3 October, 2019
On August 9, 2019, CCI penalized 51 entities (collectively ‘Opposite Parties’) for big rigging in a tender floated by Hindustan Petroleum Corporation Limited (‘HPCL’). The investigation began pursuant to an anonymous letter dated April 25, 2013, received by CCI, alleging cartelization among bidders in relation to two tenders floated by HPCL (‘Tender No.1’ and ‘Tender No.2’, respectively). [1]
With respect to Tender No. 1, the Opposite Parties, inter alia, successfully argued that the nature of the market of supply of LPG cylinders to oil manufacturing companies (‘OMCs’) is oligopolistic in nature, and therefore, each seller is likely to be aware of actions and decisions of others, leading to price parallelism. Reliance was placed on Supreme Court of India’s decision in Rajasthan Cylinders and Containers Ltd. v. Union of India and Another[2], where it was held that mere quotation of identical prices cannot lead to an inference that parties have formed a cartel. The Opposite Parties further argued that bidders quoted for supplies in different states of India as per their installed capacity and rates for supplies were fixed by HPCL after negotiation with L-1 bidder. Accordingly, CCI did not find any contravention in relation to Tender No. 1.
In its analysis of Tender No. 2, CCI noted that out of the 66 participants in the tender, 51 vendors withdrew their bids out of which 46 withdrew their bids simultaneously on the same date. While the reasons were provided by the 46 participants for withdrawal of bids from each bidder, CCI did not find the reasons to be plausible. Other factors such as common agents working for the cylinder manufacturers in absence of any confidentiality agreements, email exchanges between the bidders revealing exchange of information in relation to bid price, identical nature of withdrawal letters, common IP addresses from which bids were uploaded and collusive decision making by the Opposite Parties under the guise of LPG Cylinders Manufacturers Association were also discovered during the investigation.
Accordingly, CCI held that the Opposite Parties were involved in bid-rigging and therefore, decided to impose penalty at 1% of their average relevant turnover for the financial years 2013-14, 2014-15 and 2015-16. Additionally, CCI penalized individuals officers/office bearers of the Opposite Parties who were found to be in-charge of, and responsible for the conduct of the business of the contravening companies/ association.
For further information, please contact:
Zia Mody, Partner, AZB & Partners
zia.mody@azbpartners.com
[1] Suo Motu Case no 01 of 2014.
[2] Civil Appeal No. 3546 of 2014.
