CCI imposes penalties on cement companies for bid-rigging, cartelization

This has been established from quoting of unusually higher rates in the impugned tender of cement

The Competition Commission of India (CCI) has imposed penalties on seven cement companies for bid rigging of a tender floated by the Director, Supplies and Disposals of Haryana in 2012 for procurement of cement to be supplied to the Government Departments/Boards/Corporations in the state.

The CCI has also imposed penalties upon 10 cement companies and their trade association i.e. Cement Manufacturers Association (CMA) for cartelisation in the cement industry.

Cement worker

A final order has been passed by CCI pursuant to a reference filed under Section 19(1)(b) of the Competition Act, 2002 by the Director, Supplies and Disposals, Haryana and Competition Appellate Tribunal remanding the matter back while setting aside the original order of CCI.

The CCI has held that the cement companies, through their impugned conduct, have engaged in bid-rigging in contravention of the provisions of Section 3(3)(d) read with Section 3(1) of the Act, which eliminated and lessened competition and manipulated the bidding process in respect of the impugned tender.

The bid-rigging has been established from quoting of unusually higher rates in the impugned tender (than rates quoted in tenders of previous years), determining different basic prices for supply of cement at the same destination through reverse calculation, quoting of quantities in the impugned tender such that the total bid quantity almost equalled the total tendered quantity, quoting of rates for the districts in a manner that all cement companies acquired L1 status at some of the destination(s) etc. The anti-competitive conduct was re-affirmed through SMSes exchanged and calls made amongst the officials of the cement companies.

The information in the cartelisation case was filed by Builders Association of India under Section 19(1)(a) of the Competition Act, 2002 (the Act) against the cement companies and CMA alleging contravention of the provisions of the Act.

Accordingly, penalty of Rs. 18.44 crore, Rs. 68.30 crore, Rs. 38.02 crore, Rs. 9.26 crore, Rs. 29.84 crore, Rs. 35.32 crore and Rs. 6.55 crore has been imposed upon Shree Cement Limited, UltraTech Cement Limited, Jaiprakash Associates Limited, J.K. Cement Limited, Ambuja Cements Limited, ACC Limited and J.K. Lakshmi Cement Limited respectively.

Additionally, penalties of Rs. 1147.59 crore (ACC), Rs. 1163.91 crore (ACL), Rs. 167.32 crore (Binani), Rs. 274.02 crore (Century), Rs. 187.48 crore (India Cements), Rs. 128.54 crore (J K Cements), Rs. 490.01 crore (Lafarge), Rs. 258.63 crore (Ramco), Rs. 1175.49 crore (UltraTech) and Rs. 1323.60 crore (Jaiprakash Associates Limited) have also been imposed. A penalty of Rs. 0.73 crore has been imposed on CMA.

Vide separate order, the CCI has also imposed a penalty of Rs. 397.51 crore upon Shree Cement Limited in RTPE No. 52 of 2006.

While highlighting the role played by trade associations in promoting the interests of their members and the industry they serve, CCI noted in its order that cement companies were interacting using the platform made available by the trade association (CMA). Such interactions have been found to have transgressed the limits in sharing of information and extended to discussions on cost, prices, production and capacities, thereby, facilitating the enterprises to determine prices and production in a concerted and collusive manner, than in a competitive manner.

The cement companies have been directed to cease and desist from indulging in the acts/conduct which have been held to be in contravention of the provisions of the Act, or in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market.