CCI finds no evidence of cartelisation by Tyre Manufacturers K Venugopal AN Haskar Khaitan Amarchand JSA and Luthra represent Tyre Manufacturers

The Competition Commission of India (CCI) has given a clean chit to tyre manufacturers, stating that there is no evidence of cartelisation. In its order dated October 30, 2012 the CCI has said, “there is not sufficient evidence to hold a violation by the tyre companies Apollo, MRF, J.K. Tyre, Birla, Ceat and Automotive Tyre Manufacturers Association (ATMA)” of the provisions of the Competition Act..The Competition Commission of India (CCI) has given a clean chit to tyre manufacturers, stating that there is no evidence of cartelisation. In its order dated October 30, 2012 the CCI has said, “there is not sufficient evidence to hold a violation by the tyre companies Apollo, MRF, J.K. Tyre, Birla, Ceat and Automotive Tyre Manufacturers Association (ATMA)” of the provisions of the Competition Act..The All India Tyre Dealers’ Federation (AITDF) had filed a complaint against the tyre manufacturers. AITDF alleged that the major tyre manufacturers, which control 95% of the market, were indulging in anti-competitive activities, resorting to mal-practices such as “price rigging and strangulation of production and supplies”, and “usurping the excise duty reduction” against the interests of tyre users..A host of law firms through their senior counsels represented the tyre companies..The Informant, AITDF was represented by Convenor SP Singh..Below is the table with list of Tyre Companies along with their Legal Counsels..Opposite PartiesSenior Counsel and Law FirmJK TyresSenior Advocate Krishnan Venugopal and Advocate Aditya NarainCeat LtdManas Chaudhuri, Head of Competition Law Practice at Khaitan & CoMRF LtdSenior Advocate AN Haskar and Advocate Aditya NarainApollo TyresAmarchand Mangaldas Senior Partner and Head of Competition Law Practice Pallavi Shroff along with Harman Singh SandhuGoodyear IndiaSenior Advocate AN Haskar and Aditya NarainBirla Tyres (Unit of Kesoram Industries)Advocate Pinaki Addy of M/S. Sandersons & MorgansMichelin IndiaPartner Amitabh Kumar and Associate Gautam Shahi of J. Sagar AssociatesATMARaviSekhar Nair* and Nidhi Singh of Luthra & Luthra Law Offices.*Ravisekhar Nair moved to ELP from Luthra & Luthra in July, 2012..The dispute can be traced back to 2007 when the AITDF filed an information before the Ministry of Corporate Affairs which was eventually placed before the CCI. In June of 2010, the CCI had directed the Director General (DG) to conduct an investigation on the five major domestic tyre manufacturing companies including Apollo Tyres, MRF Ltd., Ceat Tyre, Birla Tyre and JK Tyre with regard to these allegations..The DG concluded that the major domestic tyre companies acted in concert and ATMA provided the platform to the members for exchange and sharing of information relating to price, export, import etc. Thus, the DG concluded that ATMA and its five major domestic tyre-manufacturing companies have acted in concert in contravention of the provisions of of the Act..However, the CCI in its 126-page majority order said that “taking into consideration the act and conduct of the tyre companies/ ATMA, it is safe to conclude that on a superficial basis the industry displays some characteristics of a cartel there has been no substantative evidence of the existence of a cartel”..The CCI observed, “As a tradable the industry has always been open to competitive threats from imports”..However, one CCI member, R. Prasad dissented with the majority order. He held that the tyre companies operated as a cartel and have followed anticompetitive practices. Prasad further held that ATMA was also involved in the anti-competitive practices and is an extension of the cartel. In fact, Prasad has imposed a penalty of 0.5 times of net profit for 2009-10 on tyre companies and a penalty of 10% of its total receipts for the year 2009-10 on ATMA..The majority opinion, however was that the available evidence did not provide enough proof to prove that tyre companies/ ATMA acting together have limited and controlled the production and price of tyres in the market in India..The Commission further stated, “There are some factors which may be conducive to cartelization but they may be diluted due to other factors. The fact that market concentration is very high with entry barriers and the product is homogenous which support cartel formation, but high bargaining powers of Original Equipment Manufacturers due to the volumes, options to replacement consumer to retread, increasing radialization, imports effectively being cheaper even in the brief period of anti dumping duty go against sustaining a cartel structure”..Speaking to Bar & Bench, Khaitan Competition Partner Manas Chaudhuri representing CEAT said, “This is definitely a far better analysis of the Competition law by the CCI than its earlier order. It’s definitely on a much matured platform. The CCI has analysed every aspect of the Investigation Report as well as the submissions made by all the parties. The sequential analysis is very logical.”.AITDF has already decided to approach the Competition Appellate Tribunal against the CCI judgement, according to media reports..“The CCI has passed a well reasoned order in the tyre cartel case. It has stated that mere price parallelism in price is not sufficient to find a cartel if there are other reasons that explain the price parallelism, which is the generally accepted principle in competition law”, said Vinod Dhall, former CCI Chairman and Founding partner, Dhall Law Chambers..Vinod further said, “The challenge that the CCI now faces is how to unravel the various cartels suspected to be functioning in the Indian markets. The answer lies in more thorough and deeper investigation and encouraging the use of the ‘leniency’ provision. That will enable the CCI to come to findings that will pin down cartels with orders that will withstand judicial scrutiny”..Recently, CCI had imposed a heavy penalty on cement companies on cartelisation charges. The companies have now also approached the Compat against the CCI order..Bar & Bench also spoke to JSA Partner Amitabh Kumar, who was representing Michelin India. Amitabh said, “There are a lot of similarities between the Cement Cartel Case and the Tyre Cartel Case. Cement cartel was also prosecuted on the basis of circumstantial evidence and similar circumstantial evidence was adduced by the DG in this case In spite of similarities in the conduct of the parties involved – homogeneous nature of product, excess capacity, price parallelism, exchange of commercially sensitive information and uncanny and unexplained action, which seems to be in concert, the same yard stick has not been applied by the Hon’ble CCI in both these cases.”