On October 11, 2022, the CCI accepted allegations of bid-rigging and cartel conduct against eight companies engaged in the manufacture and supply of axle bearings to the Indian Railways. The complaint alleged six companies had indulged in cartelisation in the bidding process for the procurement of axle bearing used in railway coaches and have quoted identical prices and its break-up in the e-tender flouted by the complainant. The DG later added two more companies as opposite parties. (these eight companies are collectively referred to as the ‘OPs').1
The DG in its investigation, found that there was regular communication among the OPs through telephone calls as well as SMS. Six of the OPs quoted identical prices in the bid, and four of them had reduced their prices to an exact same number post negotiation despite different geographical locations of the OPs. Two lesser penalty applicants too admitted on oath that the OPs had indulged into bid-rigging. It was also found that the OPs maintained and shared records of allocation of tender quantities, assisted/ compensated each other in case of any shortfall in any member's agreed share, and the OPs continued the cartel post-2014 despite being held to have formed a cartel for bid-rigging.2 The DG also found certain individuals played an active role in the contravention.
Based on the lesser penalty applications and the evidence collected by the DG, the CCI held there was a pattern of identical/similar bids quoted by the OPs over 8 years despite the OPs having separate manufacturing units situated in different locations, with different manufacturing costs, overhead costs, transportation costs and profit margins. Some OPs have admitted before the DG that they exchanged commercially sensitive information. Thus, the CCI presumed that the OPs' conduct caused AAEC in the market and held the OPs liable for contravening the provisions of Sections 3(3)(a) and 3(3)(d) read with Section 3(1) of the Competition Act. The CCI also held certain individuals of the OPs liable under Section 28(1) of the Act.
However, the CCI did not impose any penalty on the OPs as; (i) they are MSMEs having limited staff and small turnover; (ii) they were cooperative and non-adversarial; (iii) they stopped the conduct immediately after the investigation began in the previous case in 2020; and (iv) imposition of penalty may lead to exiting of some firms from the market further reducing competition.
Footnotes
1 Ref. Case No. 02 of 2020.
2 Ref. Case No. 02 of 2018.
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