By way of a February 17 2016 order the Competition Appellate Tribunal (COMPAT) upheld a Competition Commission of India (CCI) order which closed an investigation into bid-rigging allegations for the supply of an axle-mounted disc braking system (ADBMS) to Indian Railways.

The investigation was launched based on information provided by the deputy chief materials manager of Rail Coach Factor, Kapurthala. The investigation focused on the identical prices in three emergency purchase tenders provided by the respondents (M/s Faiveley Transport India Pvt Ltd and M/s Knorr Bremse India Pvt Ltd) for procurement of ADBMS by Rail Coach Factory. The complainant alleged that the respondents took advantage of the limited competition in the market for the supply of AMDBS and refused to provide cost breakdowns and proper justifications for their quoted rates. The CCI sent the information to the director general for further investigation.

During the investigation, the director general found evidence of bid rigging, as the rates quoted by the two suppliers (which were the only suppliers approved by the Research and Design Organisation of Indian Railways) were identical in each of the three tenders under investigation. Despite this, the CCI closed the investigation into Indian Railways on the basis that mere identical rates do not prove cartelisation.

COMPAT agreed and ultimately dismissed the appeal, observing as follows:

"in an oligopolistic market like the one in question, the identity of price quoted by the bidders is not an unusual feature. The players in a limited market are aware of the price quoted by each other in one or the other bid and it is a normal tendency to quote the same price in response to the next tender. Therefore, identical price quoted by the respondents for the items of AMDBS did not constitute sufficient evidence of cartel formation and in the absence of other plus-factors, it is not possible to record a finding that the respondents had acted in violation of Section 3(3)(d) read with Section 3(1) of the [Competition] Act".

COMPAT relied on the Supreme Court's judgment in Union of India V Hindustan Development Corporation(1) in reaching its decision.

This order is unique, as COMPAT admitted an appeal filed by a complainant against a CCI order despite the fact that the Competition Act does not prescribe the right to appeal in this regard. COMPAT disregarded its own earlier full bench orders where it had held that such appeals are non-maintainable. Further, the order was passed without notifying the respondents or the CCI. Whether this order will set a precedent against the Supreme Court's judgment in CCI v SAIL(2) remains to be seen.

For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525) or email (mmsharma@vaishlaw.com). The Vaish Associates website can be accessed at www.vaishlaw.com.

Endnotes

(1) 1993 (3) SCC 499. For the full text see COMPAT's website.

(2) (2010) 10 SCC 744.

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