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CCI imposes penalties on 18 sugar mills, associations for rigging bids

Zoom in font  Zoom out font Published: 2018-09-20  Views: 9
Core Tip: The Competition Commission of India (CCI) has imposed penalties upon 18 sugar mills and two associations for rigging the bids in respect of a joint tender floated by oil marketing companies on January 2, 2013 for the procurement of ethanol for blending wi
The Competition Commission of India (CCI) has imposed penalties upon 18 sugar mills and two associations [the Indian Sugar Mills’ Association (ISMA) and Ethanol Manufacturers Association of India (EMAI)] for rigging the bids in respect of a joint tender floated by oil marketing companies [Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL) and Indian Oil Corporation Ltd (IOCL)] on January 2, 2013 for the procurement of ethanol for blending with petrol. This was stated in a recent release by the ministry of corporate affairs.
 
The final order was passed by CCI on September 18, 2018 on a batch of information filed by India Glycols Limited and five other informants.
 
Pursuant to the notification dated January 2, 2013 issued by the ministry of petroleum and natural gas, Government of India, regarding mandatory five per cent blending of ethanol with motor spirit/gasoline, the government-owned public sector oil marketing companies (OMCs), viz IOCL, HPCL and BPCL, invited quotations from alcohol manufacturers for supply of ethanol through a joint tender dated January 2, 2013, which was issued by BPCL on behalf of OMCs as the coordinator of the tender process.
 
Through the joint tender, OMCs invited sealed tenders under the two bid system, i e technical bid and price bid from ethanol suppliers. The supply was to be made available to various depots and terminals of OMCs across the country for a period of one year, with effect from March 1, 2013.
 
The informant (India Glycols Ltd), however, alleged that ISMA and EMAI persuaded the OMCs to come out with a joint tender for the purpose of procuring ethanol. The said joint tendering by OMCs was alleged to be an agreement amongst horizontal players to procure ethanol from various suppliers in contravention of the provisions of Section 3 of the Competition Act, 2002 (the Act) which was likely to cause appreciable adverse effect on competition within India in supply and distribution of ethanol.
 
It was also alleged that the sugar manufacturers who had participated in the joint tender of 2013 manipulated the bids by quoting similar rates and, in some cases, identical rates through an understanding and collective action in violation of the provisions of Section 3 of the Act.
 
The Commission, in its order, noted that the bidders through their impugned conduct have contravened the provisions of Section 3(3)(d) read with Section 3(1) of the Act by acting in a collusive and concerted manner which has eliminated and lessened the competition besides manipulating the bidding process in respect of the impugned tender floated by OMCs.
 
The bidders who participated in respect of the depots located in Uttar Pradesh, Gujarat and Andhra Pradesh, in response to the joint tender floated by OMCs, were found to have acted in a concerted and collusive manner in submitting their bids.
 
This was evidenced from the prices quoted, quantities offered and the explanations given by the parties. Such collusion was further strengthened from the fact that the bidders utilised the platform of ISMA and also acted on the signals emitted by EMAI, which influenced the bidding behaviour of the parties.
 
Accordingly, a total penalty of Rs 38.05 crore was imposed upon 18 sugar mills and their trade associations (ISMA/EMAI). Besides, a Cease and Desist Order was also issued against them.
 
While imposing penalties, the Commission applied the principle of relevant turnover and based the penalties on the revenue generated by the sugar mills from the sale of ethanol only.
 
The penalty was imposed by the Commission at the rate of seven percent of the average relevant turnover of the sugar mills. However, penalty at the rate od 10 percent of the average receipts was imposed upon the trade associations, viz ISMA and EMAI, keeping in view the key role they played in facilitating bid rigging.
 
The Order of the Commission was passed in Case Numbers 21, 29, 36, 47, 48 and 49 of 2013, and a copy thereof has been uploaded on CCI’s website.
 
 
keywords: sugar ethanol
 
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