Amazon and Flipkart found violating Competition law in India-DG investigation report out
The Competition Commission of India (CCI) vide its order dated September 14, 2017 imposed penalty of almost INR 12 Crore on 10 entities (Opposite Parties/OP) namely SSV Coal Carriers Pvt. Ltd (OP-1), Bimal Kumar Khandelwal (OP-2), Pravin Transport (OP-3), Khandelwal Transport (OP-4), Khandelwal Earth Movers (OP-5), Khanduja Coal Transport Co. (OP-6), Punya Coal Road Lines (Op-7), B. Himmatlal Agrawal (OP-8), Punjab Transport Co. (OP-9) and Avaneesh Logistics Pvt. Ltd (OP-10) for bid rigging in coal and sand transportation tenders floated by the Informant, Western Coalfields Ltd which is one of the eight subsidiary companies , of the public sector monolith, the Coal India Ltd..
Incidentally , both Coal India Ltd. and Western Coalfields Ltd. have been penalized by CCI for abuse of dominance for imposing unfair conditions in supply of non cooking coal to thermal power producers .
The information was filed by Western Coalfields Ltd., pursuant to quoting of identical bids by the OPs in four tenders floated by the Informant being Tender No. 34/2013 dated April 16, 2014 (Tender No. 1), Tender No. 37/2013-14 dated May 2, 2014 (Tender No. 2) for coal transportation and Tender No. 03/2014-15 dated June 3, 2014 (Tender No. 3) and Tender No. 06/2014-15 dated June 6, 2014 (Tender No. 4) for sand transportation. Out of the four tenders, OP-1 to OP-4 were alleged to have colluded with respect to sand transportation tenders and OP-5 to OP-10 were alleged to have colluded with respect to coal transportation tenders.
The CCI noted that in Tender No. 1, OP-1, OP-2 and OP-4 quoted identical prices, not for just one job but for all the four different jobs. Similarly, in Tender No. 2 OP-2, OP-3 and OP-4 quoted identical prices for each of the three different jobs.
The CCI observed that that in normal market conditions it is highly unlikely that prices quoted by different bidders in two tenders for several jobs would be identical to this extent.
Further, the identical price quoted in both the said tenders was not for one job, but for four different jobs in Tender No. 1 and three different jobs in Tender No. 2. This was treated as strong evidence by the CCI to show that the same are not a co-incidence but more an outcome of understanding amongst OP-1, OP-2, OP-3 and OP-4.
Further the CCI also relied on several “plus factors” such as the financial dealings between the parties, and that fact that the partners/proprietors of the OPs have social relationships and frequently meet/interact with each other.
It was also noted that OP-1 and OP-4 had quoted identical prices in two earlier tenders namely Tender No. CH3 150-Min-0018/2013-14 and Tender No. HLC-1/SAND/42/2008-09, and the historical data was taken as one of the relevant circumstances indicating bid-rigging.
The CCI also found that the infrastructure conditions at the Informant’s office was conducive of last minute exchange of price information.
Further, the fact that the OPs formed a trade association and that the association demanded higher prices in the tenders floated by the Informant pursuant to the quoting of identical prices by the OPs was also considered as a plus factor.
Thus, on the basis of the identical pricing despite different cost structures, apparently last minute filling of price bids; existence of earlier financial dealings amongst the OPs as well as identical price quotes even in previous tenders floated by the Informant, the CCI concluded that quoting of identical prices by OP-1, OP-2 and OP-4 for each of the four different jobs in Tender No. 1 and by OP-2, OP-3 and OP-4 for each of the three different jobs in Tender No. 2 along with OP-1 quoting higher prices with uniform and exact price difference of Rs. 4/- for each of the three different jobs, was not a mere co-incidence but the result of clear understanding amongst OP-1, OP-2, OP-3 and OP-4 to fix prices in the tenders floated by the Informant, resulting in rigging the bids in the impugned tenders for sand transportation.
Having held that an agreement of the nature envisaged under Section 3(3) (d) existed, the CCI held that agreements mentioned in Section 3(3) of the Act, would be treated as ipso facto causing an appreciable adverse effect on competition. It was held that once the existence of an agreement for anti-competitive object is established, the burden is on the alleged contravener to prove that the said agreement does not have any appreciable adverse effect on competition.
Similar circumstances and the presence of plus factors were also noted by the CCI in Tender No. 3 with OP-5, OP-7, OP-9 and OP-10 quoting identical prices not only for one job but for all five different jobs.
Similarly with respect to Tender No.4, OP-5, OP-6 and OP-7 quoted identical prices for each of the three different jobs, up to the last decimal points. The CCI held that this was on account of clear consensus/ understanding amongst OP-5 to OP-10.
On the basis of the same, the CCI imposed a penalty amounting to 4% of the average turnover of the parties under Section 27 of the Act. The CCI also imposed penalty on the office bearers of the OPs under Section 48(1) of the Act.
Comment: The jurisprudence on bid rigging cartels is still developing in India. In the absence of direct evidence of communication between competitors prior to bidding , CCI primarily relies upon the “pre-ponderance of probability” to arrive at the conclusion of a collusive bidding based on certain “plus factors ‘including identical or near identical prices, pre- bid meetings, active trade association providing platform to bidders etc as circumstantial eveidence. You may like to read my article on the evolving trends in detection of bid rigging cartels in India here .
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