The analogy might seem stupid or funny to many, but I just couldn’t help but remember the movie Batman Begins while reading the news about the CCI’s Cement Cartel Decision. Think about it, just like the Batman, there are now those who love the CCI, proud that someone decided to teach the big corporations a lesson, and there are those who hate the CCI, who are not only crying themselves hoarse on the injustice meted out to the Cement Manufacturers’ Association (CMA) and its affiliated companies and who will surely appeal to the COMPAT, and if required, even the Supreme Court.
While I do support the decision (a day may come when I shall become Anti- CCI, but it is not today and shall probably not come for quite some time), there are a few questions or points which do merit consideration, just for the sake of clarification, if nothing else. They are as follows:
1. Almost all the companies as respondents have contended that there profits actually fell for the period in consideration, and hence, no benefit actually accrued to the companies who were allegedly members of the cartel. Even assuming that this is true, the argument is irrelevant under competition law. The U.S. Supreme Court held as far back as 1927 in United States v. Trenton Potteries Co. et. al., 273 US 392 (1927) that
“the aim and he aim and result of every price-fixing agreement, if effective, is the elimination of one form of competition. The power to fix prices, whether reasonably exercised or not, involves power to control the market and to fix arbitrary and unreasonable prices….Once established, it may be maintained unchanged because of the absence of competition secured by the agreement for a price reasonable when fixed. Agreements which create such potential power may well be held to be, in themselves, unreasonable or unlawful restraints without the necessity of minute inquiry whether a particular price is reasonable or unreasonable as fixed and without placing on the government”
The decision was further affirmed in United States v. Socony-Vacuum Oil Co., 310 US 150 (1940) wherein it was observed
“Any combination which tampers with price structures is engaged in an unlawful activity. Even though the members of the price-fixing group were in no position to control the market, to the extent that they raised, lowered, or stabilized prices, they would be directly interfering with the free play of market forces.”
2. Circumstantial Evidence also seems to have become a bone of contention with every respondent contending that the circumstantial evidence is not good enough to prove a cartel. This IS a contentious issue since the use of circumstantial evidence in competition law is as of now debatable. I would prefer to let the OECD do the talking on this subject, through their excellent policy roundtable paper on the same. The key point to note is that their primarily two forms of circumstantial evidence, communication evidence and economic evidence. Of the two, communication evidence is considered to be the more important as economic evidence is often ambiguous due to the multiple interpretations available for the same. This is more than evident in the Order itself, wherein a number of respondents have relied on the affidavits and expert opinion of economic experts to substantiate their case. ( One sees to get the impression that all of them have their own opinion regarding the same !! 😀 Also, pages 156 and 157 of the Order speak on the Commissions decision of circumstantial evidence).
3. There is a prickly issue in the claim that the collection of the information was asked by the government itself, and that after the closure of the Office of Development Commissioner of Cement Industry (DCCI) in 1989, the CMA was directed by the Department of Industrial policy and Promotion to collect and submit data which was earlier collected by the DCCI. Now Section 54 clearly allows the Central Government, by notification to exempt any enterprise or class of enterprises from the provisions of the Act where that enterprise performs a sovereign function on behalf of the Central Government. Also, in case an enterprise is engaged in any activity including the activity relatable to the sovereign functions of the Government, the Central Government may grant exemption only in respect of activity relatable to the sovereign functions. The collection of such information by the CMA for the Ministry of Commerce can be interpreted as the performance of the sovereign function for the Central Government. The catch: I could not find any notification issued by the Central Government published in the Gazette which grants such an exemption to the CMA. If the respondents possess one, then good for them. It will be a very strong argument before the COMPAT.
4. I don’t see the relevant market issue ( See pages 184 and 233 of the Order) as a serious problem as long the evidence points to a general collusion. However, only further proceedings before the COMPAT help us understand this issue better.
Indian Competition and Anti-Trust Blog 
You have put forward some really relevant issues.
However i find the first point a little flawed (probably you have perceived it wrongly). This is not the what the opposite parties have contended. Actually to the contrary they have unanimously (however indirectly) admitted that they earned super normal profits. What they were trying to say is that their profits were not consistent and some losses were seen in some quarters, and therefore they denied the allegation that “low capacity utilization”[under section 3(3)(b)], even when there was high market demand, was a concerted action to limit the supply and had earned them super-normal profits. Also they meant that there is no relation to their meetings (under the CMA banner) and the subsequent price rises after them to show that there was a collusive or concerted action to fix the prices under section 3(3)(a).
As regards to your second point i think the decision is clear on the point that no explicit agreement is required to prove a contravention under sec. 3(3) as sec.2(b) covers an action in concert to be an agreement in itself.
Also as per my understanding another justification could be that section 3(3) is especially a per-se provision (kindly see a phrase “shall be presumed” in the section) that requires no explicit proof and puts the onus of disproving the allegations on the contravening party.
Regarding the 3rd point i don’t think they are going to succeed solely on this. The decision states that CMA were having some concerns about their meetings being against the Competition Act. They even asked for the advise of the Ministry for it. However they did this in May 2008 and section 3 came to be notified on 20 May 2009. Also they proposed some amendments in their rule book to make their meetings outside the purview of the Act, it could not be done until notices were served by the commission some time in 2010.
Relevant market is not a consideration as the case does not involves abuse of dominant position under section 4
Dear Tuhin
Thanks for your comment.
1. I advise you to read the Order again carefully. As a specific contention, please see pages 47, 63, 64, 67, 68 and 94 of the Order, wherein the respondents have specifically argued that that they have recently suffered losses. Also, no respondent has at all admitted, directly or indirectly, that they did earn super normal profits. To do so would be, to use the hindi phrase, Apne hi per pe khulari marna, since admitting to super normal profits would only strengthen the circumstantial evidence against them.
In fact, atleast two respondents have specifically argued that they haven’t earned super normal profits. (See pages 116 and 136 and 137). The low capacity utilization was also an issue but I chose not to comment upon it since it is a purely factual argument and further more as already pointed out in the post script post, a lot of the data published has been crossed out.
2. I respectfully beg to differ on your interpretation to Section 3(3) till the extent that it still necessary to prove that the agreement resulted in one or more effects as mentioned in the four sub clauses (a) to (d) as mentioned in the sub section. ONLY once such effects of the agreement are proved, would it become a per se violation of Section 3.
3. What the Order states is irrelevant if the CMA has a government notification published in the Official Gazette of India exempting it under Section 54. Section 54 gives overriding powers to the government and therefore the CCI would automatically lose its jurisdiction in the present matter. However, there is no mention of such a notification whatsoever, hence the catch.
Hon’ble High Court of Delhi in its judgment in writ petition(C ) 993/2012 filed by Govt. of India through Railway Board against Competition Commission of India and Others.
‘in the premises, it is held that only primary, inalienable and nondelegable functions of the constitutional government should quality for exemption within the meaning of ‘sovereign functions’ of the government under section 2 (h) of the Competition Act, 2002. welfare, commercial and economic activities, therefore, are not covered within the meaning of ‘sovereign functions’ and the State while discharging such functions is as much amenable to the jurisdiction of the competition regulator as any other private entity discharging such functions’
Sorry for a late reply !
1. Agreed, but I found this contention only at one page. At every other page, mentioned by you, the contention is that respondents suffered fall in margins. Decrease in profit margins does not mean losses. And i have a different perception on this contention. The argument is that fall in margin is indicative that there was no collusion between the companies and that the cement market is competitive.
I see the issue of low capacity utilization as an important one as it is directly indicative of the collusive action by the companies.
2. Agreed, but for section 3(3) only the result of the agreement is required to be proved and not the existence of a specific collusive agreement.
3. Totally agreed.