CCI finds no violations by REC Power Distribution Co

CCI has rejected allegations of anti-competitive practices against REC Power Distribution Company even as it said that state-owned REC should have adequate safeguards to remove perceived or actual conflicts of interest caused by its association with the firm.
REC Power Distribution Company Ltd (RECPDCL) is a wholly-owned subsidiary of REC, a leading lender for rural electrification works.
Among others, it was alleged that RECPDCL has been leveraging its association with REC for securing work related to consultancy services in relation to proposed rural electrification projects, mainly preparation of Detailed Project Reports (DPRs).
In a 52-page order the regulator said, "No customer of RECPDCL complained of its conduct, hence, making it clear that neither the informant, nor any competitor, provided any evidence of establishing that the relationship between RECPDCL and REC had resulted in additional works being allocated to RCPDCL on nomination basis."

Since the decision as to whether a DPR is to be prepared in-house or outsourced to a consultant is taken by the PIA (Project Implementing Agency), no adverse conclusions could be drawn against REC or RECPDCL for such decision making process, CCI noted.
For deciding the case, CCI took into account two relevant markets -- 'for financing of projects under rural electrification schemes' and 'for preparation of DPRs (Detailed Project Reports) for projects under rural electrification schemes in India'.

Closing the case, CCI noted that the preferential advantage to RECPDCL given by discoms (power distribution companies) appears to be a consequence of the structure in the market and the same cannot be taken as the basis to infer abuse on the part of REC.

CCI noted that the case brings into sharp focus the issue of level playing field in a mixed public/private market getting disturbed as a result of structural advantages enjoyed by a public provider and the consequent bias of the public buyers in favour of such an entity.
Though such structure-induced distortions do not violate the letter of the competition law, they are not in accordance with the spirit of competitive neutrality, it said.
"... The Commission is of the opinion that it is incumbent upon REC to put in place adequate safeguards in the appraisal processes and to remove any perceived, potential, or actual conflicts of interest caused by its association with RECPDCL," the order said.

CCI has held that the cement companies, through their
impugned conduct, have engaged in bid-rigging that eliminated and lessened competition.
The bid-rigging has been established from quoting of unusually higher rates in the impugned tender and determining different basic prices for supply of cement at the same destination through reverse calculation, among others.
"The anti-competitive conduct was re-affirmed through SMS exchanged and calls made amongst the officials of the cement companies," CCI said in a release.
While imposing penalties, the regulator took note of potential delay which would have occurred in the execution of public infrastructure projects due to cancellation of the impugned tender.

"At the same time, due consideration was given to factors such as peculiarity of the tender process which created uncertainty in procurement, total size of the impugned tender and competition compliance programmes put in place by some companies while determining the quantum of penalty," it added.
In August 2016, CCI had slapped a penalty of over Rs 6,700 crore on 11 cement firms, but the order was stayed following an appeal before the Competition Appellate Tribunal.