2024 (11) TMI 1005 - CCI - Companies Law

Price fixation and bid-rigging by sugar mills and associations - price parallelism - contravention of the provisions of Section 3(3)(a) and 3(3)(d) read with Section 3(1) of the Competition Act, 2002 - HELD THAT - It is seen that for the allegations of price cartel amongst ISMA and the sugar mills of the State of Uttar Pradesh in contravention of the provisions of Section 3(3)(a) of the Act, the only credible evidence brought out in the investigation report is a few instances of quotation of identical prices by OP-11 and OP-19 in the Impugned Tender, and exchange of calls by them as well as by key officials of certain other OPs with Shri GK Thakur, Director of ISMA, during the tender period - It is no longer res integra that price parallelism cannot be the sole criteria to establish a cartel. Evidence of parallel pricing must be supplemented with plus factors showing that alleged conduct is conscious and not the result of independent business decisions. In the present matters, the plus factors on record to supplement price parallelism by 2 OPs, is exchange of a few calls between the OPs with the representative of the industry association ISMA, which may have been to understand the nuances of the Impugned Tender as it ushered a novel way of tendering process. The investigation has not brought out sufficient evidence on record for the Commission to arrive at a finding of contravention of the provisions of the Act against any OP in the present matters - It is made clear that all information used in the present order is for the purposes of the Act and as such, in terms of Section 57 of the Act, does not qualify for grant of confidential treatment. Thus, no case of contravention of the provisions of the Act can be made out in the present matters against any OP and the matters are directed to be closed forthwith - The Secretary is directed to forward certified copy of the present order to the Informants and the OPs, accordingly.

Issues Involved:
1. Allegations of price fixation and bid-rigging by sugar mills and associations.
2. Anti-competitive conduct by industry associations (ISMA, NFCSF, EMA).
3. Legality of joint tendering by Oil Marketing Companies (OMCs).
4. Alleged quantity allocation and identical pricing by sugar mills.
5. Examination of supplementary investigation report findings.
6. Liability of individuals under Section 48 of the Competition Act.

Detailed Analysis:

1. Allegations of Price Fixation and Bid-Rigging:
The primary allegations pertained to price fixation and bid-rigging by various sugar mills, particularly those from Uttar Pradesh, in the joint tender issued by OMCs for Ethanol procurement. The Commission examined evidence such as identical pricing and communication records but found no conclusive evidence of a cartel. The investigation highlighted instances of identical bids and communication between officials of sugar mills and ISMA, but these were not sufficient to establish collusion. The Commission noted that price parallelism alone does not establish a cartel without additional "plus factors" indicating coordinated conduct.

2. Anti-Competitive Conduct by Industry Associations:
The investigation found ISMA to have potentially facilitated anti-competitive conduct by convening meetings and exchanging data among sugar mills. However, the Commission did not find sufficient evidence to establish that these activities led to cartelization. The meetings were sparsely attended, and there was no concrete evidence of discussions on price or quantity allocation during these meetings. Similarly, allegations against NFCSF could not be substantiated due to lack of evidence of involvement in anti-competitive practices.

3. Legality of Joint Tendering by OMCs:
The DG concluded that joint tendering by the OMCs was not anti-competitive. The OMCs were found to have acted in compliance with government directives to achieve efficiencies and commercial benefits. The joint tendering was considered necessary to meet the government's Ethanol Blending Program objectives and did not result in any appreciable adverse effect on competition.

4. Alleged Quantity Allocation and Identical Pricing:
The investigation reported instances of identical pricing and narrow price ranges among bids from Uttar Pradesh sugar mills. However, the Commission found that the narrow price range could be attributed to similar cost structures within the state and did not necessarily indicate collusion. The DG's analysis of quantity allocation was found lacking as it did not consider bids for depots outside Uttar Pradesh or provide evidence of coordinated quantity allocation.

5. Examination of Supplementary Investigation Report Findings:
The supplementary investigation report found no contravention of the Act by sugar mills in Maharashtra. The Commission noted that the DG accepted the justification for the prices quoted by Maharashtra bidders based on their cost of production, which further weakened the case for cartelization allegations.

6. Liability of Individuals Under Section 48:
The DG identified 42 individuals as liable for anti-competitive conduct under Section 48 of the Act. However, the Commission's findings did not support the existence of a cartel, rendering individual liability moot in the absence of established contravention by the companies or associations.

Conclusion:
The Commission concluded that there was insufficient evidence to establish contravention of the Competition Act by any of the Opposite Parties. The matters were directed to be closed, and no penalties were imposed. The Commission emphasized that the information used in the order does not qualify for confidential treatment under Section 57 of the Act.

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