Competition Commission of India (CCI) has imposed a penalty of Rs.62.31 crore on three engineering companies for violation of Competition Act concerning forming a Cartel with respect to a tender for an Indian Railway undertaking. A penalty of Rs. 1.91 crore has been imposed on M/s Stone India Ltd., Rs. 5.70 crore on M/s Faiveley Transport Rail Technologies India Ltd and Rs.54.70 crore on M/s Escorts Ltd. The penalty has been worked out on the basis of 2% of average turnover of these companies for the three financial years from 2009-10 to 2011-12.

The penalty has been imposed after CCI took up a case of suo motto basis based on information given by M/s Diesel Loco Modernisation Works(DLMW), a unit of Indian Railways at Patiala, Punjab. The case relates to a DLMW tender wherein the three vendors quoted identical rates for feed valves.

The companies have also been directed to “Cease and Desist” from indulging in such anti-competitive conduct in future. Noting that public procurement is a major concern of all competitive authorities in the world, CCI said that it cannot ignore bid rigging in case of small procurement nor can consider small procurements unimportant.

Bid rigging: penalties imposed for cartel formation in public procurement, with cease-and-desist directives after investigation. The Commission found three engineering firms engaged in a cartel by submitting identical quotations for feed valves in a procurement tender and imposed monetary sanctions calculated as a percentage of the companies' average turnover for the relevant years; the inquiry was initiated suo motu based on information from the procuring unit and the firms were directed to cease and desist from such anti-competitive conduct.