The Indian Competition Authority imposes a cease and desist on multiple rail companies guilty for cartelization but avoids fining due to companies’ size and the economic impact of COVID-19 (Chief Materials Manager, South Eastern Railway / Hindustan Composites)

Following references by procurement officials of a number of railway companies, the Competition Commission of India (CCI) found that 10 suppliers of composite brake blocks had, at least from 2009 to 2017, engaged in cartelization, by means of directly or indirectly determining prices, allocating markets, coordinating bid responses and manipulating the bidding process, which had an appreciable adverse effect on competition (AAEC) in India. [1] In addition to the supplying companies, the CCI found 37 officers to be liable for these anti-competitive acts, whether as persons in charge of the companies or as other persons who had consented to, connived at or been negligent in relation to the breach.

The CCI directed the guilty companies and officials to cease and desist in future from indulging in the practices found to be in contravention of Section 3 of the Competition Act, 2002 (Competition Act). The CCI decided not to impose penalties, observing that the parties had not only cooperated but had even admitted their respective role/conduct in the tenders. It also noted that some of the parties were Micro Small and Medium Enterprises (MSMEs) and that most of them had small annual turnover for composite brake blocks. The CCI stated that it was also cognizant of the prevailing economic situation due to COVID-19 and the various measures taken by the Government of India to support the liquidity and credit needs of viable MSMEs to help them withstand the impact of the current shock. The CCI therefore, in the interest of justice, refrained from imposing a monetary penalty, “in the peculiar circumstances of the case”.

Referring to the cooperation of the opposite parties and the resulting benefits (optimising investigative resources, expediting the adjudicatory process and lessening the regulatory burden), the CCI stated that the ultimate object of the Competition Act was to correct market distortions and to discipline the behaviour of the market participants. These objectives would be met by a “cease and desist” requirement. The parties were, however, cautioned to ensure that their future conduct was strictly in accordance with the Competition Act.

This is the second case in two months where the CCI has decided not to impose a fine. [2]

Footnotes

[1Chief Material Manager, South Eastern Railway v Hindustan Composites Limited and Others, etc., CCI, Reference Case No. 03 of 2016, etc. (10 July 2020).

[2As reported in our June 2020 Roundup, participants in a ball-bearing cartel were not subject to penalties given the, “peculiar facts and circumstances” of that case.

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Authors

  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (Mumbai)
  • Shardul Amarchand Mangaldas (New Delhi)
  • Shardul Amarchand Mangaldas (New Delhi)

Quotation

Pallavi Shroff, John Handoll, Naval Satarawala Chopra, Shweta Shroff Chopra, Harman Singh Sandhu, Manika Brar, Aparna Mehra, Gauri Chhabra, Yaman Verma, Rohan Arora, The Indian Competition Authority imposes a cease and desist on multiple rail companies guilty for cartelization but avoids fining due to companies’ size and the economic impact of COVID-19 (Chief Materials Manager, South Eastern Railway / Hindustan Composites), 10 July 2020, e-Competitions Competition Law & Covid-19, Art. N° 96525

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