Facts CCI decision COMPAT decision

By way of a December 9 2016 order,(1) the Competition Appellate Tribunal (COMPAT) upheld a Competition Commission of India (CCI) order against Coal India Limited and Western Coalfields Limited for acting independently of market forces and being in a dominant position on the market for the production and supply of non-coking coal to thermal producers, in violation of the Competition Act.

Facts

Sai Wardha Power Limited filed a complaint alleging that the appellants had directly and indirectly engaged in the production and supply of coal (a key raw material required for the generation of power) across the country and enjoyed a monopoly, as they produced over 80% of India's coal.

According to the claim, the appellants had abused their dominant position by:

  • delaying the execution of fuel sales agreements, which the appellants required to procure coal from them; and
  • forcing the informant to enter into a one-sided anti-competitive fuel sale agreement under which it had no bargaining or negotiating power and was compelled to accept the terms and conditions stipulated by the appellants therein.

It was also alleged that the appellants had:

  • excessively increased the price of coal from Rs1,631 per metric tonne to Rs2,177 per metric tonne (excluding taxes) without justifying the reasons behind this increase; and
  • imposed discriminatory pricing on the informant and other buyers.

Finally, it was alleged that the provisions relating to the quality of coal, including sampling and testing of the coal, were unfair and discriminatory.

CCI decision

Following an investigation by the director general, the CCI concluded that the appellants were in a dominant position in the relevant market and abused their position on more than one count. The CCI held that through its subsidiaries, Coal India Limited operated independently of market forces and enjoyed undisputed dominance on the relevant market, in contravention of Section 4(2)(a)(i) of the act. The CCI thus directed Coal India Limited to cease and desist from indulging in anti-competitive practices and make necessary modifications to its agreements.

The CCI had already imposed a penalty of Rs17.7 billion on the appellants. While the case at hand involved issues regarding costs and mines, the contravening clauses and conduct related to the supply of non-coking coal to thermal power plants. Further, some of the conduct and clauses found to be in contravention of Section 4 of the act were similar to those examined and held to be in violation of the act in earlier orders, for which the appellants had already been penalised. In view of the peculiarity of the facts and circumstances of the case, the CCI deemed it inappropriate to impose a further penalty on the appellants.

COMPAT decision

COMPAT upheld the CCI's order, observing that the director general's finding that the relevant market was the production and sale of coal for thermal power generation in India, which had been approved by the CCI, was correct.

It was undisputed that Coal India Limited and its subsidiaries had a monopoly over the production and supply of coal to various consumers. Therefore, the CCI's findings that the appellants were in a dominant position on the relevant market was legally correct and did not call for interference. COMPAT also held that the CCI's conclusions regarding the facets of abuse of dominance were based on sound reasoning. COMPAT thus dismissed the appeal.

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) COMPAT order dated December 9 2016. For full text please see http://compat.nic.in/Judgements.aspx.

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