COMPAT vide order dated December 09, 2016 has upheld CCI order dated July 10, 2015 passed under section 27 of the Act against Public Sector Insurance Companies for bid-rigging while reducing the penalty from Rs. 671 Crores to Rs. 2 Crores calculated as per the relevant turnover of the product in question. On the issue of the penalty , COMPAT observed that the “penalty has to be calculated with reference to the gross premium received by United India Insurance Company Limited (UIICL) as insurance provider under Rashtriya Swasthya Bima Yojna (RSBY) scheme and penalty for each of the Appellants will be a proportion of their share in such premium”. In the present case, CCI after investigation found, National Insurance, New India Insurance, Oriental Insurance and United India Insurance guilty of cartelization and manipulating a bidding process by the Kerala government for selecting insurance service providers for Rashtriya Swasthya Bima Yogna for 2010-11, 2011-12 and 2012-13. COMPAT observed that appellants has “no hesitation in confirming that bid rigging constituting contravention of section 3 of the Act did take place and on the facts of the case and the legal position , we agree that the appellants should suffer penal consequences”. COMPAT, confirming the decision of CCI, held that in terms of the General Insurance Business (Nationalization) Act, 1972 (GIBNA), the four companies were created in order to encourage competition and function as per business principles. COMPAT further held that the influence of the Department of Financial Services (DFS) does not detract from the independent, commercially and economically separate status of each of the four companies, which as per the GIBNA Act have been created as independent entities for competing with each other in the interest of efficiency. Accordingly, the four insurance companies would not be considered as a ‘single economic entity’ under the control of the Central Government for purposes of the Act. Further, COMPAT recognized that the burden of penalty will ultimately be transferred to the public, as the insurance companies are owned by the government, hence reduced the penalty to 1% of the relevant turnover for the relevant period. Accordingly, COMPAT imposed reduced penalties of Rs1.56 Crores (on United India Insurance), Rs20 lakh (on National Insurance), Rs20 lakh (on New India Insurance), and Rs4 lakh (on Oriental Insurance).
(Source: COMPAT Order dated December 09, 2016. For full text see COMPAT website)
The original order of CCI dated July 10, 2015 was reported in a detail coverage by this News Bulletin in its August 2015 issue and can be read at http://competitionlawyer.in/wp-content/uploads/2015/10/newsletter.pdf