Rajasthan Cylinders v. Competition Commission: A guiding tool for Bid Rigging cases

L Badri Narayanan

In the recent judgment of Rajasthan Cylinders v. Competition Commission of India, the Supreme Court has clarified an important issue relating to bid rigging under competition law. The Court has held that in cases of bid rigging under Section 3(3)(d) of the Competition Act, 2003, mere instances of price parallelism or price matching cannot be the sole basis for an adverse finding.

In this case, the appellants were suppliers of LPG cylinders to Indian Oil Corporation Limited (IOCL) and other Oil Marketing Companies [OMCs].  It was alleged that the appellants indulged in bid rigging by quoting same prices in their bids. The Director General (Investigation) (DG) discerned a pattern wherein parties submitted their bids in various states at the same level to prove price parallelism. The DG in its report indicated instances when the appellants met to allegedly discuss the tender prices. Based on these findings, the Competition Commission of India (CCI), as well as the Appellate Tribunal, confirmed the allegation of bid rigging and imposed penalties.

The Supreme Court while deciding the case has adopted a different approach. While observing the instances of price parallelism, the Court has held that a key test which needs to be identified while investigating cases of bid rigging is the market situation. The Apex Court identified that this is a case where the buyers are very few and they have a control over the prices of the goods being sold by the seller. Such a situation is known as ‘oligopsony’.

In such a scenario, the onus of anti-competitive behaviour cannot be entirely saddled on the seller to mark him as an offender. To substantiate this aspect, the Court took recourse to judgments of the European Court of Justice which the address the concept of ‘oligopsony’ vis a vis competition law. Based on these findings, the Supreme Court allowed the appeal of the sellers and set aside the allegation of bid rigging under the Act.

The decision of the Hon’ble Supreme Court will immensely contribute to the developing jurisprudence of competition law. This decision is important as India has a huge diversity of market situations. In India, a large number of suppliers/sellers exist in various locations who supply goods/services to a limited number of buyers. Many such suppliers will be those who are servicing the government dominated/controlled business such as mining and transportation of minerals, steel sector, railways etc. There are many of cases of such suppliers having been investigated and charged for indulging in anti-competitive practices by the Commission and their cases are pending at various forums.

This case will act as an effective test for the Appellate Tribunal, Commission and DG to decide if an entity is indulging in above mentioned unfair practices. This case is also a guiding tool for the DG, who now must see the entire market scenario before recording its findings against an entity.

The author is a Partner at Lakshmikumaran & Sridharan Attorneys.