On October 1, 2018, the Hon’ble Supreme Court of India passed a judgment in Rajasthan Cylinders and Containers Limited (Civil Appeal No. 3546 of 2014) setting aside the orders passed by Competition Appellate Tribunal (“COMPAT”), which found that suppliers of liquefied petroleum gas cylinders were in contravention of Section 3(3)(d) of the Competition Act, 2002 (“Act”), for rigging their bids in the tender floated by Indian Oil Corporation Limited (“IOCL”), in relation to the supply of 105 lakh cylinders between the years 2010 and 2011. The COMPAT, by the said order, (a) upheld the findings of the Competition Commission of India (“CCI”), insofar as it found the suppliers guilty of contravening Section 3(3)(d) of the Act; and (b) reduced the amount of penalty imposed on the suppliers.
The suppliers filed instant appeals on the ground that there was no cartelization and that they had not contravened Section 3(3)(d) of the Act. On the other hand, the CCI challenged the latter part of the order whereby the penalties imposed on the suppliers were reduced.
Basis of CCI’s findings:
The CCI concluded that the suppliers colluded and formed a cartel, which led to bid rigging, based on the following factors:
Supreme Court’s findings and observations:
a) There are only three buyers, namely, IOCL, Hindustan Petroleum Corporation Limited and Bharat Petroleum Private Limited. In the event these buyers do not purchase from any of the suppliers, the suppliers would not be in a position to sell those cylinders to any other entity, as there are no other buyers;
b) In the event the buyer does not purchase the gas cylinders and in view of the limited number of buyers and suppliers in the market, new suppliers would be deterred from entering the market;
c) The manner in which the tenders are floated by IOCL and the rates at which the tenders are awarded, are an indicator that IOCL determines pricing. It is a matter of record that IOCL undertakes the exercise of having its internal estimates about the cost of the cylinders. All the tenders which have been accepted are for a price lesser than IOCL’s aforesaid estimate; and
d) All participants in the bidding process were awarded contracts in all States. This was to ensure a larger pool of manufacturers so that the supply of cylinders is always maintained for the benefit of the general public. The Supreme Court concluded that 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 their own interest.
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