CCI introduces Leniency “Plus” regime in India- Will it suffice?
CCI by its order dated September 21, 2016 has dismissed allegation against manufacturers of PVC Vinyl flooring in relation to supply of “PVC Flooring (Vinyl) width 1620/mm minimum length 14 meters thickness 2/mm roll to RDSO
specification no. RDSO/2006/CG-12 Rev. 1. Sample code NAC FLG-02 along with PVC welding electrode. The quantity of welding electrode to be three times the length of PVC sheet.’ (“the product”) ,to the North Western Railway, Jaipur in violation of Section 3(3)(d) of the Competition Act, 2002 (Act).
The reference was filed by the Chief Materials Manager-I, North Western Railway, Jaipur(Informant) against M/s Responsive Industries Ltd., M/s RMG Polyvinyl India Ltd., M/s Premier Polyfilms Ltd. Alleging bid-rigging in the supply of the product in tenders by North Western Railway (NWR) and other Railway Zones. It was stated that all three RDSO approved firms had been quoting less than Rs 300 per sq. m in the tenders floated by NWR and other railway zones before and in the calendar year 2013. However, from June 2014 onwards the rates were increased by all three firms substantially.
In the investigation report, the DG noted that the OPs are the only three RDSO approved vendors for the supply of PVC flooring (CG-12) for use in AC and non-AC coaches of Indian Railways. The Product is essentially the same for both AC and Non-AC coaches, with only difference being the colour.
From the cost-break-up and the statements of the OPs, the DG found that the pricing of the Product to the Indian Railways was not based on costing and expected profit margins. The Product was being supplied to the Railways by the OP at a loss. DG during the investigation compared the bid price quoted across various railway zones in the corresponding period and found that during the same period, the OPs had quoted in similar price range in other railway zones (other than NWR) and tender bids were in similar price band across all zones.
From the statement of the Informant and based on the data of various zonal railways, the DG found that the Informant had chosen only selected tenders for comparing the rates quoted by the OPs in the tenders in question. Further, the DG found that the justification given by the OPs regarding quantity, number of rolls, size of rolls, distance, etc., was reasonable in view of business dynamics. Taking into account various factors during the course of investigation, DG concluded that during the course of the investigation, no evidence was found which could substantiate the allegation of anti-competitive conduct of the OPs in violation of Section 3(3) (a) or Section 3(3) (d) of the Act.
The CCI noted that the Responsive Industries Ltd. has not denied that it has been quoting below cost. Rather it has stated that it has been quoting low cost to maintain the prestigious RDSO certification. Thus, any loss incurred in supply to Indian Railways is recouped by it from the orders executed for other parties.
The CCI noted that in the market for supply of the Product, Responsive is found to be a dominant player which is continuously quoting prices below cost, a fact which has apparently deterred other two players in the market, i.e., OP-2 and OP-3 from competing in the market. Such market dynamics may be indicative of abuse of dominance by Responsive way of predatory pricing. However, this was neither the allegation of the Informant nor an issue that was referred to the DG for investigation. The CCI agreed with the finding of the DG that only select tenders had been chosen by the Informant for assessing the rates quoted by the OPs. Further, the Informant also did not take into consideration the costing of the Product. While there is no direct evidence to show meeting of minds, there is also no circumstantial evidence that indicates collusion amongst the three OPs. The CCI concluded that the allegation of violation of Section 3(3)(d) of the Act could not be proved. (Source: CCI Order dated September 21, 2016. For full text see CCI website)
Suggested Reading:
(i) Competition Commission of India (CCI) re-imposes penalty on 11 cement companies for cartelisation
(iii) CCI again fines Pharma Company for Anti-Competitive Activities
(iv) Bid-Rigging in Public Procurement: Some evolving trends in Indian Competition Law
(vi) COMPAT sets aside order against Cement Cartel
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