CCI was unduly reliant on internal notings of 4 PSU
insurance companies in the bid-rigging case.
As per a July 10 decision of the Competition Commission of India
(CCI), a combined penalty of Rs 671 crore is imposed on four PSU
insurance companies—National Insurance, New India Assurance,
Oriental insurance and United India Insurance—for bid-rigging
and cartel activities in response to tenders floated by the
Government of Kerala for selecting an insurance service provider
for the Rashtriya Swastha Bima Yojna.
The finding of the CCI is primarily based on an Inter-Company
Coordination Committee (ICCC) meeting between these companies,
recording their agreement to be ranked in the bidding process
(presumably) in terms of the price quoted by them.
The four companies had put up a common (and combined) defence
that since they were completely owned by the government of India
and managed and controlled by the department of financial services
(ministry of finance), they were a single economic entity and were
therefore justified in discussing and taking a coordinated approach
in the bidding process. However, the defence raised by the
insurance companies raises issues regarding the extent to which
these companies coordinate and align their commercial and business
decisions. CCI may consider investigation of such (deliberate)
anti-competitive practices adopted by these companies in other
areas of their commercial activity.
The decision raises an important question—whether the
evidence in the matter conclusively leads to identifying
cartelisation among the state-run insurance companies. CCI relied
heavily on minutes of the ICCC meeting to presume a cartel between
the four companies. However, the ICCC minutes do not, as a
standalone, lead to such a conclusive inference of cartelisation.
It does not prove that insurance companies had discussed their bids
with one another or had ultimately coordinated the pricing of their
The conclusion of price manipulation has been drawn out by CCI
by using the internal notes of such companies in relation to the
tenders issued by the government of Kerala. The internal notes
refer to the companies opting for re-tendering due to operational
losses, and quoting higher tariffs during 2010 and 2011. Such
internal noting, by itself, cannot be a proof of coordinated
efforts between these companies for bid-rigging; it needs to be
proven that the companies had acted jointly and in a coordinated
manner pursuant to such internal noting.
In order to further establish price manipulation, CCI also
relied on the fact that one of the competing private insurance
companies had been able to run its business profitably during 2013
to 2015 at lower insurance premium.
This again can't be a conclusive evidence that the four
insurance companies colluded for upward revision of their prices.
Every company has its own efficiencies and it is a widely accepted
position that PSUs are not best placed in terms of cost efficiency.
Further, the conclusion of CCI is self-defeating since United India
was at a risk of losing in the bid process with a higher price.
While it is a difficult to unearth direct evidence of
conspiracies of cartelisation and price-fixing where decisions are
taken behind closed doors, such conclusions cannot be drawn purely
on the basis of assumptions. It would have been worthwhile for the
DG to carry out extensive examination both in terms of economic
evidence e.g. pricing patterns vis-ŕ-vis costs, pricing
differential, profitability and revenue generation of the concerned
companies, and hard evidence in the form of letters,
communications, mails and statements recorded of participants of
the ICCC meetings.
However, the DG appears to have wounded up the investigation in
three months when their European and US counterparts take years to
gather data and evidence in support of such offences. The reason is
that the standard of proof applied by the anti-trust authorities in
these jurisdictions are strict and do not allow an element of
It is indeed difficult for the competition regulator to cope
with the growing number of anti-trust cases that are being filed in
various sectors of business. Nonetheless, exigencies of
investigation cannot lead the regulator and courts to be emotive in
dealing with such issues and must ensure that they look at hard
data and evidence to arrive at findings of anti-competitive
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