2022 (7) TMI 917 - Commission - Law of Competition

Anti-competitive meeting or not - Informant has alleged that the decisions taken by the OPs in various meetings during 2010 to 2018 are anti-competitive - fixation of tariffs for trailers and not allowing CFS operators to reduce the rate from what was decided by OP - restriction imposed upon the members of the Informant/NACSF and their sister concerns by mandating them not to ply more than 20 trailers of their own for movement of containers - contravention of the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act or not - whether OP-1 to OP-10 have been able to rebut the said presumption so as to absolve them of the liability that has arisen? HELD THAT - Both the allegations raised in the present matter fall under the category of decision taken by any association of enterprises or association of persons which are presumed to be having an appreciable adverse effect on competition (AAEC). Generally in cases concerning horizontal arrangement/collusive conduct falling under Section 3(3) of the Act the most difficult task is to establish the existence of the agreement/arrangement/understanding amongst the parties because such agreements are often perpetrated in secrecy. In the present case however the existence of the agreement i.e. the fixation of price is not under challenge. The DG has found enough evidence that the prices were increased and certain restrictions were imposed collectively by OP-1 to OP-10 through association meetings from 2014 till 2018. OP-1 the only OP that filed response to the Investigation Report has admitted to these meetings. Rather it has sought to justify its participation in such meetings by citing the prevailing circumstances at the time when such meetings took place and the mutual nature of such meetings where admittedly the members of the Informant also participated. Further many such meetings were organised at the premises of the Chennai Port Trust and with its knowledge. Circulars were issued by these OPs after the said meetings which have been received and responded to by the Informant. Thus the Commission finds no purpose being fulfilled by reiterating the minutes of the meetings and the discussions that took place which have been amply elucidated in the DG findings - It suffices to say that the minutes of various meetings and various letters exchanged between the Informant and these OPs relied upon by the DG establish that the prices for container trailer services were being fixed and increased from time to time collectively by the OPs and also that a decision was taken to restrict the number of trailers plied/operated by the members of the Informant and their sister concerns. Section 3(3) being presumptive in nature the presumption of these practices/decisions taken at the association meet. It is observed that OP-2 to OP-10 have not filed any response to the Investigation Report while OP-1 has filed its submissions. As can be noted from the submissions filed by OP-1 the justifications/reasons offered by it falls into three broad categories. Firstly it has been stated that there was an increase in the price of fuel insurance spares tyres repair and maintenance driver salary labour charges etc. besides inflation factor from 2010 to 2014 and from 2014 to 2018 which has not been considered by the DG. Though such increase has not been stated as a justification of collusive conduct OP-1 has claimed that this provides some perspective on the reasonability of price increase. Secondly OP-1 has brought forward their plight and financial considerations such as inordinate delay on the part of CFS in clearing the dues to use transportation services of the members of the TOAs; CFSs entering the transportation business and thus sidelining members of the TOAs whose only means of survival was through these transportation services etc. Thirdly OP-1 has stated that the decisions taken at the impugned meetings were mutual decisions which had an active involvement of the members of the Informant and the Chennai Port Trust and thus the same cannot be held as unilateral price increases on the part of the OPs. The Commission will deal with each of these in the ensuing paras - The Commission observes that through the first and second justification cited above OP-1 has tried to demonstrate the role of associations as an instrument to further the economic and social well-being of its otherwise small members having unequal bargaining power. On one hand OP-1 has cited the comparative increase in the prices of diesel insurance tyres spare parts driver/cleaner charges inflation etc. between 2010 and 2018 and on the other hand it has brought forward the plight and financial distress of its members. OP-1 has stated that the transportation business is the only means of survival for the members of various associations which have been made OPs in the present matter thereby making such members solely dependent upon the income derived from the transport business for their livelihood for payment to their drivers/cleaners repayment of loans from financial institutions upkeep of the trailers etc. Further CFSs were entering the transportation business and thus sidelining members of TOAs - While the Commission may tend to have a sympathetic inclination towards certain difficulties which has been expressed by OP-1 that its members face and is cognizant of the facilitative role of trade associations in furthering the collective interests of its members to alleviate the hardships if any the Commission cannot be oblivious to such Association providing its aegis to facilitate coordinated conduct which are otherwise falling foul of the provisions of the Act. Further as regards the third justification offered by OP-1 i.e. the decisions taken at the impugned meetings were mutual decisions which had an active involvement of the members of the Informant and the Chennai Port Trust the Commission is hesitant to accept this as a justification for a conduct falling under Section 3(3)(a) and (b) of the Act. The rebuttal of the presumption of AAEC that exists in such cases or is likely to exist thereby distorting competition needs to be dispelled by providing concrete evidence to the satisfaction of the Commission on the redeeming nature of the alleged conduct. It has to be shown that the impugned conduct rather than harming competition has resulted in accruing benefits to consumers or achieving improvements in the production or distribution of goods or provision of services or promotion of technical scientific and economic development by means of production or distribution of goods or provision of services - The participation of Informant or Chennai Port Trust cannot alter the characterisation of an otherwise collusive conduct/practice. Neither can it dilute the responsibility of the associations involved in such collusive decision making. In a competitive market the prices of goods or services should ideally be determined by a free interaction between demand and supply forces. Any collective collusive action can manipulate the market outcomes under which the independent decisions between each buyer and seller could have been reached. Seen in this light the collective action by TOAs has manipulated the market forces and narrowed the scope of competition. The Commission does not find any of the justifications offered by OP-1 to be sufficient to rebut the presumption and discharge the burden of proof that was on it considering the nature of its submissions and evidence in support thereof. In the event thereof the Commission concludes that the conduct of OP-1 to OP-10 has led to a contravention of the provisions of Section 3(3)(a) and Section 3(3)(b) read with Section 3(1) of the Act - The Commission holds that the decisions taken by OP-1 to OP-10 for the reasons adumbrated in this order are in contravention of the provisions of Section 3(3)(a) and Section 3(3)(b) read with Section 3(1) of the Act. Accordingly the Commission directs OP-1 to OP-10 to cease and desist in respect of the anti-competitive conduct committed by it and which has been found to be in contravention of the provisions of the Act. The Commission is of the considered view that a cease-and-desist order under Section 27 of the Act would sub-serve the ends of justice in the matter.

Summary

Issues Involved:
1. Alleged anti-competitive decisions by trailer associations (OPs) regarding the number of trailers operated by Container Freight Stations (CFS).
2. Alleged price-fixing for trailer services by the OPs.
3. Alleged strikes and lockouts by OPs to enforce their demands.
4. Examination of the role and actions of OP-11 and OP-12.

Issue-wise Detailed Analysis:

1. Alleged Anti-Competitive Decisions on Trailer Operations:
The Informant alleged that the OPs imposed a restriction on CFS operators, limiting them to operate no more than 20 trailers. This decision, taken in a meeting on 07.07.2010, was deemed anti-competitive as it controlled the provision of transport services at Chennai Port. The DG's investigation confirmed this restriction, noting that it was enforced through the issuance of passes by the Chennai Port, which required endorsement by trailer associations. The Commission found this conduct to contravene Section 3(3)(b) read with Section 3(1) of the Act as it limited and controlled the provision of transportation services.

2. Alleged Price-Fixing for Trailer Services:
The Informant claimed that the OPs collectively decided to increase trailer service rates in various meetings, notably on 09.08.2014. The DG found evidence supporting this allegation, noting that the rates were increased by ?900 for 20 feet containers and ?1400 for 40 feet containers. The OPs communicated these decisions to their members, ensuring compliance through threats of strikes. The Commission held that such collective price-fixing by the OPs contravened Section 3(3)(a) read with Section 3(1) of the Act, as it directly determined the sale prices of trailer services.

3. Alleged Strikes and Lockouts by OPs:
The Informant alleged that the OPs used strikes and lockouts to enforce their anti-competitive demands. Evidence showed that the OPs issued strike notices and engaged in strikes, disrupting the movement of goods and containers. The DG noted instances where the OPs threatened or executed strikes to compel the Informant to comply with their demands. The Commission observed that such actions were used to manipulate market outcomes, reinforcing the anti-competitive nature of the OPs' conduct.

4. Examination of the Role and Actions of OP-11 and OP-12:
The DG did not find contravention by OP-11 and OP-12, which are associations of drivers. However, the Informant argued that these OPs participated in meetings where anti-competitive decisions were made and benefited from the price increases. The Commission noted the DG's findings but did not find sufficient evidence to hold OP-11 and OP-12 liable under the Act.

Conclusion and Order:
The Commission concluded that OP-1 to OP-10 contravened Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act by collectively fixing prices and limiting the number of trailers operated by CFSs. The Commission directed OP-1 to OP-10 to cease and desist from such anti-competitive conduct. Given the circumstances, the Commission deemed a cease-and-desist order sufficient to address the violations. The Commission also granted confidential treatment to certain information provided by the Informant for three years.

Final Decision:
The Commission ordered OP-1 to OP-10 to cease and desist from their anti-competitive practices. No penalties were imposed, considering the overall context and submissions. The Secretary was directed to inform the parties accordingly.