Case No. 29/2010. Case: Builders Association of India Vs Cement Manufacturers' Association and Ors.. Competition Commision of India
| Case Number | Case No. 29/2010 |
| Judges | Ashok Chawla, Chairperson, H.C. Gupta, Member (G), R. Prasad, Member (R), Geeta Gouri, Member (GG), Anurag Goel, Member (AG), M.L. Tayal, Member (T) and Shiv Narayan Dhingra, Member (D) |
| Issue | Competition Act, 2002 - Sections 19, 19 (3), 19(3), 19(3)(e), 19(e), 19(f), 2 (c), 2(b), 26 (1), 27, 27(b), 3, 3 (1), 3 (3), 3 (3) (a), 3 (3) (b), 3 (3)(b), 3(1), 3(3), 3(3) (a), 3(3)(a), 3(3)(b), 3(4), 3(4)(e), 4, 41, 41(2), 19(d) |
| Citation | 2012 CompLR 629 (CCI) |
| Judgement Date | June 20, 2012 |
| Court | Competition Commision of India |
Order:
1. The present matter relates to an information filed under section 19 of the Competition Act, 2002 (herein after referred to as the Act) on 26.07.2010 by Builders' Association of India (herein after referred to as the informant) against the Cement Manufacturers' Association (herein after referred to as the Opposite Party-1 or OP-1) and 11 other cement manufacturing companies (OP-2 to 12) for alleged violation of the provisions of section 3 and 4 of the Act The facts of the case, as per the information, in brief, are as under:
1.1 The informant, a society registered under the Societies Registration Act, 1860 is an association of builders and other entities involved in the business of construction.
1.2 The OP-1 is an association of the cement manufacturers of India in which both public and private sector cement units are members. As per the informant, the total strength of the OP-1 as on March 31, 2009, comprising of most of the big cement manufacturer stands at 46 in number.
1.3 The informant has submitted that cement manufacturers, namely, Associated Cement Co Ltd. (hereinafter referred to as OP-2 or ACC), Gujarat Ambuja Cement Ltd. (herein after referred to as OP-3 or ACL), Grasim Cement (hereinafter referred to as OP-4 or Grasim), Ultratech Cement Ltd, (hereinafter referred to as OP-5 or Ultratech), Jaypee Cement (hereinafter referred to as OP-6 or Jaypee), India Cements Ltd. (hereinafter referred to as OP-7 or India Cements), J.K. Cements of Group (herein after referred to as OP-8 or JK Cements), Century Cement (hereinafter referred to as OP-9 or Century), Madras Cement Ltd (hereinafter referred to as OP-10 or Madras Cement), Binani Cement Ltd (hereinafter referred to as OP-11 or Binani) and Lafarge India Ltd. (hereinafter referred to as OP-12 or Lafarge) are also the members of OP-1 and are the leading manufacturers, distributors and sellers of cement in India.
1.4 As per the informant, the respondent cement manufacturers under the umbrella of OP-1 indulge directly and indirectly into monopolistic and restrictive trade practices, in an effort to control the price of cement by limiting and restricting the production and supply of cement as against the available capacity of production. The cement manufacturers in connivance with the OP-1 have also been indulging in 'collusive price fixing'. They have divided the territory of India into five (5) zones so as to enable themselves to control the supply and determine or fix exorbitantly high price of cement by forming a cartel in contravention of provisions of section 3 of the Act.
1.5 Further, the OP-2 to OP-9, by virtue of the fact that they collectively hold more than 57.23% of market share in India, enjoy a position of dominance and arbitrarily increase the price of cement. As per the informant, the acts of these cement manufacturers, under the aegis of the OP-1, tantamount to abuse of dominance under section 4 of the Act.
1.6 The informant has further submitted that the OP-2 and OP-3 are the leading cement manufacturers having approximately 21% market share in India. It has been alleged that although with effect from November 1, 2009, OP-2 and 3 are no longer the members of the OP-1, resignation from its membership is only to keep their activities of cartelization under a veil since they are still actively participating in the "benchmarking exercise" of OP-1. As per the informant, despite having resigned from the membership, OP-2 and 3 have been successful in keeping their prices per bag similar to the prices per bag of other cement manufacturers who continue to be members of the OP-1. The informant has also alleged that the reasons stated by OP-2 and 3 for discontinuing their association from the OP-1 is an admission of cartelization amongst the dominant players as is evident from the following portion of news release:-
There is widespread feeling in the industry that CMA indulges in cartelization and holds up cement prices artificially high. Halcim feels that being associated with CMA would get them in trouble with competition commission in the EU and therefore they have withdrawn from the body.
1.7 As per the informant, the OP-2 and 3 by virtue of being the members of OP-1 in the past, have not only been active participants in the cartel but are also leading the acts of 'cartelization' by the cement manufacturers over the past couple of decades which is evident from various inquiries caused into the functioning of their holding company, Halcim, by various Courts and Commissions. Action has been taken against and Halcim group has been penalized and held guilty of acts of anti-competitive activities all over the world. The informant has further brought out that the OP-12, "Lafarge India", a subsidiary of the French building materials major 'Lafarge', has already been fined in 1994, 2002 and 2008 for committing irregularities in different jurisdictions which shows that it is a habitual offender of provisions of the competition laws.
1.8 The informant has stated that due to their large market share in Indian market, OP-2 and OP-3 are in a position to fix price and also curtail competition by controlling the supply of cement in the market. Relying upon certain newspaper reports, it has been alleged by the informant that the OP-2 and OP-3 in collusion with the OP-1 has sought to cartelize, limit the production/supply of cement in the market and fix the price of cement thereby eliminating competition in the market.
1.9 The informant has further alleged that in addition to OP-2 and 3, the Opposite Parties listed as OP-4 to OP-12 have also indulged into various anti-competitive activities and have collectively sought to control the supply of cement. According to the informant, despite having large cities, the Opposite Parties with the sole intention to control the supply, produce less cement and increase the market price of the cement deliberately.
1.10 The informant has also alleged that in addition to limiting production in order to create artificial scarcity, the Opposite Parties through their concerted action also resort to the practice of restricting the supply of cement the builders and consumers, causing artificial increase in the price of cement. According to the informant, irrespective of (sic) and regions and irrespective of availability of cement or artificial scarcity thereof in the markets, the cement prices have been increasing continuously. The acts of cement manufactures, in the past as well as in the present, have an adverse effect on the competition in the real estate sector and affect the interest of the consumers at large.
1.11 As per the informant, the cement manufacturers under OP-1 are continuing with their ill-intended acts of price increase through the act of cartelization, despite a 'cease and desist order' continuing under the directions of the Hon'ble Supreme Court of India. The Apex Court had only relieved the cement manufacturers held guilty of cartelization and restrictive trade practices under RTPE 99/1990 and RTPE 21/2001 from filing affidavits of compliance and therefore the 'cease and desist' notices passed there under continue in full force. The acts of omission and commission by all the Opposite Parties are, therefore, in violation of the above mentioned 'cease and desist' order of the Apex Court.
1.12 Giving details of the contravention of the provisions of the Act committed by the Opposite Parties, the informant has submitted that the cement manufacturers, including the OPs - 2 to 9 have set up their cement manufacturing units at different places in India, keeping in view the availability of raw materials, power, coal etc. and accordingly have different costs of production. As per the informant, in spite of the aforesaid and also the fact that the manufacturing units of the OPs are geographically dispersed and are having different costs of production and transportation, the OPs have in a concerted action uniformly and simultaneously increased their prices at the same time. The price of cement has been increased in all the five zones (North, East, West, South and Central), in which they are operating, without any direct link or correlation to increase in input costs in the respective zones.
1.13 In order to put forth the acts of cartelization and undue increase in price of cement due to anti-competitive behaviour on part of the OPs, the informant has submitted the following:
1.13.1 As per the informant, the construction and housing are the sole consumers of cement. The growth in the construction sector decreased from 10.10% in 2007-08 to 7.25% in 2008-09 and was further projected at 6.5% for the year 2009-10, Similarly, the growth in real estate sector came down from 8.52% in 2007-08 to 7.77% in 2008-09 and was projected at 8.10% in 2009-10 as per data published by National Account of Statistics, 2009 and press reports for 2009-10. Due to slowdown in the growth of construction and real estate sectors, growth in cement sector witnessed a downward trend from 9.76% En 2006-07 to 8.13% in 2007-08 to 7.90% in 2008-09. As a result of this slowdown, utilization of installed capacity also came down to 85.55% in 2008-09 from 94% in 2006-08 The growth in cement sector increased to 11.68% in the year 2009-10 due to revival in housing segment of real estate sector from April 2009. In spite of growth in production of cement, the utilization of installed capacity got reduced to 82.45% in 2009-10.
1.13.2 As per the informant, in spite of slowdown as discussed above, the cement industry during the year 2008 earned an Operating Profit Margin (OPM) of 26% on turnover of Rs. 45,717 crore, the highest OPM amongst 16 major industries save and except mining as reported by Capital Market, dated November 2, 2009.
1.13.3 The informant has averred that the cement manufacturing units had deliberately reduced their production and produced much less than their installed capacity to create an artificial scarcity and raise the...
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...Act 2002, Section 2 (b) [3] Builders Association of India Vs Cement Manufacturers' Association, Competition Commission of India [2012 CompLR 629 (CCI)] [4] OECD Round Table, 'Information Exchanges Between Competitors under Competition La' (OECD, 2010) [5] Competition Act,2002,Section 3(3). ......
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