Partly allowed

07 (01) of 2014 of In Re: Cartelisation in the supply of Electric Power Steering Systems (Eps Systems) against Nsk Limited, Japan and Others.

CCI9 Aug 201907 (01) of 2014

Case brief

AI extract

What is this about?

The Competition Commission held that Japanese firms NSK and JTEKT and their Indian subsidiaries engaged in cartelisation by fixing prices and allocating markets in the EPS segment, adversely affecting competition in India. The Commission imposed penalties on the companies but granted 100% reduction for NSK and 50% for JTEKT due to their cooperation.

What did the court decide?

Penalty of INR 8.43 Cr imposed on NSK/RNSS but reduced to nil by 100%; Penalty of INR 17.07 Cr imposed on JTEKT/JSAI after 50% reduction; Order to cease and desist from cartelisation.

07 (01) of 2014 of In Re: Cartelisation in the supply of Electric Power Steering Systems (Eps Systems) against Nsk Limited, Japan and Others. — CCI (2019) — LawSathi Research

¶1

PUBLIC VERSION

¶2

COMPETITION COMMISSION OF INDIA

¶3

Suo Motu Case No. 07 (01) of 2014

¶4

In Re : Cartelisation in the supply of Electric Power Steering Systems (EPS Systems)

¶5

Against:

¶6

1. NSK Limited, Japan

¶7

2. JTEKT Corporation, Japan

¶8

3. JTEKT Sona Automotive India Limited

¶9

4. Rane NSK Steering Systems Ltd.

¶10

CORAM

¶11

Ashok Kumar Gupta Chairperson

¶12

U. C. Nahta Member

¶13

Sangeeta Verma Member

¶14

Present:

¶15

For NSK Ltd., Japan, Rane NSK Steering Systems Ltd. and for

¶16

of NSK Ltd.,

¶17

Japan:

¶18

Mr. Somasekhar Sundaresan, Ms. Nisha Kaur Uberoi, Ms. Shravani Shekhar, Mr. Mathew George and Ms. Nandini Pahari, Advocates

For and of NSK

None

Ltd., Japan:

For JTEKT Corporation, Japan, JTEKT Sona Automotive India Ltd. and for

¶23

Mr.	Samir	Gandhi,
Ms.	Aditi Go	palakrishnan,
Ms.	Nikita	Agarwal,
Mr.	Karan	Sood and
Ms.	Rajshree	Sharma,
Advo	cates

¶24

of JTEKT Corporation, Japan:

¶25

Suo Motu Case No. 07 (01) of 2014

¶26

¶27

PUBLIC VERSION ORDER UNDER SECTION 27 OF THE COMPETITION ACT, 2002

¶28

Background:

¶29

The present case pertains to alleged anti-competitive conduct by NSK Limited, Japan (‘ NSK ’) and JTEKT Corporation, Japan (‘ JTEKT ’) alongwith their Indian subsidiaries namely Rane NSK Steering Systems Ltd. (‘ RNSS ’) and JTEKT Sona Automotive India Limited (‘ JSAI ’) respectively (hereinafter collectively referred to as the ‘ parties ’), in the Electric Power Steering (‘ EPS ’) Systems market.

¶30

Steering System is a collection of components, linkages, etc. which allows a vehicle to follow the desired course. The primary purpose of a Steering System is to allow the driver of a vehicle to guide the vehicle. There are two types of Steering Systems – Manual and Power. A Power Steering is a device that helps the drivers steer by augmenting steering effort of the Steering Wheel so that the driver needs to make less effort to turn the steered wheels when driving at typical speed and reduce considerably physical effort necessary to turn the wheels when a vehicle is stopped or moving slowly. Power Steering Systems can further be categorised into – Hydraulic and Electric. An Electric Power Steering (‘ EPS ’) System is mechanically less complex than its traditional counterparts and has fewer working parts and no fluids. In an EPS System, the steering movement of the vehicle is assisted by an electric motor.

¶31

Globally, in the EPS Systems market, NSK and JTEKT are counted amongst the top 5 companies in terms of revenue. In the present case, the Commission has enquired into allegations of cartelisation amongst NSK and JTEKT from 2005 to 25.07.2011, in relation to the supply of EPS Systems to the various automotive Original Equipment Manufacturers (‘ OEMs ’), having AAEC in India, as NSK and JTEKT are manufacturing and selling EPS Systems in India through their Indian subsidiaries namely RNSS and JSAI respectively. In India, NSK/ RNSS as well as JTEKT/ JSAI manufacture only column type EPS (‘ C-EPS ’). The said enquiry has covered the period till 25.07.2011 only because on 25.07.2011, another competition authority namely Japanese Fair Trade Commission had conducted an onsite inspection of four Japanese companies including NSK and JTEKT, in connection with alleged cartelisation in another product.

¶32

Suo Motu Case No. 07 (01) of 2014

PUBLIC VERSION

Facts:

The case was initiated on the basis of an application received by the Commission under the provisions of Section 46 of the Competition Act, 2002 (the ‘ Act ’) read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘ LPR ’), from NSK. Based upon the same, the Commission, forming an opinion that a prima facie case of contravention of the provisions of Section 3 (3) (a) and Section 3 (3) (d) read with Section 3 (1) of the Act is made out, passed an order on 17.09.2014 under Section 26 (1) of the Act and directed the Director General (‘ DG ’) to cause an investigation into the matter. During the pendency of investigation before the DG, JTEKT also approached the Commission by filing an application under the provisions of Section 46 of the Act read with the LPR.

¶37

The DG, after causing a comprehensive investigation, submitted its report. Thereafter, upon mutual agreement between the parties, a confidentiality ring in the matter was created vide order dated 19.07.2018. Pursuant thereto, vide order dated 10.10.2018, the non-confidential qua parties version of the DG report was forwarded to, inter alia , NSK, RNSS, JTEKT and JSAI and their concerned persons who were found by the DG to be liable under Section 48 of the Act. They were given an opportunity to file their objections/ suggestions, if any, to the report of the DG and to appear for an oral hearing in the matter. After receipt of the objections/ suggestions to the DG report from them (in confidential and non-confidential versions), the Commission heard oral arguments on behalf of the parties and their respective persons on 12.02.2019 and thereafter, decided to pass an appropriate order. Further, the Commission, in the light of the submissions made by the learned counsel for NSK and its group companies during the oral hearing, decided to delete

¶38

and

¶39

, from the array of parties in the present matter.

¶40

Investigation by the DG:

¶41

The DG, in its investigation report, has found cartelisation amongst the parties in contravention of the provisions of the Act. The DG has found that the parties, upon receipt of Request for Information (‘ RFI ’)/ Requests for Quotation (‘ RFQ ’) from three

¶42

Suo Motu Case No. 07 (01) of 2014

¶43

¶44

PUBLIC VERSION

¶45

automobile OEMs viz.

¶46

, for supply of EPS systems to their subsidiaries situated in various regions including in India, had contacts/ interactions with each other through their employees and executives, during the period from 2005 to 25.07.2011, through meetings and/ or telephonic calls. As per the DG, the purpose of such contacts was to co-ordinate prices, allocate the market on the basis of geographical regions (one of which was India), and allocate market on the basis of type of vehicles/ platform/ product and thereby to rig the bidding process of the named three automobile OEMs. The DG has collected information from the parties, recorded the statements on oath of their concerned representatives, and also collected information from third-parties i.e. the concerned automobile OEMs. The DG has stated that in their replies and statements, both NSK and JTEKT have admitted the existence of such cartel. Thus, based on the oral and documentary evidences gathered during investigation, the DG has found that the parties have contravened the provisions of Section 3 (3) (a) and Section 3 (3) (d) read with Section 3 (1) of the Act.

¶47

Proceedings before the Commission :

¶48

The Commission has perused the applications filed by NSK and JTEKT under Section 46 of the Act read with the LPR, the investigation report submitted by the DG, the objections/ suggestions thereto filed by the parties and their concerned persons, other material available on record, and also heard oral arguments addressed by the respective learned counsel for the parties and their concerned persons.

¶49

Assessment of Evidences:

¶50

The Commission notes that the DG, in its report, has investigated contacts/ exchange of information between the employees and executives of NSK and JTEKT, with respect to the following RFQs of three automobile OEMs:

¶51

(a) For global RFIs/ RFQs issued by and RFQ issued by

for C-EPS

system for the

;

Suo Motu Case No. 07 (01) of 2014

¶56

¶57

PUBLIC VERSION

¶58

(b) For global RFQs issued by for EPS System for ; and

¶59

for

¶60

¶61

Firstly, for the RFIs/ RFQs, from the admissions of the parties, the DG has found evidence that of NSK met with of JTEKT in

¶62

at NSK’s office and also had discussions telephonically. In such meetings, they exchanged pricing information for India and other regions to be quoted to . The objective of such discussions was to fix prices to be quoted to in such a manner that NSK would be chosen to supply brush type C-EPS System and JTEKT for brushless EPS System. The DG has further found evidence that with respect to the first meeting, of NSK documented the prices agreed to between NSK and JTEKT for multiple regions including India, and that a copy of this document was given by him to of JTEKT.

¶63

Further, the DG has noted from the submissions of the parties that in its first RFI issued in , had requested quotations for both brush and brushless type EPS System for Asia-Oceania region which included India. The volume w.r.t. India was around for brush type EPS System only. In this RFI, the price quoted by NSK and JTEKT (for ) were as below (prices for other regions were marked up by specific percentage of the prices):

¶64

Table 1 (In )

¶65

Brush Type EPS System	Brushless Type EPS System
NSK
JTEKT

¶66

The DG has further noted that a second RFI was issued by in Finally, issued a formal RFQ in to NSK and JTEKT. The same included various regions but not India. However, quotations for Indian market were

¶67

¶68

Suo Motu Case No. 07 (01) of 2014

¶69

PUBLIC VERSION

¶70

sought for reference purpose only. had obtained and checked quotes from potential suppliers including NSK and JTEKT so as to provide basic information to . In response to the RFQ issued by , after discussions with NSK, JTEKT gave a quotation for but this was only in respect of

¶71

brushless EPS System as the RFQ did not include brush type EPS System as a targeted product.

¶72

For the brush type EPS, the DG has pointed out that had issued an RFQ for the in to JSAI and RNSS. had also provided basic information to from the quotes obtained by it from the potential suppliers. In response to this RFQ issued by , quotations were given only by RNSS. JSAI did not participate. RNSS was selected and the supply order was issued to it. In this regard, the Commission notes that NSK has admitted before the DG that though in some cases, RFQs for Indian market requirements are released by customers to RNSS and the response to these is also made to the customers directly by RNSS, this is however, done in consultation with NSK. The Commission further notes that NSK has also admitted before the DG that the price quoted by RNSS for the RFQ in was also based on the discussions held between NSK and JTEKT, in .

¶73

From the above evidence collected by the DG, which has not been disputed by the parties during enquiry, the Commission is of the opinion that NSK and JTEKT indulged in cartelisation in respect of the RFIs/ RFQs issued by for C- EPS system for the . Further, the Commission notes that NSK

¶74

had admitted before the DG that contacts with JTEKT benefitted NSK as it was able to avoid significant reduction in prices quoted by it in India for brush type EPS System. Thus, the Commission is of the view that since RNSS was able to quote higher prices to

¶75

in India because of NSK’s cartelisation with JTEKT in , the said cartelisation has resulted in AAEC in India.

¶76

The Commission notes that JTEKT/ JSAI in their objections/ suggestions to the report of the DG, have argued that JSAI cannot be held to be a part of the cartel as it was not directly involved in the contacts and meetings between NSK and JTEKT and that, being a subsidiary of JTEKT, it was not involved in the decisions related to the rates to be quoted to the OEMs for the global RFQ. JTEKT/ JSAI have argued that it has been

¶77

¶78

Suo Motu Case No. 07 (01) of 2014

¶79

PUBLIC VERSION

¶80

stated before the DG that the RFQ of was handled independently by JSAI on a competitive basis without any support from the individuals of JTEKT who were responsible for sales to . However, the Commission observes that no reasonable justification has been provided by JTEKT/ JSAI for JSAI refraining to quote in response to RFQ of for brush type EPS system. Even from the case record, no reason for such abstention by JSAI has emerged. The Commission is of the view that, without reasonable justification, such non-participation by JSAI in

¶81

RFQ in India has to be seen holistically in the light of the existence of a cartel between NSK and JTEKT that NSK would be allowed to win the orders for brush type C-EPS System and JTEKT for brushless EPS System. When seen in this light, it leads to the only credible inference that JSAI did not quote in the RFQ as it was a part of the cartel between NSK and JTEKT. But for such cartel, there is no plausible explanation for JSAI’s behaviour. Thus, in view of the same, the plea taken by JTEKT/ JSAI, cannot be accepted.

¶82

Notwithstanding the above, the Commission is of the view that with respect to the RFIs/ RFQs issued by , cartelisation between NSK and JTEKT has been established by the evidence on record and the same has not been refuted by the parties.

¶83

Secondly, for the RFQs issued for in in relation to the to be manufactured in and India and thereafter in for , from the admissions of the parties, the DG has found evidence that of NSK had discussions with of JTEKT in and many times thereafter. Such discussions took place in NSK’s office or telephonically. In such discussions, NSK and JTEKT reached an agreement on minimum bid level. NSK told JTEKT that it (NSK) was unlikely to secure an order because it was not in a position to meet schedule for development as it did not have a C-EPS Systems manufacturing base in India. The DG noted that eventually, due to paucity of time to meet production schedule, NSK did not submit a quotation for . For , NSK submitted a

¶84

Suo Motu Case No. 07 (01) of 2014

¶85

¶86

PUBLIC VERSION

¶87

bid but could not win due to technical reasons. In

¶88

and on ,

¶89

intimated to JTEKT that the orders for both would be

¶90

given only to JTEKT. The DG further noted that in his deposition, of JTEKT had stated that the final prices to be quoted by JTEKT in RFQs

¶91

for EPS Systems during the period 2005 to 2009 were approved by his boss

¶92

would be

¶93

For another RFQ for brush type EPS System for issued in , the DG has noted from the submissions of NSK that it did not have the necessary technology to fulfil such order. However, it has stated that it colluded with JTEKT that it would submit a higher quote to in such RFQ, and would later withdraw its bid. The DG further noted that NSK did in fact submit its bid and later withdrew the same. Hence, JTEKT won the RFQ for . However, with respect to this RFQ, the DG has found that the same did not pertain to manufacturing of cars in India.

¶94

From the above evidence collected by the DG which has not been disputed by the parties during enquiry, the Commission observes that in respect of RFQ for , NSK, despite not having technical wherewithal, gave a quotation to

¶95

. From the same, it emerges that w.r.t. this RFQ, NSK, in agreement with JTEKT,

¶96

had provided a cover bid to . Further, it can also be seen that w.r.t. , NSK and JTEKT had reached an agreement on minimum bid level.

¶97

Thus, in the light of such evidence, the Commission is of the opinion that NSK and JTEKT indulged in cartelisation in respect of the RFQs issued by for EPS System for

¶98

. Further, the Commission notes that the DG has found that manufacturing of vehicles in relation to such RFQs was to take place in India as well.

¶99

Lastly, for the RFQs, from the admissions of the parties, the DG has found evidence that in relation to , RFQ for which was floated in which covered EPS supply to the Indian subsidiary of namely , of

¶100

Suo Motu Case No. 07 (01) of 2014

¶101

¶102

PUBLIC VERSION

¶103

NSK, upon instructions from his boss (mistakenly mentioned by the DG as ) , contacted and of JTEKT and they met at a Karaoke Box named a few times in . During such meetings, specific price information was exchanged and market allocation by way of deciding jurisdictions in which supplies would be made by NSK and JTEKT was discussed. The DG has found evidence that details of such discussion were also incorporated in an internal memorandum prepared

¶104

by of JTEKT wherein it was written that “ JTEKT would lose by a narrow margin in India” .

¶105

However, the DG has noted that sometime later, decided to procure EPS for this model from a single supplier only. In view of this decision of , the agreement between NSK and JTEKT for market allocation could not be effected. Later on, upon submission of quotations by NSK and JTEKT, awarded the supply order to NSK.

¶106

The DG has nonetheless found that the contacts with JTEKT benefitted NSK as the latter was able to obtain orders from by predicting the price which would be quoted by JTEKT and accordingly, quoting a price. This fact has also been admitted by NSK before the DG. NSK had also admitted that due to such co-ordination, it was able to avoid significant reduction in the prices quoted by it to thereby preventing a decline in its revenue.

¶107

Further, in relation to the

¶108

Further, in relation to the , the RFQ for which was floated in , the DG has found evidence from the admissions of the parties that of JTEKT again met and held discussions with of NSK at on . In respect of this meeting also, an internal memorandum dated was prepared by of JTEKT to report to his superior . During the said meeting, JTEKT had requested NSK to allow it to handle the entire requirement for . NSK however, disagreed and suggested that JTEKT may supply for the units for in . Thus, due to a difference of opinion regarding market allocation, no agreement could be reached between NSK and JTEKT with respect to . In the meanwhile, paused

¶109

Suo Motu Case No. 07 (01) of 2014

¶110

¶111

PUBLIC VERSION

¶112

its sourcing activity for this model. When it later revived its sourcing activity in , only NSK gave quotation for India and not JTEKT.

¶113

From the above evidence collected by the DG, which has not been disputed by the parties before the Commission, the Commission is of the opinion that NSK and JTEKT exchanged sensitive commercial information in respect of the RFQs issued by for C-EPS system for

¶114

. Such exchange of information, as admitted by NSK, benefitted NSK in at least the RFQ for , as it was able to avoid significant reduction in prices quoted by it because of such cartelisation. Further, the Commission notes that NSK has stated in its objections/ suggestions to the report of the DG that “ The Indian market was crucial in relation to * sales, with * units sold, * per cent being in relation to sales in the Indian market alone.” Thus, the Commission is of the view that since NSK was able to quote higher prices to in India because of NSK’s cartelisation with JTEKT in , the said cartelisation has resulted in AAEC in India.

¶115

In view of the aforesaid evidences collected by the DG which have been analysed by the Commission in detail and have not been refuted by the parties during enquiry, the Commission concludes that NSK and JTEKT, and their Indian subsidiaries RNSS and JSAI respectively, indulged in cartelisation in the EPS Systems market, from at least 2005 to 25.07.2011, by means of directly or indirectly determining price, allocating markets, co-ordinating bid response and manipulating the bidding process of automobile OEMs , which had AAEC in India. The Commission holds that such conduct of the parties is in contravention of the provisions of Section 3 (3) (a), 3 (3) (c) and 3 (3) (d) read with Section 3 (1) of the Act.

¶116

Though JTEKT has submitted that it derived no profits in India from such cartelisation, the Commission is of the view that once it is established by evidence on record that JTEKT was a part of a cartel which had an AAEC in India, whether or not it profited from such a cartel would have no bearing on the finding of contravention by JTEKT.

¶117

Suo Motu Case No. 07 (01) of 2014

¶118

¶119

PUBLIC VERSION

¶120

Liability under Section 48:

¶121

As regards the liability of the concerned ‘persons’ (including employees, officials, executives etc .) of the parties under the provisions of Section 48 of the Act, the evidences brought out by the DG against ‘persons’ found liable under the provisions of Section 48 (2) of the Act by the DG, are as tabulated below:

¶122

NSK – Table 2

¶123

S.
Name Role
No.
Met with officials of JTEKT w.r.t . RFQs issued by
1.
for C-EPS system for
Met with officials of JTEKT w.r.t . RFQs issued by
2.
for C-EPS system for
Met with officials of JTEKT w.r.t. global RFQs issued by
3. for EPS System for
Gave instructions to to contact
4. officials of JTEKT w.r.t. global RFQs issued by for
EPS System for
Had discussions with officials of JTEKT w.r.t. global
5.
RFQs issued by for EPS System for
Had discussions with officials of JTEKT w.r.t. global
6.
RFQs issued by for EPS System for
JTEKT – Table 3
S.
Name Role
No.
Met with officials of NSK w.r.t . RFQs issued by
1.
for C-EPS system for
Met with officials of NSK w.r.t . RFQs issued by
2.
for C-EPS system for
Met with officials of NSK w.r.t. global RFQs issued by
3. for EPS System for
Met with officials of NSK w.r.t. global RFQs issued by
4. for EPS System for
reported the meeting held w.r.t. global
RFQs issued by for
5.
, between officials of NSK and JTEKT, to
by means of an internal memorandum

¶124

Suo Motu Case No. 07 (01) of 2014

¶125

¶126

PUBLIC VERSION

¶127

S.
Name Role
No.
Had discussions with officials of NSK w.r.t. global RFQs
6.
issued by for EPS System for
Approved the final prices to be quoted by JTEKT during
7. the period 2005 to 2009 including w.r.t. global RFQs
issued by for EPS System for

¶128

In the light of the above evidences on record which show active participation in the cartel of the above-mentioned persons, and which have not been refuted by the parties during enquiry, the Commission holds the aforementioned 6 individuals of NSK named in Table 2 above and 7 individuals of JTEKT named in Table 3 above liable under the provisions of Section 48 (2) of the Act.

¶129

Further, the following ‘persons’ of NSK and JTEKT, being in-charge of and responsible to the companies for the conduct of their respective businesses, have been found by the DG to be liable under the provisions of Section 48 (1) of the Act:

¶130

NSK – Table 4

¶131

S. No. Name Designation
1. from 01.01.2005 to 24.06.2009
2. from 25.06.2009 to 31.12.2011
3. from
01.01.2005 to 31.12.2005
4. from
01.01.2006 to 26.06.2006
5. from
27.06.2006 to 24.06.2008
6. from
25.06.2008 to 31.12.2011

¶132

Suo Motu Case No. 07 (01) of 2014

PUBLIC VERSION

JTEKT – Table 5

S. No.		Designation
1.	2009	from January 2006 to June
2.		from July2009 to June 2011
3		from January 2005 to June
.	2007
4		from July 2007 to June
.	2009
5.		from July2009 to June 2010
6.		from July2010 to June 2011
7.		from July2011 to December 2011

¶137

In this regard, the Commission finds the two individuals of NSK mentioned at Sl. Nos. 1 and 2 in Table 4 above, who were in-charge of, and responsible to NSK, for the conduct of its business, being the of NSK at the time when the contravention was committed by the parties, liable under the provisions of Section 48 (1) of the Act. The said individuals, in their common objections/ suggestions to the report of the DG have not controverted this finding of the DG.

¶138

With regard to the other four individuals of NSK mentioned at Sl. Nos. 3 to 6 in Table

¶139

4 above, who were the

¶140

of NSK, at the time when the

¶141

contravention was committed by the parties, the Commission notes that the DG Report could not be served upon these persons before the date of final hearing in the matter. Hence, separate proceedings against these four individuals of NSK will be carried out in due course.

¶142

With regard to JTEKT, the Commission notes that JTEKT and its individuals in their common objections/ suggestions to the report of the DG have stated that the abovementioned persons had no role to play in the alleged cartelisation. The of JTEKT i.e. did not have any involvement

¶143

in the day-to-day business or decision making on any pricing, bidding or sales activity of JTEKT and they had no knowledge of JTEKT’s sales related business arrangement

¶144

with NSK. Further, the i.e.

¶145

Suo Motu Case No. 07 (01) of 2014

¶146

¶147

PUBLIC VERSION

¶148

* ************* only look after the overall functioning of the department and their scope of work was limited to strategic decision making, structuring of the business and monitoring of progress related to output generation for customers. They were also not involved in communications with the competitors and were not even aware of the discussions taking place amongst the lower level employees of JTEKT. Thus, they could not have prevented such conduct even when exercising reasonable due diligence.

¶149

In the light of the submissions made by JTEKT and its individuals in their common objections/ suggestions to the report of the DG regarding the afore-mentioned seven individuals of JTEKT, the Commission does not hold these seven individuals of JTEKT named in Table 5 above liable under the provisions of Section 48 (1) of the Act.

¶150

Conclusion:

¶151

In view of the above, the Commission holds NSK and JTEKT, and their Indian subsidiaries RNSS and JSAI respectively, liable for contravention of the provisions of Section 3 (3) (a), 3 (3) (c) and 3 (3) (d) read with Section 3 (1) of the Act as they indulged in cartelisation in the EPS Systems market from at least 2005 to 25.07.2011 (on which date, another competition authority, namely, Japanese Fair Trade Commission had conducted an onsite inspection of four Japanese companies including NSK and JTEKT, in connection with alleged cartelisation in another product). These entities, by means of directly or indirectly determining price, allocating markets, coordinating bid response and manipulating the bidding process of automobile OEMs

¶152

********************** , have contravened the provisions of Section 3 of the Act which had AAEC in India. Further, the Commission holds eight persons of NSK named in Tables 2 and 4 above and 7 persons of JTEKT named in Table 3 above liable under the provisions of Section 48 of the Act.

¶153

Penalty:

¶154

For such contravention of the provisions of the Act, the Commission is empowered, in terms of Section 27 (b) of the Act, to impose a penalty upon the contravening parties and their concerned persons. Under the proviso to Section 27 (b) of the Act, the Commission may impose upon a cartelising entity, penalty of upto three times of its profit for each year of the continuance of such agreement or ten percent of its turnover

¶155

Suo Motu Case No. 07 (01) of 2014

¶156

¶157

PUBLIC VERSION

¶158

for each year of the continuance of such agreement, whichever is higher. In the present case, the period of cartel has been identified to be from at least 2005 to 25.07.2011. As the relevant provisions of the Act i.e. Section 3, were enforced w.e.f. 20.05.2009, the Commission proceeds to compute penalty to be imposed upon the contravening parties, for the period from 20.05.2009 to 25.07.2011.

¶159

Further, as per the Hon’ble Supreme Court’s decision in Excel Crop Care Limited v. Competition Commission of India and Others , (2017) 8 SCC 47 , ‘turnover’ for the purposes of Section 27 (b) is ‘relevant turnover’ of a company which relates to the product in question in respect whereof the provisions of the Act are found to have been contravened. In the present case, the product in question is EPS Systems. Both NSK and JTEKT have submitted that direct sales of EPS Systems in India are made by them only through their Indian subsidiaries RNSS and JSAI respectively. Therefore, for the purposes of calculation of penalty, the Commission shall take into consideration ‘relevant turnover’ and ‘relevant profit’ details of RNSS and JSAI.

¶160

The Commission notes that JTEKT has submitted in its objections/ suggestions to the report of the DG that for the purposes of imposition of penalty, only the turnover/ profits derived from sales of EPS Systems in all the RFQs issued by the relevant automobile OEMs i.e. ********************** be taken as its relevant turnover. However, the Commission is of the view that such plea of JTEKT is misconceived in terms of the clear decision of the Hon’ble Supreme Court in the case of Excel Crop Care (supra ).

¶161

Furthermore, in the present case, both NSK and JTEKT had filed applications under Section 46 of the Act read with LPR seeking benefit of reduction in penalty. In this regard, the Commission notes that since NSK was the first to approach the Commission for grant of lesser penalty, NSK, RNSS and the identified persons are entitled to benefit of reduction in penalty upto 100%. Further, it is noted that since JTEKT was the second to approach the Commission for grant of lesser penalty, JTEKT, JSAI and the identified persons are entitled to benefit of reduction in penalty upto 50%.

¶162

Thus, keeping in mind the aforesaid, the Commission proceeds to determine the penalty to be imposed upon the contravening entities as follows:

¶163

¶164

Suo Motu Case No. 07 (01) of 2014

¶165

PUBLIC VERSION

¶166

37.1 As per the proviso to Section 27 (b) of the Act, the maximum penalty which may be imposed upon NSK/ RNSS, based upon the financials of RNSS, is as follows:

¶167

Financials of RNSS (In INR) – Table 6

¶168

FINANCIAL YEAR	RELEVANT TURNOVER	RELEVANT PROFIT	10 % OF RELEVANT TURNOVER	3 TIMES OF RELEVANT PROFIT
2009-10¹	73,93,71,692	1,40,47,014	7,39,37,169	4,21,41,041
2010-11	74,20,21,295	1,10,68,172	7,42,02,130	3,32,04,516
2011-12²	62,83,83,659	1,61,78,714	6,28,38,366	4,85,36,142
Total			21,09,77,665	12,38,81,699

¶169

37.2 From the aforesaid table, it can be seen that ten percent of the relevant turnover of RNSS for each year of the continuance of the agreement is higher than three times the relevant profit of RNSS for each year of the continuance of the agreement. Therefore, in terms of the proviso to Section 27 (b) of the Act, the Commission proceeds to impose penalty upon NSK/ RNSS, based on the relevant turnover of RNSS.

¶170

37.3 Based on the facts and circumstances of the present case, the Commission decides to impose upon NSK/ RNSS, penalty @ 4% (percent) of the relevant turnover of RNSS, for each year of the continuance of the agreement which amounts to INR 8,43,91,066/-.

¶171

37.4 However, the Commission notes that NSK provided vital disclosures by submitting evidence of the cartel, which enabled the Commission to form a prima facie opinion regarding the existence of the cartel and the Commission at that time, did not have sufficient information to form such opinion. Also, NSK cooperated genuinely, fully, continuously and expeditiously throughout the investigation and further proceedings before the Commission. Thus, the Commission, keeping in mind the quality of information provided by NSK and the facts and circumstances of the case, decides to grant NSK/ RNSS, benefit of reduction in penalty of 100% (percent) in terms of Regulation 4 (a) of the LPR.

¶172

1 From 20.05.2009 to 31.03.2010 i.e. 316 out of 365 days.

¶173

2 From 01.04.2011 to 25.07.2011 i.e. 116 out of 366 days.

¶174

¶175

Suo Motu Case No. 07 (01) of 2014

¶176

PUBLIC VERSION

¶177

37.5 Consequently, the penalty to be paid by NSK/ RNSS after reduction is nil .

¶178

37.6 Similarly, the maximum penalty which may be imposed upon JTEKT/ JSAI, based upon the financials of JSAI, is as follows:

¶179

Financials of JSAI (In INR) – Table 7

¶180

FINANCIAL YEAR	RELEVANT TURNOVER	RELAVANT PROFIT	10 % OF RELEVANT TURNOVER	3 TIMES OF RELEVANT PROFIT
2009-10³	1,94,54,08,548	8,26,36,164	19,45,40,855	24,79,08,493
2010-11	3,80,26,90,000	21,04,30,000	38,02,69,000	63,12,90,000
2011-12⁴	1,47,71,52,240	4,83,96,721	14,77,15,224	14,51,90,164
Total			72,25,25,079	1,02,43,88,657

¶181

37.7 From the aforesaid table, it can be seen that three times of the relevant profit of JSAI for each year of the continuance of the agreement is higher than ten percent of the relevant turnover of JSAI for each year of the continuance of the agreement. Therefore, in terms of the proviso to Section 27 (b) of the Act, the Commission proceeds to impose penalty upon JTEKT/ JSAI, based on the relevant profit of JSAI.

¶182

37.8 Based on the facts and circumstances of the present case, the Commission decides to impose upon JTEKT/ JSAI, penalty @ 1 times of the relevant profit of JSAI for each year of the continuance of the agreement which amounts to INR 34,14,62,886/-.

¶183

37.9 However, the Commission notes that JTEKT provided significant added value to the evidence already in possession of the Commission and the Director General, to establish existence of the cartel. Further, JTEKT co-operated genuinely, fully, continuously and expeditiously throughout the investigation and further proceedings before the Commission. Thus, the Commission, keeping in mind the quality of information provided by JTEKT and the facts and circumstances of the

¶184

3 From 20.05.2009 to 31.03.2010 i.e. 316 out of 365 days.

¶185

4 From 01.04.2011 to 25.07.2011 i.e. 116 out of 366 days.

¶186

Suo Motu Case No. 07 (01) of 2014

¶187

¶188

PUBLIC VERSION

¶189

case, decides to grant to JTEKT/ JSAI, benefit of reduction in penalty of 50% (percent) in terms of Regulation 4 (c) of the LPR.

¶190

37.10 Consequently, the penalty to be paid by JTEKT/ JSAI after reduction is INR 17,07,31,443/-.

¶191

Further, the Commission decides to impose penalty upon the persons found liable under the provisions of Section 48 of the Act, @ 10% (percent) of the average of their incomes for the last three preceding financial years, in terms of the provisions of Section 27 (b) of the Act. The same is calculated as follows:

¶192

38.1 The penalty calculated for the individuals of NSK:

¶193

NSK (In INR⁵ ) – Table 8

¶194

S. NO. PERSON	YEAR	INCOME
	2009-2010	51,62,408
	2010-2011	66,61,197
1 ****************	2011-2012	69,04,838
.	Total	1,87,28,443
	Average	62,42,814
	Penalty	6,24,281
	2009-2010	74,61,798
	2010-2011	98,71,165
2 ********************	2011-2012	2,71,60,084
.	Total	4,44,93,047
	Average	1,48,31,016
	Penalty	14,83,102
	2009-2010	49,66,711
	2010-2011	60,15,162
3 *********************	2011-2012	63,83,557
.	Total	1,73,65,430
	Average	57,88,477
	Penalty	5,78,848

¶195

5 Converted from Japanese Yen to INR @ 1 JPY = 0.5657 INR and from Euro to INR @ 1 EUR = 63.6605 INR prevailing as on 25.07.2011.

¶196

Suo Motu Case No. 07 (01) of 2014

¶197

¶198

PUBLIC VERSION

¶199

S. NO.	PERSON	YEAR	INCOME
		2009-2010	73,39,578
		2010-2011	86,75,807
4	******************	2011-2012	82,84,326
.		Total	2,42,99,711
		Average	80,99,904
		Penalty	8,09,990
		2009-2010	57,99,573
		2010-2011	67,81,917
5	*******************	2011-2012	68,84,925
.		Total	1,94,66,416
		Average	64,88,805
		Penalty	6,48,881
		2009-2010	73,34,374
		2010-2011	70,18,341
6	********************	2011-2012	1,22,00,678
.		Total	2,65,53,393
		Average	88,51,131
		Penalty	8,85,113
		2009-2010	3,43,14,231
		2010-2011	3,74,04,084
7	*****************	2011-2012	2,61,35,340
.		Total	9,78,53,655
		Average	3,26,17,885
		Penalty	32,61,789
		2009-2010	2,44,47,291
		2010-2011	3,34,43,618
8	****************	2011-2012	4,46,90,300
.		Total	10,25,81,210
		Average	3,41,93,737
		Penalty	34,19,374

¶200

38.2 As NSK was the first to approach the Commission as a lesser penalty applicant in the matter and has been granted 100% (percent) reduction in penalty, the Commission decides to grant benefit of reduction in penalty of 100% (percent) in terms of Regulation 4 (a) of the LPR to the above-stated identified persons of NSK also.

¶201

Suo Motu Case No. 07 (01) of 2014

¶202

¶203

PUBLIC VERSION

¶204

38.3 Thus, the penalty to be paid by the aforesaid individuals of NSK, identified in Table 8 above would be nil .

¶205

38.4 The penalty calculated for the individuals of JTEKT:

¶206

JTEKT (In INR⁶ ) – Table 9

¶207

S. NO.	PERSON	YEAR	INCOME
		2009-2010	53,93,554
		2010-2011	55,78,481
1	********************	2011-2012	59,19,937
.		Total	1,68,91,972
		Average	56,30,657
		Penalty	5,63,066
		2009-2010	71,58,413
		2010-2011	72,10,440
2	****************	2011-2012	76,10,950
.		Total	2,19,79,804
		Average	73,26,601
		Penalty	7,32,660
		2009-2010	53,84,174
		2010-2011	52,16,093
3	****************	2011-2012	55,75,313
.		Total	1,61,75,581
		Average	53,91,860
		Penalty	5,39,186
		2009-2010	67,39,467
		2010-2011	71,51,904
4	*****************	2011-2012	74,60,876
.		Total	2,13,52,246
		Average	71,17,415
		Penalty	7,11,742
		2009-2010	92,45,444
		2010-2011	1,37,94,538
5	******************	2011-2012	2,50,36,120
.		Total	4,80,76,103
		Average	1,60,25,368
		Penalty	16,02,537

¶208

6 Converted from Japanese Yen to INR @ 1 JPY = 0.5657 INR prevailing as on 25.07.2011.

¶209

Suo Motu Case No. 07 (01) of 2014

¶210

¶211

PUBLIC VERSION

¶212

S. NO. PERSON	YEAR	INCOME
	2009-2010	66,67,340
	2010-2011	70,23,194
6 ******************	2011-2012	75,81,794
.	Total	2,12,72,328
	Average	70,90,776
	Penalty	7,09,078
	2009-2010	1,39,92,677
	2010-2011	1,62,77,308
7 ******************	2011-2012	1,22,67,996
.	Total	4,25,37,981
	Average	1,41,79,327
	Penalty	14,17,933

¶213

38.5 As JTEKT was the second to approach the Commission as a lesser penalty applicant in the matter and has been granted 50% (percent) reduction in penalty, the Commission decides to grant benefit of reduction in penalty of 50% (percent) in terms of Regulation 4 (c) of the LPR to the above-stated identified persons of JTEKT also.

¶214

38.6 Thus the penalty to be paid by the aforesaid individuals of JTEKT, identified in Table 9 above would be as follows:

¶215

JTEKT (In INR) – Table 10

¶216

S. NO.	PERSON	PENALTY IMPOSED	PENALTY PAYABLE AFTER REDUCTION
1 **	*****************	* 5,63,066	2,81,533
2	****************	7,32,660	3,66,330
3	****************	5,39,186	2,69,593
4	*****************	7,11,742	3,55,871
5 *	*****************	16,02,537	8,01,268
6 *	*****************	7,09,078	3,54,539
7 *	*****************	14,17,933	7,08,966

¶217

Suo Motu Case No. 07 (01) of 2014

PUBLIC VERSION

ORDER

The parties and their concerned persons identified in Tables 2, 3 and 4 above are directed to cease and desist from indulging in any act of cartelisation, in the EPS Systems market in India.

¶222

Further, under the provisions of Section 27 (b) of the Act, the Commission directs the following entities/ persons to pay the following penalty:

¶223

Table 10

¶224

S. No.	Name of the Party	Penalty (In INR)	Penalty in Words
	JTEKT Corporation,
1.	Japan/ JTEKT Sona Automotive India Limited (now JTEKT India Limited)	17,07,31,443/-	Rupees Seventeen Crores Lacs Thirty One Thousand Hundred and Forty Three On	Seven Four ly
			Rupees Two Lacs Eighty	One
2.	********************	2,81,533/-	Thousand Five Hundred ThirtyThree Only	and
			Rupees Three Lacs Sixty	Six
3.	****************	3,66,330/-	Thousand Three Hundred ThirtyOnly	and
			Rupees Two Lacs Sixty	Nine
4.	****************	2,69,593/-	Thousand Five Hundred NinetyThree Only	and
			Rupees Three Lacs Fifty	Five
5.	*****************	3,55,871/-	Thousand Eight Hundred SeventyOne Only	and
			Rupees Eight Lacs One Tho	usand
6.	******************	8,01,268/-	Two Hundred and Sixty Only	Eight
			Rupees Three Lacs Fifty	Four
7.	******************	3,54,539/-	Thousand Five Hundred ThirtyNine Only	and
			Rupees Seven Lacs	Eight
8.	******************	7,08,966/-	Thousand Nine Hundred SixtySix Only	and

¶225

Suo Motu Case No. 07 (01) of 2014

¶226

¶227

PUBLIC VERSION

¶228

The Commission directs the entities/ persons mentioned in Table 10 above to deposit the respective penalty amounts within 60 days of receipt of this order.

¶229

As noted as Para 30 above, separate proceedings against four individuals of NSK, who have been identified by the DG to be liable under the provision of Section 48 (1) of the Act will be carried out in due course and a separate order in this regard, shall be issued.

¶230

The Commission further directs that two versions of the present order may be prepared – non-confidential qua parties version and public version. The same shall be prepared keeping in mind the confidentiality requests made by the parties and the provisions of Section 57 of the Act.

¶231