behaviour. We are conscious of the argument put forth by Mr. Venugopal that in an oligopoly situation parallel behaviour may not, by itself, amount to a concerted practice. It would be apposite to take note of the following observations made by U.K. Court of Justice in Dyestuffs :
“By its very nature, then, the concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants. Although parallel behaviour may not itself if identified with a concerted practice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not respond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings, and the volume of the said market…….””
“57. In most cases, the existence of an anti-competitive practice or agreement must be inferred from a number of coincidences and indicia which, taken together, may, in the absence of another plausible explanation, constitute evidence of an infringement of the competition rules”.
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instances, may be dictated by economic necessity, the underlying demandsupply conditions and oligopolistic interdependence. Thus, it is imperative to first rule out all plausible explanations to parallel behaviour in order to arrive at a conclusive view that the observed parallel behaviour is unlikely but for an agreement or collusion. This assumes even greater significance in the context of bidding markets, where narrow range of bids could also demonstrate competitive bidding. I now proceed to look at the plausible explanations to the conduct of GACL, which has not been adequately investigated by the DG.
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across various producers, the prices are subject to the same demand and supply factors and as such would also show some degree of similarity amongst the bidders.
Ref. C. Nos. 03 & 04 of 2013 95
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Rs.1000 as against marginal increase of Rs.200 by GIL and that the freight component given by GIL is lowest as compared to ABCIL and GACL. The DG has assumed without any evidence or undertaking any analysis that given the locational differences, bidding prices which are in narrow range indicate collusive behaviour. GACL has explained the offsetting/evening out of its low cost of production/basic prices on account of significantly higher freight charges by way of transportation costs as compared to GIL/ABCIL. In my view, in the absence of any analysis/finding by the DG to the contrary, the explanation given by GACL appears to be quite plausible to justify its bid price in the DJB tenders. I also do not find any inconsistency in GACL’s own bidding behaviour over the years given the fixed distance of its plant from DJB and its near constant cost of production. However variation on account of transport charges, which is a major component of the total quoted price cannot be ruled out. Secondly, to draw any inference from GACL’s cost of production and that of GIL/ABCIL is not tenable, as the DG has rejected the detailed submissions of GIL and ABCIL regarding their costs of production. No such independent analysis was undertaken by the DG for GACL. The majority order too, based on DG report, has similarly dismissed the cost submissions of GIL/ABCIL that the parties did not provide specific details regarding the methodology involved in deciding rates to DJB and their other customers.
Ref. C. Nos. 03 & 04 of 2013 96
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calculating the cost of production. Even cost of HDP Drums was noted as highly illogical because ABCIL did not supply liquid PAC to DJB in HDP Drums. Based on these the DG concluded with certainty that justifications given for variation in cost of production of liquid PAC, was not tenable and the cost submissions were unreliable and doctored. The analysis however, as mentioned earlier was limited/confined to ABCIL and GIL and not to GACL though the latter had submitted all cost details and calculations and indicated that it had taken unilateral and independent decisions based on sound commercial and economic justification. It was obligatory on part of the DG to have done such an analysis as done for GIL/ABCIL and given an opportunity to GACL to explain in detail its methodology for calculating its cost of production/transportation rates and give reasons for rejecting the same before arriving at any adverse conclusions. This shows that the DG giving a complete bye-pass to Principles of Natural Justice by not independently questioning/analysing GACL’s data, has erroneously clubbed/juxtaposed the conduct of GIL/ABCIL with/on GACL without any basis and therefore its conclusion is at most a mere assertion. In fact in the DG report in the chapter on ‘Cost of production of PAC’ only the pricing conduct of GIL and ABCIL has been discussed/analysed thread bare but surprisingly conclusion of coordination has been drawn for all three including GACL.
Ref. C. Nos. 03 & 04 of 2013 97
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uncertainties. Telescopic tariff structure, on the other hand is more applicable to rail transportation which is fairly homogenous in nature unlike road movement and as such telescopic structure for road movement may not have any empirical basis in this instance, all the more so when the freight charges submitted by the parties have not been questioned by the DG and no analysis of the same has been undertaken
Ref. C. Nos. 03 & 04 of 2013 99
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discouraging competitive quotes in some of the earlier orders of the Commission. Third, it is equally possible that had GACL aggressively bid and become L2, the differential in its contracted volume, i.e . 20%, may not be a commercially attractive proposition to GACL, who could profitably divert the sales to nearby customers. No such analysis has been done by the DG and the behavior of GACL is being assumed as an economically irrational behavior. In fact in the course of the hearing before the Commission, GACL clarified that its bidding decisions were solely guided by independent commercial considerations and that the prices quoted by it to all its customers are at par with each other and as such it cannot be said that in relation to DJB tenders GACL quoted prices after colluding with its competitors. It has been accepted by DG that GACLs prices quoted to its other customers were at par with DJB. The assumption of economically irrational behavior without understanding the overall PAC market and the importance of DJB or other customers of GACL in the market, is erroneous. Underlying this assumption is the premise that GACL has an obligation to supply to DJB, which is not so.
Ref. C. Nos. 03 & 04 of 2013 100
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participants, whereas in complementary or cover bidding, where the winner is pre-decided and the other participants place non-serious bids, the participants take turns in getting the award or the contracted amount is subcontracted. The data in the instant case is not consistent with any of these collusive theories. According to the DG though the Informant DJB has submitted that the cartelisation was of ongoing nature from 2003-05 onwards, the analysis was carried out only from 2009 onwards, since the Competition Act, 2002 came in force in the year 2009-10. However, for identification of any discernible pattern for the purpose of comparison, data should have been collected for a longer period of time i.e. at least a year or two both before and after period of alleged cartelisation. This would have enabled to establish conclusively any theory of collusion. Similarly, when establishing bid rotation by the OPs, one cycle of bid rotation alone may not be sufficient to implicate GACL by cherry picking the last three bids alone as in five previous tenders GACL was L3. Thus, in my view, the majority orders observation that GACL was a participant in a bid rotation, cannot be sustained with this limited data.
Ref. C. Nos. 03 & 04 of 2013 101
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order do not, in my view, meet the standard of proof when direct evidence is lacking.
Ref. C. Nos. 03 & 04 of 2013 103
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“In case of contravention the Commission has been conferred power to impose only civil fines and it does not have criminal jurisdiction. It is also pertinent to mention that under section 36 of the Act, the Commission is vested with some powers of the civil courts in conduct of its inquiries. Hence, cartelisation not being a criminal offence, the test of proof will only be ‘balance of probabilities’ and ‘liaison of intention’ which can be established with the support of indirect or circumstantial evidence. Since, in criminal cases the offence has to be proved beyond reasonable doubt, the law makers in the beginning have opted to make cartel a civil offence only .”
In Aluminium Phosphide Case also, the Commission reiterated this point:
“The existence of an anti-competitive agreement is required to be tested on the principle of ‘preponderance of probability; same need not be proved ‘beyond reasonable doubt.”’
The Commission notes at paragraph 183 of the Cement Order:
“existence of an anti-competitive practice or agreement must be inferred from a number of co-incidences and indicia which, taken together, may, in the absence of any other plausible explanation, constitute evidence of the existence of an anti-competitive agreement”. (emphasis added).
Ref. C. Nos. 03 & 04 of 2013 104
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explanations – explanations that may be perfectly rational economic decisions and in line with the independent commercial objectives of GACL – the majority order, in my view, does not meet the requirement of “standard of proof” as implied in “preponderance of probabilities”.
Sd/(Sudhir Mital) Member
New Delhi Date: 05/10/2017
Ref. C. Nos. 03 & 04 of 2013 105
3 issues framed by the court
Whether third-party complainant's or employees' own acts can be attributed to a company.
Whether a company can be held liable for fraudulent statements made by its employees regarding a merger or acquisition of another company.
Whether a company can be held liable for improper exercise of power in representing another company.
Colour shows how this judgement treated each authority
Copperweld Corp v Independent Tube CorporationReferred¶114
Copperweld Corp v Independent Tube Corporation [467 US 752 (1984)]
American Needle Inc v National Football LeagueReferred¶114
American Needle Inc v National Football League [560 U.S. 183 (2010)]
Mausegatt v Haute autoriteReferred¶114
Mausegatt v Haute autorite [C-13/60]
Viho Europe BV v CommissionReferred¶114
Viho Europe BV v Commission [1996] ECR I-5457
Akzo Nobel NV v Commission of the European CommunitiesReferred¶114
Akzo Nobel NV v Commission of the European Communities [Case C- 97/08]
Imperial Chemical Industries Limited v Commission of European CommunitiesReferred¶114
Imperial Chemical Industries Limited v Commission of European Communities [Case No. 48/69]
Exclusive Motors Pvt. Ltd. v. Automobili LamborghiniReferred¶115
Exclusive Motors Pvt. Ltd. v. Automobili Lamborghini, [Case No. 52 of 2012]
Kansan News Pvt. Ltd. v. Fastway Transmission Pvt. Ltd.Referred¶115
Kansan News Pvt. Ltd. v. Fastway Transmission Pvt. Ltd. [Case No. 36 of 2011]
Suo Moto Case No. 02 of 2014 (Appeal Nos. 94-97)Referred¶127
Appeal Nos. 94/2015, 95/2015, 96/2015 & 97/2015 arising out of Suo Moto Case No. 02 of 2014
Excel Crop Care Limited v Competition Commission of IndiaRelied on¶211
Excel Crop Care Limited v Competition Commission of India & Anr., Civil Appeal No. 2480 of 2014 decided on 08.05.2017
3 provisions across 1 enactments
Delhi Jal Board
Grasim Industries Ltd.
Aditya Birla Chemicals (India) Ltd.
Gujarat Alkalies and Chemicals Ltd.
Kanoria Chemicals & Industries Ltd.
Punjab Alkalies and Chemicals Ltd.
Devender Kumar Sikri
S. L. Bunker
Sudhir Mital
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
