CCI asks three debenture trustees and association not to cartelise

CCI has ordered the Trustees' Association of India and three debenture trustees to cease alleged cartelisation and fee fixing for trusteeship services

Competition Commission of India (CCI) said on Thursday it has issued a ‘cease and desist’ order against Trustees’ Association of India (TAI) and three of its member debenture trustees for allegedly cartelising to fix the fee for trusteeship services.

 

CCI found that TAI along with IDBI Trusteeship Services Limited, Axis Trustee Services Limited and SBI CAP Trustee Company Limited allegedly fixed a benchmark price, for providing debenture trusteeship services. 

 

The alleged violation took place during FY21 and FY22 which prevented independent commercial decision making by the debenture trustees and amounted to cartelisation in terms of the provisions of the Competition Act. 

 

TAI is a professional association of organisations acting as debenture trustees, security trustees, escrow agents, lender agents and trustees of REITs, InvITs and AIFs.

  

Queries sent to TAI, IDBI Trusteeship Services Limited, Axis Trustee Services Limited and SBI CAP Trustee Company Limited on Thursday seeking comments for the story remained unanswered at the time of publishing.

 

CCI also held certain officials of the association and the companies liable for the alleged anti-competitive practice.

 

“Such collective fixing of minimum price/fee by Trustees’ Association of India, for the provision of debenture trusteeship services, and other follow-on actions prevented independent commercial decision making by the debenture trustees and amounted to cartelisation in terms of the provisions of the Act,” the CCI said in its statement. 

 

The case arose from a complaint by Muthoot Finance after IDBI Trusteeship Services, which had been its debenture trustee for several NCD issuances, quoted significantly higher fees for a proposed Rs 982-crore issue in 2021, showed an order made available by CCI.

 

The higher fee was attributed to a pricing structure fixed by TAI, under which members were required to follow a benchmark floor price and faced the prospect of adverse action for deviations.

 

Debenture trustees are appointed to protect the interests of investors in debt securities and monitor issuers’ compliance with the terms governing such instruments.

 

CCI also found that the conduct went beyond the fixing of fees and had the effect of limiting and controlling the market for trusteeship services. Members and non-members of the association were allegedly directed not to accept assignments from debenture issuers at fees below the prescribed benchmark.

 

The Commission said in its order that TAI and its members were not only setting the benchmark prices for the member debenture trustees but were also attempting to nudge non-members  to follow the same.

 

“This was to allay any chance of competitive pricing by non-members and thereby ensuring earning of significantly higher trusteeship services fees without competing with each other,” said the CCI order.

 

Despite recording findings of infringement, the regulator did not impose a monetary penalty on either the entities or the officials concerned due to certain mitigating factors including cooperation with the investigation.