CCI issues cease and desist orders on 8 firms involved in the cartelization process
The Competition Commission of India (CCI) asked eight firms and some officials to cease unfair business practices on Tuesday. The companies were allegedly involved in a tender floated by the Eastern Railway.
However, the CCI did not impose any penalty on them due to the situation of the sectors these firms belong to. The firms belong to the Micro, Small and Medium enterprises (MSMEs).
It is believed that the companies are alleged to have quoted identical bids in the tender floated by the Eastern Railway for axle bearings that are used for certain railway coaches.
However, the CCI-backed investigation arm director general has initiated a detailed investigation against these firms and found that the companies were involved in the cartelization process between 2015 to 2019.
CCI’s response to the cartelization process of the companies:
According to the PTI reports, the Competition Commission of India has stated that MSME firms are already under stress and are struggling to nullify the impact that the covid-19 situation has inflicted on the economy. The action could be attributed to the lack of adequate staff in such companies, which has impacted the company’s turnover.
If the CCI imposes any penalty on the firms, they would be overburdened.
The CCI has openly stated that if a penalty was to be levied, it might render the firms to be economically unviable, while some of them may take an exit from the market, and this may reduce the competition.
In addition, the report indicated that the representatives of two out of eight firms have admitted to the anti-competitive conduct that was committed by all the entities in concert and collusion with each other.
Moreover, the firms have revealed the modus operandi employed in the cartel.
The eight firms that were recognized by CCI for the cartelization processes were Krishna Engineering Works, Chandra Brothers, Rama Engineering Works, Sriguru Melters and Engineers, Chandra Udyog, Janardan Engineering Industries, Jai Bharat Industries, and V K Engineering.
It was found out that the firms mentioned identical bids in the tender floated for axle bearings that are used in several railway coaches.
CCI has discovered that the firms were involved in cartelization in the trading of axle bearings and, thus, influenced the transaction by employing directly or indirectly determining the prices, allocating tenders, coordinating the bid prices, and manipulating the bidding process.
There was much evidence that was presented during the investigation process, including e-mails, call detail records, and the statements of the representatives of the firms.
The e-mails exchanged revealed that the firms discussed quantity allocation concerning the tenders of the Indian Railways for the procurement of Axle Bearings among themselves.
It was found that the vendors discussed the various compensation mechanisms through the mail and showed that some of them did not gain the agreed requirements.
Under Section 46 of the Competition Act that was introduced in 2002, the entity involved or cartel member can come forward to the CCI seeking lesser penalty provided that the company must share complete, true, and critical disclosures concerning the alleged cartels in the Commission.
CCI found the companies to be involved in bid rigging and tender floating for four years. However, they refrained from imposing any monetary penalty.
It was because the Commission found that the companies stopped their cartel conduct immediately after the investigation began in the subject matter in 2018. As a result, the commission refrained from levying any penalty.
Cartelization is a process in which firms collaborate to fix prices, are involved in bid rigging, or share customers. The prices fixed by the government do not fall under cartelization. The competition Commission of India (CCI) has strong policies against cartelization.
The organization has issued many penalties on certain manufacturing industries for cartelization.
Edited by Prakriti Arora
