Dec 31, 2018

CCI Dismisses Allegations against Apollo Industrial Corporation and LEEL Electricals Limited for Contravening Section 3

On November 9, 2018, CCI dismissed allegations of contravention of Section 3 of the Act filed by Kelvion India Pvt. Ltd. (‘Informant’) against Apollo Industrial Corporation (‘OP 1’) and LEEL Electricals Limited (‘OP 2’). It was alleged that OP 1 and OP 2 were engaged in a cartel in relation to tenders floated by Chittaranjan Locomotive Works (‘CLW’), Diesel Locomotive Works, Varanasi (‘DLW’) and Diesel Locomotive Works, Patiala (‘DMW’) for procurement of oil cooler radiators (‘OCRs’) for transformers. [1]

The Informant had submitted its bids for three tenders floated by CLW, DLW and DMW in 2018. OP 1 and OP 2 had also participated in these tenders. The Informant raised the allegation that the bid prices quoted by the two OPs were similar on account of their having previously agreed on such prices. To support this, the Informant submitted that there had been an increase in the price of aluminum, but such the effect of this increase was not visible in the bid price submitted by the two OPs.

In its analysis, CCI stated that while the prices of the two OPs were indeed similar, it was pertinent to examine the bids submitted by the third approved provider, M/s. Tesio Cooling (‘Tesio’), which were similar to the bids of OP 1 and OP 2. Thus, bidding by Tesio posed competitive constraints on the two OPs. CCI also noted that for DLW and CLW’s tenders, Tesio was awarded the highest quantity.

On the issue of the non-effect of increase in aluminium’s price on the bids, CCI found that the companies were able to take advantage of economies of scale as the requirement of OCRs had increased over the past few years. Further, the number of approved vendors of OCRs had increased from two to three, making the market more competitive.

On the contention concerning a vast difference between the bids of unapproved vendors from those of approved vendors as indicative of collusive behavior, CCI noted that an unapproved source could be considered for a development order only if its quoted price was lower than the approved vendor’s. CCI agreed with the DLW’s submission that the rate quoted by unapproved vendors may not indicate the real cost as such vendors are yet to be assessed for capacity, capability and technical know-how to manufacture the product(s). In this regard, CCI stated that high profit by itself does not elicit the competition authority’s action unless such profit is achieved by violation of provisions of the Act.

Therefore, the allegation of collusion was held to be untenable, and the matter ordered to be closed in terms of the provisions of Section 26 (2) of the Act.

[1] Case No. 33 of 2018.




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