Competition Commission of India (CCI) dismisses allegations of bid-rigging against in supply of PVC Vinyl flooring to railways |

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

(ii) COMPAT sets aside CCI’s penalty on Alkem Laboratories for indulging in anti-competitive practices-

(iii) CCI again fines Pharma Company for Anti-Competitive Activities

(iv) Bid-Rigging in Public Procurement: Some evolving trends in Indian Competition Law

(v) Competition Appellate Tribunal (COMPAT) directs Competition Commission of India (CCI) to re-consider penalties imposed on LPG manufacturers

(vi) COMPAT sets aside order against Cement Cartel

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.