COMPAT by its order dated July 1, 2016 has over-ruled the order
of CCI wherein the Indian Jute Mils Association (IJMA) and Gunny
Trade Association (GTA) were penalized for alleged cartelization in
pricing of jute bags. It was alleged that the jute manufacturers
have acquired a monopoly position as a result of the circular of
the Government under the Jute Price Maintenance Act, 1987 that 100%
sugar to be produced by the sugar factories is to be mandatorily
packaged in the jute bags(A-Twill type). Taking advantage of this
monopoly, the jute mills have unreasonably hiked the prices of jute
bags from INR 53.50/bag in April 2010 to INR 64.50/bag in February
2011. It was alleged that this increase was possible only because
of an agreement/understanding among all the members of the IJMA and
GTA, who were quite conscious of the fact that they enjoy complete
monopoly. Thus, it was alleged that, IJMA/GTA have cartelized the
market for packaging material for sugar thereby infringing Section
3(3) of the Act by jointly deciding sale prices and limiting
technical development of the industry. The CCI considered the same
as prima-facie violation of Section 3(3)(a) of the Act and ordered
an investigation into the same.
The DG Report submitted after detailed investigation found that
IJMA and GTA are utilizing their platform to discuss the jute bags
prices to be published to discuss the jute bags prices to be
published in the GTA Daily Price Bulletin (DPB) clearly indicate
the involvement of IJMA in fixation and publication of prices of
The CCI agreed with the findings of the DG, primarily, based on
the fact that a comparison of A-Twill jute bags with B-Twill had no
correlation with each other despite the basic material and
production cost remaining the same. In fact, the price of A-Twill
bags on per gram basis was found higher by approximately 50%
compared to that of B-Twill Bags. The actual transactions in the
market were taking place almost near to the DPB price meaning
thereby that the DPB prices were actually being followed. Such
conduct of IJMA and GTA was held to be in violation of Section
3(3)(a) and Section 3(3)(b) of the Act. The CCI penalized IJMA and
GTA at the rate of 5% of their average turnover for the past three
years. The total amount of penalty payable by IJMA was indicated as
INR 768527/- and on GTA as 35169/-. Similarly, the CCI also imposed
a penalty on 25 members of IJMA and 19 members of GTA@ 5% of their
average income of the last three financial years.
In the appeals, the COMPAT noted that the participation of Mr.
U.C. Nahata, one of the members who joined the CCI more than three
years after filing of the case, in the decision making of the CCI
in the present case had vitiated the order due to violation of
principles of natural justice as he was not part of earlier hearing
in the CCI. On the merits of the order, the COMPAT noted that
neither the DG nor the Informant could collect any evidence to show
that there was an agreement between GTA and IJMA about fixation of
price of A-Twill jute bags or that the price of such bags was fixed
by GTA after discussion with IJMA. The CCI did not independently
analyze the findings of DG and mechanically approved the findings.
None of the correspondence referred to between IJMA and GTA show
that they had entered into an agreement for increase in prices of
A-Twill bags. Further, the comparison of A-Twill and B-Twill bags
for faulty as the A-Twill bags were of 1190 gms. as compared to
B-Twill bags of 665 gms. The COMPAT held that the finding of
violation of Section 3(3)(a) and 3(3)(b) were unsustainable and
deserved to be set aside.
Lastly, the COMPAT also held that the penalty imposed on IJMA
and GTA (at the rate of 5% of the average turnover of the past
three years) is disproportionate and without setting out cogent
reasons. The COMPAT sets aside the order of the CCI and the penalty
imposed on IJMA and GTA.
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The Legal Metrology Act, 2009 was passed by the Indian Parliament in order to repeal and replace The Standards of Weights and Measures Act, 1976 and the Standards of Weights and Measures (Enforcement) Act, 1985.
In the wake of liberalization and privatization that was triggered in India in early nineties, a realization gathered momentum that the existing Monopolistic and Restrictive Trade Practices Act, 1969 was not equipped adequately enough to tackle the competition aspect of the Indian economy.
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