India: CCI Imposes Penalty On Geep Industries For Being A Member Of Bilateral "Ancillary" Cartel

Last Updated: 26 September 2018

Article by MM Sharma, Head Competition Law & Policy Practice, Vaish Associates, Advocates, New Delhi, India

The Competition Commission of India vide order dated 30/08/18 imposed a penalty of Rs.9,64 06,682 on Geep Industries (India) Private limited for acting in violation of Section 3(3) read with Section 3(1) of the Competition Act, 2002.

The case was initiated by the Commission Suo Motu on the basis of a Leniency/ Lesser Penalty Application filed by Panasonic Corporation, Japan on behalf of itself and Panasonic Energy India Co. Limited and their respective Directors, officers and employees on 7th September 2016 which disclosed that there existed a "bilateral ancillary cartel" between Panasonic (India) and Geep industries in the institutional sales of dry cell batteries. It was further deduced from the LP application that Panasonic (India) had a primary cartel with Everyday Industries India (Everyday) and Indo National Limited (Nippo), where they coordinated the market prices of zinc-carbon dry-cell batteries and therefore Panasonic (India) had the fore knowledge about the time of price increase and it used as a leverage to negotiate and increase the basic price of the batteries being sold by it to Geep Industries. It was further disclosed in the LP application that Panasonic (India) and Geep Industries used to agree on the market price of the batteries being sold by them, so as to maintain price parity. Such price parity was in consonance with the prices determined by the Primary cartel consisted of Panasonic, Eveready and Nippo.

Finding of the DG in the investigation report:

The DG concluded a contravention by Panasonic (India) and Geep Industries basing its reliance on the Product Supply Agreement whereby, there existed a mutual obligation on both the parties  to not to take any steps detrimental to each other's market interests with respect to the market prices and such prices were to be reviewed and maintained at an agreed level.

In addition, the DG found the following people liable under Section 48- Mr. Parimal Vazir(General Manager of Panasonic (India)), Mr. S.K Khurana (Managing Director of Panasonic (India), Mr. Pushpa ( In-charge of Accounts and Finance of Geep Industries), Mr Joeb Thanawala ( exchanged mails containing sensitive information) and Jainuddin Thanawala (Director of Geep Industries).

Panasonic trying to justify and challenge the findings of the DG based on the Product Supply Agreement stated that such clause which obliged Geep Industries to not act in detriment to its interest as to the market prices, was merely to ensure discipline in trade. However, the commission agreed with the DG saying such a clause inherently impedes competition.

In addition to the Product Supply Agreement, other evidences relied upon by the DG were the statements and e-mails exchanged between the representatives of the parties whereby commercial sensitive information about prevailing and desired market prices of dry cell batteries were exchanged and had a price monitoring system in place.

Analysis by the Commission:

The Commission agreed to the DG's opinion based on the Product Supply Agreement. It was noted by the Commission that the initial supply of batteries by Panasonic (India) to Geep Industries was on quotation basis based on the quantities demanded and the rates of which were based on Price plus duties and taxes. However, later the Product Supply Agreement was entered into them which clearly obliged Geep Industries to maintain the market prices as agreed by Panasonic (India). As regards the defense of Panasonic (India) that the particular clause which obliged Geep Industries to not act in detriment to its interest as to the market prices was merely to ensure discipline in trade, the Commission denying such defense stated that "the Product Supply Agreement was an agreement in normal commercial trade on 'principal-to-principal' basis between two independent parties, who are otherwise competitors" and such an agreement impeded competition and cannot be justified.

Geep Industries in an attempt to justify submitted that it was compelled by Panasonic (India) not to sell the batteries below the price determined. To this, in addition to the 'Principal-to-principal agreement', the Commission also emphasized that, even though Geep Industries was merely a recipient of information on pricing of a "Larger Cartel/Primary Cartel" from Panasonic (India) and such disclosure was unilateral in nature, still it cannot escape liability.

This observation by the Commission was further empowered by Para 62 of the Guidelines of European Union on applicability of Article 101 of TFEU to Horizontal Co-operation agreements, 2010 which states: "A situation where only one undertaking discloses strategic information to its competitor(s) who accept(s), it can also constitute a concerted practice................When one undertaking alone reveals to its competitors, strategic information concerning its future commercial policy that reduces strategic uncertainty as to the future operation of the market for all the competitors involved and increase the risk of limiting competition and collusive behaviour."

The Commission agreeing to the findings of the DG observed that "when two independent competing competitors agree for taking actions to protect each other's interest in the market, by no stretch of imagination can such agreement be considered pro-competitive. The very objective of the clause is to restrict or even eliminate fair competition in the market, and therefore, no justifications offered are acceptable."

Panasonic Corporation (Japan) submitted to the Commission that since it is not engaged in the manufacture and sale of dry-cell batteries in India directly and moreover since DG has not found any contravention by it, its name should be struck off from the present case. The Commission denied the submission and disagreed to strike off its name, however, noted that since no investigation or finding has been made by the DG, it would be inappropriate for it to make any analysis or finding against it.

The penalty imposed on Geep Industries was a sum of Rs. 9,64,06,682/- calculated at 4% of the turnover for each year of the continuance of the cartel which is from 1.10.2010 (when the PSA was entered into) till 30.04.2016 (when the last supplies were made).

A penalty of Rs. 73, 93, 25, 600/- calculated at 1.5 times the profit for each year of continuance of cartel was also decided against Panasonic Energy India Co. Limited, however, they were granted 100% reduction in the penalty amount as the Commission found that Panasonic (India) and its representatives had provided genuine, full, continuous and expeditious cooperation during the entire course of investigation which not only enabled the Commission to order investigation but also helped in establishing a contravention of Section 3.

A penalty of Rs. 1, 29, 839 /- , Rs. 1, 10, 386/- and Rs. 2, 40, 452/- calculated at 10% of the average of their income for three preceding years was imposed on Mr. Pushpa M (In-charge of accounts and finance), Mr. Joeb Thanawala (exchanged emails containing sensitive information), and Mr. Jainuddin Thanawala (Director) of Geep Industries under Section 48.


This case shows hardening of stance on cartels in India because, Firstly: This is the first case in which a party which was not a member of the original/Primary cartel was held liable on the ground that it is in a "Bilateral ancillary cartel"  with one of the members of the Primary cartel. The Primary cartel consisted of Panasonic, Eveready and Nippo, and Geep industries (Geep) was only in a bilateral relation with Panasonic, which is the supplier of dry cells. As Panasonic was a member of the Primary cartel it had the fore knowledge of the price change being made by its competitors and it used such knowledge to influence the prices of Geep industries. Geep being the victim/ buyer of the pre- cartelized products had no knowledge about the prices having been pre- fixed by the Cartel perhaps could not have been imputed with a liability ,  however , the Commission noted that it should have refused such an agreement as it was fully aware of the existence of the Primary Cartel.

Secondly: Panasonic Corporation, Japan , the leniency applicant, filing on behalf of itself and its Indian subsidiary prayed to strike out its name from the inquiry since it is not engaged in the manufacture and sale of dry cell batteries directly in India and the DG also did not find any involvement of it in the matter, still , the Commission , even though observed that it would be inappropriate to form an analysis against Panasonic, Japan as the DG has found no involvement in the investigation report, chose not to strike off the name throughout the matter.

This article first appeared on the Antitrust & Competition Law Blog.

Specific Questions relating to this article should be addressed directly to the author.

© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

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