The recent case of Competition Commission of India imposing a whopping Rs 6,000 crore penalty on cement companies and even the Cement Manufacturers’ Association has kicked off a heated debate across the industry.
As is known, CCI’s ruling came in the wake of a complaint filed by Builders Association of India. By bringing the case to the CCI, the builders may have been trying to protect the fat margins that they had commanded at the height of the housing boom.
As the CMA said, the third-parties from whom information was collected in this case by the CCI are builders and cement dealers, who all have their own vested interests. The CCI’s very enquiry rests on thin ice here.
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Another interesting observation made by the CCI was that the common platform of CMA was used for collection and dissemination of the information on prices of different companies. The CMA countered that it never collected prices by brand but only average prices for passing on to the Department of Industrial Policy and Promotion.
Furthermore, it had been asked by the ministry of commerce and industry to collect the data on a monthly basis to calculate the Wholesale Price Index.
It is akin to penalizing an organization for following the orders of a government department. Besides, as the association said, the information is available publicly!
The CMA also said mere price parallelisms cannot be used to infer cartelization and it is bound to occur in cases where a homologous product is sold in the same market.
Overall, despite all the headlines the CCI made, it looks like the findings have not strong legal base and could be thrown out by higher legal institutions. Till then, however, the CCI’s action has introduced an element of uncertainty into the cement industry at a time of weak demand and slowing economy. The action will have the opposite effect to what the CCI intended under the current economic circumstances.
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