Case No. C-145/2008/DGIR. Case: DDRS (G)-II, Railway Board, Ministry of Railways Vs RMG Polyvinyl India Ltd., Royal Cushions Vinyl Products Ltd., Premier Polyfilm Ltd. and Responsive Industry Ltd.. Competition Commision of India
| Case Number | Case No. C-145/2008/DGIR |
| Issue | Monopolies and Restrictive Trade Practices Act, 1969; Competition Act, 2002 - Sections 3, 3(1), 3(3), 4 and 66(6) |
| Judgement Date | April 06, 2011 |
| Court | Competition Commision of India |
Order:
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Consequent upon the repeal of Monopolies and Restrictive Trade Practices Act, the present case has been received by the Competition Commission of India (the Commission) from the erstwhile Monopolies and Restrictive Trade Practices Commission (the MRTPC) on transfer under Section 66(6) of the Competition Act, 2002 (the Act). In this case, the complaint was filed by DDRS(G)-2, Railway Board, New Delhi (the informant) against M/s. RMG Polyvinyl India Ltd. (RMG Poly), M/s. Royal Cushion Vinyl Products Ltd. (Royal Cushion), M/s. Premier Polyfilm Ltd., (Premier Poly) and M/s. Responsive Industry Ltd. (Responsive Industry), alleging that they have formed a cartel while bidding for the tender of Poly Vinyl Chloride flooring sheets (PVC sheets) floated by the informant.
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Facts/allegations of the Case in Brief
2.1 In the present case the opposite parties are Railways Research and Standard Organization (RDSO) approved firms/venders engaged in supply of Poly Vinyl Chloride flooring sheets (PVC sheets) to railways.
2.2 As per the informants, all the RDSO approved firms for supply of PVC sheets have abnormally increased the prices of this item by 80.6% within a period of 6 months. The informant has alleged that there is no justification for such an upward jump in prices and thus appears to be a case of suspected cartel formation.
2.3 It is stated by the informant that the supply of PVC sheets of CK-604 specification for tender No. S/7507/5013/4 for South Eastern Railways opened on 31.12.2007 shows that the rates quoted by all the four RDSO approved -vendors were exorbitantly higher (lowest rate quoted was Rs. 4,297.70 per roll). The previous supplies of PVC sheets of C-8515 specification were procured at the rate of Rs. 1508.00 per roll on 15.5.2007.
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After receiving the complaint the MRTPC sought comments/replies from the said opposite parties as well as from the complainant. In the meantime the MRTP Act was repealed and the case was transferred to the Commission in terms of Section 66(6) of the Act.
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The matter was considered by the Commission in its ordinary meeting held on 18.06.2010 and upon forming an opinion that there exists a prima facie case, referred the matter to the Director General (DG), CCI for investigation vide its order dated 18.06.2010.
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The DG, after receiving the direction from the Commission, got the matter investigated through the Joint Director General and submitted the investigation report to the Commission on 29.11.2010.
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Summary of Findings of DG
For investigation in this case the DG has relied on the...information and reply provided by the opposite parties obtained through detailed qestionnaire. The DG has also considered the details of price quoted by the opposite parties during the year 2007, 2008 and 2009 as well as information available on public domain. The findings of the DG are summarized below:
5.1 The price quoted by the opposite parties in the year 2007 was raised at a very high level by their concerted action to maximize the profit.
5.2 The investigation clearly indicates that the opposite parties have raised price of CK-604 to unjustified level of more than 80% of the previous specification from Rs. 110 per sq.mtr. to Rs. 204/- per sq.mtr. and had again raised the price of the product within a short span of 3 to 4 months to a level of Rs. 375/- per sq.mtr.
5.3 None of the opposite parties could justify the increase in the prices. The enquiry conducted reveals that the prices of raw material did not change in proportion to the increase in price quoted by the opposite parties in the tenders floated by the informant.
5.4 The opposite parties were having close association and tender forms were found to be filled in the same handwriting and similar languages quoting same rates. The pattern of these price quotations over a period of 3 years shows that there is definite direct or indirect concerted effort by the opposite parties in furnishing the price quotations of PVC sheets to not only one Railway Zone but also to other Railway Zones. None of the parties could justify the reason as to why they have reduced the prices to around Rs. 200/- per sq. mtr. from around 375/- per sq. mtr. after initiation of investigation in the matter.
5.5 The procurement procedure and manual tender process of Indian Railways during 2007-08 also helped to foster cartelization by the suppliers. The system of approval of vendors by RDSO has restricted the number of participants and the frequency of tenders by different zones also affected the fair competition among members.
5.6 DG has recommended that the action of opposite parties is in the contravention of the provisions of the Section 3(1) read with Section 3(3)(d) of the Act.
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The DG report was forwarded to the parties for filing their replies/objections vide Commission's order dated 04.01.2011. The Commission also directed the informant and the opposite parties to appear for oral hearing, if they so desire, either personally or through their authorized...
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