Secret Agreement - Fragile Evidence

Author:Mr E. Sathish Kumar
Profession:PSA Legal Counsellors
 
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Introduction

Collusive Bidding or Bid rigging denotes collusion of bidders (actual or potential) with an intention to keep the bid amount at a pre-determined level. Collusion must be generated by a "secret" agreement between two or more parties for an illegal purpose. Such "secret" agreement may be horizontal1 or vertical2. If bid rigging results in an adverse effect on competition in India, it is prohibited by Section 3(3) of the Competition Act, 2002 ("Act"). The Act defines bid rigging as "any agreement, between enterprises or persons engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding."

Competition Commission of India ("CCI") aims to eliminate such anti-competitive practices, so as to ensure free trade in India, and protect the interest of the end users. CCI has passed several orders to eliminate anti-competitive agreements and bid rigging. This bulletin examines an order of August 06, 2013 where the CCI discussed bid rigging and market allocation in a reference filed by the Directorate General of Supplies & Disposal ("Informant"), a government department, against eleven shoe enterprises ("Opposite Parties") situated across India. It clearly discloses the ability of CCI in concluding inquiries and passing orders without sufficient evidence and, thereby, proved CCI's ability to control anti-competitive practices in India.

Case Facts

The Informant filed a reference under section 19(1)(b) of the Act with CCI against the Opposite Parties, alleging they engaged in bid rigging and market allocation while bidding for a tender floated by the Informant for polyester blended duck ankle boots ("Product") and conclusion of new rate contracts for the period December 01, 2011 to November 30, 2012. The Product was procured by various government agencies against the Rate Contracts awarded by the Informant. The Informant provided the following information alleging cartel formation and violation of the various provisions of the Act by the Opposite Parties.

The Opposite Parties quoted the prices with only a slight variation for 45 types of the Product. They did not consider the cost of transportation to be incurred by them while offering the prices. Further, they restricted the quantity to be supplied by them during the 12 month period specified in the tender. The Opposite Parties mutually agreed the quantity...

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