The Competition Commission of India (CCI) has imposed penalties on 10 cement companies and their apex association - Cement Manufacturers Association (CMA) for cartelisation. The CCI has levied penalties on 10 cement companies. The Builders Association of India (BAI) had filed complaint against the cement companies and the CMA alleging in fixing collectively prices of cement. It was alleged that these cement companies and the CMA shared details relating to prices, capacity utilisation, production and dispatch and thereby restricted output and supplies. It was also detrimental to the interests of consumers and the economy as cement is a basic input in construction and infrastructure industry. The CCI(Competition Commission of India) is quasi-judicial statutory body established under The Competition Act, 2002. It established in 2003 to eliminate practices that adversely affect competition in different industries and protect interests of consumers and ensure freedom of trade. Its predecessor was the MRTPC (Monopolies and Restrictive Trade Practices Commission) which was functional prior to 1991 Economic Reforms.
COMPAT Order: Aggrieved by CCI´s orders, the Respondents appealed before the Competition Appellate Tribunal (¨COMPAT¨), on the grounds of violation of principles of natural justice. One of the questions that rose was, whether CCI´s Chairperson who did not participate in the hearing of arguments of the Respondents could become a party to the final order dated June 20, 2012. The Respondents also raised objections on the grounds of unfair hearing, bias and pre-determined mindset. COMPAT noted that thorough consideration was not given to the report of the Director General (´DG¨), parties´ submissions and interlocutory orders. COMPAT observed that procedural defect in nature of non-observance of principles of natural justice cannot be cured in appeal, because if natural justice is violated in the first stage, the same cannot be given as true right in an appeal. No party can be compelled to satisfy an unjust trial. Accordingly, the COMPAT set aside the impugned orders and remitted the matter to the CCI for fresh adjudication of the issues relating to the alleged violation of S. 3(3)(a) and S. 3(3)(b) read with S. 3(1) of the Act, in accordance with law.
Issues and Arguments
CCI framed 2 questions for determination; whether alleged conduct of the Respondents was an (i) anti-competitive agreement under S. 3 and (ii) amounted to abuse of dominance under S.4 of the Act.
CCI observed that: Relying on statistical information on price, production, supply in cement industry, minutes and reports of CMA, facility utilization reports, party testimonies, the CCI held that the Respondents operated in a cartel to cause appreciable adverse effect in competition in cement industry for May 2009 to March 2011.
CCI´s Decision on Anti-Competitive Agreement
In cartelization, parties are cautious to avoid explicit and direct evidence such as minutes, paper trails, call records, inevitably mandating an inference to be based on circumstantial evidence taken as a whole and economic indices.
Cement manufacturing companies had deliberately reduced their production and produced much less than the installed capacity to create an artificial scarcity and raise the prices of cements in order to earn abnormal profits.