- August 12, 2017
- Posted by: suvanlaw
- Category: Other Regulators
- CCI Imposes Penalty of Rs. 6700 crore on Cement Companies & CMA
Vide Order dated August 31, 2016, Competition Commission has imposed penalty upon cement companies and the Cement Manufacturers Association (CMA) for cartelization in the cement industry.
The Builders Association of India had filed a complaint alleging that the cement companies used the platform provided by CMA and shared details relating to prices, capacity utilization, production and dispatch and thereby restricted production and supplies in the market. Further, it also alleged that the cement companies were acting in concert in fixing prices of cement.
The Commission noted the action of the cement companies and CMA as being not only detrimental to the interests of consumers but also as detrimental to the whole economy, as cement is a critical input in construction and infrastructure industry, and thus vital for the economic development of the country.
CCI further noted that such interaction between cement companies using the platform made available by CMA transgressed the limits in sharing of information and extended to discussions on cost, prices, production and capacities, thereby, facilitating the enterprises to determine prices and production in a concerted and collusive manner, than in a competitive manner.
The cement companies and CMA have also been directed to cease and desist from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market.
Incidentally, Assam Real Estate and Infrastructure Developers’ Association has filed a case with the CCI on 02.09.2016 alleging that three cement companies (Star, Topcem and Dalmia) are leading a syndicate and indulging in rampant cartelization and manipulation of the market price to fleece the consumers of the Northeast.
- Relief or Not- COMPAT stays order of CCI with respect to cement cartels
On August 31, 2016, CCI had imposed penalty of Rs. 6700 Crore upon cement companies and the Cement Manufacturers Association for cartelization in the cement industry pursuant to an application by the Builder’s Association of India.
Subsequently, an appeal was filed by Ambuja Cement, Ultratech Cement, India Cements Ltd., Ramco Cement and JK Cement before the Competition Appellate Tribunal (COMPAT). On 21st November, 2016, COMPAT stayed the order of CCI against these companies. However, these companies are required to deposit 10% of the penalty in the Registry of the Tribunal before December 20, 2016 and if the appeal is ultimately dismissed, the companies will be liable to pay the balance amount with 12% interest p.a.
- COMPAT’s order in Gujarat Industries Power Co. Ltd. v. CCI
COMPAT held that the Competition Commission while exercising power under section 26(1) of the Competition Act, 2002 cannot adjudicate upon merits and de-merits of reference made by Central Government or State Government or statutory authority or averments/ allegations contained in information but is required to issue a direction to Director General to cause an investigation to be made into matter.
- COMPAT upholds CCI’s order in the matter of Power Grid Corporation of India Limited
An appeal was filed by Mr. Prem Prakash (“the Appellant”) against the order of Commission holding PowerGrid Corporation of India Limited (‘the Respondent”) liable for abuse of dominant position. The Appellant stated that the Respondent while getting its material tested by labs insists that labs should be accredited by NABL or accreditation bodies which are full member of ILAC/APLAC and which have a MRA with ILAC/APLAC. Further the Respondent specified that they are consumers and have freedom to choose the services they want. On the basis of this analysis the Commission concluded that from the information provided it could not find any such facts during the course of their consideration of the information which would have even faintly indicated that PGCIL had any presence in the relevant market delineated by the Commission.
The COMPAT agreed with the Commission views on delineation of relevant market and further noted that there is no vertical relationship between the Appellant and Respondent. It further stated that it is evident from the fact that there is no common course of business between the two entities involved in this case and it could not be said that the Respondent exercised any dominant position in the relevant market delineated by the Commission. Subsequently, the COMPAT upheld the decision of Commission and dismissed the appeal.
- MCA revised the exemption to combinations under Competition Act
The Government vide Gazette notification dated March 29, 2017 has exempted enterprises being parties to all forms of combinations under Section 5 of the Competition Act, 2002i.e. to acquisitions, mergers and amalgamations, from the provisions of the said section for 5 years in case the value of assets, shares, voting rights or control being acquired, merged or amalgamated does not exceed Rs. 350 crore or the turnover of the enterprise does not exceed Rs. 1000 crore. It further clarifies that the value of assets is required to be determined on the basis of the book value of the assets as per the audited books of accounts of the enterprise or as per statutory auditor’s report, as the case may be. Such value should take in to account any depreciation and include the value of commercial rights like copyright, patent, etc. The turnover is required to be certified by the statutory auditor on the basis of the last available audited accounts of the company.
- Government relaxes reporting norms for combinations under Competition Act, 2002
Central Government vide notification dated June 29, 2017 has exempted every person or enterprise who is a party to a combination as referred to in section 5 of the Competition Act, 2002 (“Act”) from giving notice within 30 days mentioned in section 6(2) of the Act for a period of 5 years. In terms of section 6(2) of the Act every combination beyond a certain threshold need to be intimated to CCI within 30 days of being finalized by the parties concerned. However, the exemption is subject to the provisions of section 6(2A) and section 43A of the Act. In terms of section 6(2A) of the Act, any combinations shall come into effect only after either 210 days have passed from the day on which the notice has been given to the CCI or when the regulator has passed an order. Further, as per section 43A of the Act, in case of failure by any person or enterprise to give notice to the CCI before bringing into effect a particular combination it shall be liable for penalty which may extend to 1% of the total turnover or the assets, whichever is higher, of such a combination.
- MCA extends exemption provided to Vessel Sharing Agreements from CCI purview
Ministry of Corporate Affairs (“MCA”) vide notification dated June 16, 2017, has extended the exemption provided to Vessels Sharing Agreements of Liner Shipping Industry from the provisions of section 3 of the Completion Act, 2002 for a further period of 1 year with effect from June 20, 2017, in respect of carriers of all nationalities operating ships of any nationality from any Indian port provided such agreements do not include concerted practices involving fixing of prices, limitation of capacity or sales and the allocation of markets or customers.