Explosive Suppliers' Penalty Reduced for Bid Rigging; Tribunal Upholds Fine Despite Appeals.

The Competition Commission of India (CCI) determined that the explosive suppliers engaged in bid rigging and manipulation of the bidding process, violating Section 3(3)(d) of the Competition Act, 2002. A penalty of 3% of the average turnover was initially imposed. However, the Tribunal, considering mitigating factors such as this being the first breach and the suppliers' participation in subsequent auctions, reduced the penalties to 10% of the original amount. The appeals were dismissed on merits, and the modified penalties were upheld. Claims of denial of natural justice, selective prosecution, procedural impropriety, and bias were rejected by the Tribunal.

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Issues Involved:
1. Whether the explosive suppliers had indulged in fixation of bid prices under an agreement.
2. Whether the explosive suppliers had engaged in the act of controlling and limiting the supply of explosives.
3. Whether the explosive suppliers had caused manipulation of the bidding process in contravention of Section 3(3) read with Section 3(1) of the Competition Act, 2002.

Summary:

Issue 1: Fixation of Bid Prices
The CCI concluded that although the bids for the years 2004-05, 2005-06, and 2006-07 were identical, indicating a lack of independent decision-making and a meeting of minds among the explosive suppliers, these issues occurred before the notification of Sections 3 and 4 of the Act. Therefore, the appellants could not be held guilty for violation of these sections. The CCI also considered a letter dated 13.10.2009 from EMWA but found it insufficient to establish collective price-fixing.

Issue 2: Controlling and Limiting Supply
The CCI found that although explosive suppliers had previously stopped supplies, such actions occurred before Sections 3 and 4 were effective. The CCI reviewed letters from 2010 and found no evidence of a deliberate limitation of supplies under the agreements. The CCI noted that some suppliers had fulfilled more than 90% of their contractual obligations, and the letters cited by CIL did not indicate any anti-competitive agreement. Thus, the appellants were exonerated from contravening Section 3(3)(b).

Issue 3: Manipulation of Bidding Process
The CCI determined that the collective boycott of the Electronic Reverse Auction on 4th and 5th January 2010 constituted a concerted action among the appellants, resulting in bid rigging and manipulation of the bidding process, violating Section 3(3)(d) of the Act. The CCI imposed a penalty of 3% of the average turnover of the appellants under Section 27(b).

Common Issues Raised by Appellants:
- Denial of Natural Justice: The appellants argued that they were not supplied with the objections and documents from CIL, causing denial of natural justice. The Tribunal found that the appellants had adequate notice and failed to appear or request the documents, thus rejecting this contention.
- Selective Prosecution: The appellants claimed arbitrary selection by CIL. The Tribunal found no fault in CIL proceeding against those for whom it had evidence.
- Procedure for Inquiry: The appellants argued that the CCI should have initiated further inquiry under Section 26(7) after the DG's report. The Tribunal held that the CCI has discretion to pass an order under Section 26(6) without further inquiry if it disagrees with the DG's report.
- Bias Allegation: Some appellants argued that Shri H.C. Gupta should have recused himself due to potential bias. The Tribunal rejected this, noting no evidence of bias and that the issue was not raised at the earliest opportunity.

Penalty:
The Tribunal noted the need to consider mitigating factors such as this being the first breach, the participation in the subsequent auction, and uninterrupted supplies. The penalties were reduced to 10% of the original penalty imposed by the CCI. The appeals were dismissed on merits, with the penalties modified accordingly.

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