2019 (4) TMI 2167 - AT - Law of Competition

Maintainability of appeal - Anti-competitive practices - abuse of dominant position - bid-rigging - contravention of Section 3(3) r/w Section 3(1) of the Competition Act 2002 - Whether the Commission was justified in overturning the finding of DG in regard to alleged contravention of Section 3 of the Act? - Price fixation. Maintainability of appeal - HELD THAT - Since the Commission found some deficiencies in investigation it directed the DG to examine all relevant issues including the deficiencies pointed out by the Commission. Further investigation was carried out by DG culminating in filing of supplementary investigation report wherein DG reiterated its earlier conclusions and observed that KCDA had no role in appointing or terminating the dealers which was the sole prerogative of cement manufacturers. It also found that KCDA had no role in regard to supply of cement by the cement manufacturers to dealers which purely depended on market considerations. The supplementary investigation report thus further reinforced conclusions arrived at in the main investigation report - the Commission closed the matter largely agreeing with the recommendation of DG though disagreeing with its finding regarding contravention of Section 3 noticed hereinabove passing the order within the ambit of Section 26(6) of the Act which is appealable in terms of Section 53-B r/w Section 53-A clause (a) of the Act. Objection raised by the Commission in regard to maintainability of appeal being devoid of merit is accordingly overruled. Whether the Commission was justified in overturning the finding of DG in regard to alleged contravention of Section 3 of the Act? - HELD THAT - Clause 05 of Annexure A11 provides that any new appointment of stockists/dealers shall be as per understanding with KCDA. Normally grant of dealership or appointment of stockists should rest exclusively with the cement manufacturing company. Merely because the cement manufacturer has an understanding with the Cement Dealers Association in regard to grant of dealership or appointment of stockists does not imply that a role is assigned to KCDA in appointment of stockists/dealers - The allegations emanating from the Appellants /Informants in regard to termination of dealership and stoppage of supplies to dealers have been inquired into by the Commission and on the basis of available evidence it has been found to be attributable to reasons peculiar to the dealer/ stockists. CCI appears to have considered these documents to arrive at a finding that there was no meeting of minds between KCDA and the cement manufacturers in regard to grant or termination of dealership. No fault can be found with the conclusions drawn by the Commission on consideration of the available material moreso as the investigation found that there were several cement dealers in Kerala who were not members of KCDA - in arriving at the conclusion that no case of contravention of Section 3(3) r/w Section 3(1) of the Act was made out was largely influenced by the fact that the investigation reports consistently concluded that there was no material to attribute any role to KCDA in award or termination of dealership. Price fixation - HELD THAT - An isolated instance of merely two manufacturers out of a large number of manufacturers of a product withdrawing post sale discounts would not necessarily be a proof of an anti- competitive agreement moreso as the rationale behind the same as noticed above has been explained. While it is true that the aforestated exhortation on the part of KCDA jointly with the two odd cement manufacturers to dealers would impinge on the fair concept of competition the same would not fall within the mischief of Section 3(3) r/w Section 3(1) of the Competition Act. Conclusion - The anti-competitive agreements require clear evidence of a meeting of minds and that exhortations or suggestions without a direct impact on competition do not constitute a violation of Section 3. The impugned order does not suffer from any legal infirmity and the conclusions drawn on evaluation of material are not erroneous - Appeal dismissed.

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

Whether the Kerala Cement Dealers Association (KCDA) engaged in anti-competitive practices in violation of Section 3(3) read with Section 3(1) of the Competition Act, 2002.
Whether the alleged conduct of KCDA and associated cement manufacturers, particularly Ramco and Dalmia Cements, constituted a cartel or anti-competitive agreement affecting the supply and pricing of cement in Kerala.
Whether the Competition Commission of India (CCI) appropriately evaluated the evidence and applied the law in closing the case without finding a contravention of the Act.
Whether the appeals against the CCI's decision to close the matter are maintainable under the provisions of the Competition Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Anti-Competitive Practices by KCDA

Relevant legal framework and precedents: Section 3(1) of the Competition Act prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition. Section 3(3) specifically addresses agreements that directly or indirectly determine purchase or sale prices, limit or control production, supply, or markets, or result in bid rigging or collusive bidding.
Court's interpretation and reasoning: The court examined whether there was an agreement between KCDA and cement manufacturers that resulted in anti-competitive effects. The court noted that an agreement requires a meeting of minds and that the evidence must demonstrate such an agreement.
Key evidence and findings: The investigation revealed no substantial evidence of KCDA's involvement in appointing or terminating dealers or influencing the supply of cement. The supplementary investigation reports did not find persuasive evidence of KCDA's role in anti-competitive conduct.
Application of law to facts: The court applied the provisions of Section 3, concluding that the evidence did not support the existence of an anti-competitive agreement involving KCDA.
Treatment of competing arguments: The appellants argued that KCDA played a pivotal role in controlling dealership appointments and supply, but the court found these allegations unsubstantiated by the evidence.
Conclusions: The court concluded that there was no contravention of Section 3 by KCDA, as the evidence did not demonstrate an agreement or conduct that adversely affected competition.

Issue 2: Alleged Cartelization and Price Fixing

Relevant legal framework and precedents: Section 3(3) presumes agreements that fix prices or limit supply to have an appreciable adverse effect on competition.
Court's interpretation and reasoning: The court considered the evidence related to a meeting where cement dealers were allegedly exhorted not to sell below the invoice price. It assessed whether this constituted price fixing.
Key evidence and findings: The second supplementary investigation report found evidence of exhortation by Ramco, Dalmia, and KCDA representatives, but the court noted that such exhortation did not necessarily equate to an anti-competitive agreement.
Application of law to facts: The court determined that the exhortation did not have a direct and proximate nexus with price fixing, especially given the diverse market conditions and the rationale behind avoiding sales below invoice price.
Treatment of competing arguments: The appellants contended that the exhortation was indicative of cartel behavior, but the court found the rationale provided by the manufacturers plausible and not indicative of a cartel.
Conclusions: The court concluded that the evidence did not support a finding of cartelization or price fixing by KCDA and the cement manufacturers.

Issue 3: Evaluation by CCI and Maintainability of Appeals

Relevant legal framework and precedents: Sections 26 and 53 of the Competition Act outline the procedures for investigation and appeal.
Court's interpretation and reasoning: The court examined whether the CCI properly evaluated the investigation reports and evidence, and whether the appeals were maintainable.
Key evidence and findings: The CCI found no substantial evidence of anti-competitive conduct and closed the case. The court agreed with this assessment, noting the lack of persuasive evidence.
Application of law to facts: The court applied the procedural requirements under the Act and found that the CCI's decision was within its discretion and based on the evidence.
Treatment of competing arguments: The appellants argued that the CCI failed to consider key issues, but the court found that the CCI had adequately addressed the relevant concerns.
Conclusions: The court upheld the CCI's decision to close the case and found the appeals maintainable but without merit.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The Commission, while disagreeing with the second supplementary investigation report of the DG in regard to contravention of Section 3 of the Act for lack of substantive evidence, accepted the conclusions arrived at by DG in main as well as supplementary investigation report that complicity of KCDA in award or termination of cement dealership was not disclosed by the material assembled during investigation."
Core principles established: The court reinforced that anti-competitive agreements require clear evidence of a meeting of minds and that exhortations or suggestions without a direct impact on competition do not constitute a violation of Section 3.
Final determinations on each issue: The court dismissed the appeals, affirming the CCI's decision to close the case due to insufficient evidence of anti-competitive conduct by KCDA and associated parties.

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