Competition Commission of India SuoMoto Case No. 03/2011 (In Re: ... vs . Spray Rite Service Corporation That To ... on 24 February, 2012 BEFORE THE COMPETITION COMMISSION QF INQIA Case No. 3/2011 DATE OF DECISION: 24.02.2012 In re: suomotu case aqainst LPG cylinder manufacturers ORDER The cognizance in the present case was taken by the Competition Commission of India (hereinafter referred to as 'the Commission') suo motu under section 19(1) of the Competition Act, 2002 (hereinafter referred to as 'the Act') consequent upon the submission of investigation report of the Director (General (hereinafter referred to as 'the DG') in Case No. 10 of 2010, M/s Pankaj Gas Cylinders Ltd. v. lndian Oil Corporation Ltd. In that case it was reported by the DG that in tender No. LPG0/M/PT03/0910 floated by Indian Oil Corporation Ltd. (hereinafter referred to as IOCL) for the supply of 105 lakh,14.2 Kg capacity LPG cylinders with SC valves, the manufacturers of LPG cylinders had manipulated the bids and k ntical rates in groups through an understanding and coll '},L,; 2. BRIEF FACTS OF THE CASE 2.1While conducting investigation in Case No. 10 of 2010, the DG had noted that IOCL had invited bids vide Tender No. LPGo/M/PT03/09 10, for the supply of 105 Lakh, 14.2 KG capacity LPG Cylinders with SC valves in year 20102011, to various bottling plants as per the terms and conditions and specifications mentioned in the tender document. As per the conditions of tender documents, only those manufacturers having valid approval from Chief Controller of Explosives (CCOE) and Bureau of Indian Standards (BIS) license for manufacture of 14.2 kg LPG Cylinders as per IS3196 (Part 1) as on the due date of this tender, were eligible to submit bids for the tender. The tender was having two parts viz, Technical Bid and Price Bid. 2.2 it was noted by the DG that out of the 63 bidders who participated in the tender, 50 bidders were qualified for opening of Price Bids, 12 bidders were qualified as New Vendors (who were not required to submit price bids) and 1 bidder was not qualified for the opening of price bid. The Technical Bid of the subject tender was opened on 03.03.2010 and the Price Bids of 50 qualified bidders were opened on 23.03.2010. _2.3Further, the DG, on the analysis of bids submitted by the bidders for the year 20102011, had noted that there Wa.%Sk.\'.&'§'\,.4,i§.;]'ltFlI]l\l§Tlty of pattern ' rice bids for (a various States. The bids of a large number of parties were exactly identical or near to identical in different States. 2.40n the basis of analysis of bids the DG had observed that there were strong indications of some sort of agreement and understanding among bidders to manipulate the process of bidding. 2.5The Commission, after considering the matter in its meeting dated 09.03.2011 and in exercise of its suomotu powers under section 19 of the Act, was of the view that a thorough investigation into the matter of bid rigging was necessary in the tender awarded for the procurement of 14.2 Kg LPG cylinders by the public sector gas marketing companies viz. IOCL, Bharat Petroleum Corporation Ltd. (BPCL) and Hindustan Petroleum Corporation Ltd. (HPCL). Accordingly, the Commission after forming an opinion under Section 26(1) of the Act that there exists a prima facie case referred the matter to the Director General (DG) for investigation. 2.6DG after receiving the directions from the Commission investigated the matter and submitted the investigation report dated 13.05.2011 to the Commission. 3. INVESTIGATION BY THE DG 3.1 it is gathered from the investigation report..«t;«lé;1:qt;»~/l,r.1 the course of , AL. L] ~'\\ %"'¢,'0~ir>» . (5, _ _ g Q <\ . _'S .L4,' 9 3 .. , A' ' \\ ('A 'M }/V andanalysedtheir statements in light of va ipés investigation. The DG collected evidence by sending questionnaire to the concerned parties and bidders were given opportunity to explain their position in the light of evidence gathered against them. 3.2 it has been highlighted in the DG report that IOCL is a leading market player in the Liquefied Petroleum Gas (LPG) market by virtue of having market share of 48.2%. Being the largest player in LPG market, IOC is a major procurer of 14.2 Kg LPG cylinders. On the basis of facts gathered the DG has also noted that for the year 2010 11,in addition to tender floated by IOCL for procurement of 105.16 Lakh cylinders, HPCL floated a tender for 36 Lakh, 14.2 Kg cylinders and BPCL floated tender for procurement of 40.33 Lakh, 14.2 Kg cylinders during the year. While HPCL and BPCL have adopted e platforms for tender invitation and finalization IOCL is procuring by way of invitation of tenders. 3.3The DG, after analyzing various regulatory framework of LPG distribution in India, has noted that the companies in the private sector are not authorized to supply LPG to domestic consumers in 14.2 Kg LPG cylinder. Only P