The Competition Commission of India (CCI) issued a final order today against four regional associations of Kraft Paper manufacturers, including their 115 members which were found to have contravened the provisions of Section 3(3) read with Section 3(1) of the Competition Act, 2002 (the 'Act’), which proscribe anti-competitive agreements. The case was initiated on the basis of information filed by three federations/associations of corrugated box manufacturers.

It was alleged that the various associations of Kraft Paper Manufacturers, by way of periodic meetings and correspondences, direct their members (i.e., Kraft Paper Mills) to: (i) increase the price of the paper to be sold to the buyers, i.e., corrugated box manufacturers; and (ii) create a condition of shortage to enforce the unjust price increase and shut the operation of the paper mills in a region collectively. 

Based on the evidence on record such as minutes of Meetings, e–mail communications, WhatsApp messages exchanged on WhatsApp groups as well as oral depositions of various representatives, the CCI found 119 parties including four regional associations of Kraft Paper Manufacturers in contravention of provisions of Section 3(3)(a) and Section 3(3)(b) read with Section 3(1) of the Act, except one Kraft Paper Mill, which was found guilty of contravention of provisions of Section 3(3)(a) read with Section 3(1) of the Act, only. Of the 119 opposite parties, 31 Kraft Paper Mills were lesser penalty applicants before the CCI. Under Section 46 of the Act, a cartel member may approach the CCI by way of filing an application seeking lesser penalty, in return for providing full, true and vital disclosures in respect of the alleged cartel to the Commission.

Keeping in mind the peculiar facts and circumstances of the case including the fact that the many of the Kraft Paper Manufacturers were MSMEs and were going through economic and financial crisis as a fallout of COVID-19 pandemic, the CCI refrained from imposing any monetary penalty upon the infringing associations and Kraft Paper Manufacturers. Further, several Kraft Paper Manufacturers also admitted their wrongdoings and adopted a cooperative and non-adversarial approach. Thus, the CCI considered the aforesaid as the mitigating factors for not imposing any monetary penalty and issued a cease and desist order against the contravening entities.

A copy of the order in Case No. 24 of 2017 is available on CCI website at www.cci.gov.in.

Anticompetitive agreements: cartel conduct among kraft paper associations led to a cease and desist order, with no monetary penalties. The Commission found coordinated conduct by regional associations and member mills constituting anti-competitive agreements to raise prices and create artificial shortages through collective shutdowns and directed communications. Documentary and testimonial evidence supported findings of price-fixing and supply restriction amounting to cartel conduct. Several parties applied for the lesser penalty mechanism; considering admissions, cooperation, MSME status and pandemic-induced distress as mitigating factors, the Commission issued a cease and desist order and did not impose monetary penalties.