Biggest Indian cartel fine quashed

After three years of litigation, India’s Competition Appellate Tribunal (Compat) has struck down a 61 billion rupee (EUR 836 million) fine imposed on members of an alleged cartel by the Competition Commission of India (CCI).

On 20 June 2012 the CCI issued an order finding that eleven cement companies and the Cement Manufacturers Association (CMA) had infringed the Indian competition law prohibition of anti-competitive agreements contained in section 3 of the Indian Competition Act 2002.  According to the CCI, the cement companies conspired to reduce or restrict their cement output in order to create a situation of short supply, thereby increasing prices.  The CCI also maintained that the companies frequently engaged with one another at events and meetings of the CMA, where the industry association allegedly provided a means for the cement manufacturers to exchange commercially sensitive information which facilitated parallel pricing, limits on production and market sharing.

The CCI relied entirely on indirect evidence (i.e. circumstantial evidence including parallel price increases) which the CCI used to support a finding of infringement by deduction or inference.  The penalties imposed by the CCI remain in aggregate the largest fines imposed by the CCI since it gained competition law powers in 2009 and are considerable by any standards. 

Compat has remitted the case to the CCI with an order to reconsider it and take a new decision within three months.  Compat’s ruling is interesting because it contains no real substantive discussion of the merits of the case.  It is highly critical of the conduct of Ashok Chawla, CCI’s Chairman since 2012.  Compat found that Chawla did not attend the hearings during the administrative proceedings but still approved the order imposing fines.  Endorsing the investigated companies’ submissions that the CCI violated their rights of defence, Compat was persuaded that the CCI’s decision was tainted with procedural irregularity amounting to the denial of a fair hearing. 

Compat has urged the CCI to develop protocols to ensure compliance with the principles of natural justice.  The judgment is likely to have a resonating effect on the many ongoing procedures before the CCI and will no doubt focus attention on due process and transparency.

It remains to be seen whether CCI will maintain its original theory of harm or whether it will moderate its approach to the calculation of fines.  Compat did not opine on the magnitude of the fine and to date there remain no guidelines from the CCI or under statute on the appropriate level of the fine for breaches of India’s competition law.