M M Sharma February 27 2014 Commission imposes record fine on Coal India for market abuse Vaish Associates Advocates | Competition & Antitrust - India M M Sharma Competition & Antitrust Commission orderTribunal orderCommentCommission orderThe Competition Commission has imposed a record penalty of Rs17.73 billion ($290 million) on Coal India Ltd for abusing its dominant position. The final order was passed on December 9 2013 following information filed by Maharashtra State Power Generation Company Ltd and Gujarat State Electricity Corporation Limited against Coal India and its subsidiaries (Mahanadi Coalfields Ltd, Western Coalfields Ltd and South Eastern Coalfields Ltd).The commission held that, through its subsidiaries, Coal India had operated independently of market forces and enjoyed undisputed dominance in the relevant market (ie, the production and supply of non-coking coal in India). Among other things, the commission held that Coal India and its subsidiaries had contravened Section 4(2)(a)(i) of the Competition Act 2002 by imposing unfair or discriminatory conditions in fuel supply agreements with power producers for the supply of non-coking coal. Besides issuing a cease-and-desist order against Coal India and its subsidiaries, the commission directed that the fuel supply agreements be modified in light of the findings and observations recorded in the order. The impugned clauses included those on:the sampling and testing procedure;the charges for transportation and other expenses for the supply of ungraded coal from the buyers; andthe capping of compensation for the supply of stones.Furthermore, Coal India was ordered to consult all of its stakeholders before effecting these modifications. Coal India was also directed to ensure parity between old and new power producers, as well as between private and public sector power producers, insofar as was practicable.The commission also observed that the government should take the initiative to introduce more players into the market, in order to reduce the dominance of any one player and facilitate competition.Tribunal orderCoal India filed an appeal before the Competition Appellate Tribunal against the commission's order. On January 13 2014 the tribunal issued an order directing that the status quo be maintained until further orders have been given.CommentThis is the first time that the commission has passed an order imposing a penalty on a public sector enterprise since the entry into force of the relevant provisions of the Competition Act in May 2009. The order sets a precedent in relation to the principle of competitive neutrality for the growth of competition jurisprudence in India.For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4929 2525), fax (+91 11 2332 0484) or email ([email protected]). The Vaish Associates website can be accessed at www.vaishlaw.com.