TaxTMI 
TaxTMI 
2018 (10) TMI 229
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....APPEAL NO. 8953 OF 2014 APPEAL NO. 6367 OF 2014 CIVIL APPEAL NO. 6374 OF 2014 CIVIL APPEAL NO. 6368 OF 2014 CIVIL APPEAL NO. 6364 OF 2014 CIVIL APPEAL NO. 6369 OF 2014 CIVIL APPEAL NO. 6370 OF 2014 CIVIL APPEAL NO. 10579 OF 2014 CIVIL APPEAL NO. 1724 OF 2015 CIVIL APPEAL NOS. 5277-5278 OF 2016 CIVIL APPEAL NOS. 5281-5315 OF 2016 AND CIVIL APPEAL NO. 7359 OF 2016 For The Appellant(s) : Mrs. Sarla Chandra, AOR Mr. Arjun Krishnan, AOR Mr. Kedar Nath Tripathy, AOR Mr. Ashwani Kumar, AOR Mr. O. P. Gaggar, AOR Mr. Annam D. N. Rao, AOR Mr. Deepak Anand, AOR Mr. K. Krishna Kumar, AOR Mr. Umesh Pratap Singh, Adv. Mr. Karan Khanna, Adv. Mr. Aniket Bhattacharya, Adv. Mr. Arjun Aggarwal, Adv. Mr. Sarad Kumar Singhania, AOR Mr. Pradeep Aggarwal, Adv. Mr. Lal Pratap Singh, Adv. Mr. Umesh Pratap Singh, Adv. Ms. Ruchi Kohli, AOR Mr. Jaiveer Shergill, Adv. Ms. Pallavi Langar, AOR Mr. Rajesh Sharma, Adv. Mr. Shafiq Khan, Adv. Ms. Nidhi Singh Dubey, Adv. Ms. Shalu Sharma, AOR Mr. P. V. Yogeswaran, AOR Mr. Rameshwar Prasad Goyal, AOR Mr. S. Nandakumar, Adv. Mr. R. Satish Kumar, Adv. Mr. M. Soundarasarankumar, Adv. Ms. Deepika Nandakumar, Adv. Mr. Sugam Kumar Jha, Adv. And Mr. Naresh Kumar, AOR &nbs....
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....ad entered into an arrangement/agreement insofar as statements of bids pursuant to tenders issued by IOCL are concerned. Out of these 45 companies one did not challenge the orders before the COMPAT and other 44 had filed appeals which have been decided by the COMPAT. 3) The manner in which the inquiry was undertaken by the CCI, culminating into the finding of guilt and imposition of penalty, is succintly and sequally recorded by the COMPAT in its impugned order. As there is no dispute about the said factual narration, it would be convenient to borrow the said discussion as recorded by the COMPAT. 4) The suo-motu proceedings were started by the CCI on the basis of the information received by it in Case No. 10 of 2010 titled M/s. Pankaj Gas Cylinders Ltd. Vs. Indian Oil Corporation Ltd. in that case a complaint was made by M/s. Pankaj Gas Cylinders before the CCI complaining about unfair conditions in the tender floated by IOCL for the supply of 105 lakh 14.2 Kg. capacity LPG Cylinders with SC valves in the year 2010-11, the tender No. being LPG-O/M/PT-03/09-10. While considering the Director General's investigation report in Case No. 10 of 2010, the CCI in pursuance of its dut....
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....at State as per fixed formula provided in the bid documents. vi) Certain bidders were called new parties. They were required to submit only technical bids and to supply as per L-1 rates determined after the negotiations. vii) One bidder could quote for maximum eight States. 7) The Director General after analyzing the bids came to the conclusion that there was not only a similarity of pattern in the price bids submitted by the 50 bidders for making supply to the IOCL but the bids of large number of parties were exactly identical or near to identical in different States. It was also found that bidders, who belonged to same group, might have submitted identical rates. It was found that not only there was identical pricing in case of group concerns but the rates of other entities not belonging to the group were also found to be identical. The D.G. painstakingly noted the names of group companies as well as non-group companies. He came to the conclusion that in all 37 entities could not be said to be belonging to any single group and were independently controlled. The Director General found it unusual that unrelated firms had quoted identical rates in different Stat....
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.... 9) Ultimately, the D.G. came to the conclusion that there was a cartel like behavior on the part of the bidders and that the factors necessary for the formation of cartel existed in the instant case. It was also found that there was certainly a ground to hold concerted action on the part of the bidders. The D.G. had also noted that the rates quoted for the year 2009-10 and in years previous to that were also identical in some cases. Thus, he came to the conclusion that the bids for the year 2010-11 had been manipulated by 50 participating bidders. It was thereafter that the CCI decided to supply the D.G.'s investigation report to the concerned parties and invite their objections. 10) A common reply came to be filed as also the individual replies. After considering the same, the CCI formulated the following issue for determination:- "Whether there was any collusive agreement between the participating bidders which directly or indirectly resulted in bid rigging of the tender floated by IOCL in March 2010 for procurement of 14.2 kg. LPG cylinders in contravention of Section 3(3)(d) read with Section 3(1) of the Act?" 11) After considering the oral as well as written....
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....significant technological changes 9. Meeting of bidders in Mumbai and its agenda. 10. Appointing common agents 11. Identical bids despite varying cost. 14) After consideration of these factors, the CCI came to the conclusion that it did suggest collusive bidding. Thereafter, the CCI analyzed these bids for each States and found that all 50 participating bidders had secured the order; that the orders were placed on the said 50 bidders who had quoted identical rates or near to identical rates in a particular pattern common to all the parties. CCI also highlighted the facts of absence of business justification. According to the CCI, the material revealed that the supplies were effected at the higher cost. After discussing the concepts of standards of proof and appreciable adverse effect on competition, the CCI considered the various arguments and repelled those arguments. The CCI then went on to consider the case law, and in particular the judgment of this Court in Union of India vs. Hindustan Development Corporation (1993) 3 SCC 499. It also took into consideration the arguments raised by the individual parties and then came to record that cases of M/s. ....
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....ehalf. These common agents were instructed to keep a close watch on the price quoted by the competitors in a particular State. Though some of the appellants had contended that they had not appointed the common agents, the plea was not accepted by the COMPAT. The COMPAT, therefore, proceeded on the 'admitted grounds' that there was an association of cyliner manufactures; practically all the appellants were members of the said association; this association was an active association; it held meetings on the eve of entry tender obviously for discussing tenders, its conditions etc.; these meetings were attended by representatives of at least 19 appellants; and these appellants had six common agents at Mumbai who were instructed to watch the prices offered by the others. A dinner meeting as also a munch were held and one Mr. Chandi Prasad Bhartia of M/s. Haldia Precision Engineering Private Limited paid the bill for the same. Dinner and lunch held in Sahara hotel were attended by about 50 persons in all. From this the COMPAT inferred that there was no reason to disbelieve that the parties had an access to each other through their association which was an active association. The existe....
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....ainstakingly noted the details of that meeting. The CCI has referred to the evidence of Mr. Dinesh Goyal, who was an active member of the Indian LPG Cylinder Manufacturers' Association and noted that he had attended the meeting. He has also referred to the statement of Mr. Sandeep Bhartia of Carbac Group though initially he denied to have organized the conference, he later on had confirmed about such a conference having been held along with Mr. Sandeep Bhartia of Carbac Group. The CCI also noted that he admitted that in such meetings there were discussions on pre-bid issues. He also admitted that though there are about 50 competitors, in fact about 25 persons control the whole affairs. From this evidence, the CCI correctly deduced that pre-bid issues were discussed in that meeting. The CCI has then referred to the evidence of Mr. Manvinder Singh of Bhiwadi Cylinders Limited, Mr. Chandi Prasad Bhartia of Haldia Precision Engineering P. Ltd., Mr. Vijay Kumar Agarwal of SM Sugar Pvt. Ltd., Mr. S. Kulandhaiswamy, MD of Lite Containers Pvt. Ltd. and Secretary of the Association, Mr. Ramesh Kumar Batra, Director of Surya Shakti Vessels Pvt. Ltd. and on that basis came to the correct conc....
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....he costs of the components would differ from State to State. Even the taxing structure, the labour conditions and other factors like cost of electricity etc. were bound to be different. Still the prices quoted were almost identical. (7) On the above considerations, the defence of the appellants was rejected as unconvincing, thereby undergoing the factors considered by the CCI. 17) According to the COMPAT all these could not have been possible unless there were internal agreements between the appellants. The COMPAT has approved the finding of the CCI that owing to the collusion, the IOCL could not get lower or the competitive prices. The rates quoted in 2010-2011 were higher as compared to the rate quoted in 2009-10. From the year 2006-07, the prices had collectively been raised on an average of 30% for making supplies in different states. 18) According to the COMPAT, the CCI was right in concluding that it had appreciable adverse effect on competition as the conduct of the LPG cylinder manufacturers in coming together on a common platform and fixing the bid prices ensures that no new player could enter the relevant market and quote the prices independently. Thus, the....
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....ernative, even assuming that there is a collusive agreement or bid-rigging in the present case, there is no appreciable adverse effect on competition. 23) On the first proposition, argument developed by Ms. Divan was that the Act prohibits anti-competitive practices, which would imply that there has to be a competition in the market, in the first place. As a corrolary, if there is no such competition, Section 3(1) of the Act does not get triggered. According to her, in the instant case, the fact would show that there was a tight control and regulation by the IOCL and, thus, it did not lead any scope of competition at the very threshold. She stressed that the conditions of monopsony/oligopsony prevailed. For the existence of monopsony/oligopsony, she referred to the Glossary of Industrial Organization Economics and Competition Law published by the Organisation for Economic Co-operation and Development (OECD), as per which a monopsony consists of a market with a single buyer. When there are only a few buyers, the market is described as an oligopsony. In general, when buyers have some influence over the price of their inputs they are said to have monopsony power. The ability of a f....
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....ny other party. In this behalf, she pointed out that the IOCL had carried out the exercise of ascertaining the estimated cost of the cylinder through its experts. In the report given by the expert, the estimated cost per cylinder was arrived at Rs. 1106.61 paisa per cylinder. As against this, the final negotiated price at which the appellants had supplied cylinders to the IOCL was much lesser. According to her, in the whole process the price determination was on the basis of internal estimates by IOCL which could not be influenced by the appellants at all. In fact, even after the tenderers submitted their bids, final price was the price negotiated by IOCL which fact was accepted by Mr. Y. Ramana Rao of IOCL in his deposition recorded by the Director General of CCI. This, according to the learned counsel, clearly proved that there was no adverse effect on competition, in any case. (ix) The internal estimates were drawn up long after the price bids were made, i.e., on 5th May, 2010. Price bids were opened on 23rd March, 2010 and negotiations were held only after the submission of Mott MacDonald Report on 05.05.2010. (x) The pattern shows that since L1, L2 and even L....
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....ia (2007) 2 SCC 640 : "109. It may be true that prices are required to be fixed having regard to the market forces. Demand and supply is a relevant factor as regards fixation of the price. In a market governed by free economy where competition is the buzzword, producers may fix their own price. It is, however, difficult to give effect to the constitutional obligations of a State and the principles leading to a free economy at the same time. A level playing field is the key factor for invoking the new economy. Such a level playing field can be achieved when there are a number of suppliers and when there are competitors in the market enabling the consumer to exercise choices for the purpose of procurement of goods. If the policy of the open market is to be achieved the benefit of the consumer must be kept uppermost in mind by the State. xxx xxx xxx 127. While fixing a fair and reasonable price in terms of the provisions of the Essential Commodities Act (although the price is not dual), it is essential that price is actually fixed. Such price fixation is necessary in view of the fact that coal is an essential commodity. It is, therefore, vital that price is ....
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.... being taken of the specific features of the products in question." 29) The learned counsel also referred to various judgments of other jurisdictions, primarily that of European Commission and the Court of Justice of European Union, which we shall discuss at the appropriate stage. 30) Ms. Divan, also highlighted that in this entire scenario, it was necessary to have the views of IOCL. However, in a suo motu case, IOCL was not even served with any notice and therefore no evidence was elicited from IOCL on the issue whether there was any autnomy left to the manufacturer in the matter of price determination. 31) She, thus, argued that merely because there was price parallelism, it could not have been the reason to arrive at a conclusion that there was a collusive agreement or bid rigging. She submitted that in a monopsonistic market where there are few buyers, the price is set by the buyers, and the conditions are such that sellers can predict demand, there is a repetitive bidding process and the products are identical and specilized, the likelihood of price parallelism is natural. 32) Further, price parallelism is inevitable where the buyer has a high degree of control an....
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....stry is such that there are very small numbers of suppliers, very few new entrants and a standard product being supplied to the same party year after year, such factors are beyond the control of the individual manufacturers and cannot be relied upon as factors to lead to a presumption that there is collusive conduct. In other words, the very nature of the industry cannot be used as a factor to presume collusion because collusion itself requires a state of mind or intent whereas in this case, most of these factors are inherent in the nature of the industry as described by the CCI itself. 36) Adverting to her 2nd proposition, namely, there was no collusive agreement or bid rigging in the present case, her submission was that CCI has relied on a dinner attended by some manufacturers on 1st March, 2010 and a lunch on 2nd March, 2010 as evidence of a price fixing agreement. Her response was that the factum of meetings of an association by itself in any case cannot lead to a conclusion of collusion. Likewise, the COMPAT also upheld that inference based on the factum of the meetings of the Associaiton. The COMPAT went to the extent of holding that it is irrelevant whether a particular ....
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....mercial risks. Further, the similarity in the dates of price announcements may be regarded as a direct result of the high degree of market transparency, which does not have to be described as artificial. Finally, the parallelism of prices and the price trends may be satisfactorily explained by the oligopolistic tendencies of the market and by the specific circumstances prevailing in certain period. Accordingly, the parallel conduct established by the Commission does not constitute evidence of concertation. This test is not met in the present case for reasons that are enumerated. 42) Her third proposition was that in any case there was no appreciable adverse effect on competition. She tried to make this submission good by contending that when industry is an oligopoly, the price parallel or a finding of identical quoting of price does not by itself lead to the conclusion of a conerted price. Moreoever, in the instant case, number of entrants had increased as 12 new entrants submitted their bid for the year 2010-11. Therefore, the finding of the CCI, upheld by the COMPAT, that there has been a creation of barriers for new entrants is without any basis. 43) Other counsel who a....
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....rpose and legal effect of an Explanation. It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. Sarathi in Interpretation of Statutes while dwelling on the various aspects of an Explanation observes as follows: (a) The object of an Explanation is to understand the Act in the light of the explanation. (b) It does not ordinarily enlarge the scope of the original section which it explains, but only makes the meaning clear beyond dispute." 46) He submitted that there is no positive evidence of this nature at all and the CCI as well as COMPAT has proceeded on inferences as regards bid rigging and, therefore, such orders cannot be sustained. In the absence thereof, submitted the learned counsel, doctrine of reverse burden which was put on the appellants would not apply. He referred to the following judgments9 in support. 47) The counsel relied upon the following observations in CCI v. Artistes & Technicians of W.B. Film & Televis....
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....bid rigging as defined in Section 3(3). To take the first ingredient, i.e., eliminating or reducing competition for bids, the report of D.G. itself finds that out of the 60 bidding parties 37 entities were not belonging to any single group and are independently controlled. Hence, straight away there is no case of 'eliminating or reducing competition for bids' which is one of the possible ingredients of bid rigging as there were 37 entities who were free of mind to participate and bid of their own accord in the absence of any control by any cartel. 50) As regards the second and third requirement of bid rigging, i.e., adversely effecting or manipulating the bidding process, he argued that the submission of bids by the appellant (even if identical) can have no effect of 'adversely effecting or manipulating the bidding process' this being on account of the very nature of the present tender process. Although, bids are invited from bidders, IOCL has a fixed/base procurement price of Rs. 1106.61 per cylinder. IOCL then works out an estimated rate per State based on certain factors peculiar to that State such as octroi, freight etc. The bid offered by the L1 (lowest bidder) is then subj....
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.... predatory price has to be accepted the smaller manufacturers will not be in a position to compete and may result in elimination of free competition. But there again the authorities reserved a right to reject such lower price. Under these circumstances though the attitude of these three big manufacturers gave rise to a suspicion that they formed a cartel but there is not enough of material to conclude that in fact there was such formation of a cartel. However, such an opinion entertained by the concerned authorities including the Minister was not malicious nor was actuated by any extraneous considerations. They entertained a reasonable suspicion based on the record and other surrounding circumstances and only acted in a bona fide manner in taking the stand that the three big manufacturers formed a cartel." 52) Some literature on the 'theory of oligopolistic interdependence' as well as judgments of the European Union and European Commission were also cited. 53) Mr. Pradeep Aggarwal, in addition, argued that though there was no positive finding of cartelisation and the conclusion was merely presumptive, even if it is accepted that there was such an agreement of bid rigging or c....
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....n cost of production, location, input cost etc. (e) The overall effect of increase in price of procurement of LPG Cylinders over previous years. 57) He also submitted that pattern of identical and near identical bids, which was all pervasive through out, could not be brushed aside lightly as that was the clear indicator of price bidding as a result of agreement between the parties. The analysis of the bids also shows that it had already been decided amongst the LPG Cylinder manufacturers as to who the L1 and L2 bidders were going to be prior to submission of bids. For instance, in the State of Punjab, the L1 bidder (Shri Ram Cylinders) bid Rs. 1080 whereas the four L2 bidders placed identical bids at Rs, 1080.50, i.e., a difference of only 50 paise from the L-1 bid. Similarly, in Rajasthan, the L-1 bidder (M/s. Rajasthan Cylinders) quoted Rs. 1130, whereas nine L2 bidders quoted identically by just 50 paise more, at Rs. 1130.50. This pattern is repeated across a number of States. 58) Not only this, in order to achieve the pre-decided outcome, some of the bidders hastily made corrections to their bid documents. One such case is that of M/s. Jesmajo Industrial Fabricat....
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....oresaid economic forces and not because of any agreement or arrangement between the parties. It was submitted that merely because same price was quoted by the appellants in respect of the 2009 FCI tender, one could not jump to the conclusion that there was some "agreement" as well between these parties, in the absence of any other evidence corroborating the said factum of quoting identical price. In respect of this submission, Mr Venugopal had also referred to a few judgments. 49. The aforesaid argument is highly misconceived. A neat and pellucid reply of Mr. Kaul, which commands acceptance, is that argument of parallelism is not applicable in bid cases and it fits in the realm of market economy. It is for this reason that entire history of quoting identical price before coming into operation of Section 3 and which continued much after Section 3 of the Act was enforced, has been highlighted..." 61) He also referred to the following findings of COMPAT with the submission that finding of facts need to be accepted:- "36. We are thoroughly convinced by this analysis that all this could not have been possible unless there were internal agreements between the concern....
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.... and valid in law. He also referred to certain judgements of this Court as well as other jurisdictions, such as, European Commission and the Court of Justice of European Union to which reference would be made at the appropriate stage. 64) Before we deal with the arguments advanced by various counsel who appeared for the appellants and rebuttal thereto by Mr. Salman Khurshid, learned senior counsel who appeared for CCI as also counsel for IOCL, we would like to reproduce the relevant provisions of the Act in the light of which these appeals are to be decided: 65) Section 2(c) defines "cartel" and reads as under: ""Cartel" includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services; 66) Section 3 of the Act deals with and prohibits those agreements which cause and are likely to cause an appreciable adverse effect on competition within india. It reads as under: "Section 3 : Anti-competitive agreements:- (1) No enterprise or association of enterprises or person or a....
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....ue regard to all or any of the following factors, namely:- (a) creation of barriers to new entrants in the market; (b) driving existing competitors out of the market; (c) foreclosure of competition by hindering entry into the market; (d) accrual of benefits to consumers; (e) improvements in production or distribution of goods or provision of services; (f) promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services." 68) In Excel Crop Care Limited, scope of Section 3 of the Act which prohibits three kinds of practices as anti-competitive, was taken note of as follows: "20. Chapter II of the Act deals with three kinds of practices which are treated as anti-competitive and prohibited. These are: (a) where agreements are entered into by certain persons with a view to cause an appreciable adverse effect on competition; (b) where any enterprise or group of enterprises, which enjoys dominant position, abuses the said dominant position; and (c) regulating the combination of enterprises by means of mergers or amalgamations to e....
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....number of benefits, it clearly follows that cartels or anti-competitive agreements cause harm to consumers by fixing prices, limiting outputs or allocating markets. Effective enforcement against such practices has direct visible effects in terms of reduced prices in the market and this is also supported by various empirical studies. xxx xxx xxx 27. Keeping in view the aforesaid objectives that need to be achieved, Indian Parliament enacted the Competition Act, 2002. Need to have such a law became all the more important in the wake of liberalisation and privatisation as it was found that the law prevailing at that time, namely, Monopolies and Restrictive Trade Practices Act, 1969 was not equipped adequately enough to tackle the competition aspects of the Indian economy. The law enforcement agencies, which include CCI and COMPAT, have to ensure that these objectives are fulfilled by curbing anti-competitive agreements." 70) The Court also mentioned, in particular, that competition leads to economic efficiency, economic growth and development as well as consumers welfare. The Court also spelled out the manner in which competition contributed to increase economic g....
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.... The types of agreement which may fall foul of Section 3 are mentioned in sub-section (3) thereof. These include sharing the market by way of allocation of geographical areas of market [clause (c)] and the agreements which result in bid-rigging or collusive bidding whether directly or indirectly [clause (d)]. There is a presumption that four types of agreements mentioned in sub-section (3) will have an appreciable adverse effect on competition. 73) We may also state at this stage that Section 19(3) of the Act mentions the factors which are to be examined by the CCI while determining whether an agreement has an appreciable adverse effect on competition under Section 3. However, this inquiry would be needed in those cases which are not covered by clauses (a) to (d) of sub-section (3) of Section 3. Reason is simple. As already pointed out above, the agreements of nature mentioned in sub-section (3) are presumed to have an appreciable effect and, therefore, no further exercise is needed by the CCI once a finding is arrived at that a particular agreement fell in any of the aforesaid four categories. We may hasten to add, however, that agreements mentioned in Section 3(3) raise a pres....
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.... 76) Though the expression 'collusive bidding' is not defined in the Act, it appears that both 'bid rigging' and 'collusive bidding' are overlapping concepts. This position stands accepted in Excel Crop Care Limited case which should be found from the following discussion therefrom: "38. Mr Neeraj Kishan Kaul, learned Additional Solicitor General, refuted the aforesaid submission with vehemence by urging that bid rigging and collusive bidding are not mutually exclusive and these are overlapping concepts. Illustratively, he referred to the findings of CCI, as approved by COMPAT, in the instant case itself to the effect that the appellants herein had "manipulated the process of bidding" on the ground that bids were submitted on 8-5-2009 collusively, which was only the beginning of the anti-competitive agreement between the parties and this continued through the opening of the price bids on 1-6-2009 and thereafter negotiations on 17-6-2009 when all the parties reduced their bids by same figure of Rs. 2 to bring their bid down to Rs. 386 per kg from Rs. 388 per kg. From this example, he submitted that on 8-5-2009 there was a collusive bidding but with concerted negotiations....
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....cretly conspire to raise prices or lower the quality of goods or services for purchasers who wish to acquire products or services through a bidding process." (d) United States Office of the Inspector General, Investigations (Fraud Indicators Handbook) "Collusive bidding, price fixing or bid rigging, are commonly used interchangeable terms which describe many forms of an illegal anti-competitive activity. The common thread throughout all these activities is that they involve any agreements or informal arrangements among independent competitors, which limit competition. Agreements among competitors which violate the law include but are not limited to: (1) Agreements to adhere to published price lists. (2) Agreements to raise prices by a specified increment.(3) Agreements to establish, adhere to, or eliminate discounts. (4) Agreements not to advertise prices. (5) Agreements to maintain specified price differentials based on quantity, type or size of product." (e) Australian Competition and Consumer Commission "Bid rigging, also referred to as collusive tendering, occurs when two or more competitors agree they will....
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....uld never be the intention of the legislature to exclude "collusive bidding" by construing the expression "bid rigging" narrowly. No doubt, clause (d) of sub-section (3) of Section 3 uses both the expressions "bid rigging" and "collusive bidding", but the Explanation thereto refers to "bid rigging" only. However, it cannot be said that the intention was to exclude "collusive bidding". Even if the Explanation does contain the expression "collusive bidding" specifically, while interpreting clause (d), it can be inferred that "collusive bidding" relates to the process of bidding as well. Keeping in mind the principle of purposive interpretation, we are inclined to give this meaning to "collusive bidding". It is more so when the expressions "bid rigging" and "collusive bidding" would be overlapping, under certain circumstances which was conceded by the learned counsel for the appellants as well. 42. We are, therefore, of the opinion that the two expressions are to be interpreted using the principle of noscitur a sociis i.e. when two or more words which are susceptible to analogous meanings are coupled together, the words can take colour from each other. (See Leelabai Gajanan P....
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.... provisions of the Act which we have already referred to including Sections 26, 29, 30, 31, 53-B(5) and 53-T and Regulations 12, 15, 16, 22, 32, 48 and 31 clearly show the legislative intent to ensure time-bound disposal of such matters." 78) We would like to reemphasise that the purpose of the Act is not only to illuminate practices having adverse effect on the competition but also to promote and sustain competition in the market. Enforcement provides remedies to avoid situation that will lead to decrease competition in the market. Therefore, effective enforcement is important not only to sanction anti-competitive conduct but also to deter future competitive practices. In the present case itself, there are sixty suppliers of the product for which there are three buyers. After all, each supplier would like to be L-1 or L-2 so that it is able to get order for larger quantities than the other. In this sense, there would be a competition among them. Further, it would also be in the interest of the buyers like IOCL etc. that the elements of healthy competition persists in the market. In any case, it is the duty of the CCI to ensure that the conditions which have tendency to kill the....
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..... PLC [Guinness PLC and Distillers Company PLC (Panel hearing on 25-8-1987 and 2-9-1987 at p. 10052 - Reasons for decisions of the Panel.)] the question before the Takeover Panel was whether Guinness had acted in concert with Pipetec when Pipetec purchased shares in Distillers Company PLC. Various factors were taken into consideration to conclude that Guinness had acted in concert with Pipetec to get control over Distillers Company. The Panel said: "The nature of acting in concert requires that the definition be drawn in deliberately wide terms. It covers an understanding as well as an agreement, and an informal as well as a formal arrangement, which leads to cooperation to purchase shares to acquire control of a company. This is necessary, as such arrangements are often informal, and the understanding may arise from a hint. The understanding may be tacit, and the definition covers situations where the parties act on the basis of a 'nod or a wink'.... Unless persons declare this agreement or understanding, there is rarely direct evidence of action in concert, and the Panel must draw on its experience and common sense to determine whether those involved in any dealings have....
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.... might be called communication evidence for purposes of this discussion. It includes: - Records of telephone conversations between competitors (but not their substance), or of travel to a common destination or of participation in a meeting, for example during a trade conference. - other evidence that the parties communicated about the subject e.g., minutes or notes of a meeting showing that prices, demand or capacity utilisation were discussed; internal documents evidencing knowledge or understanding of a competitors pricing strategy, such as an awareness of a future price increase by a rival. A broader category of circumstantial evidence is often called economic evidence. Economic evidence identifies primarily firm conduct that suggests that an agreement was reached, but also conduct of the industry as a whole, elements of market structure which suggest that secret price fixing was feasible, and certain practices that can be used to sustain a cartel agreement. Conduct evidence is the single most important type of economic evidence. As noted earlier, observation of certain, suspicious conduct frequently triggers an investigation of a possible car....
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....on story' put together by the competition law enforcer. Facilitating practices include: - information exchanges; - price signalling; - freight equalisation; - price protection and most favoured nation policies; - Unnecessarily restrictive product standards." 82) Thus, even in the absence of proof of concluded formal agreement, when there are indicators that there was practical cooperation between the parties which knowingly substitute the risk of competition, that would amount to anti-competitive practices. This has been discussed in Coordination Committee of Artistes and Technicians of West Bengal Film and Television & Ors. (see paras 44 and 45). Then, there are guidelines on the applicability of Article 101 of the Treaty on the functioning of the E.U. to horizontal cooperation agreements which records as under: "60. Information exchange can only be addressed under Article 101 if it establishes or is part of an agreement, a concerted practice or a decision by an association of undertakings. The existence of an agreement, a concerted practice or decision by an association of undertakings does not prejudge whether the agreemen....
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....onstitute a concerted practice. Such disclosure could occur, for example, through contacts via mail, emails, phone calls, meetings etc. It is then irrelevant whether only one undertaking unilaterally informs its competitors of its intended market behaviour, or whether all participating undertakings inform each other of the respective deliberations and intentions. When one undertaking alone reveals to its competitors strategic information concerning its future commercial policy, that reduces strategic uncertainty as to the future operation of the market for all the competitors involved and increases the risk of limiting competition and of collusive behaviour. For example, mere attendance at a meeting where a company disclose its pricing plans to its competitors is likely to be caught by Article 101, even in the absence of an explicit agreement to raise prices. When a company receives strategic data from a competitor (be it in a meeting, by mail or electronically), it will be presumed to have accepted the information and adapted its market conduct accordingly unless it responds with a clear statement that it does not wish to receive such data." (emphasis added) 83) Accord....
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....f the appellants are members. That product in question, namely, gas cylinder is of a particular specification which is needed by IOCL in large numbers every year and there are very few manufacturers and suppliers of this product to IOCL and two other buyers. For this identical product which is to be supplied by all the suppliers, there is no substitute and no significant technology change. Further, there is an active trade association in which most of the appellants are the members. Their interest is to ensure that no new entrants are able to join. Further, the trade association also ensures that all the members are able to get some order. It is for this reason the bids submitted in various standards which are floated by IOCL at different places are almost identical despite varying cost. The authorities below attributed this identical bidding to the concerted action of the appellants. This has been inferred from the fact that 2-3 days before the submission of bids, meeting of the association took place which most of the appellants attended. Not only this, common agents, six in number, were appointed who submitted the bids on behalf of these appellants. 87) We may say at the outs....
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....contract is not awarded at the rate quoted by bidder who turns out to be L-1. Negotiations are held with such a bidder who is L-1 which generaly leads to further reduction of price than the one quoted by L-1. Thereafter, the other bidders who may be L-2 or L-3 etc. are awarded the contract at the rate at which it is awarded to L-1. Thus, ultimately, all the bidders supply the goods at the same rate which is fixed by the IOCL after negotiating with L-1 bidder. The only difference is that bidder who is L-1 would be able to receive the order for larger quantity than L-2 and L-2 may get an order of more quantity than L-3. (iv) It has also come on record that there are very few suppliers. For the tender in question, there were 50 parties already in the fray and 12 new entrants were admitted. Number of 12, in such a scenario, cannot be treated as less. Therefore, the conclusion of CCI that the appellants ensured that there should not be entry of new entrant may not be correct. (v) Since there are not many manufacturers and supplies are needed by the three buyers on regular basis, IOCL ensures that all those manufacturers whose bids are technically viable, are given some....
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....ting becomes obvious. It has come on record that just a few days before the tender in question, another tender was floated by BPCL and on opening of the said tender the rates of L-1, L-2 etc. came to be known. In a scenario like this, that obviously becomes a guiding factor for the bidders to submit their bids. 90) When we keep in mind the aforesaid fact situation on the ground, those very factors on the basis of which the CCI has come to the conclusion that there was cartelization, in fact, become valid explanations to the indicators pointed out by the CCI. We have already commented about the market conditions and small number of suppliers. We have also mentioned that 12 new entrants cannot be considered as entry of very few new suppliers where the existing suppliers were only 50. Identical products along with market conditions for which there would be only three buyers, in fact, would go in favour of the appellants. The factor of repetitive bidding, though appears to be a factor against the appellants, was also possible in the aforesaid scneario. The prevailing conditions in fact rule out the possibility of much price variations and all the manufacturers are virtually forced t....
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....f which these aspects are to be judged are stated in Excel Crop Care Limited as follows: "50. It needs to be emphasised that collusive tendering is a practice whereby firms agree amongst themselves to collaborate over their response to invitations to tender. Main purpose for such collusive tendering is the need to concert their bargaining power, though, such a collusive tendering has other benefits apart from the fact that it can lead to higher prices. Motive may be that fewer contractors actually bother to price any particular deal so that overheads are kept lower. It may also be for the reason that a contractor can make a tender which it knows will not be accepted (because it has been agreed that another firm will tender at a lower price) and yet it indicates that the said contractor is still interested in doing business, so that it will not be deleted from the tenderee's list. It may also mean that a contractor can retain the business of its established, favoured customers without worrying that they will be poached by its competitors. 51. Collusive tendering takes many forms. Simplest form is to agree to quote identical prices with the hope that all will re....
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....features of the products in question." Having regard to the aforesaid principles in mind, we deal with the arugment on oligopsony raised by the appellants. 94) Monopsony consists of a market with a single buyer. When there are only few buyers the market is described as an oligopsony. What is emphasised is that in such a situation a manufacturer with no buyers will have to exit from the trade. Therefore, first condition of oligopsony stands fulfilled. The other condition for the existence of oligopsony is whether the buyers have some influence over the price of their inputs. It is also to be seen as to whether the seller has any ability to raise prices or it stood reduced/eliminated by the aforesaid buyers. 95) On a hollistic view of the matter, we find that the appellants have been able to discharge the onus by referring to various indicators which go on to show that parallel behaviour was not the result of any concerted practice. 96) In Dyestuffs, the European Court held that parallel behaviour does not, by itself, amount to a concerted practice, though it may provide a strong evidence of such a practice. Nevertheless, it is a strong evidence of such a practice. ....
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....rategies which is beyond the reach of laws against cartels and yet which has serious implications for consumers welfare. xxx xxx xxx xxx xxx xxx (iii) A regulatory approach A different possibility would be to regulate the prices of undertakings that operate in an oligopolistic environment. This, however, would be a counsel of despair. As a matter of policy direct regulation should be a remedy of last resort. Competition authorities should not be price regulators; they should be the guardians of the competitive process. Where markets are oligopolistic and entry is limited, competition authorities should be concerned with the question of whether there are barriers to entry and whether the state itself, for example through restrictive licensing rules, regulation or legislation, is responsible for a lack of competition." 97) In Theatre Enterprises v. Paramount Films, the Supreme Court of United States held as under: "1-3 The crucial question is whether respondents' conduct toward petitioner stemmed from independent decision or from an agreement, tacit or express. To be sure, business behavior is admissible circumstantial evidence from whi....
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..... The Court of Appeals erred in two respects: (i) the "direct evidence" on which the court relied had little, if any, relevance to the alleged predatory pricing conspiracy; and (ii) the court failed to consider the absence of a plausible motive to engage in predatory pricing..... xxx xxx xxx Lack of motive bears on the range of permissible conclusions that might be drawn from ambiguous evidence: if petitioners had no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, [475 U.S. 574, 597] the conduct does not give rise to an inference of conspiracy. See Cities Service, supra, at 278-280." 100) Similarly, in Bell Atlantic Corp v. Twombly, the U.S. Supreme Court held as under: "[1-3] Because §1 of the Sherman Act "does not prohibit [all] unreasonable restraints of trade ... but only restraints effected by a contract, combination, or conspiracy," Copperweld Corp. v. Independence Tube Corp.,467 U.S. 752,775(1984) , "[t]he crucial question" is whether the challenged anticompetitive conduct "stem[s] from independent decision or from an agreement, tacit or express," Theatre Enterprises, 346 ....