Sugar Mills Penalized for Bid Rigging; Oil Companies' Joint Tender Process Cleared of Antitrust Violations.

The Commission determined that the joint tender process by Oil Marketing Companies (OMCs) did not violate Section 3 of the Act, as it enhanced efficiency and did not adversely affect competition. However, it found that sugar mills, facilitated by industry associations, engaged in bid rigging in the tender process, contravening Section 3(3)(a) of the Act. Consequently, the Commission imposed penalties on the sugar mills and associations, requiring them to cease anti-competitive practices and pay penalties within 60 days. The plea for cross-examination was rejected, and no collusion was found among bidders in Maharashtra.

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Issues Involved:
1. Whether the joint tender floated by OMCs is in violation of provisions of Section 3(1) read with Section 3(3) of the Act.
2. Whether the tender floated on 02.01.2013 by PSU OMCs was rigged by sugar mills/ISMA/EMAI/NFSCF in contravention of the provisions of Section 3 of the Act.

Issue-wise Analysis:

Issue 1: Joint Tender by OMCs
The EBP Programme was introduced to benefit the agriculture sector and improve the environmental footprint. Ethanol is produced from sugar molasses, and the programme aimed for 5% ethanol blending with petrol. The joint tender by OMCs was scrutinized to determine if it violated Section 3 of the Act.

The Commission noted that the Government of India (GoI) holds a majority of shares in OMCs, which work under the Ministry of Petroleum and Natural Gas. The joint tendering process was found to enhance efficiency by saving time, money, and resources, thus avoiding wastage and ensuring equitable distribution of ethanol among OMCs. Separate tenders would have led to inefficiencies and potential market imperfections.

The Commission concluded that the joint tendering process by OMCs was not anti-competitive and had evident efficiency benefits. The presumption of appreciable adverse effect on competition was not applicable as the process increased efficiency in production, supply, and distribution of ethanol. The Commission found no merit in the allegations against the joint tendering process and upheld its legality.

Issue 2: Bid Rigging by Sugar Mills/ISMA/EMAI/NFSCF
The Commission examined whether the sugar mills rigged the bids in the tender floated on 02.01.2013. The tender required bidders to quote Basic Price and Net Delivered Cost (NDC), with L1 determined based on NDC. The investigation revealed that the prices quoted by bidders in UP were clustered in a narrow range, indicating collusion. Identical bids were found in Gujarat and Andhra Pradesh as well.

The DG's investigation found that ISMA facilitated coordinated action among ethanol manufacturers. Meetings were convened by ISMA, and call data records showed frequent interactions between ISMA officials and bidders. The platform provided by ISMA enabled collusive behavior, leading to bid rigging.

The Commission also found that EMAI influenced the bidding behavior of its members by setting a benchmark price for ethanol. The conduct of EMAI was found to contravene Section 3(3)(a) of the Act.

The Commission concluded that the bidders colluded in submitting bids, quoting collusive prices, and sharing quantities using the platform of ISMA and signals from EMAI. The conduct of ISMA and EMAI facilitated bid rigging, violating the provisions of Section 3 of the Act.

Conclusion:
The Commission directed the sugar mills and ISMA/EMAI to cease and desist from anti-competitive conduct. Penalties were imposed on the sugar mills at 7% of their average relevant turnover from ethanol sales and on ISMA/EMAI at 10% of their average receipts. The parties were directed to deposit the penalty within 60 days.

The Commission found no merit in the plea for cross-examination by Dhampur and upheld the findings against the bidders in UP, Gujarat, and Andhra Pradesh. The bidding pattern in Maharashtra did not indicate collusion, and no contravention was found against the bidders there.

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