RAJASTHAN CYLINDERS AND CONTAINERS LIMITED versus UNION OF INDIA AND ANOTHER
[2018] 12 S.C.R. 495, Supreme Court of India, 2018
Outcome: Disposed off
Segment: Facts
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RAJASTHAN CYLINDERS AND CONTAINERS LIMITED
v.
UNION OF INDIA  AND ANOTHER
(Civil Appeal No. 3546 of 2014)
OCTOBER 01, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Competition Act, 2002:
ss. 3, 19 and 27 – Cartelisation, bid-rigging and collusive
bidding – Suo-motu proceedings initiated by Competition Commission
of India – Against bidders/manufacturers of LPG Gas Cylinders –
Investigating into complaint about unfair conditions in the tender
floated by Indian Oil Corporation Ltd. (IOCL) for supply of LPG
Gas Cylinders – Competition Commission held that there was collusive
bidding – Competition Appellate Tribunal affirmed the findings of
Competition Commission – On appeal, held: It is duty of the
Commission to ensure that the conditions which have tendency to
kill the competition are to be curbed – There may not be  direct
evidence on the basis of which cartelisation or such agreement
between the parties can be proved – The standard of proof for such
agreement is one of probability – There is a  presumption that four
types of agreements mentioned in s. 3(3) will have an appreciable
effect on competition – However, the presumption is rebuttable as
these agreements are not conclusive proof of the fact that it would
result in appreciable adverse effects on competition – If evidence is
led which rebuts the presumption, the Commission shall take into
consideration the factors mentioned in s. 19 – If the evidence
collected by the Commission leads to one or more or
all the factors
mentioned in s. 19(3), it would again be treated as an agreement
which may cause or likely to cause an appreciable adverse effect
on competition – In the present case, inferences drawn by the
Commission, on the basis of the evidence collected by it, have been
duly rebutted by the appellants/manufacturers – They have been
able to discharge the onus that shifted upon them – However, at
that stage, the Commission failed to carry the matter further – Thus,
there is no sufficient evidence to hold that there was any agreement
between the appellants for bid rigging – Appeals by the manufactures
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are allowed – Since no penalty is payable, appeals of the Commission
are dismissed as infructuous – Evidence.
Words and Phrases:
“bid rigging” and “collusive rigging” – Meaning of, in the
context of Competition Act, 2002.
Allowing the appeals filed by the manufactures and
dismissing the appeals filed by the Competition Commission, the
Court
HELD: 1. On the one hand the economic policy of the nation
has ushered in the era of liberalisation and globalisation thereby
giving freeplay to the private sector in the manner of conducting
business, at the same time, in public interest and in the interest
of consumers, a regime of regulators has also been brought to
ensure certain checks and balances. Since competition among
the enterprises or businessmen is treated as service for a public
purpose and, therefore, there is a need to curb anti-competitive
practices. The Competition Commission of India (CCI) is given
the task (as a regulator) to ensure that no such anti-competitive
practices are undertaken.  In fact, Section 18 of the Act casts a
specific and positive obligation on CCI to ‘eliminate’ anti-
competitive practices and promote competition, interest of the
consmuer and free trade.  [Para 72] [536-G-H; 537-A-B]
Competition Commission of India vs. Steel Authority of
India Limited and Another (2010) 10 SCC 744 : [2010]
11 SCR 112 – relied on.
2. One of the anti-competitive practices is cartelisation,
the essential
postulate whereof is agreement between enterprises
or association of enterprises or persons or associations of persons
in respect of production, supply, distribution, storage, acquisition
or control of goods or provisions of service, which causes or is
likely to cause an appreciable adverse effect on competition within
India. Such an agreement is treated as void.  The types of
agreement which may fall foul of Section 3 are mentioned in sub-
section (3) thereof. These include sharing the market by way of
allocation of geographical areas of market [clause (c)] and the
agreements which result in bid-rigging or collusive bidding
whether directly or indirectly [clause (d)].  There is a presumption
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that four types of agreements mentioned in sub-section (3) will
have an appreciable adverse effect on competition. [Para 73] [537-
F-H]
3. Section 19(3) of the Act mentions the factors which are
to be examined by the CCI while determining whether an
agreement has an appreciable adverse effect on competition under
Section 3.  However, this inquiry would be needed in those cases
which are not covered by clauses (a) to (d) of sub-section (3) of
Section 3.  Reason is simple. The agreeements of nature
mentioned in sub-section (3) are presumed to have an appreciable
effect and, therefore, no further exercise is needed by the CCI
once a finding is arrived at, that a particular agreement fell in any
of the aforesaid four categories. Agreements mentioned in Section
3(3) raise a presumption that such agreements shall have an
appreciable adverse effect on competition.  It follows, as a
fortiorari, that the presumption is rebuttable as these agreements
are not treated as conclusive proof of the fact that it would result
in appreciable adverse effect on competition.  What follows is
that once the CCI finds that case is covered by one or more of
the clauses mentioned in sub-section (3) of Section 3, it need not
undertake any further enquiry and burden would shift upon such
enterprises or persons etc. to rebut the said presumption by
leading adequate evidence.  In case such an evidence is led, which
dispels the presumption, then the CCI shall take into
consideration the
factors mentioned in Section 19 of the Act and
to see as to whether all or any of these factors are established. If
the evidence collected by the CCI leads to one or more or all
factors mentioned in Section 19(3), it would again be treated as
an agreement which may cause or is likely to cause an appreciable
adverse effect of competition, thereby compelling the CCI to take
further remedial action in this behalf as provided under the Act.
That, is the broad scheme when Sections 3 and 19 are to be read
in conjuction.   [Para 74] [538-A-F]
4. Explanation to Section 3, assigns meaning to ‘bid
rigging’. The necessary ingredients of bid rigging, are: (a)
agreement between the parties;  (b) these parties are engaged
in idential or similar production or trading of goods or provisions
of services; and (c) the agreement has the effect of eliminating
or reducing competition of bids or adversely affect or manipulating
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the process for bidding. Though the expression ‘collusive bidding’
is not defined in the Act, it appears that both ‘bid rigging’ and
‘collusive bidding’ are overlapping concepts.  [Paras 75, 77] [538-
G; 539-B-C]
5. Having regard to the scheme of the Act, it cannot be
said that there is no possibility of a competition in the present
cases and, therefore, CCI had no jurisdiction to carry out any
such investigation.  Section 3 prohibits anti-competitive
agreements and brings about the prime objective of the
Competition Act. The purpose of the Act is not only to illuminate
practices having adverse effect on the competition but also to
promote and sustain competition in the market.  Enforcement
provides remedies to avoid situation that will lead to decrease
competition in the market.  Therefore, effective enforcement is
important not only to sanction anti-competitive conduct but also
to deter future competitive practices. In the present case itself,
there are sixty suppliers of the product for which there are three
buyers.  After all, each supplier would like to be L-1 or L-2 so
that it is able to get order for larger quantities than the other.  In
this sense, there would be a competition among them.  Further,
it would also be in the interest of the buyers like IOCL etc. that
the elements of healthy competition persists in the market. [Paras
78 and 79] [543-D; 544-C-E]
6. It is the duty of the CCI to ensure that the
conditions
which have tendency to kill the competition are to be curbed.  It
is also the function of the CCI to ensure that there is a
competition so that benefits of such competition are reaped by
the consumers. [Para 79] [544-E]
7. The CCI and Competition Appellate Tribunal (COMPAT)
have held that there was collusive bidding in the present case in
view of the fact that there is an active trade association of the
suppliers; a meeting took place couple of days before the date of
bidding; common changes were pointed out by these appellants
who submitted bids on their behalf; and bids were of identical
amounts despite varying cost, which were repetitive in nature.
The respondents may be right in their submission that there may
not be a direct evidence on the basis of which cartelisation or
such agreement between the parties can be proved as these
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agreements are normally entered into in closed doors. The
standard of proof which is required is one of probability. [Para
80] [544-G-H; 545-A]
Technip SA v. SMS Holding (P) Ltd. & Ors. (2205) 5
SCC 465 : [2005] 1 Suppl. SCR 223; Commissioner of
Income Tax, Bombay City I, Bombay v. Jubilee Mills
Ltd., Bombay (1963) 48 ITR 9 – relied on.
8. Even in the absence of proof of concluded formal
agreement, when there are indicators that there was practical
co-operation between the parties which knowingly substitute the
risk of competition, that would amount to anti-competitive
practices.[Para 83] [549-D]
9. The manner in which tendering process takes place
would show that in such a competitive scenario, the bid which
the different bidder would be submitting becomes obvious. It
has come on record that just a few days before the tender in
question, another tender was floated by BPCL and on opening of
the said tender the rates of L-1, L-2 etc. came to be known.  In a
scenario like this, that obviously becomes a guiding factor for
the bidders to submit their bids. Keeping in mind the aforesaid
fact situation, the very factors on the basis of which the CCI has
come to the conclusion that there was cartelisation, in fact,
become valid explanations to the indicators pointed out by the
CCI. [Paras 90 and 91] [555-F-G]
10. Identical products along with market conditions for which
there would be only three buyers, in fact, would go in favour of
the appellants.  The factor
of repetitive bidding, though appears
to be a factor against the appellants, was also possible in the
aforesaid scneario.  The prevailing conditions in fact rule out the
possibility of much price variations and all the manufacturers are
virtually forced to submit their bid with a price that is quite close
to each other.  Therefore, it became necessary to sustain
themselves in the market.  Hence, the factor that these suppliers
are from different region having different cost of manufacture
would lose its significance. It is a situation where prime condition
is to quote the price at which a particular manufacturer can bag
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an order even when its manufacturing cost is more than the
manufacturing cost of others.  The main purpose for such a
manufacuring would be to remain in the fray and not to lose out.
Therefore, it would be ready to accept lesser margin.  This would
answer why there were near identical bids despite varying cost.
[Para 91] [556-A-D]
11. Insofar as meeting of bidders in Mumbai just before
the date of submission of tender is concerned, some aspects
pointed out by the appellants are not considered by the CCI or
the COMPAT at all.  No doubt, the meeting took place a couple
of days before the date of tender. No doubt, the absence of agenda
coming on record would not make much difference.  However,
only 19 appellants had attended that meeting. Many others were
not even members or did not attend the meeting.  In spite thereof,
even they quoted almost same rates as the one who attended the
meeting.  This would lead the Court to the inference that reason
for quoting similar price was not the meeting but something else.
[Para 92] [556-D-E]
12. Monopsony consists of a market with a single buyer.
When there are only few buyers the market is described as an
oligopsony. In such a situation, a manufacturer with no buyers
will have to exit from the trade. Therefore, first condition of
oligopsony stands fulfilled.  The other condition for the existence
of oligopsony is whether the buyers have some influence over
the price of their
inputs.  It is also to be seen as to whether the
seller has any ability to raise prices or it stood reduced/eliminated
by the aforesaid buyers. [Para 95] [558-G-H; 559-A]
13. On a hollistic view of the matter, it is clear that the
appellants have been able to discharge the onus by referring to
various indicators which go on to show that parallel behaviour
was not the result of any concerted practice. [Para 96] [559-A-B]
14. Parallel behaviour does not, by itself, amount to a
concerted practice, though it may provide a strong evidence of
such a practice. Nevertheless, it is a strong evidence of such a
practice.  However, before such an inference is drawn it has to
be seen that this parallel behaviour has led to conditions of
competition which do not correspond to the normal conditions of
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the market, having regard to the nature of the products, size and
volume of the undertaking of the said market. [Para 97] [559-B-C]
15. Whenever there is a situation of oligopsony, parallel
pricing simplicitor would not lead to the conclusion that there
was a concerted practice there has to be other credible and
corroborative evidence to show that in an oligopoly a reduction
in price would swiftly attract the customers of the other two or
three rivals, the effect upon whom would be so devastating that
they would have to react by matching the cut. [Para 97] [559-D-E]
16. The inferences drawn by the CCI on the basis of
evidence collected by it are duly rebutted by the appellants and
the appellants have been able to discharge the onus that shifted
upon them on the basis of factors pointed out by the CCI.
However, at that stage, the CCI failed to carry the matter further
by having required and necessary inquiry that was needed in the
instant case. [Para 102] [563-F-G]
17. In such a watertight tender policy of IOCL which gave
IOCL full control over the tendering process, it was necessary
to summon IOCL.  This would have cleared many aspects which
are shrouded in mystery and the dust has not been cleared. [Para
103] [563-G-H]
18. Thus, there is no sufficient evidence to hold that there
was any agreement between the appellants for bid rigging. As a
consequence, since no penalty is payable, appeals of the CCI are
rendered infructuous and dismissed as such.  [Para
104] [564-A-B]
Union of India vs. Hindustan Development Corporation
(1993) 3 SCC 499 : [1993] 3 SCR 128; Ashoka
Smokeless Coal India (P) Ltd. v. Union of India (2007)
2 SCC 640 : [2006] 9 Suppl. SCR 954; Excel Crop Care
Limited v. Competition Commission of India & Anr.
(2017) 8 SCC 47 : [2017] 5 SCR 901; Union of India
v. Hindustan Development Corporation (1993) 1 SCC
467 : [1993] 3 SCR 108; Union of India v. Hindustan
Development Coproration (1993) 3 SCC 499 : [1993]
3 SCR 128; Punjab Land Developement & Reclamation
Corporation Ltd. v. Presiding Officer, Labour
Court
RAJASTHAN CYLINDERS AND CONTAINERS LIMITED v.
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(1990) 3 SCC 682 : [1990] 3 SCR 111; S. Sundaram
Pillai v. V.R. Pattabiraman (1985) 1 SCC 591 : [1985]
2 SCR 643; CCI v. Artistes & Technicians of W.B. Film
& Television (2017) 5 SCC 17 : [2017] 5 SCR 1; Union
of India vs. Hindustan Development Corporation
(1993) 3 SCC 499 : [1993] 3 SCR 128 – referred to.
Ahlstrom Osakeyhtio v. Commission 31.3.1993, ECJ
(“Woodpulp”); Theatre Enterprises v. Paramount Films
346 US 357; Monsanto Co. v. Spray-Rite Service Corp.
346 US 357; Monsanto Co. v. Spray-Rite Service Corp.
465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed. 2Nd 775 (1984);
Matsushita v. Zenith Ratio Corp. 475 U.S.574 (1986)
Bell Atlantic Corp v. Twombly 550 U.S. 544 – referred
to.
Case Law Reference
[1993] 3 SCR 128
referred to
Para 14
[2006] 9 Suppl. SCR 954
referred to
Para 27
[2017] 5 SCR 901
referred to
Para 28
[1993] 3 SCR 108
referred to
Para 32
[1993] 3 SCR 128
referred to
Para 33
[1990] 3 SCR 111
referred to
Para 43
[1985] 2 SCR 643
referred to
Para 45
[2017] 5 SCR 1
referred to
Para 48
[1993] 3 SCR 128
referred to
Para 52
[2010] 11 SCR 112
referred to
Para 72
[2005] 1 Suppl. SCR 223
relied on
Para 80
(1963) 48 ITR 9
relied on
Para 81
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3546
of 2014
From the Judgment and Order dated 20.12.2013 of the Competition
Appellate Tribunal in Appeal No. 59 of 2012.
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WITH
Civil Appeal Nos. 4280/2014, 4346/2014, 4649/2014, 4342/2014,
4879/2014, 4868/2014, 6033/2014, 5771/2014, 5772/2014, 5035/2014,
5773/2014, 5649/2014, 5650/2014, 5651/2014, 4972/2014, 6661/2014,
7214/2014, 7102/2014, 6365/2014, 6025/2014, 5993-5994/2014, 6868/2014,
5774/2014, 5775/2014, 5776/2014, 5832-5833/2014, 5777/2014, 5778/2014,
6371/2014, 8953/2014, 6372/2014, 6373/2014, 6366/2014, 6367/2014,
6374/2014, 6368/2014, 6364/2014, 6369/2014, 6370/2014, 10579/2014,
1724/2015, 5277-5278/2016, 5281-5315/2016, 7359/2016.
Salman Khurshid, Prashanto Sen, Sr. Advs., Manan Verma, Ms.
Nidhi Khanna, Mrs. Sarla Chandra, Ms. Diksha Rai, Arjun Krishnan, O.
P. Gaggar, Aditya Gaggar, Sudipto Sircar, Annam D. N. Rao, Annam
Venkatesh, Rahul Mishra, Amol Sinha, Ms. Anshum Jain, Rahul Kochar,
Naveen Kumar, Deepak Anand, N. S. Nandakumar, N. Krishn Kumar,
K. Krishna Kumar, Sarad Kumar Singhania, Ms. Ruchi Kohli, Ms. Pallavi
Langar, Jaiveer Shergill, Amit Goyal, Rajesh Sharma, Ms. Nidhi Singh
Dubey, Shafiq Khan, Ms. Shalu Sharma, R. Satish Kumar, V. Susheetha,
P. V. Yogeswaran, Rameshwar Prasad Goyal, S. Nanda Kumar, R. Sathis
Kumar, M. S. Saron Kumar, Ms. N. Deepika Nanda Kumar, Naresh
Kumar, Praveen Mahajan, Arjun Krishnan, Ankur Singh, Sumit Srivastava,
Kaustav Som, Ms. Gitanjali Kapur, Antony Julian, Arpit Shukla, Udayan
Verma, Sarvesh Mishra, Amit Sharma, Raj Bahadur, Ms. Anil Katiyar,
Kedar Nath Tripathy, Girija Ballav Das, B. B. Pradhan, Gaurav Agrawal,
Manan
Verma, Ms. Diksha Rai, Ms. Palak Mahajan, Kuljeet Rawal,
Ashwani Kumar, Ms. Iti Sharma, Pradeep Aggarwal, Karan Khanna,
Aniket Bhattacharya, Arjun Agggarwal, Advs. for the appearing parties.
The Judgment of the Court was delivered by
A. K. SIKRI, J. 1. All these appeals are filed against the orders
dated 20th December, 2013 passed by the Competition Appellate Tribunal
(hereinafter referred to as ‘COMPAT’). The COMPAT by the said
judgment has upheld the findings of the Competition Commission of India
(for short, ‘CCI’) that the appellants/suppliers of Liquefied Petroleum
Gas (LPG) Cylinders to the Indian Oil Corporation Ltd. (for short, ‘IOCL’)
had indulged in cartilisation, thereby influencing and rigging the prices,
thus, violating the provisions of Section 3(3)(d) of the Competition Act,
2002 (for short, the ‘Act’).  The CCI, as a result, imposed severe penalties
in the form of fines under Section 27 of the Act.  While maintaining the
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order of the CCI insofar as it found the appellants guilty of contravention
of Section 3(3)(d) and also under Section 3(3)(a) of the Act, the
COMPAT has reduced the amount of penalty.  These suppliers have
filed the instant appeals on the ground that there was no cartilisation and
they have not contravened the provisions of the Act.  On the other hand,
CCI has also come up in appeal challenging latter part of the order
whereby penalties inflicted on the suppliers stand reduced. For the sake
of convenience these suppliers will be referred to as the appellants
hereinafter.
2. We may point out at the outset that all these appellants are
manufacturing gas cylinders of a particular specification having capacity
of 14.2 kg which are needed for use by the three oil companies in India,
namely, IOCL, Bharat Petroleum Corporation Ltd. (BPCL) and
Hindustan Petroleum Corporation Ltd. (HPCL) [all public sector
companies].  It is also a matter of record that apart from the aforesaid
three companies there are no other buyers for these cylinders
manufactured by the appellants.  Insofar as IOCL is concerned, it is a
leading market player in LPG as its market share is 48%.  Thus, in case
a particular manufacturer is not able to supply its cylinders to the aforesaid
three companies, there is no other market for these cylinders and it may
force that company to exit from its operations. We may also point out at
this stage itself that
inquiry was started against 47 companies.  The CCI
exonerated two companies and found that 45 companies had entered
into an arrangement/agreement insofar as statements of bids pursuant
to tenders issued by IOCL are concerned.  Out of these 45 companies
one did not challenge the orders before the COMPAT and other 44 had
filed appeals which have been decided by the COMPAT.
3. The manner in which the inquiry was undertaken by the CCI,
culminating into the finding of guilt and imposition of penalty, is succintly
and sequally recorded by the COMPAT in its impugned order. As there
is no dispute about the said factual narration, it would be convenient to
borrow the said discussion as recorded by the COMPAT.
4. The suo-motu proceedings were started by the CCI on the
basis of the information received by it in Case No. 10 of 2010 titled M/
s. Pankaj Gas Cylinders Ltd. Vs. Indian Oil Corporation Ltd. in that
case a complaint was made by M/s. Pankaj Gas Cylinders before the
CCI complaining about unfair conditions in the tender floated by IOCL
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for the supply of 105 lakh 14.2 Kg. capacity LPG Cylinders with SC
valves in the year 2010-11, the tender No. being LPG-O/M/PT-03/09-
10. While considering the Director General’s investigation report in Case
No. 10 of 2010, the CCI in pursuance of its duties under Section 18 felt
that investigation was necessary in the case of all bidders who were the
suppliers of 14.2 kg. LPG cylinders in that tender. In the investigation
report in the said case, the Director General had noted that out of 63
bidders who participated in the tender, 50 bidders were qualified for
opening of price bids, while 12 bidders were qualified as new vendors
who were not required to submit price bids and one bidder was not
qualified for the opening of the price bid. The technical bid of the subject
tender was opened on 3.3.2010 and the price bids of 50 qualified bidders
were opened on 23.3.2010. According to the Director General, there
was a similar pattern in the bids by all the 50 bidders who submitted
price bids for various States. The bids of a large number of parties were
exactly identical or near to identical for different States. The Director
General had observed that there were strong indications of some sort of
agreement and understanding amongst the bidders to manipulate the
process of bidding.
It was on this basis the CCI directed further investigation in the
matter. The Director General after careful consideration submitted a
detailed investigation report to the CCI.
After the CCI considered the
freshly ordered investigation report, it directed that a copy of the report
be sent to the parties seeking their objections. In all, 44 opposite parties
submitted their objections. After giving them the opportunity to be heard,
the CCI passed the order in question.
As per the Director General’s report, the process of bidding
followed by the IOCL in the tender was as under :-
i) The bidders would submit their quotations with the bid
documents.
ii) The existing bidders, who were existing suppliers, were required
to submit the price bids and technical bids.
iii) The bidders were to quote for supplies in different States of
India in keeping with their installed capacity.
iv) After price bids were opened the bidders were arranged
according to the rates in the categories of L-1, L-2 and L-3.
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v) The rates for the supplies in different States were approved
after negotiations with L-1 bidder. In case the L-1 bidder could
not supply a required number of cylinders in a particular State, the
orders of supplies went to L-2 and also L-3 bidder or likewise
depending upon the requirement in that State as per fixed formula
provided in the bid documents.
vi) Certain bidders were called new parties. They were required
to submit only technical bids and to supply as per L-1 rates
determined after the negotiations.
vii) One bidder could quote for maximum eight States.
7. The Director General after analyzing the bids came to the
conclusion that there was not only a similarity of pattern in the price bids
submitted by the 50 bidders for making supply to the IOCL but the bids
of large number of parties were exactly identical or near to identical in
different States. It was also found that bidders, who belonged to same
group, might have submitted identical rates. It was found that not only
there was identical pricing in case of group concerns but the rates of
other entities not belonging to the group were also found to be identical.
The D.G. painstakingly noted the names of group companies as well as
non-group companies. He came to the conclusion that in all 37 entities
could not be said to be belonging to any single group and were
independently controlled. The Director General found it unusual that
unrelated firms had
quoted identical rates in different States. The D.G.
had analyzed the bidding pattern for the various parties for all the 25
States. He found that :-
a. The orders were placed on all the 50 successful bidders.
b. The contracts were awarded to the sets of bidders who had
quoted identical rates or near to identical rates in a particular pattern
in almost all the States.
c. There was a common pattern for quotation depending upon the
State. In case of North East the rates were highest, quoted at Rs.
1240 whereas in case of others rates were Rs.1100, Rs.1127 and
Rs. 1151.
d. It was found that only for Andaman and Nicobar Islands there
was a single party who had quoted the L-1 rate and got the formal
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contract. In other States the contracts were bagged in a group on
the basis of identical or near to identical rates.
e. The similarity of the rates was found even in case of bidders
whose factories and offices were not located at one and the same
place in the States and where they were required to supply was
far off from their factories located in different place.
8.The D.G. had found further that though the factors like market
conditions and small number of companies were different, there was a
large scale collusion amongst the bidding parties.  He also arrived at a
finding to the effect that the LPG Cylinder Manufacturers had formed
an Association in the name of Indian LPG Cylinders Manufacturers
Association and the members were interacting through this Association
and were using the same as a platform. The date for submitting the bids
in the case of the concerned tender was 3.3.2010 and just two days
prior to it, two meetings were held on 1st and 2nd March, 2010 in Hotel
Sahara Star in Mumbai. As many as 19 parties took part and discussed
the tender and, in all probability, prices were fixed there in collusion with
each other. The D.G. reported that the bidders had agreed for allocation
of territories, e.g., the bidders who quoted the bids for Western India
had not generally quoted for Eastern India and that largely the bidders
who quoted the lowest in the group in Northern India, had not quoted
generally in Southern India.  The D.G. also concluded
that this behavior
created entry barrier and that there was no accrual of benefits of
consumers nor were there any plus factors like improved production or
distribution of the goods or the provision of services.
9. Ultimately, the D.G. came to the conclusion that there was a
cartel like behavior on the part of the bidders and that the factors
necessary for the formation of cartel existed in the instant case. It was
also found that there was certainly a ground to hold concerted action on
the part of the bidders. The D.G. had also noted that the rates quoted for
the year 2009-10 and in years previous to that were also identical in
some cases. Thus, he came to the conclusion that the bids for the year
2010-11 had been manipulated by 50 participating bidders. It was
thereafter that the CCI decided to supply the D.G.’s investigation report
to the concerned parties and invite their objections.
10. A common reply came to be filed as also the individual replies.
After considering the same, the CCI formulated the following issue for
determination:-
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“Whether there was any collusive agreement between the
participating bidders which directly or indirectly resulted in bid
rigging of the tender floated by IOCL in March 2010 for
procurement of 14.2 kg. LPG cylinders in contravention of Section
3(3)(d) read with Section 3(1) of the Act?”
11. After considering the oral as well as written submissions, the
CCI answered the issue against the Cylinders Manufacturers and inflicted
the penalties against the present appellants.  In its impugned order, while
determining the issue, the CCI, in the first instance, considered the
common replies to the DG’s report filed by as many as 44 opposite
parties. It was more or less pleaded that every part of LPG Cylinder is
regulated by the Rules through various Notifications and that the price
of steel constitutes 50% of the total manufacturing cost, so also the
price of the paint, it being an essential raw material. All these factors,
including the taxes which vary from State to State, determine the overall
bidding pattern of the bidders. In para-5.2.3 of the common objection, it
was added that these 44 parties had nominated six agents for depositing
their bids on their behalf and it was a common practice amongst the
bidders to direct their agents to keep close watch on the rates offered by
their competitors in respect of a particular State and this led to the
possibility of copying and matching of the rates quoted in the price bids
by
many suppliers in a particular State, who may have appointed common
agents. Due to this reason, cutting and over-writing in the price bids for
the tender in question was noticed by the Director General.
12. It was further pointed out that there were only 62 qualified
tenderers in the whole country, out of whom 12 bidders were classified
as new parties, meaning thereby that they had not supplied Cylinders in
last three years and were not required to bid in the tender. Out of the
remaining 50 bidders, there were group companies controlled by single
management.
13. The CCI in its detailed order began with considering the scope
of constructed bid rigging agreement and cartel. In that the CCI also
considered the 18 famous observations by Lord Denning in case of RRTA
vs. W. H. Smith & Sons Limited regarding the quiet and secret nature
of the agreement between the parties. The CCI then went on to record
its inference holding that there was element of agreement and considered
the following factors in coming to the conclusion. They being:-
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1. Market conditions
2. Small number of suppliers
3. Few new entrants
4. Active trade association
5. Repetitive bidding
6. Identical products
7. Few or no substitutes
8. No significant technological changes
9. Meeting of bidders in Mumbai and its agenda.
10. Appointing common agents
11. Identical bids despite varying cost.
14. After consideration of these factors, the CCI came to the
conclusion that it did suggest collusive bidding. Thereafter, the CCI
analyzed these bids for each States and found that all 50 participating
bidders had secured the order; that the orders were placed on the said
50 bidders who had quoted identical rates or near to identical rates in a
particular pattern common to all the parties. CCI also highlighted the
facts of absence of business justification. According to the CCI, the
material revealed that the supplies were effected at the higher cost.
After discussing the concepts of standards of proof and appreciable
adverse effect on competition, the CCI considered the various arguments
and repelled those arguments. The CCI then went on to consider the
case law, and in particular the judgment of this Court in Union of India
vs. Hindustan Development Corporation1. It also took into consideration
the arguments raised by the individual parties and then came to record
that cases of M/s. JBM Industries and Punjab Cylinders, however, were
exceptional ones and they could be exonerated. After this the CCI went
on to decide the penalty
factor under Section 27 of the Act.
15. The COMPAT after discussing the findings of the CCI and
also taking note of the arguments of the appellants which were advanced
before the CCI, proceeded with its own discussion.  It started with the
admitted facts of the case, and took note of the following such facts:
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(A) The tender offers were to be made at Mumbai on 03.03.2010.
Admittedly there were meetings in Hotel Sahara Star, Mumbai on
1st and 2nd March, 2010 which were attended by some of the
appellants.  The D.G. has held that 19 appellants were represented
by various persons in that meeting.  The fact of the meeting having
been held was not disputed.
      Though some of the appellants stated that they did not attend
the meeting and those who attended the meeting maintained that
nothing was disucssed about the tender, the same was not believed
by the COMPAT and it held that these meetings did relate to the
tender offers which were to be submitted on 03.03.2010.  This
finding is premised on the basis that nobody came with the
explanation as to what transpired in the meeting or gave any proof
that prices were discussed.  Minutes of the meeting were also not
produced.
(B) There is an association of the cylinder manufacturers. All the
parties, except few competing with each other, stated that they
were not the members of that association. A feeble argument
was also raised by some appellants that though they were the
members but they were not the active members thereof. Some of
the appellants also argued that they had abandoned the membership
by not contributing the subscription in the later years. However,
the appellants could not deny the position that there was an
association called Indian LPG Cylinder Manufacturers’
Association.
    It was a registered association, its Memorandum of
Association provided that one of the objectives was to prtoect
common interest and welfare of LPG cylinder manufacturers.
According to COMPAT, there was a definite platform available
for all cylinder manufacturers and practically all the appllants
appear to be the members of that Association.
(C) A common written reply was submitted by as many as 44
parties. Further, the appellants had nominated six agents for
depositing bids on their behalf. These common agents were
instructed to keep a close watch on the price quoted by the
competitors in a particular State.
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    Though some of the appellants had contended that they had
not appointed the common agents, the plea was not accepted by
the COMPAT.  The COMPAT, therefore, proceeded on the
‘admitted grounds’ that there was an association of cyliner
manufactures; practically all the appellants were members of the
said association; this association was an active association; it held
meetings on the eve of entry tender obviously for discussing
tenders, its conditions etc.; these meetings were attended by
representatives of at least 19 appellants; and these appellants had
six common agents at Mumbai who were instructed to watch the
prices offered by the others.  A dinner meeting as also a lunch
were held and one Mr. Chandi Prasad Bhartia of M/s. Haldia
Precision Engineering Private Limited paid the bill for the same.
Dinner and lunch held in Sahara hotel were attended by about 50
persons in all.  From this the COMPAT inferred that there was no
reason to disbelieve that the parties had an access to each other
through their association which was an active association.  The
existence of such an association under the aegis of which meetings
took place just before the submission of tender has been noted as
a very relevant factor by the COMPAT in affirming the findings
of CCI on cartelisation and it summed up the position in the
following manner:
“26. What is important is not whether a particular appellant
was a member of the association or not. The existence of an
association
is by itself sufficient, as it gives opportunity to the
competitors to interact with each other and discuss the trade
problems. There will be no necessity to prove that any party
actually discussed the prices by actively taking part in the
meeting. If there is a direct evidence to that effect that is
certainly a pointer towards the fact that such party had a tacit
agreement with its competitors. However, the existence of an
association and further holding of the meetings just one or two
days prior to the last date of making offers and further
admission that the parties had appointed common agents with
the instructions to keep watch on the prices quoted by the
competitors would go a long way in providing plus factors in
favour of the agreement between the parties. All these factors
would form a back drop, in the light of which, the further
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evidence about agreement would have to be appreciated. We
have seen the comments of Director General as also the
findings of the CCI. We are convinced that CCI has not
committed any error in considering all these factors as plus
factors to come to the conclusion that there was a concerted
agreement between the parties on the basis of which the
identical or near identical prices came to be quoted in tenders
for the supply of cylinders to the 25 States. In view of this, we
need not dilate on the individual claims by some of the appellants
that they were not the members of the association or that they
were only the dormant members or that they had abdicated
their membership. We also need not go on the claim that while
the meeting was attended by the 19 parties as held by the D.G.
and confirmed by the CCI, it was not attended by the rest of
the appellants because that would be of no consequence. Once
there was a meeting, there was every opportunity to discuss
or to communicate to each other whatever transpired in the
meeting.
27. We have seen the order of the CCI and while commenting
about the meeting, the CCI has painstakingly noted the details
of that meeting. The CCI has referred to the evidence of Mr.
Dinesh Goyal, who was an active member of the Indian LPG
Cylinder Manufacturers’ Association and noted that he had
attended the meeting. He has also referred to the statement of
Mr. Sandeep Bhartia of Carbac Group
though initially he denied
to have organized the conference, he later on had confirmed
about such a conference having been held along with Mr.
Sandeep Bhartia of Carbac Group. The CCI also noted that
he admitted that in such meetings there were discussions on
pre-bid issues. He also admitted that though there are about
50 competitors, in fact about 25 persons control the whole
affairs. From this evidence, the CCI correctly deduced that
pre-bid issues were discussed in that meeting. The CCI has
then referred to the evidence of Mr. Manvinder Singh of
Bhiwadi Cylinders Limited, Mr. Chandi Prasad Bhartia of
Haldia Precision Engineering P. Ltd., Mr. Vijay Kumar Agarwal
of SM Sugar Pvt. Ltd., Mr. S. Kulandhaiswamy, MD of Lite
Containers Pvt. Ltd. and Secretary of the Association, Mr.
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Ramesh Kumar Batra, Director of Surya Shakti Vessels Pvt.
Ltd. and on that basis came to the correct conclusion that not
only was the meetings held on 1st and 2nd March, but thorough
discussions went on in those meeting on the pre-bid issue of
the concerned tender. The CCI has also correctly noted about
the agenda of the meeting and has also referred to an admission
made by one of the witnesses that the matching of the quotation
was a matter of co-incidence and telephonic discussions do
take place amongst the parties regarding the trends. We are
thus thoroughly convinced about holding of the meeting, the
discussion held therein and also the discussion regarding the
pre-bid issue having been taken place in that meeting.”
16. The COMPAT thereafter took up for discussion the argument
of the appellants that the CCI should have enquired IOCL also. But
rejected the same.  Another significant argument which was canvassed
before us also with great emphasis was that it was an oligopolistic market
wherein there was a likelihood of each player being aware of actions of
the other and in such a situation price parallelism would be a common
phenomena.  Thus, merely because there was a price parallalism, it
would not be construed as  evidence of collusion.  The COMPAT rejected
this argument as well.  In the process, it analysed the order of CCI,
conclusion whereof was founded on the following factors:
(1) The prevailing  market conditions were such that there was a
constant demand for cylinders not only by IOCL but by other two
oil manufacutring companies as well.  Therefore, there was a
constant need for the cylinders which facilitated factor for the
collusion.
(2) There was small number of suppliers.  Among the 50
participating companies, only 37 companies could be said to be
independant bidding companies and there were seven groups
consisting of 20 participating companies.  This small number of
suppliers should also be a facilitating factor.
(3) There were very few new entrants.
(4) The existence of an active trade association in which all the
bidders, except seven companies, were members would be another
facilitating factor.
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(5) Few other factors like repetitive bidding, identical products,
few or no substitutes and no significant technological changes
were the additional factors which persuaded the CCI to arrive at
such a conclusion.
(6) These manufacturing companies had their factories at different
places in India, where the costs of the components would differ
from State to State. Even the taxing structure, the labour conditions
and other factors like cost of electricity etc. were bound to be
different.  Still the prices quoted were almost identical.
(7) On the above considerations, the defence of the appellants
was rejected as unconvincing, thereby undergoing the factors
considered by the CCI.
17. According to the COMPAT all these could not have been
possible unless there were internal agreements between the appellants.
The COMPAT has approved the finding of the CCI that owing to the
collusion, the IOCL could not get lower or the competitive prices.  The
rates quoted in 2010-2011 were higher as compared to the rate quoted in
2009-10.  From the year 2006-07, the prices had collectively been raised
on an average of 30% for making supplies in different states.
18. According to the COMPAT, the CCI was right in concluding
that it had appreciable adverse effect on competition as the conduct of
the LPG cylinder manufacturers in coming together on a common
platform and fixing the bid prices ensures that no new player could enter
the
relevant market and quote the prices independently.  Thus, these
manufacturers would make entry of a new player into the relevant market
difficult, because such new player would necessarily have to first
negotiate with the existing players to get the business profitably. Other
factors were driving existing competitiors out of the market and
foreclosure of competition by hindering entry into the market.
19. It negated the argument of the appellants that when the IOCL
was placing orders on the basis of negotiated rates there could be no
possibility of incentive to collude.  According to it, even where the rates
are fixed, the bid rigging can still take place to keep the big amounts to a
pre-determined level. Such pre-determination can be by way of intentional
manipulation by members of the bidding group and where the L-1 rates
themselves get fixed like in the present case at higher level even if there
are negotations the negotiators would have to take into consideration the
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benchmark rates.  There is aslo a possibility that such benchmark rates
could go higher in the subsequent tenders; known as rippel effect in long
term.
20. The COMPAT also took note of the provisions of Section 3,
as per which once the agreement is proved there is a presumption about
the appreciable adverse effect on competition on the mere proof of the
agreement.  Thus, onus shifts on the other side to prove otherwise which
according to the COMPAT was not discharged by the appellants.  The
COMPAT thereafter took note of some arguments by certain counsel
specific to their cases but did not find any substance in them.
21. Having examined the relevant provisions whereupon these
appeals centre around, we proceed to take note of the arguments that
were advanced by various counsel appearing for the appellants and the
manner in which respondents endeavoured to meet the same.
22. Ms. Madhavi Divan, learned counsel appearing in the appeal
filed by Rajasthan Cylinders and Containers Ltd., attacked the very basis
and foundation on which CCI came to conclusion that there was an
agreement or cartelisation by the appellants aimed at bid rigging.  She
premised her case on the following three propositions:
(i) the inherent nature of the market of cylinder manufacturers
itself precludes the possibility of competition;
(ii) alternatively, there is no collusive agreement or bid-rigging in
the present case; and
(iii) further, in the alternative, even assuming that there is
a collusive
agreement or bid-rigging in the present case, there is no
appreciable adverse effect on competition.
23. On the first proposition, argument developed by Ms. Divan
was that the Act prohibits anti-competitive practices, which would imply
that there has to be a competition in the market, in the first place.  As a
corrolary, if there is no such competition, Section 3(1) of the Act does
not get triggered. According to her, in the instant case, the fact would
show that there was a tight control and regulation by the IOCL and,
thus, it did not lead any scope of competition at the very threshold.  She
stressed that the conditions of monopsony/oligopsony prevailed. For the
existence of monopsony/oligopsony, she referred to the Glossary of
Industrial Organization Economics and Competition Law published by
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the Organisation for Economic Co-operation and Development (OECD),
as per which a monopsony consists of a market with a single buyer.
When there are only a few buyers, the market is described as an
oligopsony.  In general, when buyers have some influence over the price
of their inputs they are said to have monopsony power.  The ability of a
firm to raise prices, even when it is a monopolist, can be reduced or
eliminated by monopsony or oligopsony buyers.  To the extent that input
prices can be controlled in this way, consumers may be better off.
24. According to her, these conditions were adequately present in
the instant case.  In her attempt to make this propositoin good, she
highlighed the following features and conditions surrounding the contract:
(i) Extremely limited number of buyers and for this particular kind
of market - a sole buyer, i.e., IOCL.  IOCL controls 48% of the
market share.  There are no other purchasers of 14.2 Kg gas
cylinders except for HPCL and BPCL, both of whom invite e-
tenders, having a market share of 26% and 25% respectively.
(ii) The product is standardized and special to the extent that it is
tightly controlled and regulated by the Government and also there
are no other takers for it.
(iii) There are entry barriers in the market.  As per the Tender
conditions, only those manufacturers having valid approval from
the Chief Controller of Explosives (CCOE) and Bureau of Indian
Standards
(BIS) license for manufacture of 14.2 kg LPG cylinders
as per IS-3196 (Part 1) could submit bids for the tender.
(iv) Even the machinery used to manufacture this product is special
and will become obsolete and reduceable to scrap if IOCL and
the aforesaid two players were to discontinue contracts for supply
of 14.2 kg cylinders.  She pointed out that this was accepted in
the Expert Report of Dr. Rughvir K.S. Khemani.
(v) The tender conditions state that it can be rejected without
furnishing reasons.  Therefore, the lowest price is not sacrosanct
(clause 11 of the contract).
(vi) L2 and L3 have also been granted contracts irrespective of
the price they have quoted.
(vii) Effective price has no sanctity since not only L2 and L3 also
get contracts in addition to or in exclusion of L1 but further, the
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final negotiated price is determined on the basis of privately
conducted negotiations with individual bidders for which the
benchmark is not the price quoted by them but the internal estimates
arrived on the basis of objective criteria.
(viii) In most States, the final negotiated price was concluded at a
rate lower than the internal estimate.  The internal estimate had
absolutely no correlation with the quoted rates by L1 or any other
party.  In this behalf, she pointed out that the IOCL had carried
out the exercise of ascertaining the estimated cost of the cylinder
through its experts.  In the report given by the expert, the estimated
cost per cylinder was arrived at Rs. 1106.61 paisa per cylinder.
As against this, the final negotiated price at which the appellants
had supplied cylinders to the IOCL was much lesser.  According
to her, in the whole process the price determination was on the
basis of internal estimates by IOCL which could not be influenced
by the appellants at all.  In fact, even after the tenderers submitted
their bids, final price was the price negotiated by IOCL which
fact was accepted by Mr. Y. Ramana Rao of IOCL in his deposition
recorded by the  Director General of CCI.  This, according to the
learned counsel, clearly proved that there was no adverse effect
on competition, in any case.
(ix) The internal estimates were drawn up long after the price
bids were made, i.e., on 5th May, 2010.  Price bids were opened
on 23rd March, 2010 and
negotiations were held only after the
submission of Mott MacDonald Report on 05.05.2010.
(x) The pattern shows that since L1, L2 and even L3 were awarded
the contract and not merely L1, quoting the lowest price did not
even determine the identity of the parties who were to get the
contract, therefore, the manner in which the process was
conducted or controlled by IOCL,  completely leaves no scope
for either determination of price or the identity of the parties who
would get the contract.
25. She submitted that in such market conditions where on account
of the vertical agreement there is virtually no scope of competitive forces
between horizontal players, the question of anti-competitive conduct by
virture of horizontal agreements does not arise.  There is no competition
in the market even before a player enters the fray.  Therefore, the first
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premise for the applciation of Section 3, i.e., the presence of an otherwise
competitive market is absent.  The burden of proof is on the respondent—
CCI to establish that there is competition in the market before it can
justify invoking Section 3.  There is no automatic presumption under
Section 3 that there is competition in the market.
26. From the aforesaid factors, Ms. Divan tried to deduce that
price control was entirely in the hands of IOCL and in a  situation like
this, question of entering into any agreement with the motive of bid rigging
or collusive bidding did not arise.
27. She also referred to LPG (Regulation of Supply and
Distribution) Order, 2000 published vide Notification dated 26th April,
2000 as per which only Government oil companies can supply LPG to
domestic consumer of 14.2 kg LPG cylinders with dimensions as specified
therein.  Predicated thereupon, her submission was that the LPG supply
in 14.2 kg gas cylinders is an essential commodity; the distribution of
such cylinders takes place only through Government oil companies; the
price to the consumer is controlled by the Government; and parallel
marketeers, supplier and distributor of LPG cylinders may do so only for
cylinders and specifications other than 14.2 kg cylinders.  This control of
the Government, insofar as supply of 14.2 kg gas cylinders is concerned,
would also show tight control over the pricing.  In such a statutorily tight
control price fixing mechanism there could not be bid rigging, was the
submission of Ms. Divan.  She supported this submission by drawing the
attention of the Court to the following observations in Ashoka Smokeless
Coal India (P) Ltd. v. Union of India2 :
“109. It may be true that prices are required to be fixed having
regard to the market forces. Demand and supply is a relevant
factor as regards fixation of the price. In a market governed by
free economy where competition is the buzzword, producers may
fix their own price. It is, however, difficult to give effect to the
constitutional obligations of a State and the principles leading to a
free economy at the same time. A level playing field is the key
factor for invoking the new economy. Such a level playing field
can be achieved when there are a number of suppliers and when
there are competitors in the market enabling the consumer to
exercise choices for the purpose of procurement of goods. If the
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policy of the open market is to be achieved the benefit of the
consumer must be kept uppermost in mind by the State.
xxx
xxx
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127. While fixing a fair and reasonable price in terms of the
provisions of the Essential Commodities Act (although the price is
not dual), it is essential that price is actually fixed. Such price
fixation is necessary in view of the fact that coal is an essential
commodity. It is, therefore, vital that price is actually fixed and
not kept variable. Fixation of price of coal is of utmost necessity
as it is a mineral of grave national importance. Non-availability of
coal and consequently, the other products may lead to hardship to
a section of citizens. It may entail closure of factories and other
industries which in turn would lead to loss to the State exchequer;
as they would be deprived of its taxes. It will lead to loss of
employment of a large number of employees and would be
detrimental to the avowed object of the Central Government to
encourage small-scale industries.”
28. She also referred to the following discussion in Excel Crop
Care Limited v. Competition Commission of India & Anr.3:
“52. We are here concerned with parallel behaviour. We are
conscious of the argument put forth by Mr Venugopal that in an
oligopoly situation parallel behaviour may not, by itself, amount to
a concerted practice. It would be apposite to take note of the
following observations made by European Court of Justice in
Dyestuffs [Imperial
Chemical Industries Ltd. v. Commission of
European Communities, 1972 ECR 619 (ECJ)] :
“By its very nature, then, the concerted practice does not have
all the elements of a contract but may inter alia arise out of
coordination which becomes apparent from the behaviour of
the participants. Although parallel behaviour may not itself
be identified with a concerted practice, it may however
amount to strong evidence of such a practice if it leads to
conditions of competition which do not respond to the normal
conditions of the market, having regard to the nature of the
products, the size and number of the undertakings, and the
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volume of the said market. Such is the case especially where
the parallel behaviour is such as to permit the parties to seek
price equilibrium at a different level from that which would
have resulted from competition, and to crystallise the status
quo to the detriment of effective freedom of movement of the
products in the [internal] market and free choice by consumers
of their suppliers.”
(emphasis supplied)
At the same time, the Court also added that the existence of a
concerted practice could be appraised correctly by keeping in
mind the following test:
“If the evidence upon which the contested decision is based is
considered, not in isolation, but as a whole, account being taken
of the specific features of the products in question.”
29. The learned counsel also referred to various judgments of
other jurisdictions, primarily that of European Commission and the Court
of Justice of European Union, which we shall discuss at the appropriate
stage.
30. Ms. Divan, also highlighted that in this entire scenario, it was
necessary to have the views of IOCL.  However, in a suo motu case,
IOCL was not even served with any notice and therefore no evidence
was elicited  from IOCL on the issue whether there was any autnomy
left to the manufacturer in the matter of price determination.
31. She, thus, argued that merely because there was price
parallelism, it could not have been the reason to arrive at a conclusion
that there was
a collusive agreement or bid rigging. She submitted that
in a monopsonistic market where there are few buyers, the price is set
by the buyers, and the conditions are such that sellers can predict demand,
there is a repetitive bidding process and the products are identical and
specilized, the likelihood of price parallelism is natural.
32. Further, price parallelism is inevitable where the buyer has a
high degree of control and determines price, quantity, and even the
identities of the awardees at its discretion. Referring to the following
discussion in Union of India v. Hindustan Development Corporation4,
she argued that mere identical pricing cannot lead to the conclusion of
cartelisation:
4 (1993) 1 SCC 467
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“7. [….]  (1) There is not enough of material to conclude that M/
s H.D.C., Mukand and Bhartiya formed a cartel. Because of
mere quoting identical tender offers by the said three
manufacturers for which there is some basis, the conclusion that
the said manufacturers had formed a cartel does not appear to be
correct. However since the offers of the said three tenderers
were identical and the price was somewhat lower, the Tender
Committee entertained a suspicion that a cartel had been formed
and the same got further strengthened by the post-tender attitude
of the said manufacturers which further resulted in entertaining
the same suspicion by the other authorities in the hierarchy of
decision making body including the Minister of Railways. [….]
33. She pointed out that this principle has also been stated in
paragraph 17 of the Union of India v. Hindustan Development
Coproration5.  Her submission was that identical pricing may be further
explained by the fact that, given the high degree of predictability of prices,
bidders may take a business decision to mirror prices of competitors in
certain States, by adjusting or averaging prices in others.
34. The learned counsel pointed out that the CCI arrived at an
inference of a collusive agreement based, inter alia, on the presence of
circumstances which have acted as ‘facilitating factors’ for collusion.
These factors which describe the nature of the industry are:
(i)   Predictability of demand
(ii)  Small number
of suppliers
(iii)  Few new entrants
(iv)  Active trade association
(v)   Repetitive bidding
(vi)  Identical products
(vii)  Few or no substitutes
(viii) No significant technological changes, i.e, a standardised
product in repsect of which there has been no change or alteration in
design.
35. Her reply was that these are the characteristics which define
the industry.  Yet these very factors are relied upon to come to the
5 (1993) 3 SCC 499
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consclusion that there is ‘collusion’ and ‘bid rigging’.  She submitted that
if the very nature of the industry is such that there are very small numbers
of suppliers, very few new entrants and a standard product being supplied
to the same party year after year, such factors are beyond the control of
the individual manufacturers and cannot be relied upon as factors to
lead to a presumption that there is collusive conduct.  In other words, the
very nature of the industry cannot be used as a factor to presume
collusion because collusion itself requires a state of mind or intent whereas
in this case, most of these factors are inherent in the nature of the industry
as described by the CCI itself.
36. Adverting to her 2nd proposition, namely, there was no collusive
agreement or bid rigging in the present case, her submission was that
CCI has relied on a dinner attended by some manufacturers on 1st March,
2010 and a lunch on 2nd March, 2010 as evidence of a price fixing
agreement. Her response was that  the factum of meetings of an
association by itself in any case cannot lead to a conclusion of collusion.
Likewise, the COMPAT  also upheld that inference based on the factum
of the meetings of the Associaiton. The COMPAT went to the extent of
holding that it is irrelevant whether a particular party was a member of
the Association or not and the existence of Association is by itself
sufficient.  This approach was attacked
as contrary to the fundamental
right to form an association under Article 19(1)(c)(g) of the Constitution
of India.
37. So far as the meetings over dinner and lunch are concerned,
both were hosted by individual members.  In the case of the dinner
meeting on 1st March, 2010, it was hosted by Mr. C.P. Bhartiya, MD of
North India Wires.  The lunch on 2nd  March, 2010 was hosted by Mr.
Santosh Bhartiya of Haldia Precision.  It is not as if that the Association
paid or the expenses were shared by all members who attended.
38. She also submitted that insofar as appellant – Rajasthan
Cylinders and Containers Limited is concerned, no representatives of
appellant attended the said meeting.  Further, many other members did
not attend the meeting. Even as per the findings of the Director General,
only 12 persons representing 19 parties are said to have attended the
meeting.  Her submission was that as per the allegations, 45 persons had
entered into an agreement of cartelisation which should not be established
only with the said meeting which was not attended by all and in fact very
few members.
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39. In any case, according to her, it was expressly stated by at
least two persons who attended the meeting that price was not discussed.
These are Mr. Chandi Prasad Bhartia from Haldia Precision and Mr.
Manvinder Singh of Bhiwadi Cylinders Ltd.
40. Her further submission on this aspect was that  the inference
drawn on the basis of six agents being nominated for depositing 44 bids
was also misconceived.  The CCI holds that ‘this might have held to the
possibility of copying and matching of the rates quoted in the price bids
by many suppliers in a particular state.”
41. The test as laid down in the case of Ahlstrom Osakeyhtio v.
Commission6 is: Is the concertation the only plausible explaination for
the conduct?
“126. Following that analysis, it must be stated that, in this case,
concertation is not the only plausible explanation for the parallel
conduct.  To begin with, the system of price announcements may
be regarded as constituting a rational response to the fact that the
pulp market constituted a long-term market and to the need felt
by both buyers and sellers to limit commercial risks. Further, the
similarity in the dates of price announcements may be regarded
as a direct result of the high degree of market transparency, which
does not  have to be described as artificial.  Finally, the parallelism
of prices and the price trends may be satisfactorily explained by
the oligopolistic tendencies of the market and by the specific
circumstances prevailing
in certain period.  Accordingly, the parallel
conduct established by the Commission does not constitute
evidence of concertation.
This test is not met in the present case for reasons that are
enumerated.
42. Her third proposition was that in any case there was no
appreciable adverse effect on competition.  She tried to make this
submission good by contending that when industry is an oligopoly, the
price parallel or a finding of identical quoting of price does not by itself
lead to the conclusion of a conerted price.  Moreoever, in the instant
case, number of entrants had increased as 12 new entrants submitted
their bid for the year 2010-11.  Therefore, the finding of the CCI, upheld
6 31.3.1993, ECJ (paragraph 115, Internal P.1611) (“Woodpulp“)
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by the COMPAT, that there has been a creation of barriers for new
entrants is without any basis.
43. Other counsel who appeared on behalf of the appellants made
their submission almost on the same lines, albeit, with further elaborations
on certain aspects, some of which are taken note of hereafter.  Mr.
Jaiveer Shergil, who argued for the appellant—Om Containers (C.A.
No. 6369 of 2014) submitted that in order to attract the presumption
contained in Section 3(3) about the appreciable adverse effect on
competition, in the first instance, there has to be a finding that there has
been an agreement of the kind set out in Section 3(3)(a) to (d).  Since,
the allegation against the appellants was that the agreement resulted in
bid rigging and case is covered under Section 3(3)(d) of the Act, it was
necessary that there is a positive finding to the aforesaid effect, namely,
that there was agreement which had resulted in bid rigging. Accordoing
to him, since the definition of bid rigging in Explanation to Section 3(3)
uses the words ‘means’, the definition is a hard and fast definition and
no other meaning can be assigned to the expression than is put down in
the definition, as held in Punjab Land Developement & Reclamation
Corporation Ltd. vs. Presiding Officer, Labour Court7in the following
words:
“72. The definition has used the word ‘means’. When a statute
says that a word or phrase shall “mean”— not merely that it shall
“include” — certain things or acts, “the definition is a hard-and-
fast definition, and no other meaning can be assigned to the
expression than is put down in definition” (per Esher, M.R., Gough
v. Gough [(1891) 2 QB 665 : 65 LT 110] ). A definition is an
explicit statement of the full connotation of a term.”
44. Thus, according to him, for it to be a case of bid rigging, the
agreement must be such which is defined in the Explanation to Section
3(3)(d) creating the effect of:
a. Eliminating or reducing competition for bids or
b. Adversely affecting the process for bidding or
c. Manipulating the process for bidding.
45. He referred to the judgment in S. Sundaram Pillai vs. V.R.
Pattabiraman8, on the purpose of an ‘Explanation’, viz.:
7 (1990) 3 SCC 682
8 (1985) 1 SCC 591
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“46. We have now to consider as to what is the impact of the
Explanation on the proviso which deals with the question of willful
default. Before, however, we embark on an inquiry into this difficult
and delicate question, we must appreciate the intent, purpose and
legal effect of an Explanation. It is now well settled that an
Explanation added to a statutory provision is not a substantive
provision in any sense of the term but as the plain meaning of the
word itself shows it is merely meant to explain or clarify certain
ambiguities which may have crept in the statutory provision. Sarathi
in Interpretation of Statutes while dwelling on the various aspects
of an Explanation observes as follows:
(a) The object of an Explanation is to understand the Act in the
light of the explanation.
(b) It does not ordinarily enlarge the scope of the original section
which it explains, but only makes the meaning clear beyond
dispute.”
46. He submitted that there is no positive evidence of this nature
at all and the CCI as well as COMPAT has proceeded on inferences as
regards bid rigging and, therefore, such orders cannot be sustained.
47. In the absence thereof, submitted the learned counsel, doctrine
of reverse burden which was put on the appellants would not apply. He
referred to the following judgments9 in support.
48. The counsel relied upon the following observations in CCI v.
Artistes & Technicians of W.B. Film & Television:
“31. The Competition Act, 2002, as amended
in 2007 and 2009,
deals with anti-trust issues viz. regulation of anti-competitive
agreements, abuse of dominant position and a combination or
acquisition falling within the provisions of the said Act. Since the
majority view of CCI also accepted that the impugned activities
of the Coordination Committee did not amount to abuse of dominant
position, and it treated the same as anti-competitive having
appreciable adverse effect on competition, our discussion would
be focused only on anti-competitive agreements. Section 3 of the
9 (i) Babu v. State of Kerala: [(2010) 9 SCC 189]
   (ii) Noor Aga v. State of Punjab; [(2008) 16 SCC 417]
   (iii) CCI v. Artistes & Technicians of W. B. Film & Television: [(2017) 5 SCC 17]
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Act is the relevant section in this behalf. It is intended to curb or
prohibit certain agreements. Therefore, in the first instance, it is
to be found out that there existed an “agreement” which was
entered into by enterprise or association of enterprises or person
or association of persons. Thereafter, it needs to be determined
as to whether such an agreement is anti-competitive agreement
within the meaning of the Act. Once it is found to be so, other
provisions relating to the treatment that needs to be given thereto
get attracted.”
49. Taking aid of the aforesaid legal principle, it was submitted
that in the present case it will be seen that the CCI, rather arriving at a
finding with focus on the aforesaid factors, proceeded to analyse factors
which attach to the general market conditions of the industry to ‘infer’
the ‘possibility’ of bid rigging and then concluded that the ‘facilitating
factors’ which may be ‘considered conducive for cartelisation’ are
present.  The D.G. found that ‘in all the probability, prices were fixed
there at the meeting in Bombay in collusion with each other.  Such an
inference and assumption based on ‘higher chances’, ‘probability’,
‘tendencies’ or ‘likelihood’ by the CCI does not meet the requirement of
the definition contained in Explanation to Section 3(3) and certainly does
not constitute a finding of ‘bid rigging’ as defined therein.  The Tribunal
has also proceeded on the basis
that it ‘is to be deduced....that these
meetings did relate to the tender offers’.  There was, thus, not clearcut,
precise and consistent evidence to support that the alleged bid rigging
took place.
50. Next submission of Mr. Shergil was that apart from the complete
absence of a finding of bid rigging, in the present IOCL tender, as a
matter of fact there canot be any bid rigging as defined in Section 3(3).
To take the first ingredient, i.e., eliminating or reducing competition for
bids, the report of D.G. itself finds that out of the 60 bidding parties 37
entities were not belonging to any single group and are independently
controlled. Hence, straight away there is no case of ‘eliminating or
reducing competition for bids’ which is one of the possible ingredients of
bid rigging as there were 37 entities who were free of mind to participate
and bid of their own accord in the absence of any control by any cartel.
51. As regards the second and third requirement of bid rigging,
i.e., adversely effecting or manipulating the bidding process, he argued
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that the submission of bids by the appellant (even if identical) can have
no effect of ‘adversely effecting or manipulating the bidding process’
this being on account of the very nature of the present tender process.
Although, bids are invited from bidders, IOCL has a fixed/base
procurement price of Rs. 1106.61 per cylinder.  IOCL then works out an
estimated rate per State based on certain  factors peculiar to that State
such as octroi, freight etc. The bid offered by the L1 (lowest bidder) is
then subject to further downward negotiations by IOCL as per the tender
clause and a further finalised rate is arrived at.  Such finalised rate is
eventually even lower10 than the L1 bid amount.  Thus, factually, logically
and in reality any bid submitted by any party can never be one which is
said to adversely affect or manipulate the bidding process. All of this
information is with IOCL as part of its bidding process preparations,
estimates and financial workings and could easily have been taken into
consideration. In support, Mr. Shergil also referred to the terms and
conditions of the IOCL tender.
52. His further submission was that CCI, or for that matter
COMPAT, were wrong in getting influenced by the submissions of
identical bids by the appellants as it could not be, ipso facto, inferance
of bid rigging.  Such identical prices could be for various reasons and he
shared that the reasons given by Ms. Divan predicated her submissions
on oligopsony/monopsony.  In
addition, he relied upon the judgment of
this Court in Union of India vs. Hindustan Development Corporation11
and, in particular, para 17 thereof, which is as under:
“17. Therefore, whether in a given case, there was formation of
a cartel by some of the manufacturers which amounts to an unfair
trade practice, depends upon the available evidence and the
surrounding circumstances. In the instant case, initially the Tender
Committee formed the opinion that the three big manufacturers
formed a cartel on the ground that the price initially quoted by
them was identical and was only a cartel price. This, in our view,
was only a suspicion which of course got strengthened by post-
tender attitude of the said manufacturers who quoted a much
lesser price. As noticed above it cannot positively be concluded
on the basis of these two circumstances alone. In the past these
10   With  the  sole  exception  of  the  Andaman  &  Nicobar  Islands  as  it  has  unique
       implication of transport related costs.
11    (1993) 3 SCC 499
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three big manufacturers also offered their own quotations and
they were allotted quantities on the basis of the existing practice.
However, a mere quotation of identical price and an offer of further
reduction by themselves would not entitle them automatically to
corner the entire market by way of monopoly since the final
allotment of quantities vested in the authorities who in their
discretion can distribute the same to all the manufacturers including
these three big manufacturers on certain basis. No doubt there
was an apprehension that if such predatory price has to be
accepted the smaller manufacturers will not be in a position to
compete and may result in elimination of free competition. But
there again the authorities reserved a right to reject such lower
price. Under these circumstances though the attitude of these
three big manufacturers gave rise to a suspicion that they formed
a cartel but there is not enough of material to conclude that in fact
there was such formation of a cartel. However, such an opinion
entertained by the concerned authorities including the Minister
was not malicious nor was actuated by any extraneous
considerations. They entertained a reasonable suspicion based on
the record and other surrounding circumstances and only acted in
a bona fide manner in taking the stand that the three big
manufacturers formed a cartel.”
53. Some literature on the ‘theory of oligopolistic interdependence’
as well as judgments of the European Union and European Commission
were also cited.
54. Mr. Pradeep Aggarwal, in addition, argued that though there
was no positive finding of cartelisation and the conclusion was merely
presumptive, even if it is accepted that there was such an agreement of
bid rigging or collusive bidding, there was no presumption of ‘appreciable
adverse effect on competiiton’.  In the alternative, he submitted that
there was, in fact, no appreciable adverse effect on competition in the
present case and the said presumption totally was rebutted by producing
sufficient  evidence on record.
55. Various other counsel also argued on the same lines and in
addition referred to facts or their specific cases and it is not necessary
to state all those arguments to avoid repetition.
56. Per contra, Mr. Salman Khurshid, learned senior counsel
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appearijng for CCI highlighted the purpose for which the Act is enacted
and, in particular, objective behind Section 3 of the Act, whch is taken
note of by this Court in Excel Crop Care Limited as well as West
Bengal Artists Association.  Insofar as instant case is concerned, his
submission was that it is a stark and clear-cut case of bid rigging as a
result of anti-competitive agreement amongst LPG manufacturers in
respect of a tender (Tender No. LPG-O/M/PT-03/09-10) floated by
IOCL for procurement of approximately 1,05,00,000 (105 laks) LPG
Cylinders. This is a matter of serious public concern because these
cylinders were to be used to supply Liquefied Petroleum Gas (LPG) for
domestic consumption across 25 States. A rise in price resulting from
anti-competitive activities would affect the cost of living for the common
man, and has serious ramifications for the economy as a whole.
57. Mr. Khurshid referred to the findings of the CCI as approved
by COMPAT and submitted that there was a strong economic evidence
of collusion which is evident from the following aspects:
(a) Identical or near-identical bidding by all 50 empaneled LPG
vendors resulting in bid rigging.
(b) Results of the tender revealed that these bids were made in
such a way that all the bidders were awarded some portion of the
tender and no bidder was left empty handed, i.e., Market Sharing
Arrangement.
(c) Geographical/Territorial allocation of market, i.e., the bids were
placed in such a
way that entities located in the northern parts of
the country were awrded the tender in the northern States, entities
located in the southern parts were awarded the tender in respect
of southern States etc.
(d) No plausible economic rationale or explanation was forthcoming
for the identical bids, despite obvious difference in cost of
production, location, input cost etc.
(e) The overall effect of increase in price of procurement of LPG
Cylinders over previous years.
58. He also submitted that pattern of identical and near identical
bids, which was all pervasive through out, could not be brushed aside
lightly as that was the clear indicator of price bidding as a result of
agreement between the parties.  The analysis of the bids also shows
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that it had already been decided amongst the LPG Cylinder
manufacturers as to who the L1 and L2 bidders were going to be prior
to submission of bids.  For instance, in the State of Punjab, the L1 bidder
(Shri Ram Cylinders) bid Rs. 1080 whereas the four L2 bidders placed
identical bids at Rs, 1080.50, i.e., a difference of only 50 paise from the
L-1 bid.  Similarly, in Rajasthan, the L-1 bidder (M/s. Rajasthan Cylinders)
quoted Rs. 1130, whereas nine L2 bidders quoted identically by just 50
paise more, at Rs. 1130.50.  This pattern is repeated across a number of
States.
59. Not only this, in order to achieve the pre-decided outcome,
some of the bidders hastily made corrections to their bid documents.
One such case is that of M/s. Jesmajo Industrial Fabrications (appellant
in C.A. No. 4868 of 2014).  In the bid documents, the bid of Rs. 1103
was cut-corrected to make it Rs. 1103.60 even though the calculation of
VAT was done only on the figure of |Rs. 1103.  The Director General
has commented on this aspect as follows:
“6.13…...That bids were submitted after mutual discussion is
apparent from the tender documents of Jesmajo Industrial
Fabricators P. Ltd. (Exhibit 4P).  There are cuttings in the tender
documents and financial bids of the company.  Since, there were
discussions among all oil companies, the company might have
decided to make alterations in the financial bids.  However, even
in the financial bids of the
company, it is noted that despite
alterations, errors have remained. It seems that the company had
originally quoted Rs. 1103/- as the rate.  Subsequently it changed
the rates to Rs. 1103.60.  However, VAT rate in the bid had been
calculated on Rs. 1103/- only instead of Rs. 1103.60.  Thus, while
other component of rates has been changed/altered, the calculation
of VAT has  been done on Rs. 1103 (originally quoted) instead of
Rs. 1103.60 (altered quote).  This appears to have been done to
match rates with other bidders who have quoted the similar rates
in the State of Karnataka and to let Sanghvi group be L-1 in that
State.”
60. Mr. Khurshid also refuted the submisison of the appellants
that there was no competition and, therefore, Section 3 was not applicable.
According to him, if the matters are examined on such basis most of  the
culprits will get away.  The purpose of the Act was not only to eliminate
cartelisation but also to promote competition.  His submission was that
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once the findings of the CCI and COMPAT are accepted that there was
an agreement, such an agreement was obviously for the purpose of
curbing the competition.
61. Answering the argument of ‘price parallelism’ which according
to the appellants resulted in identical and near identical bids, Mr. Khurshid
argued that legal submission in this respect was settled by this Court in
Excel Crop Care case wherein such an argument was rejected in the
following words:
“48…It was argued that since dominant position is enjoyed by the
buyer, it leads to parallel pricing and this conscious parallelism
takes place leading to quoting the same price by the suppliers.
The explanation, thus, given for quoting identical price was the
aforesaid economic forces and not because of any agreement or
arrangement between the parties. It was submitted that merely
because same price was quoted by the appellants in respect of
the 2009 FCI tender, one could not jump to the conclusion that
there was some “agreement” as well between these parties, in
the absence of any other evidence corroborating the said factum
of quoting identical price. In respect of this submission, Mr
Venugopal had also referred to a few judgments.
49. The aforesaid argument is highly misconceived.  A neat and
pellucid reply of Mr. Kaul, which commands acceptance, is that
argument of parallelism is not applicable in bid cases and it fits in
the realm of market economy.  It is for this reason that entire
history of
quoting identical price before coming into operation of
Section 3 and which continued much after Section 3 of the Act
was enforced, has been highlighted...”
62. He also referred to the following findings of COMPAT with
the submission that finding of facts need to be accepted:-
“36. We are thoroughly convinced by this analysis that all this
could not have been possible unless there were internal agreements
between the concerns. What shocks us is that the quotations of
the price did match to the last decimal and the quotations in some
cases were in odd figures like Rs.1127 in the State of Tamil Nadu.
The record is replete with such odd figures. It was strange that in
some of the oral statements of the representatives of these parties,
who were examined by the DG, some of them could not even
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justify these identical prices and tried to say that it was a mere
coincidence. We cannot accept the argument of coincidence as
was rightly rejected by CCI. There can be no explanation for this
kind of identical or near identical pricing. The CCI has rightly
considered that the manufacturing cost of per cylinder varies in a
wide spectrum ranging from Rs.870 to Rs.1095.89. If this was
the case, the prices had to be different, if they had been offered in
a competitive spirit. Either before the CCI or before us no material
was produced, which would be able to rebut the presumption arising
from the identity of rates. The CCI, therefore, rightly concluded
that this identity of prices was sinister and anti-competitive in
nature.”
63. Another feature which Mr. Salman Khurshid pointed out was
that the analysis of bids revealed that there was a market sharing and
territorial allocation of bids. This, according to him, could be discerned
from the following evidence emerging from record:
“Firstly, the economic evidence indicates that there was an
understanding or arrangement or agreement by which each and
every bidder would get some part of the allocation under the tender.
This is clear from the fact that each and every one of the 50
bidders who submitted price bids received some part of the
allocation in one or more states, and no one went empty handed.
In other words, the purpose of quoting identical bids in many
instances
was  to achieve the objective of sharing the market, i.e.,
the IOCL requirement across 25 states was ‘shared’ by each of
the 50 bidders, through concerted action and pre-decided
understanding.
64. Mr. Khurshid also highlighed that in spite of there being
difference in location of appellant’s units and their input cost, the bids
submitted by various tenderers were identical and there canot be any
plausible economic rationale for such identical bidding.  Therefore, the
inference drawn by the CCI as well as COMPAT based on the aforesaid
features and factors was justified and valid in law.  He also referred to
certain judgements of this Court as well as other jurisdictions, such as,
European Commission and the Court of Justice of European Union to
which reference would be made at the appropriate stage.
65. Before we deal with the arguments advanced by various
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counsel who appeared for the appellants and rebuttal thereto by Mr.
Salman Khurshid, learned senior counsel who appeared for CCI as also
counsel for IOCL, we would like to reproduce the relevant provisions of
the Act in the light of which these appeals are to be decided:
66. Section 2(c) defines “cartel” and reads as under:
“”Cartel” includes an association of producers, sellers, distributors,
traders or service providers who, by agreement amongst
themselves, limit, control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of
services;
67. Section 3 of the Act deals with and prohibits those agreements
which cause and are likely to cause an appreciable adverse effect on
competition within india. It reads as under:
“Section 3 :  Anti-competitive agreements:-
(1) No enterprise or association of enterprises or person or
association of persons shall enter into any agreement in respect
of production, supply, distribution, storage, acquisition or control
of goods or provision of services, which causes or is likely to
cause an appreciable adverse effect on competition within India.
(2) Any agreement entered into in contravention of the provisions
contained in sub-section (1) shall be void.
(3) 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—
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical
development, investment or provision of services;
(c) shares the market or source of production or provision of
services by way of allocation of geographical area of market, or
type of goods or services, or number of customers in the market
or any other similar way;
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(d) directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on
competition: Provided that nothing contained in this sub-section
shall apply to any agreement entered into by way of joint ventures
if such agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or provision of
services.
Explanation.—For the purposes of this sub-section, “bid rigging”
means any agreement, between enterprises or persons referred
to in sub-section (3) engaged in identical or similar production or
trading of goods or provision of services, which has the effect of
eliminating or reducing competition for bids or adversely affecting
or manipulating the process for bidding.”
68. Certain factors are mentioned in Section 19 of the Act which
have to be kept in mind while determining whether an agreement has an
appreciable adverse effect on competition under Section 3. We reproduce
this Section hereinbelow:
“Section 19(3) in the Competition Act, 2002:
(3) The Commission shall, while determining whether an agreement
has an appreciable adverse effect on competition under section 3,
have due regard to all or any of the following factors, namely:—
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual
of benefits to consumers;
(e) improvements in production or distribution of goods or provision
of services;
(f) promotion of technical, scientific and economic development
by means of production or distribution of goods or provision of
services.”
69. In Excel Crop Care Limited, scope of Section 3 of the Act
which prohibits three kinds of practices as anti-competitive, was taken
note of as follows:
“20. Chapter II of the Act deals with three kinds of practices
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which are treated as anti-competitive and prohibited. These are:
   (a) where agreements are entered into by certain persons
with a view to cause an appreciable adverse effect on competition;
    (b) where any enterprise or group of enterprises, which enjoys
dominant position, abuses the said dominant position; and
  (c) regulating the combination of enterprises by means of
mergers or amalgamations to ensure that such mergers or
amalgamations do not become anti-competitive or abuse the
dominant position which they can attain.”
70. In that case also the Court was concerned with the 1st category,
namely, those cases where certain persons enter into agreements with a
view to cause an appreciable adverse effect of competition.  Purpose
behind curbing such anti-competitive practices was mentioned in detail.
It is not necessary to re-state the same in that expansive manner, however,
we would still like to quote certain portions to capture the essence and
purpose of the Act:-
“21. In the instant case, we are concerned with the first type of
practices, namely, anti-competitive agreements. The Act, which
prohibits anti-competitive agreements, has a laudable purpose
behind it. It is to ensure that there is a healthy competition in the
market, as it brings about various benefits for the public at large
as well as economy of the nation. In fact, the ultimate goal of
competition policy (or for that matter, even the consumer policies)
is to enhance consumer well-being.
These policies are directed at
ensuring that markets function effectively. Competition policy
towards the supply side of the market aims to ensure that
consumers have adequate and affordable choices. Another purpose
in curbing anti-competitive agreements is to ensure “level playing
field” for all market players that helps markets to be competitive.
It sets “rules of the game” that protect the competition process
itself, rather than competitors in the market. In this way, the pursuit
of fair and effective competition can contribute to improvements
in economic efficiency, economic growth and development of
consumer welfare………..
xxx
xxx
xxx
23. In fact, there is broad empirical evidence supporting the
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proposition that competition is beneficial for the economy.
Economists agree that it has an important role to play in improving
productivity and, therefore, the growth prospects of an
economy…..
24. Productivity is increased through competition by putting
pressure on firms to control costs as the producers strive to lower
their production costs so that they can charge competitive prices.
It also improves the quality of their goods and services so that
they correspond to consumers’ demands.
xxx
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26. When we recognise that competition has number of benefits,
it clearly follows that cartels or anti-competitive agreements cause
harm to consumers by fixing prices, limiting outputs or allocating
markets. Effective enforcement against such practices has direct
visible effects in terms of reduced prices in the market and this is
also supported by various empirical studies.
xxx
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27. Keeping in view the aforesaid objectives that need to be
achieved, Indian Parliament enacted the Competition Act, 2002.
Need to have such a law became all the more important in the
wake of liberalisation and privatisation as it was found that the
law prevailing at that time, namely, Monopolies and Restrictive
Trade Practices Act, 1969 was not equipped adequately enough
to tackle the competition aspects of the Indian economy. The law
enforcement agencies, which include CCI and COMPAT, have to
ensure that these objectives are
fulfilled by curbing anti-competitive
agreements.”
71. The Court also mentioned, in particular, that competition leads
to economic efficiency, economic growth and development as well as
consumers welfare.  The Court also spelled out the manner in which
competition contributed to increase economic growth and increased
productivity.
72. It follows from the above that whereas on the one hand the
economic policy of the nation has ushered in the era of liberalisation and
globalisation thereby giving freeplay to the private sector in the manner
of conducting business, at the same time, in public interest and in the
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interest of consumers, a regime of regulators has also been brought to
ensure certain checks and balances. Since competition among the
enterprises or businessmen is treated as service for a public purpose
and, therefore, there is a need to curb anti-competitive practices, the
CCI is given the task (as a regulator) to ensure that no such anti-
competitive practices are undertaken.  In fact, Section 18 of the Act
casts a specific and positive obligation on CCI to ‘eliminate’ anti-
competitive practices and promote competition, interest of the consmuer
and free trade.  This objective was also emphasised by this Court in
Competition Commission of India vs. Steel Authority of India Limited
and Another12  which can be found in the following observations:
“6. As far as the objectives of competition laws are concerned,
they vary from country to country and even within a country they
seem to change and evolve over the time. However, it will be
useful to refer to some of the common objectives of competition
law. The main objective of competition law is to promote economic
efficiency using competition as one of the means of assisting the
creation of market responsive to consumer preferences. The
advantages of perfect competition are threefold: allocative
efficiency, which ensures the effective allocation of resources,
productive efficiency, which ensures that costs of production are
kept at a minimum and dynamic efficiency, which promotes
innovative practices. These
factors by and large have been
accepted all over the world as the guiding principles for effective
implementation of competition law.”
73. As mentioned above, one of the anti-competitive practices is
cartelisation, the essential postulate whereof is agreement between
enterprises or association of enterprises or persons or associations of
persons in respect of production, supply, distribution, storage, acquisition
or control of goods or provisions of service, which causes or is likely to
cause an appreciable adverse effect on competition within India. Such
an agreement is treated as void.  The types of agreement which may fall
foul of Section 3 are mentioned in sub-section (3) thereof. These include
sharing the market by way of allocation of geographical areas of market
[clause (c)] and the agreements which result in bid-rigging or collusive
bidding whether directly or indirectly [clause (d)].  There is a presumption
that four types of agreements mentioned in sub-section (3) will have an
appreciable adverse effect on competition.
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74. We may also state at this stage that Section 19(3) of the Act
mentions the factors which are to be examined by the CCI while
determining whether an agreement has an appreciable adverse effect
on competition under Section 3.  However, this inquiry would be needed
in those cases which are not covered by clauses (a) to (d) of sub-section
(3) of Section 3.  Reason is simple.  As already pointed out above, the
agreements of nature mentioned in sub-section (3) are presumed to have
an appreciable effect and, therefore, no further exercise is needed by
the CCI once a finding is arrived at that a particular agreement fell in
any of the aforesaid four categories.   We may hasten to add, however,
that agreements mentioned in Section 3(3) raise a presumption that such
agreements shall have an appreciable adverse effect on competition.  It
follows, as a fortiorari, that the presumption is rebuttable as these
agreements are not treated as conclusive proof of the fact that it would
result in appreciable adverse effect on competition.  What follows is
that once the CCI finds that case is covered by one or more of the
clauses mentioned in sub-section (3) of Section 3, it need not undertake
any further enquiry and burden would shift upon such enterprises or
persons etc. to rebut the said presumption by leading adequate evidence.
In case such an evidence is led, which dispels the presumption, then the
CCI shall take into
consideration the factors mentioned in Section 19 of
the Act and to see as to whether all or any of these factors are established.
If the evidence collected by the CCI leads to one or more or all factors
mentioned in Section 19(3), it would again be treated as an agreement
which may cause or is likely to cause an appreciable adverse effect of
competition, thereby compelling the CCI to take further remedial action
in this behalf as provided under the Act.  That, according to us, is the
broad scheme when Sections 3 and 19 are to be read in conjuction.
75. In these appeals, the Court is concerned with the alleged
agreement entered into between the appellants falling in clause (d) of
sub-section (3) of Section 3, which talks of bid rigging or collusive bidding.
Therefore, it would be necessary to understand the meaning of the
expression  ‘bid rigging’ and ‘collusive bidding’. Explanation to Section
3, which is reproduced, assigns meaning to ‘bid rigging’ and states :
“S. 3:
Explanation.—For the purposes of this sub-section, “bid rigging”
means any agreement, between enterprises or persons referred
to in sub-section (3) engaged in identical or similar production or
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trading of goods or provision of services, which has the effect of
eliminating or reducing competition for bids or adversely affecting
or manipulating the process for bidding.”
76. The necessary ingredients of bid rigging, thus, are: (a)
agreement between the parties;  (b) these parties are engaged in identical
or similar production or trading of goods or provisions of services; and
(c) the agreement has the effect of eliminating or reducing competition
of bids or adversely affect or manipulating the process for bidding.
77. Though the expression ‘collusive bidding’ is not defined in the
Act, it appears that both ‘bid rigging’ and ‘collusive bidding’ are
overlapping concepts.  This position stands accepted in Excel Crop
Care Limited case which should be found from the following discussion
therefrom:
“38. Mr Neeraj Kishan Kaul, learned Additional Solicitor General,
refuted the aforesaid submission with vehemence by urging that
bid rigging and collusive bidding are not mutually exclusive and
these are overlapping concepts. Illustratively, he referred to the
findings of CCI, as approved by COMPAT, in the instant case itself
to the effect that the appellants herein had “manipulated the
process of bidding” on the ground that bids were submitted on
8-5-2009 collusively, which was only the beginning of the anti-
competitive agreement between the parties and this continued
through the opening of the price bids on 1-6-2009 and thereafter
negotiations on 17-6-2009
when all the parties reduced their bids
by same figure of Rs 2 to bring their bid down to Rs 386 per kg
from Rs 388 per kg. From this example, he submitted that on 8-5-
2009 there was a collusive bidding but with concerted negotiations
on 17-6-2009, in the continued process, it was rigging of the bid
that was practiced by the appellants. We are inclined to agree
with this pellucid submission of the learned Additional Solicitor
General.
39. Richard Whish and David Bailey [Competition Law, 7th Edn.,
p. 536.] , in their book, have given illustrations of various forms of
collusive bidding/bid rigging, which include:
(a) Level tendering/bidding (i.e. bidding at same price — as in the
present case).
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(b) Cover bidding/courtesy bidding.
(c) Bid rotation.
(d) Bid allocation.
40. Even internationally, “collusive bidding” is not understood as
being different from “bid rigging”. These two expressions have
been used interchangeably in the following international
commentaries/glossaries and websites of competition authorities:
(a) UNCTAD Competition Glossary dated 22-6-2016
“Bid rigging or collusive tendering is a manner in which conspiring
competitors may effectively raise prices where business contracts
are awarded by means of soliciting competitive bids. Essentially,
it relates to a situation where competitors agree in advance who
will win the bid and at what price, undermining the very purpose
of inviting tenders which is to procure goods or services on the
most favourable prices and conditions.”
(b) OECD Glossary of Industrial Organisation Economics and
Competition Law
“Bid rigging is a particular form of collusive price-fixing behaviour
by which firms coordinate their bids on procurement or project
contracts. There are two common forms of bid rigging. In the
first, firms agree to submit common bids, thus eliminating price
competition. In the second, firms agree on which firm will be the
lowest bidder and rotate in such a way that each firm wins an
agreed upon number or value of contracts.
Since most (but not all) contracts open to bidding involve
Governments, it is they who are most often the target of bid
rigging.
Bid rigging is one of the most widely prosecuted forms of collusion.”
Collusive bidding (tendering) — See “bid rigging”.
(This shows collusive bidding and bid rigging are treated as one
and the same.)
(c) OECD Guidelines for fighting bid rigging
“Bid rigging (or collusive tendering) occurs when businesses, that
would otherwise be expected to compete, secretly conspire to
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raise prices or lower the quality of goods or services for purchasers
who wish to acquire products or services through a bidding
process.”
(d) United States Office of the Inspector General,
Investigations (Fraud Indicators Handbook)
“Collusive bidding, price fixing or bid rigging, are commonly used
interchangeable terms which describe many forms of an illegal
anti-competitive activity. The common thread throughout all these
activities is that they involve any agreements or informal
arrangements among independent competitors, which limit
competition. Agreements among competitors which violate the
law include but are not limited to:
(1) Agreements to adhere to published price lists.
(2) Agreements to raise prices by a specified increment.(3)
Agreements to establish, adhere to, or eliminate discounts.
(4) Agreements not to advertise prices.
(5) Agreements to maintain specified price differentials based on
quantity, type or size of product.”
(e) Australian Competition and Consumer Commission
“Bid rigging, also referred to as collusive tendering, occurs when
two or more competitors agree they will not compete genuinely
with each other for tenders, allowing one of the cartel members
to ‘win’ the tender. Participants in a bid rigging cartel may take
turns to be the ‘winner’ by agreeing about the way they submit
tenders, including some competitors agreeing not to tender.”
41. As the Liegeman of the law, it is our task, nay a duty, to give
proper meaning and
effect to the aforesaid “Explanation”. It can
easily be discussed that the legislature had in mind that the two
expressions are interchangeably used. It is also necessary to keep
in mind the purport behind Section 3 and the objective it seeks to
achieve:
41.1. Sub-section (1) of Section 3 is couched in the negative terms
which mandates that no enterprise or association of enterprises
or person or association of persons shall enter into any agreement,
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when such agreement is in respect of production, supply,
distribution, storage, acquisition or control of goods or provision of
services and it causes or is likely to cause an appreciable adverse
effect on competition within India. It can be discerned that first
part relates to the parties which are prohibited from entering into
such an agreement and embraces within it persons as well as
enterprises thereby signifying its very wide coverage. This
becomes manifest from the reading of the definition of
“enterprise” in Section 2(h) and that of “person” in Section 2(l)
of the Act. The second part relates to the subject-matter of the
agreement. Again it is very wide in its ambit and scope as it covers
production, supply, distribution, storage, acquisition or control of
goods or provision of services. The third part pertains to the effect
of such an agreement, namely, “appreciable adverse effect on
competition”, and if this is the effect, purpose behind this provision
is not to allow that. Obvious purpose is to thwart any such
agreements which are anti-competitive in nature and this salubrious
provision aims at ensuring healthy competition. Sub-section (2) of
Section 3 specifically makes such agreements as void.
41.2. Sub-section (3) mentions certain kinds of agreements which
would be treated as ipso facto causing appreciable adverse effect
on competition. It is in this backdrop and context that “Explanation”
beneath
sub-section (3), which uses the expression “bid rigging”,
has to be understood and given an appropriate meaning. It could
never be the intention of the legislature to exclude “collusive
bidding” by construing the expression “bid rigging” narrowly. No
doubt, clause (d) of sub-section (3) of Section 3 uses both the
expressions “bid rigging” and “collusive bidding”, but the
Explanation thereto refers to “bid rigging” only. However, it cannot
be said that the intention was to exclude “collusive bidding”. Even
if the Explanation does contain the expression “collusive bidding”
specifically, while interpreting clause (d), it can be inferred that
“collusive bidding” relates to the process of bidding as well.
Keeping in mind the principle of purposive interpretation, we are
inclined to give this meaning to “collusive bidding”. It is more so
when the expressions “bid rigging” and “collusive bidding” would
be overlapping, under certain circumstances which was conceded
by the learned counsel for the appellants as well.
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42. We are, therefore, of the opinion that the two expressions are
to be interpreted using the principle of noscitur a sociis i.e. when
two or more words which are susceptible to analogous meanings
are coupled together, the words can take colour from each other.
(See Leelabai Gajanan Pansare v. Oriental Insurance Co.
Ltd.[Leelabai Gajanan Pansare v. Oriental Insurance Co. Ltd.,
(2008) 9 SCC 720] , Thakorlal D. Vadgama v. State of
Gujarat [Thakorlal D. Vadgama v. State of Gujarat, (1973) 2
SCC 413 : 1973 SCC (Cri) 835] and M.K. Ranganathan v. State
of Madras[M.K. Ranganathan v. State of Madras, (1955) 2
SCR 374 : AIR 1955 SC 604] .)”
78. The first proposition of Ms. Divan, viz. there is no competition,
has two facets.  First, the legal one which concerns the jurisdiction of
the CCI to deal with such matters and the other is factual, which is to be
examined on the basis of facts in these cases.  Insofar as the first
component is concerned, having regard to the aforesaid scheme of the
Act, we are not convinced with the argument of Ms. Madhavi Divan
that there is no possibility of a competition in these cases and, therefore,
CCI had no jurisdiction to carry out any such investigation.  The scope
and ambit of the provisions of Section 3 have been considered in detail in
Excel Crop Care Limited case. This Section prohibits anti-competitive
agreements and brings about the prime objective of the Competition
Act.  These aspects were noted in Excel Crop Care
Limited, relevant
portions whereof are already extracted above.  We may also quote the
following portion from the judgment of this Court in Steel Authority of
India Limited wherein objective behind the Act was highlighted in the
following manner:
“125. We have already noticed that the principal objects of the
Act, in terms of its Preamble and the Statement of Objects and
Reasons, are to eliminate practices having adverse effect on the
competition, to promote and sustain competition in the market, to
protect the interest of the consumers and ensure freedom of trade
carried on by the participants in the market, in view of the economic
developments in the country. In other words, the Act requires not
only protection of free trade but also protection of consumer
interest. The delay in disposal of cases, as well as undue
continuation of interim restraint orders, can adversely and
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prejudicially affect the free economy of the country. Efforts to
liberalise the Indian economy to bring it on a par with the best of
the economies in this era of globalisation would be jeopardised if
time-bound schedule and, in any case, expeditious disposal by the
Commission is not adhered to. The scheme of various provisions
of the Act which we have already referred to including Sections
26, 29, 30, 31, 53-B(5) and 53-T and Regulations 12, 15, 16, 22,
32, 48 and 31 clearly show the legislative intent to ensure time-
bound disposal of such matters.”
79. We would like to reemphasise that the purpose of the Act is
not only to illuminate practices having adverse effect on the competition
but also to promote and sustain competition in the market.  Enforcement
provides remedies to avoid situation that will lead to decrease competition
in the market.  Therefore, effective enforcement is important not only to
sanction anti-competitive conduct but also to deter future competitive
practices. In the present case itself, there are sixty suppliers of the product
for which there are three buyers.  After all, each supplier would like to
be L-1 or L-2 so that it is able to get order for larger quantities than the
other.  In this sense, there would be a competition among them.  Further,
it would also be in the interest of the buyers like IOCL etc. that the
elements of healthy competition persists in the market.  In any case, it is
the duty of the CCI to ensure that the conditions which have tendency to
kill the competition are to be curbed.  It is also the function of the CCI to
ensure that there is a competition so that benefits of such competition
are reaped by the consumers.  However, insofar as certain factual aspects
highlighted by the appellants are concerned, they would be dealt with
while examining the third proposition, as we deem it more appropriate to
discuss these two aspects together.
80. Second proposition of Ms. Divan was that there was no
collusive bidding in the present case.  The CCI and COMPAT have
rejected this argument in view of the fact that there is an active trade
association of the suppliers; a meeting took place couple of days before
the date of bidding; common changes were pointed out by these appellants
who submitted bids on their behalf; and bids were of identical amounts
despite varying cost, which were repetitive in nature.  The respondents
may be right in their submission that there may not be a direct evidence
on the basis of which cartelisation or such agreement between the parties
can be proved as these agreements are normally entered into in closed
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doors.  The standard of proof which is required is one of probability,
which is a principle accepted in Technip SA vs. SMS Holding (P) Ltd.
& Ors.13 wherein the Court stated and discussed this aspect in the
following manner:
“54. The standard of proof required to establish such concert is
one of probability and may be established
“if having regard to their relation etc., their conduct, and their
common interest, that it may be inferred that they must be
acting together: evidence of actual concerted acting is normally
difficult to obtain, and is not insisted upon” [CIT v. East Coast
Commercial Co. Ltd., (1967) 1 SCR 821 : AIR 1967 SC 768]
. (SCR p. 829 H)
55. While deciding whether a company was one in which the
public were substantially interested within the meaning of Section
23-A of the Income Tax Act, 1922 this Court said:
“The test is not whether they have actually acted in concert
but whether the circumstances are such that human experience
tells us that it can safely be taken that they must be acting
together. It is not necessary to state the kind of evidence that
will prove such concerted actings. Each case must necessarily
be decided on its own facts.” [CIT v. Jubilee Mills Ltd., (1963)
48 ITR 9 (SC), p. 20]
56. In Guinness PLC and Distillers Co. PLC [Guinness PLC
and Distillers Company PLC (Panel hearing on 25-8-1987 and
2-9-1987 at p. 10052 — Reasons for decisions of the Panel.)] the
question before the Takeover Panel was whether Guinness had
acted in concert with Pipetec when Pipetec purchased shares in
Distillers Company PLC. Various factors were taken into
consideration to conclude that Guinness had acted in concert with
Pipetec to get control over Distillers Company. The Panel said:
“The nature of acting in concert requires that the definition be
drawn in deliberately wide terms. It covers an understanding
as well as an agreement, and an informal as well as a formal
arrangement, which leads to cooperation to purchase shares
to acquire control of a company. This is necessary, as such
13 (2005) 5 SCC 465
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arrangements are often informal, and the understanding may
arise from a hint. The understanding may be tacit, and the
definition covers situations where the parties act on the basis
of a ‘nod or a wink’…. Unless persons declare this agreement
or understanding, there is rarely direct evidence of action in
concert, and the Panel must draw on its experience and
common sense to determine whether those involved in any
dealings have some form of understanding and are acting in
cooperation with each other.” [Guinness PLC and Distillers
Company PLC (Panel hearing on 25-8-1987 and 2-9-1987 at
p. 10052 — Reasons for decisions of the Panel.)]
81. We would also like to reproduce the following discussion in
Commissioner of Income Tax, Bombay City I, Bombay vs. Jubilee
Mills Ltd., Bombay14:
“19. At the hearing a point was raised that it has to be proved as
a fact that the persons constituting the group which owns shares
carrying more than seventy-five per cent of the voting power,
were acting in unison. The test is not whether they have actually
acted in concert but whether the circumstances are such that
human experience tells us that it can safely be taken that they
must be acting together. It is not necessary to state the kind of
evidence that will prove such concerted actings. Each case must
necessarily be decided on its own facts. The exclusion of “public”
in the manner indicated generally from more than 75% of the
shares
and the concentration of such a holding in a single person
or a group acting in concert is what attracts Section 23(A).”
82. It is also significant to state that respondents had drawn
attention of this Court to OECD Policy Roundtables Prosecuting Cartels
without Direct Evidence 2006 which discussed the nature of evidence
that is required for proving cartel agreement, relevant portion thereof
contained in para 2 of the said Policy is reproduced below:
“Available evidence for proving cartel agreements
2.1  Categories of evidence
Evidence used to prove a cartel agreement can be classified into
two types: direct and circumstantial.  Circumstantial evidence, in
14 (1963) 48 ITR 9
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turn, consists of “communication” evidence and economic
evidence, which include firm conduct, market structure, and
evidence of facilitating practices.
Common types of direct evidence include:
-    A document or documents (including email messages)
essentially embodying the agreement, or parts of it, and identifying
the parties to it.
-       Oral or written statements by co-operative cartel participants
describing the operation of the cartel and their participation in it.
There are different types of circumstantial evidence.  One is
evidence that cartel operators met or otherwise communicated
but does not describe the substance of their communications.  It
might be called communication evidence for purposes of this
discussion.  It includes:
-      Records of telephone conversations between competitors
(but not their substance), or of travel to a common destination or
of participation in a meeting, for example during a trade
conference.
-      other evidence that the parties communicated about the
subject e.g., minutes or notes of a meeting showing that prices,
demand or capacity utilisation were discussed; internal documents
evidencing knowledge or understanding of a competitors pricing
strategy, such as an awareness of a future price increase by a
rival.
A broader category of circumstantial evidence is often called
economic evidence.  Economic evidence identifies primarily firm
conduct that suggests that an agreement was reached, but also
conduct of the
industry as a whole, elements of market structure
which suggest that secret price fixing was feasible, and certain
practices that can be used to sustain a cartel agreement.
Conduct evidence is the single most important type of economic
evidence.  As noted earlier, observation of certain, suspicious
conduct frequently triggers an investigation of a possible cartel.
And as the section in this paper on economics highlights 11 careful
analysis of the conduct of parties is important to identify behaviours
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that can be characterised as contrary to the parties’ unilateral
self-interest and which therefore supports the inference of an
agreement.  Conduct evidence includes, first and foremost:
-      Parallel pricing – changes in prices by rivals that are identical,
or nearly so, and simultaneous, or nearly so.  It includes other
forms of parallel conduct, such as capacity reductions, adoption
of standardised terms of sale, and suspicious bidding patterns,
e.g., a predictable rotation of winning bidders.
Industry performance could also be described as conduct evidence.
It includes:
-
abnormally high profits;
-
stable market shares
-
A history of competition law violations.
Evidence related to market structure can be used primarily to
make the finding of a cartel agreement more plausible, even though
market structure factors do not prove the existence of such an
agreement.  Relevant economic evidence relating to market
structure includes:
-
high concentration;
-
low concentration on the opposite side of the market;
-
high barriers to entry;
-
high degree of vertical integration;
-
Standardised or homogeneous product.
The evidentiary value of structural evidence can be limited,
however.  There can be highly concentrated industries selling
homogeneous products in which all parties compete.  Conversely,
the absence of such evidence cannot be used to show that a cartel
did not exist.  Cartels are known to have existed in
industries with
numerous competitors and differentiated products.
A specific kind of economic conduct evidence is facilitating
practices – practices that can make it easier for competitors to
reach or sustain an agreement.  It is important to note that conduct
described as facilitating practices is not necessarily unlawful.  But
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where a competition authority has found other circumstantial
evidence pointing to the existence of a cartel agreement, the
existence of facilitating practices can be an important complement.
They can explain what kind of arrangements the parties set up to
facilitate the formation of a cartel agreement, monitoring, detection
of defection, and/or punishment, thus supporting the ‘collusion
story’ put together by the competition law enforcer.  Facilitating
practices include:
-
information exchanges;
-
price signalling;
-
freight equalisation;
-
price protection and most favoured nation policies;
-
Unnecessarily restrictive product standards.”
83. Thus, even in the absence of proof of concluded formal
agreement, when there are indicators that there was practical cooperation
between the parties which knowingly substitute the risk of competition,
that would amount to anti-competitive practices.  This has been discussed
in Coordination Committee of Artistes and Technicians of West
Bengal Film and Television & Ors. (see paras 44 and 45).  Then,
there are guidelines on the applicability of Article 101 of the Treaty on
the functioning of the E.U. to horizontal cooperation agreements which
records as under:
“60.  Information exchange can only be addressed under Article
101 if it establishes or is part of an agreement, a concerted practice
or a decision by an association of undertakings.  The existence of
an agreement, a concerted practice or decision by an
association
of undertakings does not prejudge whether the agreement,
concerted practice or decision by an association of undertakings
gives rise to a restriction of competition within the meaning of
Article 101(1).  In line with the case-law of the Court of Justice
of the European Union, the concept of a concerted practice refers
to a form of coordination between undertakings by which, without
it having reached the stage where an agreement properly so-called
has been concluded, practical cooperation between them is
knowingly substituted for the risks of competition.  The criteria of
coordination and cooperation necessary for determining the
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existence of a concerted practice, far from requiring an actual
plan to have been worked out, are to be understood in the light of
the concept inherent in the provisions of the Treaty on competition,
according to which each company must determine independently
the policy which it intends to adopt on the internal market and the
conditions which it intends to offer to its customers.
61. This does not deprive companies of the right to adapt themselves
intelligently to the existing or anticipated conduct of their
competitors. It does, however, preclude any direct or indirect
contact between competitors, the object or effect of which is to
create conditions of competition which do not correspond to the
normal competitive conditions of the market in question, regard
being had to the nature of the products or services offered, the
size and number of the undertakings, and the volume of the said
market.  This precludes any direct or indirect contact between
competitors, the object or effect of which is to influence conduct
on the market of an actual or potential competitor, or to disclose
to such competitor the course of conduct which they themselves
have decided to adopt or contemplate adopting on the market,
thereby facilitating a collusive outcome on the market.  Hence,
information exchange can constitute a concerted practice if it
reduces strategic uncertainty in the market thereby facilitating
collusion, that is to say,
if the data exchanged is strategic.
Consequently, sharing of strategic data between competitors
amounts to concentration, because it reduces the independence
of competitors’ conduct on the market and diminishes their
incentives to compete.
62.  A situation where only one undertaking discloses strategic
information to its competitor(s) who accept(s) it can also constitute
a concerted practice.  Such disclosure could occur, for example,
through contacts via mail, emails, phone calls, meetings etc.  It is
then irrelevant whether only one undertaking unilaterally informs
its competitors of its intended market behaviour, or whether all
participating undertakings inform each other of the respective
deliberations and intentions.  When one undertaking alone reveals
to its competitors strategic information concerning its future
commercial policy, that reduces strategic uncertainty as to the
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future operation of the market for all the competitors involved
and increases the risk of limiting competition and of collusive
behaviour.  For example, mere attendance at a meeting where a
company disclose its pricing plans to its competitors is likely to be
caught by Article 101, even in the absence of an explicit agreement
to raise prices.  When a company receives strategic data from a
competitor (be it in a meeting, by mail or electronically), it will be
presumed to have accepted the information and adapted its market
conduct accordingly unless it responds with a clear statement that
it does not wish to receive such data.”
(emphasis added)
84. According to us, the real question in the present case is as to
whether there was a possibility of such an agreement having regard to
market conditions even when we proceed on the basis that meeting did
take place.  Possibility of such an agreement has been inferred by the
CCI on the grounds that identical bidding takes place thereafter and
various suppliers gave such a bid despite varying cost and also that they
have appoined common changes etc. as pointed out above.
85. The first and foremost issue which needs to be considered is
that whether there was a situation of monopsony or oligopsony.
86. From the aforesaid discussion, it is clear that as far as CCI is
concerned, it has come to the conclusion that there was a cartelisation
among the appellants herein and a concerted decision was taken to rig
the bids
which were submitted persuant to the tenders issued by IOCL.
On the other hand, the appellants argue that there was no such agreement
and even if the bids of many bidders were identical in nature, the bids
were driven by market conditions.  Their plea is that there was a situation
of oligopsony and the modus which was adopted by IOCL in floating the
tenders and awarding the contracts would show that the determination
of price was entirely within the control of the IOCL.  As per them, the
way price was determined for supply of these cylinders, it had become
an open secret known to everybody.  Therefore, there was no question
of any competition and no possibility of adversely affecting that
competition by entering into any contract.
87. The factors which have influenced the authorities below in
coming to the conclusion that the appellants had colluded and formed a
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cartel which led to bid rigging have already been noted above.  To
recaptulate, the authorities below have been influenced by the following
factors:
1. Market conditions
2. Small number of suppliers
3. Few new entrants
4. Active trade association
5. Repetitive bidding
6. Identical products
7. Few or no substitutes
8. No significant technological changes
9. Meeting of bidders in Mumbai and its agenda.
10. Appointing common agents
11. Identical bids despite varying cost.
After deliberating on the aforesaid aspects, the CCI has concluded
that there is an active trade association in which many of the appellants
are members.  That product in question, namely, gas cylinder is of a
particular specification which is needed by IOCL in large numbers every
year and there are very few manufacturers and suppliers of this product
to IOCL and two other buyers.  For this identical product which is to be
supplied by all the suppliers, there is no substitute and no significant
technology change. Further, there is an active trade association in which
most of the appellants are the members.  Their interest is to ensure that
no new entrants are able to join.  Further, the trade association also
ensures that all the members are able to get some order.  It is for this
reason the bids submitted in various standards which are floated by IOCL
at different places are almost identical despite varying cost.  The
authorities below attributed
this identical bidding to the concerted action
of the appellants.  This has been inferred from the fact that 2-3 days
before the submission of bids, meeting of the association took place
which most of the appellants attended.  Not only this, common agents,
six in number, were appointed who submitted the bids on behalf of these
appellants.
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88. We may say at the outset that if these factors are taken into
consideration by themselves, they may lead to the inference that there
was bid rigging.  We may, particularly, emphasise the fact that there is
an active trade association of the appellants and a meeting of the bidders
was held in Mumbai just before the submission of the tenders. Another
very important fact is that there were identical bids despite varying cost.
Further, products are identical and there are small number of suppliers
with few new entrants. These have become the supporting factors which
persuaded the CCI to come to the conclusion that these are suggestive
of collusive bidding.
89. However, that is only one side of the coin.  The aforesaid
factors are to be analysed keeping in mind the ground realities that were
prevailing, which are pointed out by the appellants.  These attendant
circumstances are argued in detail by the counsel for the appellants
which have already been taken note of.  We may recapitulate the same
in brief hereinbelow:
(i) In the present case there are only three buyers.  Among them,
IOCL is the biggest buyer with 48% market share.  It is also a
matter of record that all these appellants are manufacturers of
14.2 kg gas cylinders to the three buyers who are available in the
market, namely, IOCL, HPCL and BPCL.  If these three buyers
do not purchase from any of the appellants, that particular appellant
would not be in a position to sell those cylinder to any
other entity
as there are no other buyers.
(ii) There are only three buyers, it may not attract many to enter
the field and manufacture these cylinders.  It is because of limited
number of buyers and for some reason if they do not purchase,
the manufacturer would be nowhere.  That may deter the persons
to enter the field.
(iii) The manner in which the tenders are floated by IOCL and the
rates at which these are awarded, are an indicator that it is the
IOCL which calls the shots insofar as price control is concerned.
It has come in evidence that the IOCL undertakes the exercise of
having its internal estimates about the cost of these cylinders.
Their own expert arrived at a figue of Rs. 1106.61 paisa per
cylinder.  All the tenders which have been accepted are for a
price lesser than the aforesaid estimate of IOCL itself.  That apart,
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the modus adopted by the IOCL is that that final price is negotiated
by it and the contract is not awarded at the rate quoted by bidder
who turns out to be L-1.  Negotiations are held with such a bidder
who is L-1 which generaly leads to further reduction of price than
the one quoted by L-1.  Thereafter, the other bidders who may be
L-2 or L-3 etc. are awarded the contract at the rate at which it is
awarded to L-1.  Thus, ultimately, all the bidders supply the goods
at the same rate which is fixed by the IOCL after negotiating with
L-1 bidder.  The only difference is that bidder who is L-1 would
be able to receive the order for larger quantity than L-2 and L-2
may get an order of more quantity than L-3.
(iv) It has also come on record that there are very few suppliers.
For the tender in question, there were 50 parties already in the
fray and 12 new entrants were admitted.  Number of 12, in such
a scenario, cannot be treated as less.  Therefore, the conclusion
of CCI that the appellants ensured that there should not be entry
of new entrant may not be correct.
(v) Since there are not many manufacturers and supplies are
needed by the three buyers on regular basis, IOCL ensures that
all those manufacturers whose bids are technically viable, are
given some order for the supply of specific cylinder.  For this
purpose, it has framed its broad policy as well.  This also shows
that control remains with IOCL.
     Thus, the
appellants appear to be correct when they say that
all the participants in the bidding process were awarded contracts
in some State or the other which was aimed at ensuring  a bigger
pool of manufacturers so that the supply of this essential product
is always maintained for the benefit of the general public.  Had
IOCL left some manufacturers empty handed, in all likelihood,
they would have shut their shops.  However, IOCL wanted all
manufacturers to be in the fray in its own interest.  Therefore, it
was necessary to keep all parties afloat and this explains why all
50 parties obtained order along with 12 new entrants.
(vi) There is another very relevant factor pointed out by the
appellants, viz., the governmental control which is regulated by
law.  As pointed out above, it is not only the three oil companies
which can supply LPG to domestic consumers in 14.2 kg LPG
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cylinders as mandated in the LPG (Regulation and Distribution)
Order, 2000 which is issued under the provisions of Essential
Commodities Act, 1955, even the price at which the LPG cylinder
is to be supplied to the consumer is controlled by the Government.
Following features of the aforesaid LPG Order, 2000, are
significant:
•  The LPG supplied in 14.2 kg gas cylinders is an essential
commodity.
•  The distribution of LPG in 14.2 kgs cylinders takes place as
part of a public distribution system defined under clause 2(1) of
the Order as “the system of distribution, marketing or selling of
liquified petroleum gas by a Government Oil Company at the
Government controlled or declared price through a distribution
system approved by the Central or State Government”.
•  The price to the consumer is controlled by the Government.
•  The supply of LPG to domestic consumers shall be made only
in 14.2 kg gas cylinders.
•  According to clauses 4 and 5 read with Schedule III of the
LPG Order, parallel marketeers who supply and distribute LPG
cylinders, may do so only for cylinders with size and specifications
other than those specified in Schedule II.
90. The manner in which tendering process takes place would
show that in such a competitive scenario, the bid which the different
bidder would be submitting becomes obvious. It has come on record that
just a few days before the tender in question, another tender was floated
by BPCL and on opening of the said tender the
rates of L-1, L-2 etc.
came to be known.  In a scenario like this, that obviously becomes a
guiding factor for the bidders to submit their bids.
91. When we keep in mind the aforesaid fact situation on the
ground, those very factors on the basis of which the CCI has come to
the conclusion that there was cartelization, in fact, become valid
explanations to the indicators pointed out by the CCI.  We have already
commented about the market conditions and small number of suppliers.
We have also mentioned that 12 new entrants cannot be considered as
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entry of very few new suppliers where the existing suppliers were only
50. Identical products along with market conditions for which there would
be only three buyers, in fact, would go in favour of the appellants.  The
factor of repetitive bidding, though appears to be a factor against the
appellants, was also possible in the aforesaid scneario.  The prevailing
conditions in fact rule out the possibility of much price variations and all
the manufacturers are virtually forced to submit their bid with a price
that is quite close to each other.  Therefore, it became necessary to
sustain themselves in the market.  Hence, the factor that these suppliers
are from different region having different cost of manufacture would
lose its significance. It is a situation where prime condition is to quote
the price at which a particular manufacturer can bag an order even
when its manufacturing cost is more than the manufacturing cost of
others.  The main purpose for such a manufacuring would be to remain
in the fray and not to lose out.  Therefore, it would be ready to accept
lesser margin.  This would answer why there were near identical bids
despite varying cost.
92. Insofar as meeting of bidders in Mumbai just before the date
of submission of tender is concerned, some aspects pointed out by the
appellants are not considered by the CCI or the COMPAT at all.  No
doubt, the meeting took place a couple of days before the date of
tender.
No doubt, the absence of agenda coming on record would not make
much difference.  However, only 19 appellants had attended that meeting.
Many others were not even members or did not attend the meeting.  In
spite thereof, even they quoted almost same rates as the one who attended
the meeting.  This would lead us to the inference that reason for quoting
similar price was not the meeting but something else. The question is
what would be the other reason and whether the appellants have been
able to satisfactorily explain that and rebut the presumption against them?
93. The explanation is market conditions leading to the situation
of oligopsony that prevailed because of limited buyers and influence of
buyers in the fixation of prices was all prevalent.  This seems to be
convincing in the given set of facts.  The situation of oligopsony can be
both ways. There may be a situation where the sellers are few and they
may control the market and by their concerted action indulge into
cartelization.  It may also be, as in the present case, a situation where
buyers are few and that results in the situation of oligopsony with the
control of buyers.
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94. To recapitulate, the two prime factors against the appellants,
which are discussed by the CCI, are that there was a collusive tendering,
which is inferred from the parallel behaviour of the appellants, namely,
quoting almost the same rates in their bids. The parameters on the basis
of which these aspects are to be judged are stated in Excel Crop Care
Limited as follows:
“50. It needs to be emphasised that collusive tendering is a practice
whereby firms agree amongst themselves to collaborate over their
response to invitations to tender. Main purpose for such collusive
tendering is the need to concert their bargaining power, though,
such a collusive tendering has other benefits apart from the fact
that it can lead to higher prices. Motive may be that fewer
contractors actually bother to price any particular deal so that
overheads are kept lower. It may also be for the reason that a
contractor can make a tender which it knows will not be accepted
(because it has been agreed that another firm will tender at a
lower price) and yet it indicates that the said contractor is still
interested in doing business, so that it will not be deleted from the
tenderee’s list. It may also mean that a contractor can retain the
business of its established, favoured customers without worrying
that they will be poached by its competitors.
51.  Collusive tendering takes many forms. Simplest form is to
agree to quote identical prices with the hope that all will receive
their
fair share of orders. That is what has happened in the present
case. However, since such a conduct becomes suspicious and
would easily attract the attention of the competition authorities,
more subtle arrangements of different forms are also made
between colluding parties. One system which has been noticed
by certain competition authorities in other countries is to notify
intended quotes to each other, or more likely to a Central secretariat,
which will then cost the order and eliminate those quotes that it
considers would result in a loss to some or all members of the
cartel. Another system, which has come to light, is to rotate orders.
In such a case, the firm whose turn is to receive an order will
ensure that its quote is lower than the quotes of others.
52.  We are here concerned with parallel behaviour. We are
conscious of the argument put forth by Mr Venugopal that in an
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oligopoly situation parallel behaviour may not, by itself, amount to
a concerted practice. It would be apposite to take note of the
following observations made by European Court of Justice in
Dyestuffs:
“By its very nature, then, the concerted practice does not have
all the elements of a contract but may inter alia arise out of
coordination which becomes apparent from the behaviour of
the participants. Although parallel behaviour may not itself
be identified with a concerted practice, it may however
amount to strong evidence of such a practice if it leads to
conditions of competition which do not respond to the normal
conditions of the market, having regard to the nature of the
products, the size and number of the undertakings, and the
volume of the said market. Such is the case especially where
the parallel behaviour is such as to permit the parties to seek
price equilibrium at a different level from that which would
have resulted from competition, and to crystallise the status
quo to the detriment of effective freedom of movement of the
products in the [internal] market and free choice by consumers
of their suppliers.”
(emphasis supplied)
At the same time, the Court also added that the existence of a
concerted practice could be appraised correctly by keeping in
mind the following test:
“If the evidence upon which the contested decision is based is
considered, not in isolation, but as a whole, account being taken
of the specific features of the products in question.”
Having regard to the aforesaid principles in mind, we deal with
the arugment on oligopsony raised by the appellants.
95. Monopsony consists of a market with a single buyer.  When
there are only few buyers the market is described as an oligopsony.
What is emphasised is that in such a situation a manufacturer with no
buyers will have to exit from the trade. Therefore, first condition of
oligopsony stands fulfilled.  The other condition for the existence of
oligopsony is whether the buyers have some influence over the price of
their inputs.  It is also to be seen as to whether the seller has any ability
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to raise prices or it stood reduced/eliminated by the aforesaid buyers.
96. On a hollistic view of the matter, we find that the appellants
have been able to discharge the onus by referring to various indicators
which go on to show that parallel behaviour was not the result of any
concerted practice.
97. In Dyestuffs, the European Court held that parallel behaviour
does not, by itself, amount to a concerted practice, though it may provide
a strong evidence of such a practice. Nevertheless, it is a strong evidence
of such a practice.  However, before such an inference is drawn it has
to be seen that this parallel behaviour has led to conditions of competition
which do not correspond to the normal conditions of the market, having
regard to the nature of the products, size and volume of the undertaking
of the said market.  Thus, we examine the matter from the stand point of
market economy where question of oligopsony assumes relevance.
Whenever there is a situation of oligopsony, parallel pricing simplicitor
would not lead to the conclusion that there was a concerted practice
there has to be other credible and corroborative evidence to show that in
an oligopoly a reduction in price would swiftly attract the customers of
the other two or three rivals, the effect upon whom would be so
devastating that they would have to react by matching the cut. In Richard
Whish & David Bailey in Oxford’s Competition Law15 discussed the
“Theory of Oligopolistic
Interdependence” as under:
“In an oligopoly a reduction in price would swiftly attract the
customers of the other two or three rivals, the effect upon whom
would be so devastating that they would have to react by matching
the cut.  Similarly an oligopolist could not increase its price
unilaterally, because it would be deserted by its customers if it did
so.  Thus the theory runs that in an oligopolistic market
rivals are interdependent: they are acutely aware of each
other’s presence and are bound to match one another’s
marketing strategy.  The result is that price competition
between them will be minimal or non-existent; oligopoly
produces non-competitive stability…..
...Oligopolists recognize their interdependence as well as their
own self-interest.  By matching each other’s conduct they
15 Seventh Edition; Chapter 14-Horizontal agreements (w)-oligopoly, tacit collusion and
    collective dominance; Pg 561-562, 565-566
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will be able to achieve and charge a profit-maximising price
which will be set at a supra-competitive level, without
actually communicating with one another.  There does not
need to be any communication: the structure of the market
is such that, through interdependence and mutual self-
awareness, prices will rise towards the monopolistic level….
…..The logical conclusion of the case against oligopoly is that,
since it is the market structure itself which produces the problem,
structural measures should be taken to remedy it by
deconcentrating the market.  Unless this is done, there will be an
area of consciously parallel action in pricing strategies which is
beyond the reach of laws against cartels and yet which has serious
implications for consumers welfare.
xxx
xxx
xxx
xxx
xxx
xxx
(iii)  A regulatory approach
A different possibility  would be to regulate the prices of
undertakings that operate in an oligopolistic environment.  This,
however, would be a counsel of despair.  As a matter of policy
direct regulation should be a remedy of last resort.  Competition
authorities should not be price regulators; they should be the
guardians of the competitive process.  Where markets are
oligopolistic and entry is limited, competition authorities
should be concerned with the question of whether there
are barriers to entry and whether the state itself, for example
through restrictive licensing rules, regulation or
legislation,
is responsible for a lack of competition.”
98. In Theatre Enterprises v. Paramount Films16, the Supreme
Court of United States held as under:
“1-3 The crucial question is whether respondents’ conduct toward
petitioner stemmed from independent decision or from an
agreement, tacit or express. To be sure, business behavior is
admissible circumstantial evidence from which the fact finder may
infer agreement. Interstate Circuit.
16 346 US 357
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But this Court has never held that proof of parallel business behavior
conclusively establishes agreement or, phrased differently, that
such behavior itself constitutes a Sherman Act offence.
Circumstantial evidence of consciously parallel behavior may have
made heavy inroads into the traditional judicial attitude toward
conspiracy; but “conscious parallelism” has not yet read conspiracy
out of the Sherman Act entirely.”
99. In this regard, the test laid down by the Supreme Court of
United States in Monsanto Co. v. Spray-Rite Service Corp.17is relevant
and is reproduced hereunder:
“The correct standard is that there must be evidence that tends
to exclude the possibility that the manufacturer and non-
terminated distributors were acting independently.  That is, there
must be direct or circumstantial evidence that reasonably tends to
prove that the manufacturer and others had a conscious
commitment to a common scheme designed to achieve an
unlawful objective.”
100. This test was reiterated by the Supreme Court of United
States in Matsushita v. Zenith Ratio Corp.18:
“…..But antitrust law limits the range of permissible inferences
from ambiguous evidence in a 1 case. Thus, in Monsanto Co. v.
Spray-Rite Service Corp., 465 U.S. 752 (1984), we held that
conduct as consistent with permissible competition as with illegal
conspiracy does not, standing alone, support an inference of
antitrust conspiracy. Id., at 764. See also Cities Service, supra, at
280. To
survive a motion for summary judgment or for a directed
verdict, a plaintiff seeking damages for a violation of 1 must present
evidence “that tends to exclude the possibility” that the alleged
conspirators acted independently. 465 U.S., at 764 …….
…...petitioners had no motive to enter into the alleged conspiracy.
To the contrary, as presumably rational businesses, petitioners had
every incentive not to engage in the conduct with which they are
charged, for its likely effect would be to generate losses for
petitioners with no corresponding gains. Cf. Cities Service, 391
U.S., at 279 . The Court of Appeals did not take account of the
17 465 U.S. 752, 104 S.Ct. 1464, 79 L.Ed.2d 775 (1984)
18 475 U.S. 574 (1986)
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absence of a plausible motive to enter into the alleged predatory
pricing conspiracy. It focused instead on whether there was “direct
evidence of concert of action.” 723 F.2d, at 304. The Court of
Appeals erred in two respects: (i) the “direct evidence” on which
the court relied had little, if any, relevance to the alleged predatory
pricing conspiracy; and (ii) the court failed to consider the absence
of a plausible motive to engage in predatory pricing…..
xxx
xxx
xxx
Lack of motive bears on the range of permissible conclusions that
might be drawn from ambiguous evidence: if petitioners had no
rational economic motive to conspire, and if their conduct is
consistent with other, equally plausible explanations, [475 U.S. 574,
597] the conduct does not give rise to an inference of conspiracy.
See Cities Service, supra, at 278-280.”
101. Similarly, in Bell Atlantic Corp v. Twombly19, the U.S.
Supreme Court held as under:
“[1-3] Because §1 of the Sherman Act “does not prohibit [all]
unreasonable restraints of trade … but only restraints effected by
a contract, combination, or conspiracy,” Copperweld
Corp. v. Independence Tube Corp.,467 U.S. 752, 775(1984),
“[t]he crucial question” is whether the challenged anticompetitive
conduct “stem[s] from independent decision or from an agreement,
tacit or express,” Theatre Enterprises, 346 U. S., at 540. While
a showing of parallel “business behavior is admissible circumstantial
evidence from which the fact finder may infer agreement,” it
falls short of “conclusively establishing agreement or … itself
constituting a Sherman Act offense.” Id., at 540–541. Even
“conscious parallelism,” a common reaction of “firms in a
concentrated market [that] recogniz[e] their shared economic
interests and their interdependence with respect to price and output
decisions” is “not in itself unlawful.” Brooke Group Ltd. v. Brown
& Williamson Tobacco Corp., 509 U. S. 209, 227 (1993) ; see 6
P. Areeda & H. Hovenkamp, Antitrust Law 1433a, p. 236 (2d ed.
2003) (hereinafter Areeda & Hovenkamp) (“The courts are nearly
unanimous in saying that mere interdependent parallelism does
not establish the contract, combination, or conspiracy required by
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Sherman Act §1”); Turner, The Definition of Agreement Under
the Sherman Act: Conscious Parallelism and Refusals to Deal,
75Harv. L. Rev. 655, 672 (1962) (“[M]ere interdependence of
basic price decisions is not conspiracy”).
[4-6] The inadequacy of showing parallel conduct or
interdependence, without more, mirrors the ambiguity of the
behavior: consistent with conspiracy, but just as much in line with
a wide swath of rational and competitive business strategy
unilaterally prompted by common perceptions of the market.
See, e.g., AEI-Brookings Joint Center for Regulatory Studies,
Epstein, Motions to Dismiss Antitrust Cases: Separating Fact from
Fantasy, Related Publication 06–08, pp. 3–4 (2006) (discussing
problem of “false positives” in §1 suits). Accordingly, we have
previously hedged against false inferences from identical behavior
at a number of points in the trial sequence. An antitrust conspiracy
plaintiff with evidence showing nothing beyond parallel conduct is
not entitled to a directed verdict, see Theatre Enterprises,
supra; proof of a §1 conspiracy must include evidence tending to
exclude the possibility of independent action, see Monsanto
Co. v. Spray-Rite Service Corp., 465 U. S. 752 (1984); and at
the summary judgment stage a §1 plaintiff’s offer of conspiracy
evidence must tend to rule out the possibility that the defendants
were acting independently, see Matsushita Elec. Industrial
Co. v. Zenith Radio Corp., 475 U.S. 574(1986).”
102. After
taking note of the test that needs to be applied in such
cases, which was laid down in Dyestuffs and accepted in Excel Crop
Care Limited, we come to the conclusion that the inferences drawn by
the CCI on the basis of evidence collected by it are duly rebutted by the
appellants and the appellants have been able to discharge the onus that
shifted upon them on the basis of factors pointed out by the CCI.
However, at that stage, the CCI failed to carry the matter further by
having required and necessary inquiry that was needed in the instant
case.
103. We are emphasising here that in such a watertight tender
policy of IOCL which gave IOCL full control over the tendering process,
it was necessary to summon IOCL. This would have cleared many
aspects which are shrouded in mystery and the dust has not been cleared.
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104. We, thus, arrive at a conclusion that there is no sufficient
evidence to hold that there was any agreement between the appellants
for bid rigging. Accordingly, we allow these appeals and set aside the
order of the Authorities below. As a consequence, since no penalty is
payable, appeals of the CCI are rendered infructuous and dismissed as
such.  All the pending applications stand disposed of.
No orders as to costs.
Kalpana K. Tripathy
                          Appeals disposed of.