19 July, 2015
On June 10, 2015 CCI found thirteen container manufacturers (‘Suppliers’) had engaged in cartel conduct with respect to the supply of CN containers, which are containers with a disc required for a 81mm bomb, to three ordinance factories. In particular, CCI believed that the Suppliers had determined sale prices and made collusive bids, in violation of Section 3 (3) (a) and Section 3 (3) (d) of the Competition Act respectively.
CCI observed that all the Suppliers had submitted identical or similar bids in response to the tenders floated by the three ordinance factories. These bids were similar despite the firms having very different cost structures. CCI further noted that a number of the Suppliers were linked, as at least 10 of the Suppliers had common board members and members of the same family serving in the respective companies. This facilitated the possibility of information ex- change.
CCI concluded that the Suppliers had agreed to determine sale prices and made collusive bids in violation of Section 3(3)(a) and Section 3(3)(d) of the Competition Act. Given the lack of evidence to suggest that the Suppliers had restricted supply of the relevant CN containers, CCI did not find any violation of Section 3(3)(b) of the Competition Act.
In light of the above, CCI imposed a penalty of 3% of the average turnover of each of the Suppliers starting from financial year 2010-11. The cumulative penalty imposed on the Suppliers was ¤30.37 million (approximately US$477625) with the highest penalty imposed amounting to ¤20.8 million (approximately US$ 327,738).
Notably, CCI observed that Bajinath Plastic Products Pvt. Ltd. which had ceased operations in 2011 on account of the expiry of its license to supply CN containers, was a bankrupt entity and that all its assets had been liquidated. Accordingly, CCI did not impose any penalty on Bajinath Plastic Products Pvt. Ltd.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
Shuva Mandal, Partner, AZB & Partners