Cartelisation - Dry Cell batteries market

The Competition Commission of India (‘CCI’) passed a Final Order imposing penalty on Panasonic Energy India Co. Limited (‘Panasonic’) and Godrej and Boyce Manufacturing Co. Limited (‘Godrej’) for colluding to fix prices of zinc-carbon dry cell batteries in India. In respect of Panasonic, CCI granted 100 percent reduction in penalty by invoking the provisions of Section 46 of the Competition Act, 2002 (‘the Act’) read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’).  

The case was taken-up by CCI suo motu under the provisions of Section 19 of the Act based on the disclosure made by Panasonic under Section 46 of the Act read with the Lesser Penalty Regulations. From the evidence collected in the case, which included an anti-competitive clause in the written agreement entered into between Panasonic and Godrej for supply of batteries, and e-mail communications between the key managerial personnel of the two of them, CCI found existence of a bi-lateral ancillary cartel between Panasonic and Godrej in the market of institutional sales of dry cell batteries. It was found that Panasonic, which had a primary cartel with Eveready Industries India Ltd. and Indo National Limited as established in Suo Motu Case No. 01 of 2016 by CCI, having fore-knowledge about the time of price increase to be affected by this primary cartel, used such fore-knowledge as leverage to negotiate and increase the basic price of the batteries sold by it to Godrej. Further, Panasonic and Godrej, in accordance with the prices of the primary cartel, used to agree on the market price of the batteries being sold by them, so as to maintain price parity in the market.

Based on the above, CCI found that Panasonic and Godrej have indulged in the anti-competitive conduct of price co-ordination, in contravention of the provisions of Section 3 (3) (a) read with Section 3 (1) of the Act. It was observed that such conduct continued from 13.01.2012, when Panasonic and Godrej entered into a written agreement, till 30.11.2014, when Godrej terminated the said agreement.

Considering all the relevant factors, penalty on Panasonic was levied at the rate of 1.5 times of its profit for each year from January 2012 to November 2014 amounting to INR 31.76 crores, and on Godrej at the rate of 4 percent of its turnover for each year from January 2012 to November 2014 amounting to INR 85 lacs. Also, considering the totality of facts and circumstances of the case, penalty leviable on the individual officials of Panasonic and Godrej was computed at the rate of 10 percent of the average of their income for the preceding three years. As to Panasonic, to the officials of Panasonic also, 100 percent reduction in penalty was granted under the provisions of Section 46 of the Act read with the Lesser Penalty Regulations.

penalty on Chemists & Druggists

The Competition Commission of India (‘Commission’) has found the Chemists and Druggists Association of Baroda (‘CDAB’) to be in contravention of the provisions of the Competition Act, 2002 (‘Act’). A complaint/information was filed with the Monopolies and Restrictive Trade Practices Commission (MRTPC) in 2009 alleging that the CDAB has indulged in restrictive trade practices. The allegations were that the CDAB, through its practices, is limiting and controlling the supply of drugs and medicines in the market by mandating ‘No Objection Certificate’ (‘NOC’) prior to appointment of stockists and payment of ‘Product Information Service’ (‘PIS’) charges prior to introduction of new products in the market by pharmaceutical companies. Besides, there were allegations that CDAB was fixing the trade margins for the wholesalers/retailers. Subsequently, the case was transferred to the Commission by MRTPC under the provisions of Section 66(6) of the Act. The Commission after forming a prima-facie opinion directed the office of Director General (hereinafter, the ‘DG’) to conduct investigation into the matter. 

Investigation carried-out by the DG established contravention on part of the CDAB. After detailed enquiry, the Commission passed an order dated 05.09.2012 wherein it was found that the CDAB was imposing the requirement of mandatory NOC and was also fixing margins for the wholesalers and retailers by enforcing the norms laid down by AIOCD. The same was found to be in contravention of the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act. Accordingly, the Commission imposed a monetary penalty, in addition to cease and desist directions, under Section 27 of the Act.

Pursuant to an appeal filed by CDAB, the erstwhile Hon’ble COMPAT, vide its order dated 18.11.2016, set aside the Commission’s order dated 05.09.2012 on a procedural issue and remanded the matter back to the Commission for fresh adjudication.

Accordingly, the matter was considered afresh. After allowing CDAB with an opportunity to cross-examine various witnesses, the Commission allowed parties to file their written submissions and conducted a detailed hearing in the matter. Based on the material available on record, the Commission found that the CDAB was indulging in the anti-competitive practice of insisting NOC prior to the appointment of new stockists by pharmaceutical companies and was also fixing/prescribing the trade margins during the relevant time period, in contravention of the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act.

Accordingly, CDAB was directed to cease and desist from indulging in the aforesaid anti-competitive practice. Further, the Commission imposed a monetary penalty of Rs. 32,724/- calculated at the rate of 10% of the average relevant income of CDAB for the relevant period, under the provisions of Section 27 of the Act.

The detailed Order can be seen at the Commission’s website www.cci.gov.in.

HBR blog on gaining competitive advantage

An interesting, HBR blog on gaining competitive advantage, where it inferences from the achievements of a sportsperson from the recently concluded Winter Olympics, can be accessed here