NCLAT reduces cartel penalty from 4% to 2% of turnover for small battery manufacturer with losses

NCLAT reduced penalty imposed on battery manufacturer from 4% to 2% of turnover in cartel case. Court found appellant was small player with 2% market share suffering losses, unlike co-violator who had profits in later years. Both companies violated Competition Act through product supply agreements with dominant player. While penalty was reduced considering appellant's insignificant market position and losses in dry cell battery business, NCLAT refused to waive interest on penalty amount despite appeal's pendency since 2019, stating appeal pendency cannot justify interest waiver.

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Issues Involved:

1. Waiver of interest on the monetary penalty.
2. Reduction of the penalty imposed on the appellant.
3. Alleged involvement in a cartel with Respondents No.2 and 3.
4. Comparison with co-accused Geep Industries regarding penalty imposition.

Issue-Wise Detailed Analysis:

1. Waiver of Interest on the Monetary Penalty:

The appellant sought a waiver of the interest on the monetary penalty, citing Regulation 5 of the CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011. The regulation allows for the reduction or waiver of interest if the default was due to circumstances beyond the control of the enterprise. The appellant argued that the interest was mounting due to the pendency of the appeal since 2019. However, the Tribunal was not inclined to waive the interest, stating that the pendency in appeal and continuation of stay would not be a ground for waiver.

2. Reduction of the Penalty Imposed on the Appellant:

The appellant argued that the penalty of 4% on the turnover was excessive, given its minor role in the alleged cartel and its insignificant market share. The Tribunal considered the appellant's position similar to that of co-accused Geep Industries, which was subjected to a reduced penalty of 1% due to its small market share and lack of bargaining power. The Tribunal noted that although the appellant suffered losses in the dry cell battery business, it was not in a position to influence market prices. Consequently, the penalty was reduced to 2% of the turnover, acknowledging the appellant's limited role and financial losses in the dry cell battery market.

3. Alleged Involvement in a Cartel with Respondents No.2 and 3:

The appellant was accused of being part of a bi-lateral ancillary cartel with Panasonic Energy India Co Ltd, similar to Geep Industries. The evidence included the Product Supply Agreement (PSA) and email correspondences that suggested anti-competitive practices. The Tribunal noted that the appellant, like Geep, had an insignificant market share and was not in a position to dictate terms in the market. The PSA contained clauses that restricted the appellant from taking steps detrimental to Panasonic's market interests, indicating a lack of competitive autonomy. Despite these findings, the Tribunal acknowledged the appellant's limited influence in the cartel's operations.

4. Comparison with Co-Accused Geep Industries Regarding Penalty Imposition:

The Tribunal drew parallels between the appellant and Geep Industries, both being small players in the dry cell battery market with minimal market influence. In Geep's case, the penalty was reduced to 1% due to its insignificant market share and inability to influence competition. The Tribunal recognized that the appellant's turnover from the dry cell battery business was even less than Geep's, and it suffered losses, unlike Geep, which made profits in later years. Therefore, the Tribunal found it inconsistent to impose a higher penalty on the appellant and decided to reduce it to 2% of the turnover, aligning with the principle of proportionality in penalty imposition.

In conclusion, the Tribunal's judgment addressed the appellant's concerns regarding the penalty and interest, ultimately reducing the penalty to 2% while maintaining the interest obligation. The decision took into account the appellant's minor role in the cartel, financial losses, and comparison with Geep Industries, ensuring a fair and proportionate outcome. All pending applications were disposed of accordingly.

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