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India – CCI Penalises 11 Shoe Manufacturers For Bid-Rigging.

23 September, 2013

 

On August 6, 2013, the Competition Commission of India (‘CCI’) levied a cumulative penalty of INR$ 62.5 million (approximately US$0.9 million) on 11 rubber shoe manufacturers (‘Opposite Parties’) for bid-rigging in the supply of rubber shoe soles to the Directorate General of Supplies & Disposals (‘Informant’) under Section 3(3) of the Competition Act, 2002 (‘Act’).


The Informant had alleged that (i) the bids made by the Opposite Parties were in a very narrow range; (ii) most of the Opposite Parties had restricted the quantity to be supplied by them; and (iii) most of the Opposite Parties had also fixed the maximum quantity they would supply to a particular Direct Demanding Officer (‘DDO’). The Informant contended that these three practice were inconsistent with Section 3(3) of the Act.


CCI examined the bidding pattern in light of (a) the near-identical prices, and (b) the limited range in terms of quantities, quoted by each of the Opposite Parties, despite differences in, inter alia, their operations, production capacities, costs, geographies and profits. For instance, the cost of raw materials (latex and rubber) was subject to significant fluctuations, yet the Opposite Parties generated near-identical estimations of the average cost of raw materials. Moreover, the Opposite Parties gave uniform reasons for near-identical bids to the Director General for Competition, whereas while making submissions before CCI, their explanations differed. The investigation identified a meeting of the Federation of Industries of India (‘Federation’) convened to discuss various problems with the Informant, and CCI inferred that the Federation gave the shoe-makers a platform to hold meetings. Finally, commercially sensitive performance statements in relation to the other Opposite Parties were found in the possession of one of the Opposite Parties, which led CCI to infer sharing and exchange of information amongst bidders prior to participating in the bid.


CCI stated that the standard of proof in determining the presence of such cartel-like agreements was one of “preponderance of probabilities’. Thus, on the basis of the aforementioned factors, CCI held that the Opposite Parties had entered into an agreement to determine prices and rig the bids, which was inconsistent with Sections 3(3)(a) and 3(3)(d) of the Act.


CCI noted that the Opposite Parties had restricted their production to less than half their installed capacity. CCI also noted that a majority of the Opposite Parties had restricted their supply-commitment to each DDO. The Opposite Parties were unable to give any valid justification for these actions. Based on these observations, CCI held that the Opposite Parties had agreed to limit/control the supply and also colluded for mutual allocation of markets, contravening Sections 3(3)(b) and 3(3)(c) of the Act.


The penalty of  INR$ 62.5 million (approximately US$0.9 million) was a sum of the individual fines of 5% of turnover imposed on each Opposite Party.

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com


Abhijit Joshi, AZN & Partners 
abhijit.joshi@azbpartners.com


Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners 
samir.gandhi@azbpartners.com


Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

 

Competition & Antitrust Law Firms in India 

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