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TMI Blog2024 (10) TMI 835X X X X Extracts X X X X X X X X Extracts X X X X ..... ll market and had an insignificant market share like Geep. Godrej, admittedly, was not in a bargaining/negotiating position as compared to Panasonic. Further, Godrej suffered losses in the market for dry cell batteries and though Geep had also suffered losses for the years 2010-13 but made small profits in later years. Both the present appellant and M/s Geep were found in contravention of the Act by the Ld. CCI on the basis of the Product Supply Agreement(s) and e- mail correspondences between them and Panasonic - The impugned order notes that Godrej had also filed a complaint dated 25.11.2015 before the Director General of Anti-Dumping and Allied Duties on the possibility of cartelisation in the dry cell batteries market. In Excel Crop Care Ltd V CCI Anr [ 2017 (5) TMI 542 - SUPREME COURT ], the Hon ble Supreme Court of India held that the penalty imposed by the CCI must (a) relate to the relevant turnover of the relevant business in the relevant market alone, and (b) determination of percentage of penalty should be based on aggravating and mitigating factors. Thus the observation in impugned order where it notes that the losses suffered by the appellant on account of sale of dry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant relies upon Regulation 5 of CCI (Manner of Recovery of Monetary Penalty) Regulations, 2011 as under: 5. If the amount specified in any demand notice is not paid within the period specified by the Commission, the enterprise concerned shall be liable to pay simple interest at one and one half per cent, for every month or part of a month comprised in the period commencing from the day immediately after the expiry of the period mentioned in demand notice and ending with the day on which the penalty is paid: Provided that the Commission may reduce or waive the amount of interest payable by the enterprise concerned if it is satisfied that default in the payment of such amount was due to circumstances beyond the control of the enterprise concerned: Provided further that where as a result of an order of the Competition Appellate Tribunal or the High Court or the Supreme Court of India, as the case may be the amount of penalty payable has been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded in accordance with regulation 14. 3. It is argued if this Tribunal is not inclined to reduce the interest, then the appellant would press t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t OP-2 was the contract manufacturer of zinc carbon DCB for OP-3. A PSA dated 13.01.2012 was entered into between them whereby it was decided that OP-3 would procure DCB R-6 UM-3-UM AA Size (Economy) and R-6 UM-3-UM AA Size (Premium) from OP-2 to sell in the market. OP-2 and OP-3 also agreed on other specific details by way of Supplementary PSAs dated 13.01.2012 and 23.03.2013. Clause 8.2 of the PSA, which is reproduced below, has been found by the DG to be anti-competitive: Either party herein agrees and undertakes that it will not take any steps which are detrimental to the other party s market interests. 27. Regarding OP-3 s contention that the actual rates of DCB of OP-3 as shown in a table placed on record by OP-3 of the net landed prices of the top distributor of OP-3 in Madhya Pradesh, Maharashtra, Rajasthan and Kerala shows that OP-3 did not cartelise and its prices were lower, the Commission notes that in the absence of OP-2 and other DCB manufacturers net landed prices for comparison with OP- 3 s such rates, no conclusion from such table placed on record can be drawn. Once explicit unambiguous e-mails between OP-2 and OP-3 discussing each other s MOPs and asking for corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... batteries and allied products such as chargers, torches (flashlights) and portable power banks. In view of the Commission, even if OP-3 did consistently sustain losses in the Economy DCB market, it could have offset the same against the high profits earned by it in any other product segment. Further, though usually the motive behind cartelisation is earning of supra normal or high profits; however, in view of the clear evidences on record of cartelisation in the present case, mere absence of profits by one entity can be of no consequence. 34. Therefore, the Commission holds that there is contravention of the provisions of Section 3 (3) (a) read with Section 3 (1) by OP-2 and OP- 3 and a cartel between them existed from 13.01.2012, when the PSA was entered into till November 2014, when OP-3 stopped procuring supplies from OP-2. 42. In view of the above calculations in Table 4, it can be seen that in case of OP-2, as per the proviso to Section 27 (b), penalty of upto three times of its profit for each year of the continuance of the cartel may be imposed as the said figure is higher while in case of OP-3, penalty of upto ten percent of its turnover for each year of the continuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertakes that it will not take any steps which are detrimental to the other party's market interests. Pl. elaborate. Ans. The prime intention of Panasonic in inserting this clause was that in case Godrej starts undercutting and taking away our market, as a manufacturer we wanted to have some control. In case they disturbed our market after buying from us, we had the option to stop supplies to them after giving them one month's notice. This clause was inserted by us to safeguard PECIN's market interests. Q12. You are being shown a copy of the email exchanges of 6th February, 2013 between yourself and Mr. Rakesh Krishnan A with Cc marked to '[email protected]' (Mr. Sunil Patil of Godrej) and Mr. Bipon Sehgal of PECIN (provided by PECIN) with trail emails. In the emails there are concerns regarding low price of batteries being offered by Godrej in Rajasthan, Madhya Pradesh and Maharashtra etc. Please offer your comments as to from whom did you get the OMR of Godrej and what was the intention behind such email communication? Ans. Mr. Khurana received some communication from either Nippo or Eveready that Godrej is selling at a price which is very low in all markets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manufacture and supply of dry cell batteries by PECIN to Geep Industries, it is Clause 4.3 that has been found to be offensive by the CCI, clause 4.3 of PSA is as follows: 4.3- Since price to GBIPL is very special price and that PECIN too is in the business of selling dry cell batteries of the same category in the same market, it is advised and agreed that GBIPL will not take steps which are detrimental to PECIN s market interest particularly with respect to the market prices which shall be reviewed and maintained at agreed levels from time to time. 20. The Clause 4.3 of the PSA as reproduced above, is in the form of an advice which is agreed TO by Geep Industries to not take steps detrimental to PECIN s market interest particularly with respect to market prices. Further, by the application of said clause 4.3, Geep Industries also agreed to comply with the level of prices as agreed after periodic review of market conditions by PECIN. Thus, Geep Industries is very clearly in a bilateral ancillary cartel with the Panasonic, while Panasonic is found to be member of primary cartel in the dry cell batteries market. Thus, even though Geep is an extremely small player in the dry cell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries market which, in order to run its business, was buying unbranded batteries from PECIN. PECIN, being the complainant of the Lesser Penalty Application, has received benefit and no penalty has been imposed on it by the CCI, though it is a significant player in the market. It was, through the clause 4.3 of the PSA, attempting to save its interest in the said market and also imposing an anticompetitive condition in the PSA, but Geep was not in a position to resist or contest the clause 4.3, in view of its business interest in continuing to sell dry cell batteries even if with an insignificant and miniscule market presence. 34. In view of the extenuating conditions as discussed in preceding paragraphs, we are of the view that while the quantum of penalty should be such that it acts as a deterrent and regulate anticompetitive behavior. We consider Geep Industries business dynamics and situation in the market to be such that it was neither in a negotiating strength vis- -vis PECIN nor having a market share that could actually influence the price in the said market. In view of such a situation, and fully conscious of the fact that Geep Industries has turned losses in the first three y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order notes that Godrej had also filed a complaint dated 25.11.2015 before the Director General of Anti-Dumping and Allied Duties on the possibility of cartelisation in the dry cell batteries market. 12. In Excel Crop Care Ltd V CCI Anr (2017) 8 SCC 47, the Hon ble Supreme Court of India held that the penalty imposed by the CCI must (a) relate to the relevant turnover of the relevant business in the relevant market alone, and (b) determination of percentage of penalty should be based on aggravating and mitigating factors. Thus the observation in impugned order where it notes that the losses suffered by the appellant on account of sale of dry cell batteries may have been compensated by the profits made by the appellant in another produces, is wrong, per Excel Crop s case. There would be no relevance of considering the overall turn over of Godrej from any businesses other than the dry cell battery business. The impugned order also notes (a) the appellant offered lower rates as compared to Panasonic and rest of industry (b) some gifting schemes for its dry cell battery were also offered by the appellant. 13 . Hence from the facts above one thing is clear the dry cell battery market i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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