APOLLO TYRES LIMITED Introduction
Aggrieved by the CCI Order, a writ petition was filed by
In this article, we navigate through the facts and findings of the CCI Order.
Brief Facts
The matter was initiated by the
In effect, this hindered the free and fair play of market forces because the benefit from the decline in the rubber prices was not being transferred to the tyre consumers as the domestic tyre industry was maintaining a self-styled 'price control'. In furtherance to this, it was also alleged that the Tyre Companies were imposing tariff and non-tariff barriers through their trade association, ATMA, to strengthen their control on the domestic tyre market. This resulted in closing down of inefficient players and monopolisation over the Indian tyre market. On the basis of these allegations alone, vide order dated
The investigation was done on five parameters, which included checking the (i) existence of price parallelism, (ii) financial performance, (iii) cost analysis of key raw materials, (iv) circumstances conducive for collusion, and (v) evidence of communication exchanged amongst the Tyre Companies and ATMA. Finally, as per the investigation report, it was concluded that the Tyre Companies under the aegis of ATMA, indulged in cartel activity by indirectly determining the sale prices of tyres in the domestic tyre market. Therefore, the investigation report held that the Tyre Companies and ATMA fell in contravention to the provisions contained in Section 3(3)(a) read with Section 3(1) of the Act.
Pursuant to the investigation report, the CCI called upon the respondents to submit their written and oral submissions, i.e., the Tyre Companies and ATMA.
Issues
The issues that were deliberated upon by CCI are two-folds:
- Whether the Tyre Companies along with ATMA had indulged in cartelisation in the domestic tyre market by way of an agreement/understanding amongst themselves for increasing/maintaining the prices of tyres and thus, violated the provisions of Section 3(3) read with Section 3(1) of the Act?
- If the Tyre Companies are liable under Section 3, then whether the office bearers of the Tyre Companies will liable under the provisions of Section 48 of the Act?
Decision of the CCI
With regards to the first issue, the CCI observed that in an ongoing cartel where prices are being kept high over a long period of time, it is not necessary that prices increase after every meeting between the members of the cartel. The Tyre Companies under the aegis of ATMA had been meeting every quarter to discuss key issues and challenges faced by the tyre industry. This gave the Tyre Companies a convenient platform to come together and share their individual price sensitive data and take collective decisions on the prices of tyres. Further, the existence of ATMA that collates sensitive information relating to supply, prices, etc. from various players in the market provided a platform for coordination among the manufacturers. Therefore, considering all this, the CCI deduced that as the market is highly concentrated with a few players holding a large share, there is a strong possibility of conducive environment for collusive behaviour.
The CCI also evaluated the direct evidence in form of communicative evidence to ascertain the anti-competitive conduct resorted to by the Tyre Companies. It noted that a bunch of emails sent on various dates by ATMA proved sharing of price sensitive data amongst the Tyre Companies through ATMA. In furtherance to this, the association also formed various sub-groups and conducted meetings where all the companies were regularly meeting on some pretext or the other. The malicious intent was evident when the CCI noted that no minutes had been maintained by ATMA for any of those meetings. A fact that even ATMA concurred to was that it used to collect and compile information relating to company wise and segment wise data (both monthly and cumulative) on production, domestic sales and export of tyres on a real time basis much prior to the publishing of quarterly results in the public domain - such compiled data was circulated amongst its members as well. Therefore, sharing of such sensitive information made the co-ordination easier amongst the companies, and hence the CCI held that the companies along with their association was indulged in anti-competitive practices.
As far as the second issue was concerned, CCI observed that the liability of individuals belonging to the erring companies is enshrined under Section 48 of the Act. More particularly, Section 48(1) of the Act provides that where a company is committing contravention of any of the provisions of the Act, every person who, at the time such contravention was committed, was in-charge of, and was responsible for the conduct of the business of the company/firm/association, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly. However, Section 48(2) of the Act attributes liability on the basis of de facto involvement of an individual. While the investigation report enlisted 15 persons to be held liable under Section 48, the CCI held only 7 of such persons2 liable on account of the key position, active involvement and knowledge of the discussion relating to price rise they had, therefore, making them liable under Section 48(1) as well as Section 48(2) of the Act.
Accordingly, the CCI directed the Tyre Companies to cease and desist from indulging in any activity relating to agreement, and ATMA to disengage and disassociate itself from collecting wholesale and retail prices through the member tyre companies or otherwise. In furtherance to this, it also imposed penalty upon the contravening parties at the rate of 5% of average turnover for the last preceding three financial years, which was from 2011-2014. A total penalty of INR
Comment
The CCI has rightly held that the Tyre Companies along with ATMA indulged in cartelisation in the domestic tyre market by way of an agreement/understanding amongst themselves for increasing/maintaining the prices of tyres and thus, violated the provisions of Section 3(3) read with Section 3(1) of the Act. Factors such as sharing of price sensitive information within a closed group and consistent monitoring of the production and sales data were a clear indicator of cartelisation within the Tyre Companies.
Similarly, CCI has rightly held the 7 (seven) officers responsible under Section 48(1) and 48(2) of the Act who were holding key position and had an active involvement and knowledge of the discussion relating to price rise.
The authors would like to acknowledge the research and assistance of Ms.
Footnotes
1 Re:
2 The persons included the (i) vice-chairman and managing director of
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