Cartelisation:CCI slaps Rs 62 cr penalties on Escorts,2 others

Competition Commission today imposed penalties of more than Rs 62 crore on three companies, including engineering group Escorts, for forming a cartel with respect to a tender for supplying spares to an Indian Railway undertaking.
Besides Escorts, the fair trade watchdog has penalised Faiveley Transport Rail Technologies India Ltd and Stone India.
The companies have also been directed to "cease and desist from indulging in such anti-competitive conduct in future", according to Competition Commission of India order issued today.
The CCI has slapped a fine of Rs 54.70 crore on Escorts, Rs 5.70 crore on Faiveley and Rs 1.91 crore on Stone India. Together, the amount would be Rs 62.31 crore.

Penalties imposed on the companies is equivalent to two per cent of each of their average turnover.
"The Commission is also not oblivious of the submissions made by the opposite parties to the effect that the turnover relatable to the product under consideration constitutes a small percentage of the total turnover," the order said.

There are no other mitigating factors significantly raised, except that the amount involved in the tender was very small and the order was only of a few lakhs, it added.
Noting that public procurement is a major concern of all competition authorities in the world, CCI said it cannot ignore bid rigging in a case of small procurement nor can consider small procurements unimportant.

The ruling follows a case taken up by the CCI on suo-motu basis following a communication from the Diesel Loco Modernisation Works, a unit of Indian Railways at Patiala, Punjab. DLMW undertakes repair and maintenance of diesel locomotives.
The case relates to a DLMW tender, wherein the three vendors quoted identical rates of Rs 17,147.54 for feed valves per piece. Since the price was found to be 33 per cent higher than the last purchase rates, DLW suspecting cartelisation had intimated CCI. The tenders were opened in April 2012.
In the probe report, the Director General had observed that the opposite parties "acted in concert in rigging the bid by quoting identical bids on the same date".

DG is the investigation arm of the Commission.
"... The collusive action was also found to be strengthened from the past conduct of the parties where they were found to have quoted more or less similar price for the tenders of different zonal railways," DG had noted.
The DG had submitted the investigation report to the regulator in March 2013.