ANTI-COMPETITIVE

AGREEMENTS
 INTRODUCTION
¨ Art. 101 of the TFEU prohibits all agreements between undertakings, decisions by associations between
undertakings and concerted practices which may affect trade between Member States and which have as
their object or effect the prevention, restriction or distortion of competition within the common market

¨ Similarly Sec. 3(3) of the Indian Competition Act prohibits –

¤ Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or
between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or
association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which
lead to any of the effects mentioned under sub-clauses (a)-(d)

¨ The U.S. Department of Justice states that the rational behind this is – “in order to ensure an optimal
degree of competition, firms must behave independently in the market. Collusion – the coordination of
commercial policies – leads to anti-competitive outcomes, which arguably represent, price increases by
10% per year.
 FINDING OF INFRINGEMENT
¨ In order to prove infringement under Art. 101 of the TFEU the following components are required to be
established:

1. A legal component – A form of cooperation between several undertakings

2. An economic component – A restriction of competition

3. A jurisdictional component – An effect on trade within the common market

¨ Under Sec. 3 of the Indian Competition Act the following is taken into consideration to establish an
offence –

¤ Why are the concerned parties an enterprise?

¤ Why is the nature of the business carried out by both parties identical?

¤ Then come to whether both parties are in an agreement or practice carried on or is it a decision taken by association?

¤ If they are in an association then what sort of an association is it?

¤ Are they leading anything to what is laid down under Sec. 3(3) of the Act?
 OBJECTIVE OF STUDY

¨ To provide a clear description of the concepts of

agreement, concerted practice and decision of
association of undertakings
¨ Ascertain what requirements must be fulfilled by a
competition authority (or a court) to bring evidence for
the legal component (co-operation between
undertakings)
 OUTLINE

¨ Two or more independent undertakings

¨ Agreement

¨ Practices carried on & Decision of association of

undertakings

¨ Bid-rigging
TWO OR MORE UNDERTAKINGS
PRINCIPLE
RELATIONS BETWEEN FIRMS AND THEIR END
CONSUMERS
INTRA-FIRM RELATIONS
AGENCY CONTRACTS
FIRM-EMPLOYEE RELATIONS
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
PRINCIPLE

¨ Art. 101 of the TFEU clearly requires an agreement or concerted action between undertakings

¨ Similarly, Sec. 3(3) of the Indian Competition Act requires an agreement or practice carried on between
enterprises

¨ The involvement of at least two undertakings or enterprises is an essential to the aforementioned

provisions

¨ This requirement is often overlooked and entails four major consequences –

1. Relations between firms and their end-consumers;

2. Intra-firm relations;

3. Agency contracts; and

4. Firm-employee relations
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
RELATIONS BETWEEN FIRMS AND THEIR END CONSUMERS

¨ Contracts between enterprises or undertakings and consumers (or a group of consumers) are not under the scope of Art. 101
of the TFEU and Sec. 3 of the Competition Act

¨ The rationale behind this is that a consumer does not carry out any economic activity, i.e. the provision of goods or services
in a market

¨ The aforementioned rationale has been accepted in the EU as well as India in the following cases –

¤ Federacion Nacional de Empresas de Instrumentacion Cientifica, Medica, Tenica y Dental (FENIN) v. Commission [2003] ECR II – 357

¤ Consumer online foundation v. Tata Sky Ltd. & Ors. [Case no. 2 of 2009]

¨ The issue with such an exemption is that contracts entered into with consumers might contain clauses which raise
competition concerns. For example – a seller commits to match any competitive offer, in return for the consumer’s
commitment to report any better offer (English Clause)

¨ Note:

¤ In an Oligopoly the market is well informed, hence the enterprises retaliate immediately to maintain a tacit equilibrium

¤ Such practices allow existing enterprises with power to create entry barriers
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
INTRA-FIRM RELATIONS

¨ It is a well settled principle under the single economic entity doctrine that contracts
entered between a parent and subsidiary (even though two separate legal entities)
would be outside the scope of Sec. 3 of the Competition Act and Art. 101 of the
TFEU

¨ The rationale being that a subsidiary merely carries out instructions given by its
parent company, i.e. it has no independence in the market

¨ The CCI as well as the EU Commission have endorsed the aforementioned views
in the following cases –

¤ Exclusive Motors v. Lamborghini [Case No. 52 of 2012]

¤ Viho Europe BV v. Commission [ECR 1996 I-05457]

 TWO OR MORE INDEPENDENT UNDERTAKINGS –
AGENCY CONTRACTS

¨ Sec. 3(4) of Competition Act applies to an agreement between different entities operating at
different levels in the production and supply chain.

¨ This would entail principal–agent agreements under the following circumstances:

¤ limitations on the territory in which the agent may sell goods or services;

¤ limitation on the customers to whom the agent may sell the goods or services;

¤ limitation on the number of customers in the market;

¤ prices and conditions at which the agent must sell or purchase goods or services;

¤ provisions preventing the principal from appointing other agents in respect of a given type of
transaction, customer or territory; and

¤ provisions preventing the agent from acting as an agent or distributor of undertakings which compete
with the principal (single branding provisions)
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
AGENCY CONTRACTS

¨ There is no specific provision in the Act dealing with this issue and to date, CCI
has not delivered any order dealing with ‘principal-agent’ relationships

¨ Under the Act, the terms ‘enterprise’ and ‘person’ include more than one entity.
However, an agent and a principal are treated as two distinct entities or persons
under the following laws:

¤ Under Sec. 181 of the Indian Contract Act; and

¤ Under the Income Tax Act, 1961, a principal and its agent are considered separate entities

¨ Thus, the Competition Act would ordinarily apply to principal-agent relationships

unless they are proved to be a single economic entity
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
AGENCY CONTRACTS

¨ The EU courts have held that true or genuine agency contracts would fall short under Art.
101 of the TFEU

¨ Confederacion Española de Estaciones de Servicio, the ECJ ruled a true or genuine agency
contract is where –
1. the agent does not bear any of the risk resulting from the contracts negotiated on behalf of the
principal; and

2. the agent works exclusively for the principal; the agent must not work for various principals or
pursue in parallel independent trading activities

¨ The rationale behind this is that the agent is not an independent player in the market, i.e. the
agent only carries out the instructions of the principal. Hence, an agent and principal
constitute a single economic entity [“Suiker Unie” UA and others v. Commission]
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
AGENCY CONTRACTS

¨ The second condition has been particularly contentious in nature as

–
¤ the second condition stems from the first condition. In its guidelines on
vertical restraints, the Commission considers that a genuine agent can
work for several principals;
¤ Confederacion Española de Estaciones de Servicio, examined only the
first condition as a decisive factor. The second condition would bring
many agency agreements within the purview of Art. 101, while these
agreements were so far believed to fall short of EC competition rules
 TWO OR MORE INDEPENDENT UNDERTAKINGS –
FIRM-EMPLOYEE RELATIONS

¨ Firm-employee relations are not covered under Sec. 3 of the Act and Art. 101 of
the TFEU

¨ Since employees act on behalf of the undertaking that employs them they cannot
constitute independent undertakings themselves;

¨ However, Sec. 3 of the Act and Art. 101 of the TFEU is applicable where, in
parallel to carrying out of his normal duties, an employee pursues his own
economic interests;

¨ For example - a scientist develops a patent in the context of research undertaken in

his own lab, and subsequently grants a license to its regular employer
AGREEMENTS
DEFINITION

ELEMENTS

STANDARD OF PROOF

NATURE OF EVIDENCE
 AGREEMENT – DEFINITION
¨ The scope of the term agreement as defined by the Competition Act, extends to an
‘arrangement’, ‘understanding’ or ‘action in concert’, none of which need be in writing or
enforceable by law

¨ An arrangement is something where necessarily there is no concurrence of wills, but it is a

relationship which you have between two people; where you have not necessarily agreed to
the other person’s method of conduct. You come to this conclusion on the basis of how the
both of them are operating

¨ Action in concert needs an actual action, a way in which the action is joint; if you are doing
the same activity through related parties, it is an act of synchronized union. There is no
agreement or arrangement required. The action is happening in a particular pattern
 AGREEMENT – ELEMENTS
¨ What an agreement is? – It’s not an agreement as per the Contract law. However,
there has to be a meeting of minds, though the threshold is not as high as in
Contract law

¨ The Agreement doesn’t have to be formal or legally enforceable. It is merely a

concurrence of wills. For example:
¤ A formal contract, signed or unsigned;

¤ A non-binding gentlemen’s agreement;

¤ An oral understanding;

¤ A protocol which reflects a consensus;

¤ A set of guideline issued by one undertaking and adhered to by another undertaking

 AGREEMENT – STANDARD OF PROOF
¨ The scope of an agreement is kept wide, as cartels rarely exist in explicit contractual relations. Hence,
making it almost impossible to find ‘smoking gun’ evidence

¨ Less exacting and more achievable standard of proof is kept as the benchmark

¨ There are two standards of proof prevalent in India - beyond reasonable doubt and preponderance of
probability

¨ Under a beyond reasonable doubt standard of proof the CCI would have to ensure that its decision leaves
no reasonable doubt as to the existence of such an agreement

¨ Under a preponderance of probability standard of proof the CCI would have to merely show that it is more
likely than not that such an agreement exists

¨ Over the years the CCI has shifted from a beyond reasonable doubt standard of proof to a preponderance
of probabilities standard of proof
 AGREEMENT – STANDARD OF PROOF
¨ The Commission leaned towards a beyond reasonable doubt standard of proof in the following cases:

¤ Tyre Cartel case (MRTP Case: RTPE No. 20 of 2008); and

¤ Neeraj Malhotra case (Case No. 5 of 2009)

¨ The aforementioned cases held that the existence of an agreement must be established unequivocally

¨ The CCI has subsequently held that direct evidence is not necessary to establish the presence of an
‘agreement’, as cartels rarely leave behind direct evidence of their presence, in the following cases –

¤ Soda Ash Cartel case, (Case No. 66 of 2011);

¤ Shoe Cartel case (Reference Case No. 01 of 2012); and

¤ Steel Cartel case, (Case No. RTPE 09/2008)

¨ Thus, the CCI can reach a finding that an ‘agreement’ exists if the evidence suggests it to be more likely
than not
AGREEMENT – STANDARD OF PROOF
REBUTTING AAEC
¨ Once it has been established by the Commission that a cartel agreement exists, an
appreciable adverse effect on competition (AAEC) is presumed

¨ The burden of proof then shifts on the defendants, to prove that the agreement does
not create an AAEC

¨ The Commission requires the preponderance of probabilities standard of proof in

order to rebut the AAEC presumption by the defendants

¨ The CCI has not given a decision on the aforementioned, however the Supreme
Court in Vijay v. Laxman & Anr., Criminal Appeal No. 261/2013 held –

¤ “the rebuttal of a presumption requires refutation on the balance of probabilities”

 AGREEMENT – NATURE OF EVIDENCE
¨ The CCI mainly relies on circumstantial evidence of two kinds to establish the existence of a cartel –

1. Economic evidence; and

2. Conduct-based evidence

¨ Economic evidence includes –

¤ the level of market concentration;

¤ parallel movement of prices;

¤ trends in capacity utilization and variations in cost-structures across firms, etc.

¨ Conduct based evidence includes –

¤ meetings between competitors;

¤ similar or identical bidding prices;

¤ membership of trade associations;

¤ any history of cartelization;

¤ suspicious sharing of information, etc.

AGREEMENT – NATURE OF EVIDENCE
ECONOMIC EVIDENCE
¨ From the initial cursory treatment of economic evidence,

the CCI has moved on to a more detailed and sophisticated

analysis of economic evidence at hand

¨ However, there have been inconsistencies in the

development of jurisprudence in the case of economic

evidence
 AGREEMENT – NATURE OF EVIDENCE
ECONOMIC EVIDENCE
Cement cartel case v. Soda Ash & Tyre cartel case
¨ Cement cartel case – the CCI overlooked the volatility of market share over the period of alleged
cartelization
¨ Soda Ash & Tyre cartel case – the CCI used market share volatility as a negating inference for cartelization

¨ Cement cartel case – Oligopolistic market structure facilitates collusion

¨ Soda Ash – Oligopolistic interdependence does not necessarily imply collusion

¨ Cement cartel case – cost analysis was basic. Only two raw materials were chosen amongst many factors
¨ Tyre cartel case – cost analysis was given much more weight. Detailed cost analysis was asked for all
input materials

¨ Cement cartel case – no capacity utilization analysis was carried out

¨ Tyre cartel case – capacity utilization analysis was carried out. The CCI reached to the conclusion that
decrease in prices was due to recession
 AGREEMENT – NATURE OF EVIDENCE
CONDUCT BASED EVIDENCE
¨ The CCI prior to the cement cartel case had decided in Neeraj Malhotra v.
Deutsche Post Bank, In Re: Glass Manufacturers, and Consumer Online
Foundation v. Tata Sky Ltd. & Ors. that the existence of direct evidence is a must
for determining a contravention under the Act

¨ However, in the cement cartel case the Commission relied upon the doctrine of
parallelism-plus to hold that it did not require proof of an explicit agreement to
infer the existence of an “agreement” to raise prices within the meaning of the Act

¨ As per the Commission, an agreement could be “inferred from the intention or

conduct of the parties” and “established by circumstantial evidence alone”.
 AGREEMENT – NATURE OF EVIDENCE
CONDUCT BASED EVIDENCE
Builders’ Association of India v. Cement Manufacturers’ Association & Ors.

¨ The Commission in addition to parallel changes in the alleged firms’ prices, production and dispatch (i.e.
the economic evidence) - found the existence of several “plus factors” that indicated that such parallelism
was on account of concerted action.

¨ These plus factors included:

¤ CMA engaged in collecting competition sensitive data - It was found that the competitors were interacting using the
platform of the CMA. This gave them an opportunity to determine and fix prices. The fact that it was done pursuant to
the instructions by DIPP did not absolve them of liability. Further, the CMA published statistics on production and
dispatch of each company (factory wise) and circulated such information amongst its members. The sharing of price,
production and dispatch data made co-ordination easier amongst the cement companies;

¤ High Power Committee Meetings - cement prices increased immediately after the High Power Committee Meetings of
the CMA which were attended by the cement companies in January and February 2011. ACC and ACL, ceased to be
members of the CMA, attended these meetings. Whilst ACC and ACL admitted to having attended these meetings,
CMA and JAL refuted their presence. The inconsistencies in the statements of the different respondents established that
they were keen on hiding material information; and
 AGREEMENT – NATURE OF EVIDENCE
CONDUCT BASED EVIDENCE
Builders’ Association of India v. Cement Manufacturers’ Association & Ors.

¤ Amendments to the CMA constitutional documents - Certain rules and regulations of CMA had serious
competition concerns. However, amendments to those rules and regulations were carried out only after
the DG sent notice to the respondents. Rule 3(b) stated the objective of the CMA was to increase co-
operation and unanimity amongst cement producers. Rule 3(d) stated to collect and disseminate
statistical and technical information in respect of cement trade and industry and other industries to
the members of the Association

¨ The Commission treated these facts as evidence that the firms were limiting supplies to
create scarcity and increase prices

¨ The Commission held that all such factors, in conjunction with the high correlation between
the firm’s prices, production and dispatch in each region, were adequate to establish that the
cement companies had “acted in concert” and formed a cartel
 AGREEMENT – NATURE OF EVIDENCE
CONDUCT BASED EVIDENCE
LPG Gas Cylinder case & Aluminium Phosphide Tablets case

¨ In re: suo motu case against LPG cylinder manufacturers (Suo motu case No.03/2011) the Commission
relied upon the fact that –
¤ not only was the characteristics of the particular market conducive to collusion, but also near identical prices were
being charged for the LPG cylinders in each state, despite the manufacturers having different costs and location,
participation in pre-bid meetings; and

¤ the use of common agents to submit bids

¨ In re: Aluminium Phosphide Tablets Manufacturers (Suo motu case No. 02/2011) the Commission relied
upon the fact that –
¤ the officers of the alleged conspiring firms had entered the office of the Food Corporation of India (FCI) to submit bids
together, and one such officer had entered the details of the others in the visitor book of FCI.

¤ the Commission found that such conduct was evidence of the existence of a pre-determined conspiracy among such
firms
 AGREEMENT – NATURE OF EVIDENCE
CONCLUSION
¨ CCI generally uses both economic and conduct-based evidence to determine whether an agreement exists

¨ Clinching evidence in a cartel case is rarely economic as per CCI’s current jurisprudential trend

¨ For example: In the Tyre cartel case, parallelism between the parties was evident. However, the CCI acknowledged

the fact that parallelism between the competitors exists owing to the Oligopolistic nature of the market. Hence, the

existence of some conduct that would show that the parallelism is deliberate is what becomes essential

¨ What differentiated the Tyre cartel case from the Cement cartel case was the absence of any conduct based

evidence in the former

¨ This mixture of conduct and economic based evidence trend has been carried forward in cases such as the Jute
cartel case - the CCI considered the correspondence between the infringing parties as well as the analysis of price

patterns

¨ Thus, keeping in mind the aforementioned industries with trade associations have to be wary about not sharing

sensitive information such as pricing policies, market strategies or capacity utilization

 PRACTICE CARRIED ON & DECISION
TAKEN BY ASSOCIATIONS
DEFINITION
PRACTICE CARRIED ON v. ACTION IN CONCERT
HOW ARE TRADE ASSOCIATIONS COVERED BY THE COMPETITION ACT
WHEN DO TRADE ASSOCIATIONS BECOME PART OF A CARTEL
WHEN DO TRADE ASSOCITIONS CROSS THE LINE
POTENTIALLY PROHIBITED EXCHANGE OF INFORMATION
FICCI MULTIPLEX ASSOCIATION OF INDIA v. UNITED PRODUCERS/
DISTRIBUTORS FORUM
M/S SANTUKA ASSOCIATES PVT. LTD. v. AIOCD & ORS.
 DEFINITION
¨ Practice carried on, or Decision taken by associations of enterprises or persons which lead
to any of the anti-competitive effects listed under sub-clauses (a)-(d) of Sec. 3(3) are
prohibited by the CCI

¨ Practice Carried On:

¤ According to Sec. 2(m) of the Competition Act, the term ‘practice’ – includes any
practice relating to the carrying on of any trade by a person or an enterprise

¨ Decision Taken by an Association:

¨ Eros International v. Central Circuit Cine Association & Ors. -

¤ ‘The collective intent and behaviour of the members of the associations which find
reflection in the rules and regulations of the association; and decision of the association
in a way is an agreement at horizontal level of the nature provided in section 3(3) of the
Act’

¨
 PRACTICE CARRIED ON v. ACTION IN
CONCERT
¨ As seen in earlier slides an ‘action in concert’ requires an
act of synchronized union
¨ Establishing a particular pattern in the opposite parties
conduct is a must
¨ Herein lies the distinction between an action in concert and
practice carried on
¨ In ‘practices carried on’ one does not need to prove a
pattern in which the actions were carried out
 HOW ARE TRADE ASSOCIATIONS
COVERED BY THE COMPETITION ACT
¨ The Competition Act applies to the decisions, rules, recommendations, or other activities carried on by

association of enterprises including trade associations

¨ Trade associations are industry led and industry managed organizations

¨ Provide a common platform for networking and consensus building

¨ Perform the important task of furthering interests of their members

¨ Typically perform the following functions:

¤ Representing interests of members to government on legislation, regulations, taxation and policy

matters that affect them;

¤ Promoting and protecting interests of members in media;

¤ Collecting and disseminating statistics and market information;

¤ Addressing technical issues including promulgating standards, code of practices;

¤ Providing advisory or consultancy services and training

 WHEN DO TRADE ASSOCIATIONS
BECOME PART OF A CARTEL
¨ A trade association becomes a part of a cartel, when it facilitates
discussions or facilitates exchange of commercially sensitive
information between competitors regarding –
¤ Price fixing
¤ Market sharing
¤ Limiting/controlling production, supply, technical development or
investment
¤ Collusive bidding or bid-rigging in one or more markets
 WHEN DO TRADE ASSOCITIONS
CROSS THE LINE
¨ Trade associations cross the line when its decisions,
rules, recommendations, or other practices carried on
by it –
¤ Restrict competition in the market

¤ Reduce or remove uncertainties inherent in the process of

competition

¨ This includes cases of prohibited information exchange

POTENTIALLY PROHIBITED EXCHANGE
OF INFORMATION
¨ Competitors should not discuss –

¤ Current and future prices and price increase or reductions

¤ Discounts and rebates

¤ Quantity produced and sold or exported

¤ Production capacity, percentage utilization and projected increase in

capacity or proposed cuts in production

¤ Investment plans, market plans

¤ Cost of production and profits, including cost of deliveries/transportation,

or any other matter relating to or affecting prices or any element of price,
etc.
PRACTICE CARRIED ON & DECISION TAKEN BY ASSOCIATION –
FICCI Multiplex Association of India v. United Producers/
Distributors Forum

¨ The CCI found that the United Producers/Distributors, the Association of Motion Pictures & TV

Programme Producers and the Film & Television Producers Guild of India Ltd, were acting in
concert and indulging in cartel-like conduct in boycotting multiplexes

¨ The DG after conducting a detailed investigation concluded that film and TV producers had entered
into anti-competitive agreements to collectively stop the distribution of newly released films to

multiplexes

¨ The decision to boycott the multiplexes was held to be “as blatant an act of limiting or controlling
the production, distribution of films as can be”

¨ The conduct of the Film Associations’ in fixing the revenue ratio to be shared with multiplexes was
also held to be joint price-fixing

¨ The CCI imposed a fine of INR 1 lakh on each of the 27 film producers on charges of colluding

through a cartel to exploit theatre owners

PRACTICE CARRIED ON & DECISION TAKEN BY ASSOCIATION –
M/s Santuka Associates Pvt. Ltd. v. AIOCD & Ors.

¨ New entrants were hindered entry by closing competition doors in the market by imposing stringent

requirements of No Objection Certificate (NOC), Product Information Service (PIS) approvals etc. by the

All India Organisation of Chemists and Druggists (AIOCD) Organisation of Pharmaceutical Producer of

India (OPPI) and Indian Drug Manufacturer’s Association (IDMA)

¨ The CCI observed that AIOCD was the apex body and due to its position it was able to control and restrict
the supply of pharmaceutical products in the market

¨ It was also able to influence the level of prices of drugs and pharmaceutical products through its mandates

and directions which were anticompetitive in nature and thus, stringent action was required in the case

¨ CCI directed AIOCD to issue letter to OPPI and IDMA informing that there was no requirement of

obtaining an NOC for appointment of stockists and the pharmaceutical companies

¨ CCI further directed AIOCD to inform all Chemists & Druggists and all its members and associations that

PIS charges were not mandatory and PIS services could be availed by manufacturers/pharmaceuticals
firms on voluntary basis and that they were free to give discounts to the customers
BID-RIGGING
CASE STUDY –

• ALUMINIUM PHOSPHIDE CARTEL

• MEDICAL EQUIPMENT CARTEL

• SHOE CARTEL
 BID-RIGGING
In Re – Aluminium Phosphide Tablets Manufacturers

¨ On February 2011, the Food Corporation of India (“FCI”) wrote to the CCI about a

possible anti-competitive arrangement among the manufacturers of aluminium

phosphide in the context of certain tenders it had floated since 2002

¨ The letter alleged that four known manufacturers namely, United Phosphorous Ltd.,

Sandhya Organic Chemicals Pvt. Ltd., Excel Crop Care Ltd. and Agrosynth Chemicals
Ltd. (“Opposite Parties”), have formed a “cartel” to control sale prices of aluminium

phosphide tablets

¨ FCI had further alleged that the manufacturers have quoted identical price rates under an

agreement resulting in a twofold increase in prices during the period of 2007 to 2009

¨ Based on the contents of the letter, the CCI issued directions to its Director General to

carry out an enquiry into the alleged contravention by the manufacturers

 BID-RIGGING
In Re – Aluminium Phosphide Tablets Manufacturers

¨ Key Findings:

¤ The records of the tender showed that all the four manufacturers have been quoting identical rates

since 2002 in unrounded figures;

¤ There was no similarity in the various elements of costing of each company;

¤ The tenders floated in the year 2005, 2008 and 2011 were jointly boycotted by all the four
manufacturers; and

¤ The entries in the visitors’ register at the offices of the FCI showed that all three participants entered

the premises at the same time, with one signing in for the entire group

¨ Decision:

¤ From the aforementioned the CCI inferred that the bidders had the opportunity to discuss the prices,

and when combined with the other factors listed above, such evidence was sufficient to prove the

existence of an agreement to maintain prices at a certain level

 BID RIGGING
Shri Gulshan Verma v. Union of India & Ors.

¨ This case concerned the supply and installation of medical equipment to

Sports Injury Centre, Safdarjung Hospital, CCI identified a cartel on the
basis of evidence from the bid documents themselves

¨ Only three firms participated in the tender process and the contract was
awarded to MDD Medical Systems Pvt. Ltd. (‘MDD’) as the lowest bidder

¨ The initial estimated cost was INR 100 million (approximately US$ 1.5
million), but MDD was awarded the work for INR 160 million
(approximately US$ 2.4 million)
 BID RIGGING
Shri Gulshan Verma v. Union of India & Ors.

¨ CCI discovered –

¤ Many common typographical errors in the separate bids submitted by PSE Installations
Pvt. Ltd. (‘PSE’), MDD, and Medical Products Services (‘MPS’)

¤ CCI also analysed the bidding patterns of these three companies and found that PSE won
a contract for similar work at JPNA Hospital with MDD and MPS submitting
complementary, i.e. higher bids

¨ The companies tried to explain the identical errors by claiming they all visited the same
cyber café, and unsurprisingly, CCI did not accept this explanation

¨ This indicated a typical case of rotating bids when all firms, except one, quote artificially
inflated prices, and this process is repeated with different bidders winning each time

¨ To CCI, these were proof of a “meeting of minds”

 BID RIGGING
Directorate General of Supplies & Disposals v. A R Polymers & Ors.

¨ The Informant had alleged that –

¤ the bids made by the Opposite Parties were in a very narrow range;

¤ most of the Opposite Parties had restricted the quantity to be supplied

by them; and

¤ 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 practices were inconsistent with
Sec. 3(3) of the Act
 BID RIGGING
Directorate General of Supplies & Disposals v. A R Polymers & Ors.

¨ CCI economic evidence that shed light on bidding pattern were –

¤ the near-identical prices that were quoted; and

¤ 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 accused generated
near-identical estimations of the average cost of raw materials
 BID RIGGING
Directorate General of Supplies & Disposals v. A R Polymers & Ors.

¨ Adding on to the aforementioned, the following conduct based evidence was also

examined by the CCI –

¤ they gave uniform reasons for near-identical bids to the DG, whereas the

submissions to the CCI differed

¤ Commercially sensitive performance statements in relation to the other accused

were found in the possession of one of the accused, which led the CCI to infer the

sharing and exchange of information among bidders prior to participating in the bid

¤ The bidders had restricted their production to less than half their installed capacity,
and a majority of them had restricted their supply-commitment to each DDO
 BID RIGGING
Directorate General of Supplies & Disposals v. A R Polymers & Ors.

¨ The accused were unable to give any valid justification for these
actions

¨ The CCI viewed the industry’s trade association as providing the

shoemakers the necessary platform to hold meetings

¨ These factors allowed the CCI to reach a finding of bid rigging in

violation of the Act

¨ On August 6, 2013, the CCI levied a cumulative penalty of INR 62.5

million (approximately US$0.9 million) on the 11 rubber shoe
manufacturers