Ref. Case No. 01 of 2012. Case: Director General (Supplies & Disposals) Vs M/s. Puja Enterprises Basti and Ors.. Competition Commision of India

Case NumberRef. Case No. 01 of 2012
Party NameDirector General (Supplies & Disposals) Vs M/s. Puja Enterprises Basti and Ors.
CounselFor Respondents: S/Shri A. K. Bajpai, M.F. Khan and Nitin Bajpai Advocates for the Opposite Party Nos. 1, 8, 10 & 11 and Shri Matrugupta Mishra, Advocate for the Opposite Party No. 9 and For Informant: None
JudgesAshok Chawla (Chairperson), H.C. Gupta, Member (G), Geeta Gouri, Member (GG), Anurag Goel, Member (AG), M.L. Tayal, Member (T), Shiv Narayan Dhingra, Member (D) and S.L. Bunker, Member
IssueCompetition Act, 2002 - Sections 19(1)(b), 2(b), 27, 3, 3(1), 3(2), 3(3), 3(3)(a), 3(3)(b), 3(3)(c), 3(3)(d), 3(4)
Judgement DateAugust 06, 2013
CourtCompetition Commision of India

Judgment:

  1. The present reference has been filed by Director General (Supplies & Disposals), Directorate General of Supplies & Disposals (DG S&D), Department of Commerce, Ministry of Commerce & Industry, Government of India, New Delhi ('the informant') under section 19(1)(b) of the Competition Act, 2002 ('the Act') against the above named opposite parties alleging inter alia bid rigging and market allocation in contravention of the provisions of section 3 of the Act while bidding against the Tender Enquiry dated 14.06.2011 floated by DG S&D for concluding Rate Contracts/RC of product (Polyester Blended Duck Ankle Boot Rubber Sole) for the period from 01.12.2011 to 30.11.2012. Shorn of details, the facts are that Wool and Leather (WL) Directorate of DG S&D had issued a Tender Enquiry No. AB(Duck)/WL-6/RC-11050000/1112/66 dated 14.06.2011 for conclusion of new Rate Contracts relating to the period from 01.12.2011 to 30.11.2012 for polyester blended duck ankle boots rubber sole ('the product'), with tender opening date as 29.07.2011. The estimated requirement indicated in the Tender Enquiry was valued at Rs. 10.45 crores. The Tender Enquiry consisted of 45 items of different sizes and colours of the product, as in the previous Rate Contract for the year 2010-11 which was awarded to the eleven parties who were also holding the Rate Contract for the year 2009-10. On scrutiny of the tenders for year 2011-12 opened on 29.07.2011, it was found that the difference in quoted prices of different bidders was in a very narrow range and all the tenderers barring one, had restricted the quantity to be supplied by it during the Rate Contract period. Nine tenderers had also stipulated the maximum quantity to be supplied by them to a particular Direct Demanding Officer (DDO). This was stated to indicate a pre-determined, collusive and restrictive bidding pattern or cartel formation by the bidders thereby violating the various provisions of the Act.

  2. The reference was considered by the Commission in its ordinary meeting held on 08.05.2012 and vide its order of even date, the Commission noted that the above named opposite parties quoted prices within a narrow band of Rs. 393 to Rs. 410 for 45 types of different sizes and colors of Polyester Blended Duck Ankle Boots specifying the quantity to be supplied. The tender prices offered appeared not to have factored the differential cost of transportations to be incurred by opposite parties located at different places. Further, it was observed by the Commission that the material placed on record by the informant showed quantity allocation mutually agreed by the opposite parties in their offers at the time of tendering suggesting that the opposite parties quoted for limited quantities as if they have allocated shares amongst themselves. Hence, the Commission was of the opinion that prima facie a case of contravention of the provisions of the Act was made out. Accordingly, the DG was directed to conduct an investigation into the matter and to submit a report.

  3. In terms of the aforesaid order of the Commission, an investigation was conducted by the DG and the investigation report was submitted to the Commission on 26.12.2012. The DG report was considered by the Commission in its meeting held on 09.01.2013. On consideration of the report, the Commission decided to forward copies of the report of the DG to the informant and the opposite parties for filing their respective replies/objections thereto, if any.

  4. The DG report shows that he had identified the following issues for investigation:

    (i) Whether conditions prevailing specifically with respect to the industry, the product in question, its market etc. were conducive for collusive action by the parties.

    (ii) Whether the identical/near identical prices quoted by the parties against the Tender Enquiry of DGS&D dated 14.06.2011 were a result of collusion amongst them and whether there are any direct or indirect evidences in support of an agreement, formal or informal between them for bid rigging in violation of the provisions of section 3(1) read with section 3(3) of the Act as alleged.

    (iii) Whether, the restriction of total quantity to be supplied during the RC period and the restriction of maximum quantity to be supplied per Direct Demanding Officer (DDO) was a result of collusion amongst the parties and whether there are any direct or indirect evidences of collusive agreement amongst the manufacturers in violation of the provisions of section 3(1) read with section 3(3) of the Act as alleged.

    (iv) Whether there is any violation of the Act under section 3(4) as alleged by the informant.

  5. The DG returned the following findings on the issues identified:

    (i) It is noted by the DG that bid rigging is more likely to occur when a small number of companies supply the goods or services and such suppliers are repetitive bidders. The fewer the number of sellers, and the repetitive the bidding, the conditions become more conducive for bidders to reach an agreement to rig bids. Further, it is noted that when the products or services sold or rendered are identical or very similar and there are few or no substitutes, it is easier for bidders to reach an agreement on a common price structure. Based on the analysis, it was concluded by the DG that the conditions prevailing with respect to the product, its market etc. were conducive for the parties to reach an agreement for bid-rigging and mutual allocation of market.

    (ii) The identical/near identical prices quoted by the parties from time to time against the tenders of DG S&D for the given product in spite of variations in cost factors arising out of differences in product range, installed capacities, size of operations, tax rates, sources of procurement of raw materials, basis adopted for giving quotations etc. as well as on account of the parties being geographically located in different regions. The DG also found direct evidence of sharing of information by competitors and considered it as sufficient evidence to establish concerted action by the parties. Based on the above analysis and direct and indirect evidences, it was concluded by the DG that the parties had contravened the provisions of section 3(1) read with sections 3(3)(a) and 3(3)(d) of the Act by determining prices and bid rigging respectively.

    (iii) It was noted by the DG that the parties by putting in quotations quantity restrictions both in terms of total quantity to be supplied during the Rate Contract period, as well as limitations of order quantity per DDO, restricted the options of DDOs of procuring the product from any one or more Rate Contract holders as per the choice of the DDOs. This inter se agreement/arrangement of parties, made with a view to limit and control the supply of the product and to share the market by way of mutual allocation, amounted to bid rigging and was in violation of the provisions of section 3(1) read with section 3(3)(b), 3(3)(c) and 3(3)(d) of the Act.

    (iv) Lastly, it was noticed by the DG that all the parties were DG S&D registered manufacturers and Rate Contract holders for polyester blended duck ankle boots of given specifications and as such were at the same level of production chain and in the same market for supply of the said product. The parties being not at different stages or levels of the production chain in different markets as required for invoking the provisions of section 3(4) of the Act, the allegation qua contravention of section 3(4) of the Act was not made out.

  6. Based on the above findings, it was concluded by the DG that all the parties in the instant case were DG S&D...

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