TaxTMI 
TaxTMI 
2018 (10) TMI 229
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....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 For The Respondent(s) : Mr. Arjun Krishnan, AO....
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....ents 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 duties under Section 18 felt that investigation was necessary in ....
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....rties. 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 States. The D.G. had analyzed the bidding pattern for the various parties for all the 25 States. He found that :- a. Th....
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....ormation 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 submissions, the CCI answered the issue against the Cylinders Manufacturers and inflicted the penalties against the present appellants. In its impugned order, while ....
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....usion 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. JBM Industries and Punjab Cylinders, however, were exceptional ones and they could be exonerated. After this the CCI went on to decide the penalty factor under Section 27 of the Act. 15) The COMPAT after discussing the findings of the CCI and also ....
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.... 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 existence of such an association under the aegis of which meetings took place just before the submission of tender has been noted as a very relevant factor by the COMPAT in affirming the findings of CCI on cartelisation and it summed up the position in the following ....
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....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 conclusion that not only was the meetings held on 1st and 2nd March, but thorough discussions went on in those meeting on the pre-bid issue of the concerned tender. The CCI has also correctly noted about the agenda of the meeting and has also referred to an admission made by on....
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....onvincing, 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, these manufacturers would make entry of a new player into the relevant market difficult, because such new player would necessarily have to first negotiate with the existing players to get the business profitably. Other factors were driving existing competitiors out of the market and foreclosure of competition by hindering entry i....
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....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 firm to raise prices, even when it is a monopolist, can be reduced or eliminated by monopsony or oligopsony buyers. To the extent that input prices can be controlled in this way, consumers may be better off. 24) According to her, these conditions were adequately present in the instant case. In her attempt to make this propositoin good, she highlighed the fo....
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.... 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 L3 were awarded the contract and not merely L1, quoting the lowest price did not even determine the identity of the parties who were to get the contract, therefore, the manner in which the process was conducted or controlled by IOCL, completely leaves no scope for either determination of price or the identity of the parties who would get the contract. 25) She submitted that in such market conditions where on account of the vert....
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....ame 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 actually fixed and not kept variable. Fixation of price of coal is of utmost necessity as it is a mineral of grave national importance. Non-availability of coal and consequently, the other products may lead to hardship to a section of citizens. It may entail closure of factories and other industries which in turn would lead to loss to the State exchequer; as they would be deprived of its taxes. It will lead to loss of employment of a large number of em....
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....as 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 and determines price, quantity, and even the identities of the awardees at its discretion. Referring to the following discussion in Union of India v. Hindustan Development Corporation (1993) 1 SCC 467, she argued that mere identical pricing cannot lead to the conclusion of cartelisation: "7. [....] (1) There is not enough of material to conclude that M/s H.D.C., Mukand and Bhartiya formed a cartel. Because of mere quoting identical tender offers by the said three manufacturers for which the....
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.... 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 party was a member of the Association or not and the existence of Association is by itself sufficient. This approach was attacked as contrary to the fundamental right to form an association under Article 19(1)(c)(g) of the Constitution of India. 37) So far as the meetings over dinner and lunch are concerned, both were hosted by individual members. In the case of the dinner meeting on 1st March, 2010, it was hosted by Mr. C.P. Bhartiya, MD of North India Wires. The lunch on 2nd March, 2010 was hosted by Mr. Santosh Bhartiya of Haldia Precision. It is not as if....
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....ted. 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 appeared on behalf of the appellants made their submission almost on the same lines, albeit, with further elaborations on certain aspects, some of which are taken note of hereafter. Mr. Jaiveer Shergil, who argued for the appellant-Om Containers (C.A. No. 6369 of 2014) submitted that in order to attract the presumption contained in Section 3(3) about the appreciable adverse effect on competition, in the first instance, there has to be a finding that there has been an agreement of the kind set out in Section 3(3)(a) to (d). Since, the allegation against the appellants was that the ag....
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....ains, 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 & Television: "31. The Competition Act, 2002, as amended in 2007 and 2009, deals with anti-trust issues viz. regulation of anti-competitive agreements, abuse of dominant position and a combination or acquisition falling within the provisions of the said Act. Since the majority view of CCI also accepted that the impugned activities of the Coordination Committee did not amount to abuse of dominant position, and it treated the same as anti-competitive having appreciable adverse effect on competition, our discussion would be focused only on anti-competitive agreements. Section 3 of the Act is the relevant section in this behalf. It is intended t....
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....pulating 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 subject to further downward negotiations by IOCL as per the tender clause and a further finalised rate is arrived at. Such finalised rate is eventually even lower10 than the L1 bid amount. Thus, factually, logically and in reality any bid submitted by any party can never be one which is said to adversely affect or manipulate the bidding process. All of this information is with IOCL as part of its bidding process preparations, estimates and financial workings and could easily have been taken into consideration. In support, Mr. Shergil also referred to the terms and conditions of the IOCL tender. 51) His further submission was that CCI, or for that ma....
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....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 collusive bidding, there was no presumption of 'appreciable adverse effect on competiiton'. In the alternative, he submitted that there was, in fact, no appreciable adverse effect on competition in the present case and the said presumption totally was rebutted by producing sufficient evidence on record. 54) Various other counsel also argued on the same lines and in addition referred to facts or their specific cases and it is not necessary to state all those arguments to avoid repetition. 55) Per contra, Mr. Salman Khurshid, learned senior counsel appearijng for CCI highlighted the purpose for which the Act is enacted and, in particular, objective behind Sec....
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....ical 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 Fabrications (appellant in C.A. No. 4868 of 2014). In the bid documents, the bid of Rs. 1103 was cut-corrected to make it Rs. 1103.60 even though the calculation of VAT was done only on the figure of |Rs. 1103. The Director General has commented on this aspect as follows: "6.13......That bids were submitted after mutual discussion is apparent from the tender documents of Jesmajo Industrial Fabricators P. Ltd. (Exhibit 4P). There are cuttings in the tender documents and financial bids of the company. Since, there were discussions among all oil companies, the company might have decided to make alterations in the financial bids. However, even in the financial bids of the company, it is noted that despite altera....
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....on 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 concerns. What shocks us is that the quotations of the price did match to the last decimal and the quotations in some cases were in odd figures like Rs. 1127 in the State of Tamil Nadu. The record is replete with such odd figures. It was strange that in some of the oral statements of the representatives of these parties, who were examined by the DG, some of them could not even justify these identical prices and tried to say that it was a mere coincidence. We cannot accept the argument of coincidence as was rightly rejected by CCI. There can be no explanation for this kind of identical or near identical pricing. The CCI has rightly considered that the manufacturing cost of per cylinder varies in a wide spectrum ranging from Rs. 870 to Rs. 1....
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....selves, 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 association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. (2) Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void. (3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which- (a) directly or indirectly de....
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....ntered 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 ensure that such mergers or amalgamations do not become anti-competitive or abuse the dominant position which they can attain." 69) In that case also the Court was concerned with the 1st category, namely, those cases where certain persons enter into agreements with a view to cause an appreciable adverse effect of competition. Purpose behind curbing such anti-competitive practices was mentioned in detail. It is not necessary to re-state the same in that expansive manner, however, we would still like to quote certain portions to capture the essence and purpose of the Act:- "21. In the instant case, we are concerned with the first type of practices, namely, anti-competitive agreements. The Act, which prohibits anti-competitive agreements, has a laudable purpose behind it. It is to ensure that there is a healthy competition in the market, as it brings about various benefits fo....
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....greements." 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 growth and increased productivity. 71) It follows from the above that whereas on the one hand the economic policy of the nation has ushered in the era of liberalisation and globalisation thereby giving freeplay to the private sector in the manner of conducting business, at the same time, in public interest and in the interest of consumers, a regime of regulators has also been brought to ensure certain checks and balances. Since competition among the enterprises or businessmen is treated as service for a public purpose and, therefore, there is a need to curb anti-competitive practices, the CCI is given the task (as a regulator) to ensure that no such anti-competitive practices are undertaken. In fact, Section 18 of the Act casts a specific and positive obligation on CCI to 'eliminate' anti-competitive practices and promote competition, interest of the consmuer and free trade. This objective was also emphasised by this Court in....
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....ect 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 presumption that such agreements shall have an appreciable adverse effect on competition. It follows, as a fortiorari, that the presumption is rebuttable as these agreements are not treated as conclusive proof of the fact that it would result in appreciable adverse effect on competition. What follows is that once the CCI finds that case is covered by one or more of the clauses mentioned in sub-section (3) of Section 3, it need not undertake any further enquiry and burden would shift upon such enterprises or persons etc. to rebut the said presumption by leading adequate evidence. In case such an evidence is led, which dispels the presumption, then the CCI shall take into consideration the factors mentioned in Section 19 of the Act and to see as to whether all or any of these factors are established. If the evidence collected by the CCI leads to one or more or all factors mentioned in Section 19(3), it would again be treated as an agreement wh....
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....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 on 17-6-2009, in the continued process, it was rigging of the bid that was practiced by the appellants. We are inclined to agree with this pellucid submission of the learned Additional Solicitor General. 39. Richard Whish and David Bailey [Competition Law, 7th Edn., p. 536.] , in their book, have given illustrations of various forms of collusive bidding/bid rigging, which include: (a) Level tendering/bidding (i.e. bidding at same price - as in the present case). (b) Cover bidding/courtesy bidding. (c) Bid rotation. (d) Bid allocation. 40. Even internationally, "collusive bidding" is not understood as being different from "bid rigging". These two expressions have been used interchangeably in the following international commentaries/glossaries and websites of competition authorities: (a) UNCTAD Competition Glossary dated 22-6-2016 "Bid rigging or collusive tendering is a manner in which conspiring competitors may effectively raise prices where b....
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....d to as collusive tendering, occurs when two or more competitors agree they will not compete genuinely with each other for tenders, allowing one of the cartel members to 'win' the tender. Participants in a bid rigging cartel may take turns to be the 'winner' by agreeing about the way they submit tenders, including some competitors agreeing not to tender." 41. As the Liegeman of the law, it is our task, nay a duty, to give proper meaning and effect to the aforesaid "Explanation". It can easily be discussed that the legislature had in mind that the two expressions are interchangeably used. It is also necessary to keep in mind the purport behind Section 3 and the objective it seeks to achieve: 41.1. Sub-section (1) of Section 3 is couched in the negative terms which mandates that no enterprise or association of enterprises or person or association of persons shall enter into any agreement, when such agreement is in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services and it causes or is likely to cause an appreciable adverse effect on competition within India. It can be discerned that first part relates to the parties whic....
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.... take colour from each other. (See Leelabai Gajanan Pansare v. Oriental Insurance Co. Ltd. [Leelabai Gajanan Pansare v. Oriental Insurance Co. Ltd., (2008) 9 SCC 720] , Thakorlal D. Vadgama v. State of Gujarat [Thakorlal D. Vadgama v. State of Gujarat, (1973) 2 SCC 413 : 1973 SCC (Cri) 835] and M.K. Ranganathan v. State of Madras[M.K. Ranganathan v. State of Madras, (1955) 2 SCR 374 : AIR 1955 SC 604] .)" 77) The first proposition of Ms. Divan, viz. there is no competition, has two facets. First, the legal one which concerns the jurisdiction of the CCI to deal with such matters and the other is factual, which is to be examined on the basis of facts in these cases. Insofar as the first component is concerned, having regard to the aforesaid scheme of the Act, we are not convinced with the argument of Ms. Madhavi Divan that there is no possibility of a competition in these cases and, therefore, CCI had no jurisdiction to carry out any such investigation. The scope and ambit of the provisions of Section 3 have been considered in detail in Excel Crop Care Limited case. This Section prohibits anti-competitive agreements and brings about the prime objective of the Competition Act. These....
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....e conditions which have tendency to kill the competition are to be curbed. It is also the function of the CCI to ensure that there is a competition so that benefits of such competition are reaped by the consumers. However, insofar as certain factual aspects highlighted by the appellants are concerned, they would be dealt with while examining the third proposition, as we deem it more appropriate to discuss these two aspects together. 79) Second proposition of Ms. Divan was that there was no collusive bidding in the present case. The CCI and COMPAT have rejected this argument in view of the fact that there is an active trade association of the suppliers; a meeting took place couple of days before the date of bidding; common changes were pointed out by these appellants who submitted bids on their behalf; and bids were of identical amounts despite varying cost, which were repetitive in nature. The respondents may be right in their submission that there may not be a direct evidence on the basis of which cartalisation or such agreement between the parties can be proved as these arguments are normally entered into in closed doors. The standard of proof which is required is one of probabi....
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....alings have some form of understanding and are acting in cooperation with each other." [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.)] 80) We would also like to reproduce the following discussion in Commissioner of Income Tax, Bombay City I, Bombay vs. Jubilee Mills Ltd., Bombay: "19. At the hearing a point was raised that it has to be proved as a fact that the persons constituting the group which owns shares carrying more than seventy-five per cent of the voting power, were acting in unison. The test is not whether they have actually acted in concert but whether the circumstances are such that human experience tells us that it can safely be taken that they must be acting together. It is not necessary to state the kind of evidence that will prove such concerted actings. Each case must necessarily be decided on its own facts. The exclusion of "public" in the manner indicated generally from more than 75% of the shares and the concentration of such a holding in a single person or a group acting in concert is what attracts Section 23(A)." 81) It is also significant to state that respondents had ....
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....careful analysis of the conduct of parties is important to identify behaviours that can be characterised as contrary to the parties' unilateral self-interest and which therefore supports the inference of an agreement. Conduct evidence includes, first and foremost: - Parallel pricing - changes in prices by rivals that are identical, or nearly so, and simultaneous, or nearly so. It includes other forms of parallel conduct, such as capacity reductions, adoption of standardised terms of sale, and suspicious bidding patterns, e.g., a predictable rotation of winning bidders. Industry performance could also be described as conduct evidence. It includes: - abnormally high profits; - stable market shares - A history of competition law violations. Evidence related to market structure can be used primarily to make the finding of a cartel agreement more plausible, even though market structure factors do not prove the existence of such an agreement. Relevant economic evidence relating to market structure includes: - high concentration; - low concentration on the opposite side of the market; - high barriers to entry; - high degree of vertical integration; - Stand....
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.... Court of Justice of the European Union, the concept of a concerted practice refers to a form of coordination between undertakings by which, without it having reached the stage where an agreement properly so-called has been concluded, practical cooperation between them is knowingly substituted for the risks of competition. The criteria of coordination and cooperation necessary for determining the existence of a concerted practice, far from requiring an actual plan to have been worked out, are to be understood in the light of the concept inherent in the provisions of the Treaty on competition, according to which each company must determine independently the policy which it intends to adopt on the internal market and the conditions which it intends to offer to its customers. 61. This does not deprive companies of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors. It does, however, preclude any direct or indirect contact between competitors, the object or effect of which is to create conditions of competition which do not correspond to the normal competitive conditions of the market in question, regard being had to the nature of....
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....e place. Possibility of such an agreement has been inferred by the CCI on the grounds that identical bidding takes place thereafter and various suppliers gave such a bid despite varying cost and also that they have appoined common changes etc. as pointed out above. 84) The first and foremost issue which needs to be considered is that whether there was a situation of monopsony or oligopsony. 85) From the aforesaid discussion, it is clear that as far as CCI is concerned, it has come to the conclusion that there was a cartelisation among the appellants herein and a concerted decision was taken to rig the bids which were submitted persuant to the tenders issued by IOCL. On the other hand, the appellants argue that there was no such agreement and even if the bids of many bidders were identical in nature, the bids were driven by market conditions. Their plea is that there was a situation of oligopsony and the modus which was adopted by IOCL in floating the tenders and awarding the contracts would show that the determination of price was entirely within the control of the IOCL. As per them, the way price was determined for supply of these cylinders, it had become an open secret known to....
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.... submission of the tenders. Another very important fact is that there were identical bids despite varying cost. Further, products are identical and there are small number of suppliers with few new entrants. These have become the supporting factors which persuaded the CCI to come to the conclusion that these are suggestive of collusive bidding. 88) However, that is only one side of the coin. The aforesaid factors are to be analysed keeping in mind the ground realities that were prevailing, which are pointed out by the appellants. These attendant circumstances are argued in detail by the counsel for the appellants which have already been taken note of. We may recapitulate the same in brief hereinbelow: (i) In the present case there are only three buyers. Among them, IOCL is the biggest buyer with 48% market share. It is also a matter of record that all these appellants are manufacturers of 14.2 kg gas cylinders to the three buyers who are available in the market, nanely, IOCL, HPCL and BPCL. If these three buyers do not purchase from any of the appellants, that particular appellant would not be in a position to sell those cylinder to any other entity as there are no other buyers. ....
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....uring a bigger pool of manufacturers so that the supply of this essential product is always maintained for the benefit of the general public. Had IOCL left some manufacturers empty handed, in all likelihood, they would have shut their shops. However, IOCL wanted all manufacturers to be in the fray in its own interest. Therefore, it was necessary to keep all parties afloat and this explains why all 50 parties obtained order along with 12 new entrants. (vi) There is another very relevant factor pointed out by the appellants, viz., the governmental control which is regulated by law. As pointed out above, it is not only the three oil companies which can supply LPG to domestic consumers in 14.2 kg LPG cylinders as mandated in the LPG (Regulation and Distribution) Order, 2000 which is issued under the provisions of Essential Commodities Act, 1955, even the price at which the LPG cylinder is to be supplied to the consumer is controlled by the Government. Following features of the aforesaid LPG Order, 2000, are significant: * The LPG suppliedin 14.2 kg gas cylinders is an essential commodity. * The distribution of LPG in 14.2 kgs cylinders takes place as part of a public distribution....
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....en when its manufacturing cost is more than the manufacturing cost of others. The main purpose for such a manufacuring would be to remain in the fray and not to lose out. Therefore, it would be ready to accept lesser margin. This would answer why there were near identical bids despite varying cost. 91) Insofar as meeting of bidders in Mumbai just before the date of submission of tender is concerned, some aspects pointed out by the appellants are not considered by the CCI or the COMPAT at all. No doubt, the meeting took place a couple of days before the date of tender. No doubt, the absence of agenda coming on record would not make much difference. However, only 19 appellants had attended that meeting. Many others were not even members or did not attend the meeting. In spite thereof, even they quoted almost same rates as the one who attended the meeting. This would lead us to the inference that reason for quoting similar price was not the meeting but something else. The question is what would be the other reason and whether the appellants have been able to satisfactorily explain that and rebut the presumption against them? 92) The explanation is market conditions leading to the si....
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....s to each other, or more likely to a Central secretariat, which will then cost the order and eliminate those quotes that it considers would result in a loss to some or all members of the cartel. Another system, which has come to light, is to rotate orders. In such a case, the firm whose turn is to receive an order will ensure that its quote is lower than the quotes of others. 52. We are here concerned with parallel behaviour. We are conscious of the argument put forth by Mr Venugopal that in an oligopoly situation parallel behaviour may not, by itself, amount to a concerted practice. It would be apposite to take note of the following observations made by European Court of Justice in Dyestuffs: "By its very nature, then, the concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants. Although parallel behaviour may not itself be identified with a concerted practice, it may however amount to strong evidence of such a practice if it leads to conditions of competition which do not respond to the normal conditions of the market, having regard to the nature of the product....
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....gopsony, parallel pricing simplicitor would not lead to the conclusion that there was a concerted practice there has to be other credible and corroborative evidence to show that in an oligopoly a reduction in price would swiftly attract the customers of the other two or three rivals, the effect upon whom would be so devastating that they would have to react by matching the cut. In Richard Whish & David Bailey in Oxford's Competition Law15 discussed the "Theory of Oligopolistic Interdependence" as under: "In an oligopoly a reduction in price would swiftly attract the customers of the other two or three rivals, the effect upon whom would be so devastating that they would have to react by matching the cut. Similarly an oligopolist could not increase its price unilaterally, because it would be deserted by its customers if it did so. Thus the theory runs that in an oligopolistic market rivals are interdependent: they are acutely aware of each other's presence and are bound to match one another's marketing strategy. The result is that price competition between them will be minimal or non-existent; oligopoly produces non-competitive stability..... ...Oligopolists recognize their inte....
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....his regard, the test laid down by the Supreme Court of United States in Monsanto Co. v. Spray-Rite Service Corp. is relevant and is reproduced hereunder: "The correct standard is that there must be evidence that tends to exclude the possibility that the manufacturer and non-terminated distributors were acting independently. That is, there must be direct or circumstantial evidence that reasonably tends to prove that the manufacturer and others had a conscious commitment to a common scheme designed to achieve an unlawful objective." 99) This test was reiterated by the Supreme Court of United States in Matsushita v. Zenith Ratio Corp.: ".....But antitrust law limits the range of permissible inferences from ambiguous evidence in a 1 case. Thus, in Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984), we held that conduct as consistent with permissible competition as with illegal conspiracy does not, standing alone, support an inference of antitrust conspiracy. Id., at 764. See also Cities Service, supra, at 280. To survive a motion for summary judgment or for a directed verdict, a plaintiff seeking damages for a violation of 1 must present evidence "that tends to exclude....
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....obacco Corp., 509 U . S. 209, 227 (1993) ; see 6 P. Areeda & H. Hovenkamp, Antitrust Law ¶1433a, p. 236 (2d ed. 2003) (hereinafter Areeda & Hovenkamp) ("The courts are nearly unanimous in saying that mere interdependent parallelism does not establish the contract, combination, or conspiracy required by Sherman Act §1"); Turner, The Definition of Agreement Under the Sherman Act: Conscious Parallelism and Refusals to Deal, 75Harv. L. Rev. 655, 672 (1962) ("[M]ere interdependence of basic price decisions is not conspiracy"). [4-6] The inadequacy of showing parallel conduct or interdependence, without more, mirrors the ambiguity of the behavior: consistent with conspiracy, but just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market. See, e.g., AEI-Brookings Joint Center for Regulatory Studies, Epstein, Motions to Dismiss Antitrust Cases: Separating Fact from Fantasy, Related Publication 06-08, pp. 3-4 (2006) (discussing problem of "false positives" in §1 suits). Accordingly, we have previously hedged against false inferences from identical behavior at a number of points in the trial....