Sep 30, 2018

Allegations against Sugar Mills

As regards the allegations of bid rigging against the sugar mills situated in Uttar Pradesh and the sugar mills trade associations, CCI at the outset, rejected preliminary objections regarding DG’s jurisdiction to investigate sugar mills that were not specifically named as ‘Opposite Parties’ in the complaints (sugar mills situated outside Uttar Pradesh). As per CCI, irrespective of the above, details regarding such sugar mills were specified in the DG Order, and the DG Order was not limited to only the state of Uttar Pradesh in its scope.On bid rigging, CCI observed that the selection of suppliers was based on the Basic Price (ex- factory) of Ethanol and the Net Deliverable Cost (‘NDC’) that was quoted by each bidder. NDC comprised of Basic Price along with tax and freight charges. In order to determine the prospective supplier, NDCs were to be compared to a benchmark price that was set by the OMCs, post closing of the bid, for each location after considering the landed cost of motor spirit, excise duty and cost of Ethanol blending.As regards bidders situated in Uttar Pradesh, CCI was of the opinion that the bidders had quoted similar or narrowly distinguishable bids for most of the depots, in terms of both the basic price as well as the NDC. In its assessment, CCI rejected bidders’ contention that there was no collusion, considering that similarity in bids was limited to only few of the 110 depots within the tender.  As per the CCI, this was because bidders were not competing for all the depots and were largely concentrated to the depots located near their respective distillery, and therefore, the bidders’ conduct was not to be judged on a pan-India basis. CCI further noted that the quantity quoted by the bidders matched the total required quantity in most of the depots. As regards bidders situated in Gujarat, and Andhra Pradesh, CCI recorded similar observations and further observed that similarities in bids up to decimal figures (basic price and NDC) could not be an outcome of price discovered through a competitive bidding process. In the end, it noted that although price parallelism per se did not amount to bid rigging, however, it may be considered as such, in the absence of any justifiable explanation for the bid quotations being same or similar in most of the cases. CCI also reiterated its observation that generally in cases involving cartels, documentary evidence is seldom available and investigating agencies rely largely on circumstantial evidence to deduce the existence of collusion and in the instant case, circumstantial evidence was enough for CCI to clearly establish the element of collusion.

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