CCI Dismisses Allegations against Laxven Systems and Medha Servo Drives for Contravention of Section 3

On January 2, 2019, CCI dismissed allegations of contravention of Section 3 of the CA02 filed by Chief Materials Manager/Sales of Eastern Railway against M/s Laxven Systems (‘Laxven’) and M/s Medha Servo Drives Private Limited (‘Medha’). [1]

Pursuant to delisting of certain vendors from a tender issued for procurement of ‘Microprocessor Control and Fault Diagnostics System for Electric Locos’, it was alleged by the informant that the remaining 2 parties i.e. Laxven and Medha, were acting as a cartel where Laxven decided not to participate in the tender resulting in a monopoly and the quotation of a high price by Medha. Further, Laxven also did not participate in other contemporaneous tenders floated for procurement of a similar item by other railway zones. The resulting monopoly led to a situation where the informant had no other option but to accept Medha’s high rate which it did not reduce even after negotiation.

CCI perused the technical specifications prescribed by Research Designs and Standard Organisation (‘RDSO’) for procurement of such instruments/machinery related to the tender and the minutes of the tender committee meeting. CCI noted that the tender specifications per RDSO’s specifications change with every tender. Further, the minutes of the meeting showed that Laxven did not have the required technology to manufacture the instrument related to the tender. The minutes of the meeting also noted the statements made by the technical member of the committee who clarified that the item to be produced under the said tender involved many changes in the software and hardware resulting in a significant increase of manufacturing costs compared to that quoted in previous tenders. Therefore, CCI dismissed the allegations against Laxven and Medha noting that the informant had failed to substantiate its case.

[1] Reference Case Number 6 of 2018.

Published In:Inter Alia Special Edition Competition Law February 2019 [ English
Date: February 1, 2019