• Gulf Oil Corporation Ltd. (GOCL), Hyderabad, Andhra Pradesh
• Ideal Industrial Explosives Ltd. (IIEL), Secundrabad, Andhra Pradesh
• Solar Industries India Ltd. (SIIL), Nagpur, Maharashtra
• Blastec Explosives Ltd. (IEL), Kolkata, West Bengal
• Emul Tek Private Ltd. (ETPL), Satya Niketan, New Delhi
• Regenesis Industries Pvt. Ltd. (RIPL), Secundrabad, Andhra Pradesh
• Techno Blasts India Ltd.(TBIL), Secundrabad, Andhra Pradesh
• Black Diamond Explosives Private Ltd.(BDEPL), Dhanbad, Jharkhand
• Keltech Energies Ltd.(KEL)
• Explosives Manufacturers Welfare Association (EMWA), Kolkata, WestBengal.
• Explosives Manufacturers Association of India (EMAI), Secundrabad, Andhra Pradesh.
• Other Explosives Suppliers in India.
• India Private Ltd. (BIPL),Satya Niketan, New Delhi.
Allegations:
The informant, M/s Coal India Limited, a Public Sector Undertaking (PSU) of
Government of India is engaged in the business of production of coal. According to information, the explosive manufacturers/suppliers (Opposite
Parties Nos. 1 to 10 named in the information and other explosive suppliers in India) are engaged in the activity of manufacturing and supply of different types of explosives such as bulk explosives, cartridge explosives and related accessories in India. EMWA (the Opposite Party No. 11) and EMAI(the Opposite Party No.12) are the associations of these explosive
Manufacturers/ suppliers (hereinafter referred to as explosive suppliers). Till the year 2009, EMAI was communicating with the informant on behalf of the explosive suppliers. However, since 2009, another association by the name of EMWA has been active, writing to the informant on various issues concerning the explosive suppliers. It procures explosives from explosive suppliers for that purpose through a process of public tender
a) It has been alleged that the leading explosive suppliers named in the information control about 75% of the total market share and since they have formed a cartel, 75% of the market has been cartelised. This cartelised behaviour of the explosive suppliers has caused and is continuing to cause harm to the informant in purchase of explosives.
b) These companies collectively stopping supplies and threatening to stop supplies of explosives to the informant in the years 2006, 2007, 2009 and 2010, collectively fixing bid prices in 2009 and submitting identical price bids in response to the tender for the procurement of explosives in 2005-06.
The Commission considered the information in its meeting held on
24.02.2011. Having examined the facts and averments, the Commission formed a prima facie opinion and referred the matter under section 26 (1) Of the act to the Directors GENERAL FOR CARRYING OUT INVESTIGATION.
Enquiry by DG
• According to DG, it has been argued by the explosive suppliers that identical price quoted by them in the tender during the period 2005-06 was on account of unprecedented increase of Ammonium Nitrate in the year 2004, which is one of the raw materials for manufacturing explosives. The explosive suppliers had also approached the Chairman, CIL to get some elief in this regard According to the explosive suppliers, the then
Chairman, CIL had suggested them to quote the enhanced price in the subsequent tender bid so as to compensate the loss incurred during 2004 and as suggested by the Chairman, CIL all the explosive suppliers quoted identical price of Rs. 19500/- per MT in the tender of 2005-06, jump of 45% over the Last Purchase Price (LPP) of Rs. 13282/- per MT for bulk explosives.
• Taking into account all the relevant facts, DG has reported that no evidence could be found in the case suggesting collective fixation of the sale price of explosives by the explosive suppliers except for 2005-06. However, since the contract for the financial year 2005-06 was executed and completed within the financial year 2005-06 itself, the concerted action ceased to exist well before the notification of section 3 of the Act. Based on above, DG has concluded that the Opposite Parties have not contravened the provision of section 3 (3) (a) of the Act.
• Taking into account all the relevant facts, DG has reported that no evidence could be found in the case suggesting collective fixation of the sale price of explosives by the explosive suppliers except for 2005-06. However, since the contract for the financial year 2005-06 was executed and completed within the financial year 2005-06 itself, the concerted action ceased to exist well before the notification of section 3 of the Act. Based on above, DG has concluded that the Opposite Parties have not contravened the provision of section 3 (3) (a) of the Act.
• DG has also stated that the informant and the explosive manufacturers have long pending contractual dispute amongst them and therefore, allegations and counter allegations have been made by both the informant and the explosive manufacturers on different occasions. The allegations in the present case are nothing but the counter allegations of the informant against the explosive suppliers who had filed information before the Commission against the informant in case no. 04/2010.
On the basis of facts on record, DG has concluded that some of the Opposite Parties mentioned in the information indeed acted in a concerted manner to stop the supply of explosives during the period 12.04.2006 to Summarising his findings, DG in his report has concluded that although evidences do suggest that the explosive suppliers were engaged in anti-competitive acts of fixation of bid/sale price for the supply of explosives and limiting the supply of explosives during 2005-2006 and 2006-2007, since the provisions of section 3 the Act were not in force during that period, the explosives manufacturers/suppliers are not liable for violation of the provisions of section 3 (3) (a), 3(3) (b) and section 3 (3) (d) of the Act for the said acts.
Reply of opposite parties :
• In their replies to the report of DG, written submissions were filed by seven of the Opposite Parties. The OP-2, M/s Ideal Industrial Explosive Limited in its replies submitted that it had never engaged in any activity of bid-rigging or manipulation of bid process. It was also not engaged in boycott of Electronic Reverse Auction held by CIL in January, 2010 and has never given any threat to stop the supplies of explosives and accessories to CIL or to any of its subsidiaries at any point of time.
• The OP-10 (M/s Keltech Energies Ltd.) in its replies also denied that it was ever involved in any anti-competitive activity
•
Objections of CIL to DG's Report :
• The informant has stated that an analysis of price bids for the years 2004- 05, 2006-07, 2007-08 and 2008-09 clearly show that the explosive suppliers had engaged in cartelisation and bid rigging during these years.
• The informant has submitted that following common features were present in bids submitted by the explosive suppliers in each of these years:
i The difference in bids was very small, around 1% to 5% of bid amount. ii Despite the difference in the bid amounts being less, all the explosives manufacturers were willing to supply after negotiations which suggests that the initial bids were being artificially kept at a high level. If the original bids had been made in competitive market conditions, they would have approximated the competitive price. However, the fact that all the explosive manufacturers were ultimately willing to supply for substantially lower amounts strongly suggests that the initial bids were not at competitive prices. iii Different explosive manufacturers won different bids, showing that there was potential market sharing by the explosive manufacturers.
• As regards its allegations of stoppages in the year 2009 and 2010, the informant has submitted that DG has ignored various letters written by the informant and its various subsidiaries during April 2010 to July 2010 which provide contemporaneous evidence of shortages and stoppages in supplies of explosives by the explosive suppliers.
• The informant has also contested the conclusions of DG that the allegations of collective threats to stop supplies and identical letters sent by independent explosive manufacturers have no merit as they are only against a few of the manufacturers and because supplies were not actually stopped. Stating that the conclusions of DG are fundamentally flawed, the informant has submitted that the fact that the supplies were not actually stopped on those dates is entirely irrelevant. The mere fact that the supplies of explosives were not actually stopped does not mean that the offence under the Act was not committed. That there was a collective threat of disruption in supplies by the explosive manufacturers is enough to establish that there was an anti-competitive agreement among the competitors.
• According to the informant, DG has failed to contact any other purchaser of explosives to enquire about the effect of cartel of the explosive manufacturers/suppliers on their business or any other explosive manufacturer even when the information clearly lists "other explosive manufacturers" as contravening parties.
• According to the informant, the existence and conduct of the cartel among the explosive suppliers has caused and continues to cause an appreciable adverse effect on competition in India, by harming its coal mining operations and business, and by increasing the cost of explosives procured by it.
• The informant has submitted that any disruption in mining, production and the supply of coal to the industries as a result of repeated illegal collective boycott by the constituent members of the informant can have a severe adverse follow-on impact on the economy as a whole since adverse impact on mining and production of coal has a significant spillover effects on various economic activities in the country.
•
on a particular type of conduct
Decision of the Commission
• The Commission has carefully gone through all the materials and evidences available on record and has also considered the written and oral arguments of the informant and the Opposite Parties advanced during the proceedings in the case.
• The Commission notes that the informant procures explosives of different categories and other related materials from the explosive suppliers through a process of open tender to operate its Open Cast (OC) and Underground (UG) coal mines. It enters into a system of Running Contracts (RC) with successful bidders for the supply of explosives at a specified price for a specified period.
• The Commission notes that DG in his report of investigation has also submitted that the explosive suppliers apart from fixing bid rates had also stopped supplies of explosives to the informant for certain days during the year 2006-07 between 12.04.2006 and 16.04.2006. Based upon analysis of details submitted by the informant company, DG has concluded that certain
• Notices for stoppage of supply of explosives were issued by the explosive suppliers and supply was also disrupted during the period. It has been noted by the DG that one of the suppliers — Indian Explosives Limited had also admitted the fact of stopping the supplies to protest against the unilateral amendment of penalty clauses based upon weighted average powder factor.
• The Commission notes that to support its contention that the explosive suppliers had indulged in the act of collective stoppage of supplies or issuing collective threats to stop supplies even after 20.05.2009, since when the enforcement provisions of the Act came into effect, the informant company has submitted as an evidence certain letters issued by it and its subsidiaries to the explosive suppliers and also letters from certain explosive suppliers to the informant company and its subsidiaries. The informant has also submitted that supplies under the ongoing contracts had been quite erratic which shows that the explosive suppliers were acting collectively.
• Boycott Of E-Auction
One of the evidence produced by the informant to substantiate its allegations that the explosive suppliers have acted collectively in order to influence the process of bidding for supply of the explosives is their act of collective boycott of electronic reverse auction conducted by the informant company during 4th — 6th January 2010. As regards allegations of collective boycott of reverse auction held on 4th and 5th January 2010 for bulk and cartridge explosives and on 6th January 2010 for accessories like detonators and cast boosters, the Commission notes that in accordance with a decision taken by Board of the informant company in its meeting held on 09.09.2009, fresh tenders were floated for procurement of explosives for the year 2010.
• The Commission notes from the records that none of ten firms mentioned in the information participated in the reverse auction held on 4th and 5th of January 2010 for supply of bulk and cartridge explosives.
• The companies (a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of services;(c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding,
• The Commission has found the act of boycott of e-reverse auction by the explosive suppliers as violative of the provisions of section 3(3)(b) and section 3(3) (d) of the Act. The informant in the information has given the details of only ten explosive suppliers as the contravening parties. The details of all other parties who were technically qualified but did not submit price bids during reverse auction held during 4th — 6th January 2010 are not made available. Accordingly, the Commission decides to impose penalties at rate of 3% on average of three years turnover on the ten opposite parties named in the information under section 27(b) of the Act as under;
