CCI introduces Leniency “Plus” regime in India- Will it suffice?
Competition Appellate Tribunal (COMPAT) by its order dated February 17, 2016 has upheld the order of CCI closing the case for bid-rigging for supply of Axle Mounted Disk Braking System (ADBMS) to Indian Railways.
In the instant case, the investigation related to quoting of identical prices in three emergency purchase tenders by the opposite parties, M/s Faiveley Transport (India) Pvt. Ltd. and M/s Knorr Bremse India Pvt. Ltd. for procurement of ADBMS by Rail Coach Factory, Kapurthala, Punjab(RCF) ( collectively referred as “respondent”) . The Appellant , the Deputy Chief materials Manager of Rail Coach Factory, Kapurthala, who had filed the reference in CCI , alleged that the respondents took advantage of the limited competition in the market for supply of AMDBS and refused to provide cost break-up and proper justification for the rates quoted by them, which showed that their conduct was anti-competitive. The reference was sent to the Director General (DG) for investigation by CCI.
The Director General (DG) during the investigation, found evidence of bid rigging since the rates quoted by the two suppliers (who were the only suppliers approved by the Research and Design Organization (RDSO) of the Indian Railways) were identical in each of the three tenders under inquiry. However, CCI closed the reference of the Railways on grounds that mere identical rates by the respondents did not prove cartelization.
The Hon’ble COMPAT, agreeing with the views of CCI, while dismissing the Appeal observed that “in an oligopolistic market like the one in question, the identity of price quoted by the bidders is not an unusual feature. The players in a limited market are aware of the price quoted by each other in one or the other bid and it is a normal tendency to quote the same price in response to the next tender. Therefore, identical price quoted by the respondents for the items of AMDBS did not constitute sufficient evidence of cartel formation and in the absence of other plus-factors, it is not possible to record a finding that the respondents had acted in violation of Section 3(3)(d) read with Section 3(1) of the Act” . The Hon’ble COMPAT placed reliance upon a Supreme Court judgment in re: Union of India Vs. Hindustan Development Corporation and Others. [1993 (3) SCC 499] .Source: Order dated February17, 2016. For full text see COMPAT website-www.compat.nic.in)
COMMENT: This order passed by COMPAT is a unique order since by this order the Hon’ble Tribunal has admitted an appeal filed by an Informant against an Order of CCI when no such appeal is prescribed by the Act. The Hon’ble Tribunal apparently did not consider it necessary to go into the legal issue of challenge to its jurisdiction itself, since it was not in the interest of the Informant /Appellant to raise this issue and the order has been passed without issuing notice to the respondents or to CCI. Whether this order sets up a precedent against the celebrated judgment of the Hon’ble Supreme Court deciding this very issue in the case of CCI vs. SAIL (2010) 10 SCC 744 ,remains to be seen.
Suggested Reading: (i) Bid-Rigging in Public Procurement: Some evolving trends in Indian Competition Law
(iii) COMPAT sets aside order against Cement Cartel
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