CCI finds 7 firms guilty of bid-rigging, cartelisation, manipulation of Indian Railways tenders

The Competition Commission of India (CCI) today found 7 firms, who participated in a tender called by the Indian Railways, guilty of bid-rigging and cartelisation under the Competition Act, 2002 (the Act). [In Re: Cartelisation in the supply of Protective Tubes to Indian Railways].The CCI found that the 7 firms were actively engaged with each other to discuss the bids leading to manipulation of the Indian Railways’ bidding process for the procurement of polyacetal protective tubes"..the modus operandi of the collusion/coordination in the form of cartel pool amongst the OPs, which includes the allocation/allotment of tenders amongst the OPs, revision of sharing pattern, induction of new members to the pool, calculation methods to arrive at the price to be quoted, discussion on rates to be quoted, complaints regarding undercutting, and communication amongst OPs to withdraw offers", the CCI found.Therefore, it imposed penalties on the parties at the rate of 5% of their respective average turnover generated from the sale of protective tubes for the last three preceding financial years..The issue of possible cartelisation among the tender bidding participants of the Indian Railways was taken by the CCI suo motu.As per the investigation report submitted by the Director General, CCI, all the 7 firms were found to be engaged in the manufacture and supply of protective tubes.The report also stated that 3 out of the 7 firms were sister concerns and had even applied for the tender from the same IP address..The report also stated that 3 out of the 7 firms were sister concerns and had even applied for the tender from the same IP address.DG report.As per Section 3(3) of the Act, bid-rigging is an act when enterprises engaged in identical or similar production or trading of goods or provision of services, come to an agreement “that has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding”.The report concluded, with evidence, that there was an agreement between all the parties on price, and allocation with an intent to manipulate the bidding process by forming a cartel of vendors..The firms countered the findings in the report individually.It was argued that the report fails to establish any Appreciable Adverse Effect on Competition (AAEC) ot barriers to entry in the market..The CCI failed to find merit in this contention observing that “once an agreement of the types specified under Section 3(3) of the Act is established (including cartel), the same is presumed to have an AAEC within India. Thus, it is axiomatic to presume in the present matter that the impugned conduct of the parties has caused AAEC within India”.In this regard, the CCI also cited the judgment of the Supreme Court in Rajasthan Cylinders and Containers Ltd. v Union of India & Ors. in which it was held that is upon the contravening parties to rebut the presumption of AAEC by showing positive effects emanating from the cartel activity such as accrual of benefits to the consumers.In the instant, the CCI noted that the firms had not put on record any evidence contrary to the presumption of AAEC and hence, the exception will not be applicable to them..The CCI also rejected another argument that the firms did not act upon any information that was shared."It is irrelevant as to whether or not the information contained or the share allocated in the said e-mails was implemented or responded to the E-mails”, the CCI said..Upon analysing the evidence on record and the report of the DG, the CCI found all firms guilty under the provisions of Section 3(3)(a), 3(3)(b), 3(3)(c), and 3(3)(d) read with Section 3(1) of the Act (anti-competitive agreements) and imposed penalties in terms of Section 27(b) of the Act.The firms and some of the individuals heading the firms were directed to deposit their respective penalty amounts within a period of 60 days..The Coram comprised CCI Chairperson Ashok Kumar Gupta, Member Sangeeta Verma and Member Bhagwant Singh Bishnoi..The Tube companies were represented by the following Harsh Surana, Deepali Sharma, Sandeep Malik; Shardul Amarchand Mangaldas team Rohan Arora, Shweta Shroff Chopra, Pranav Satyam, Kshitij Sharma, Ritesh PuriTadimalla Bhaskar GowthamIC Universal team Kartikey Nayyar, Shaurya M. TomarAnantlaw Partners Anu Monga, Rahul Goel and Neha MishraMr. Venkata Subramanyam (party-in-person).[Read Order]