India: CCI Penalizes 10 Transportation Companies For Bid Rigging In Public Procurement Tenders

Last Updated: 17 October 2017
Article by Arjun Nihal Singh

In a recent order, the Competition Commission of India (Commission/ CCI) penalized 10 transportation companies1 (Opposite Parties) for rigging bids in response to tenders floated by a public sector undertaking for transportation of coal and sand2 (Order). The CCI held that the Opposite Parties indulged in bid rigging in violation of Section 3(3)(d)3 read with Section 3(1)4 of the Competition Act, 2002 (Act) and the came down heavily on the transportation companies as the tenders were for procurement of services by a public utility, which were ultimately meant for the public at large.

Factual Background

The informant in the present case was a public sector undertaking engaged in the business of mining and supplying of coal to major industries such as electricity, cement, fertilizers, steel, chemical etc. whereas the Opposite Parties were engaged in ancillary services in colliery areas including sand and coal transportation.

The informant had floated four tenders for procurement of services of the Opposite Parties for coal and sand transportation. In response to the tenders, the Opposite Parties submitted identical bids, which resulted in the genesis of the proceedings before the CCI. The CCI took prima facie cognizance of the matter on 02.07.2015 and directed the office of the Director General, CCI (DG) to cause an investigation.

The DG submitted its investigation report on 17.01.2016 and concluded that (1) none of the opposite parties were able to justify their conduct of quoting identical rates; (2) that there were regular talks between the bidders and that they could not substantiate in any way, legitimate grounds for such communication; (3) many of the bidders had business and financial dealings with each other and they met at social gatherings and meetings; (4) some of the bidders admitted their conduct of bid rigging in some of the previous tenders floated by the informant; (5) that few of the bidders kept exchanging important information regarding the instant matter and its investigation. On the basis of the circumstantial evidence collected by the DG, it was concluded that the Opposite Parties indulged in bid rigging in contravention of Section 3(3) (d) read with Section 3(1) of the Act.

After considering the report of the DG, the CCI sent the investigation report to the parties for their comments/ objections. The opposite parties took numerous defenses some of which included (1) mis-joinder of tenders as they related to separate products; (2) violation of principles of natural justice by recording statements in English whereas the parties made their statements in Hindi; (3) non-admissibility of call data records as the same were not supported by affidavits as per Section 65B of the Evidence Act, 1872; (4) that the DG erroneously relied on previous tenders and could not go beyond the order of investigation which restricted the investigation only to the four impugned tenders; (5) failure to establish any agreement to rig bids; (6) long standing relationship between the parties has been wrongly considered by the DG as a plus factor; (7) reliance placed by the DG upon family relationships between some of the bidders cannot be construed as a plus factor; (8) failure of the DG to prove any AAEC; and (9) that the Opposite Parties are first time offenders and no harm has been caused to consumers as the impugned tenders were cancelled.

Analysis

The Order of the Commission appears to reinforce their approach of aggressively prosecuting hardcore cartels, especially in the public procurement space. From the date of enforcement of Section 3 of the Act i.e., 20.09.2009, the Commission has prosecuted approximately 15 cases (in the public procurement space) out of which 8 have resulted in infringement findings, many of these cases were instituted by aggrieved informants who were either subjected to unfair terms and condition or bid rigging.

The Commission vide its Order appears to have laid down certain plus factors which supplement corroboration of evidence to arrive at a finding of collusion, for instance call data records to prove communication amongst the bidders, quoting of near identical rates in previous tenders, business and financial dealings between many bidders, meetings at social gatherings, infrastructural conditions at the office of the informant, admission of bid rigging in earlier tenders etc.

Further, the CCI drawing power from the recent judgment of the Supreme Court of India in Excel Crop Limited v. CCI & Anr5, rejected the argument of the Opposite Parties that the DG ought not to have investigated and relied upon the conduct of the Opposite Parties in previous tenders as they did not form part of the initial order of investigation. The CCI noted that the initial order of investigation did not in any manner restrict the DG to limit the scope of investigation to the four impugned tenders and that for the purposes of inquiry into bid-rigging, it is inherently relevant to undertake a holistic assessment of facts and circumstances including the behavior of the parties in other relevant tenders/ previous tenders to establish whether quoting of identical prices is merely a co-incidence or repetitive conduct of the opposite parties.

The CCI reiterated that appropriate standard of proof to establish cartelization/ bid rigging ought to be preponderance of probabilities and not 'beyond reasonable doubt' as the proceedings under the Act do not involve criminal punishments but only monetary penalties and that detection of cartels is arduous, as such conspiracies are hatched in secrecy and many a times direct evidence is unavailable.

It appears that the while returning a finding on the liability of the office bearers, the CCI lost sight of its recent order in Director, Supplies & Disposals, Haryana v. Shree Cement Ltd.6, wherein it categorically held that 'Lastly, the Commission notes that though the DG has identified the individuals of the OPs for the purpose of proceeding under Section 48 of the Act; however, on perusal of the DG Report, it appears that, save and except recording the designation of such individuals and noting briefly their work profile based on their respective statements, no specific investigation was undertaken to link their role with the impugned conduct of the OPs. In these circumstances, the Commission is not inclined to proceed against such individuals as reported by the DG in Chapter 8 of the Investigation Report. Resultantly, proceedings initiated against them under Section 48 of the Act stand discharged forthwith.'7 The CCI appears to have yet again disregarded the precedents laid down by the erstwhile Competition Appellate Tribunal, which in a plethora of cases has held that the Scheme of the Act suggests that proceedings against individuals under Section 48 of the Act may only begin once the final order has been passed under Section 27 of the Act.

Further, the CCI taking into account the importance of the electricity sector, treated cartelization in the public procurement space as an aggravating factor, though it weighed in cooperation by the Opposite Parties as a mitigating factor, thereby imposing a penalty of approximately INR 120 million8. Additionally, the CCI also imposed penalties on eight officers amounting to INR 390 thousand who were responsible for the conduct of the opposite parties9.

The Order seems to have clarified the approach of the CCI with respect to many facets of competition laws in India. For instance, plus factors that may be considered by the CCI while prosecuting cartels, the standard of proof required to establish cartelization, the importance of public procurement and competition compliance programs.

However, it appears that even though steps were taken by the Opposite Parties to instill the spirit of competition laws within their organization by implementing a competition compliance program, the CCI did not treat the same as a mitigating factor.

It flows from the order that the enterprises already under the lens of the CCI may not benefit much from competition compliance programs, if the same are implemented after a probe has been initiated. This may be construed to be a setback for enterprises grappling with stringent competition laws in India and at the same time trying to comply with the law by implementing competition compliance programs.

Arjun Nihal Singh is a Senior Associate in the Competition Law Practice Group at Luthra and Luthra Law Offices. He graduated from Amity Law School, Delhi in 2014 with a degree in B.A.,LL.B. (Hons.). At the Firm, He has been engaged in various complex competition law litigations, mergers as well leniencies across various sectors. He has represented clients engaged in various fields including real estate, technology markets, agriculture, auto parts etc. before the Competition Commission of India, Competition Appellate Tribunal, High Court of Delhi as well the Supreme Court of India. He can be reached at ansingh@luthra.com

Footnotes

1. SSV Coal Carriers Pvt. Ltd.; Bimal Kumar Khandelwal; Pravin Transport; Khandelwal Transport; Khandelwal Earth Movers; Khanduja Coal Transport Co.; Punya Coal Road Lines; B. Himmatlal Agarwal; Punjab Transport Co.; Avaneesh Logistics Pvt. Ltd.

2. In re: Western Coalfields Limited v. SSV Coal Carriers Pvt. Ltd. & Ors., Case No. 34 of 2015, Order dated 14.09.2017;

3. Bid rigging or collusive bidding;

4. Restriction on enterprise or association of enterprise or persons or association of persons from entering into any agreement which causes or is likely to cause Appreciable Adverse Effect on Competition (AAEC)

5. Civil Appeal No. 2480 of 2014, Order dated 8.05.2017;

6. Ref Case No. 05 of 2013, Order dated 19.01.2017;

7. Para 281;

8. Four percent of the relevant turnover of the past three financial years of the OPs, i.e., from providing coal and sand transportation services;

9. Four percent of the average income from the past three financial years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions