Competition Appellate Tribunal (COMPAT) upholds CCI order dismissing abuse of dominance allegation against Orissa Mining Corporation (OMC) |

COMPAT by its order dated August 30, 2016 has upheld order of CCI which had dismissed allegations of abuse of dominance by OMC has been indulging in abusing its dominant position in fixing an arbitrary and highly unreasonable price for sale of chrome ore.

The Information, filed in CCI by All Odisha Steel Federation, alleged that the method of deriving the price of the chrome ore by resorting to a Price Setting Tender (PST) was unfair and resulted in an excessive price being determined for the sale of chrome ore. By this method a very small quantity is tendered for sale by OMC. As a result, a few unknown companies, whose lifting of Chrome Ore is less than 2% of OMC’s total sales, quote abnormally high price and become H-1 in the tender and such price becomes the benchmark for all plants including the members of the Informant’s Association. It was also alleged that in some instances, OMC did not even accept the highest bid price (H-1) and fixed an even higher price without regard to the prevailing market conditions.

During the investigation, the DG concluded that while the OMC was in a dominant position in the relevant market, there was no abuse of dominance. The CCI agreed with the DG Report and held that despite the dominant position in the relevant market of friable chrome ore in the State of Madhya Pradesh, OMC did not abuse its position and that it was entitled to protect its business interest by adopting any methodology of price setting depending on market conditions. Since chrome ore is a non-renewable natural resource, its pricing and supply cannot be determined by market forces; that chrome ore is not like any other commodity which can be supplied to any extent and price thereof cannot be determined on the free market economy principal.

COMPAT noted that the price setting tenders were floated by OMC primarily with the objective of discovering price and in accordance with clauses of the tender scheme, the offered price could be modified to capture market realities.

Further it also needs to be appropriated that chrome ore is a scarce natural resource its availability needs to be sustained for long term use. Mineral exploitation also requires ecological mitigation. These factors make calculation of economic value extremely difficult for calculation by a competition regulator. Therefore, willingness/ability to pay is a fair method for price discovery.

The COMPAT noted that even though the OMC has made good profits out of the sale of chrome ore, this alone cannot be read against OMC. There is no conclusive determination that OMC has tried to manipulate the market in order to draw excessive pricing advantage.

The COMPAT agreed with the opinion of DG which has been approved by the CCI that the allegation of abuse of dominance by OMC has not been established and the price charged by it is not unfair. The appeal has been dismissed accordingly.

(Source: Order dated August 30, 2016. For full text see COMPAT website)

Suggested Reading:

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(ii) CCI initiates investigation against Athletic Federation of India

(iii) CCI Order refusing interim relief against OLA Cabs in an ongoing investigation upheld by COMPAT

(iv) COMPAT upholds CCI order dismissing abuse of dominance allegation against Delhi International Airport Limited (DIAL)

About the author

M M SHARMA

 Comdt. (Retd.) M. M. Sharma heads the Competition Law & Policy team in VA since 2009 and has over 30 years’ experience as an Advocate of Delhi High Court and holds a Post Graduate Diploma in Economics of Competition Law from Kings College, London. He has worked in the Competition Commission of India (CCI) as Additional Registrar during 2006-2008 and was responsible for drafting the Implementing Regulations under the Competition Act, 2002. He has experience of working as Head-Legal /In-house Counsel for a large Corporate Group in the Steel and Power sector before joining VA in 2009. He has represented clients as an independent arguing Counsel in landmark cases decided by CCI, the Competition Appellate Tribunal (COMPAT) , High Courts and the Supreme Court. As a prolific writer, he contributes articles and is regularly quoted on competition issues in National Newspapers and interviewed by TV Channels. He also teaches as a visiting faculty in various Universities and Institutions and is widely regarded as a subject expert in various Committees of Apex Business Chambers, such as FICCI, CII, ASSOCHAM and PHD CCI.  Mr. Sharma has been mentioned as a “Notable Practitioner” in the “Competition/Antitrust” category of Chambers & Partners (Asia Pacific) Ranking of Leading Lawyers for Business in India for the year 2012 and 2013. VA’s competition law and policy team has also been awarded the Law Firm of the Year Award for “Competition/Antitrust Law” for 2013 by the Indian Business Law Journal. Included as a ‘Recognised Practitioner’ in Individual Lawyers’ranking by Chamber’s Asia Pacific Guide 2020 for Antitrust/Competition Law.