By way of a September 14 2017 order, the Competition Commission of India (CCI) imposed a penalty of almost Rs120 million on 10 companies for bid rigging in regard to coal and sand transportation tenders.(1)
Western Coalfields Ltd brought claims before the CCI arguing that the companies had quoted identical bids in four tenders floated by the plaintiff for coal and sand transportation. The plaintiff argued that Tenders 34/2013 (April 16 2014) and 37/2013-14 (May 2 2014) with regard to sand transportation demonstrated collusion between:
- SSV Coal Carriers Pvt Ltd;
- Bimal Kumar Khandelwal;
- Pravin Transport; and
- Khandelwal Transport.
It also argued that Tenders 03/2014-15 (June 3 2014) and 06/2014-15 (June 6 2014) with regard to coal transportation demonstrated collusion between:
- Khandelwal Earth Movers;
- Khanduja Coal Transport Company;
- Punya Coal Road Lines;
- B Himmatlal Agrawal;
- Punjab Transport Company; and
- Avaneesh Logistics Pvt Ltd.
Tenders 34/2013 and 37/2013-14
The CCI noted that with respect to Tender 34/2013, SSV Coal Carriers, Bimal Kumar Khandelwal and Khandelwal Transport had quoted identical prices not only for one job, but for all four jobs. Similarly, with respect to Tender 37/2013-14, Bimal Kumar Khandelwal, Pravin Transport and Khandelwal Transport had quoted identical prices for each of the three jobs. The CCI observed that in normal market conditions it is highly unlikely that prices quoted by different bidders in two tenders for several jobs would be identical to this extent. The identical prices quoted in both tenders were treated as strong evidence that these were no coincidence, but rather the outcome of an understanding among the defendants.
Further, the CCI relied on several 'plus' factors, including the financial dealings between the parties, and the fact that the partners and proprietors of the defendants had social relationships and frequently met or interacted with one another. It also noted that SSV Coal Carrier and Khandelwal Transport had quoted identical prices in two earlier tenders; namely, Tenders CH3 150-Min-0018/2013-14 and HLC-1/SAND/42/2008-09, which was considered a relevant circumstance to indicate bid rigging.
In addition, the CCI found that the infrastructural conditions at the plaintiff's office were conducive to the last-minute exchange of price information. The fact that the defendants formed a trade association which demanded higher prices in the tenders floated by the plaintiff pursuant to the quoting of identical prices by the defendants was also considered to be a plus factor.
Therefore, on the basis of the identical pricing despite different cost structures, the last-minute filing of price bids and the existence of earlier financial dealings between the defendants, as well as identical price quotes in tenders previously floated by the plaintiff, the CCI concluded that the identical prices quoted by the defendants in Tenders 34/2013 and 37/2013-14 were not coincidental, but rather the result of a clear understanding between SSV Coal Carriers, Bimal Kumar Khandelwal, Pravin Transport and Khandelwal Transport to fix prices, thereby rigging the bids in the impugned tenders for sand transportation.
Tenders 03/2014-15 and 06/2014-15
Similarly, the CCI held that the quoting of identical prices not only for one job, but for all five jobs in Tender 03/2014-15 and the quoting of identical prices up to the last decimal point for the three jobs in Tender 06/2014-15 was the result of a clear consensus between Khandelwal Earth Movers, Khanduja Coal Transport, Punya Coal Road Lines, B Himmatlal Agrawal, Punjab Transport Company and Avaneesh Logistics.
The CCI also considered plus factors as evidence of an anti-competitive agreement between the companies, including:
- the quoting of identical prices despite having different cost structures;
- the last-minute filing of the price schedule in the plaintiff's office;
- the existence of financial dealings between the defendants;
- the identity of price quotes in tenders previously floated by the plaintiff; and
- the efforts of the Central India Mining and Transport Association for the upward revision of rates offered by the plaintiff.
The CCI held that an agreement of the nature envisaged under Section 3(3)(d) of the Competition Act existed and that such agreements should be treated ipso facto as having an adverse effect on competition. It held that once the existence of an agreement for anti-competitive object has been established, the burden is on the alleged contravener to prove that the agreement has no appreciable adverse effects on competition.
The CCI therefore imposed a penalty amounting to 4% of the average turnover of the defendants under Section 27 of the Competition Act. It also imposed a penalty on their office bearers under Section 48(1) of the act.
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(1) CCI decision, September 14 2017. For the full text please see the CCI website.