Cement companies escape CCI noose

The cement companies that were found guilty of cartelisation by the Monopolies and Restrictive Trade Practices Commission (MRTPC) would have had to pay a hefty fine had the Competition Commission of India (CCI) been functional.

Under the Competition Act, 2007, which is yet to be notified, there is a provision that the companies guilty of cartelisation will have to pay a fine up to 10 per cent of their turnover or three times the net profit.

If the penalty of 10 per cent of the turnover is imposed on 41 out of 44 guilty companies, including Larsen & Tubro, Shree Cement, JK Cement, the amount comes up to a whopping Rs 3,600 crore. And if the penalty of three times the profits is ordered by CCI, then Associated Cement Company and Ambuja Cement alone will have to pay fine of over Rs 7,000 crore.

The MRTPC found companies involved in restrictive trade practices and acting in concert in fixing the retail prices of their produce under Section 33 (1) (d) of the MRTP Act. It has asked the companies to file a compliance report within eight weeks.

"Under this section, MRTPC can only direct the companies that the practice should be discontinued or not repeated, other than this the commission is powerless to do anything against the companies forming a cartel," said Naveen Goel, a corporate law expert.

Reacting to the MRTPC order, CCI acting Chairman and member Vinod Dhall said, "Had the CCI been functional, each company would have had to pay 10 per cent of the average turnover for the last three financial years, or a penalty equivalent to three times of the profits made by the cartel".

"Under the Competition Act, 2007, there is also a provision to impose penalty of 10 per cent of the average of the turnover of the cartel for the last three financial years," he added.

But till the central government clears the proposal of CCI for staff requirement and notifies the Act, the commission will not be functional. The commission has asked for a staff of 480 professionals, including lawyers, financial analyst and economists.

"The CCI will be operational by the middle of next year," Minister of Corporate Affairs Prem Chand Gupta had said.