COMPAT by its order dated April 12, 2016 has set-aside the penalty imposed on suppliers of Polyester Blended Duck Ankle Boot Rubber Sole (Jungle Boots) against allegations of bid-rigging.
The suppliers have been engaged in the supply of jungle boots to the Armed Forces under the rate contracts awarded by the Director General (Supplies and Disposals) (DG S & D) from time to time .
A reference was filed in the Competition Commission of India (CCI) by the DG(S&D) alleging that the suppliers had indulged in bid-rigging in response to a particular tender dated 14.06.2011 issued by DG (S&D). CCI held that a prima-facie case was made out for investigation under Section 26(1) of the Competition Act, 2002. (the Act) and directed the Director General (DG)/ CCI to investigate the allegations.
The DG found that the suppliers had been quoting identical/near identical prices against the tenders as evident from the direct and indirect evidence. The DG Report found that the suppliers had indulged in bid-rigging in contravention of Section 3(1) read with Section 3(3)(a), 3(3)(b) and 3(3)(d) of the Act.
The CCI considered that the quotation of near identical prices despite the manufacturing units having been located in different geographical locations with varying tax structure and different margins; possession by one bidder of the performance statements of other bidders; meetings under the platform of trade federation; and failure on the part of the opposite parties to provide any plausible explanation for the same,collectively constitute “plus factors” to corroborate the finding of parallel pricing which are clearly indicative of the fact that the appellants entered into an “agreement” to determine prices besides rigging the bid. The CCI thus approved the findings of the DG and imposed a penalty at the rate of 5% of the average turnover for the preceding three financial years.
The COMPAT, considered the defense submitted by the appellants and relying on its own judgments as well as those of the Supreme Court, held that mere quotation of identical pricing by the appellants in response to tender inquiry dated 14.06.2011 did not amount to bid rigging . COMPAT found that the so called “plus factors” relied upon by CCI for recording a finding of bid-rigging did not stand to reason on a careful scrutiny and were not legally sustainable to corroborate the finding of existence of an agreement among the appellants to prove bid rigging and held that the order of CCI deserves to be set-aside. The order of CCI has accordingly been set-aside by COMPAT.
Lastly, the COMPAT also considered that the suppliers were multi-product companies and the CCI committed grave illegality by imposing the penalty on the basis of entire turnover of the companies. (Source: Order dated April 12, 2016. For full text see COMPAT website-www.compat.nic.in)
Note: Mr MM Sharma of Vaish Associates, Advocates represented three appellants out of the 10 appellants in the appeals before COMPAT.