CCI Dismisses Allegations of Anti-Competitive Agreements and Abuse of Dominance against 19 importers of Phenol

On October 8, 2020, the CCI passed an order dismissing an information filed by Indian Laminate Manufacturers Association against 19 importers of Phenol alleging a contravention of the provisions of Section 3(3) and 4 of the Competition Act. [1]

It was alleged that the identified importers of Phenol formed a cartel and hiked the prices of Phenol in January – March 2016. Due to this, the decorative laminate manufacturers who used Phenol as raw material were compelled to buy it at higher prices. It was further alleged that the identified Phenol importers spread rumours about shortage of Phenol, and prompted laminate manufacturers to buy Phenol at high prices. It was further highlighted that during the alleged period of cartel, the international prices of Phenol were low. It was alleged that the cartel continued from March 2016 till May 2016 where the price of Phenol were reduced by the identified Phenol importers upon receipt of information of a possible complaint to the CCI. Lastly, it was alleged that the identified Phenol importers abused their dominant position in the market for Phenol in India.

On January 31, 2020, the CCI directed the Director General (‘DG’) to conduct an investigation. While the DG considered the relevant period for investigation from January till June 2016, in order to maintain uniformity in analysis, the DG also analysed 6 months before and after the alleged cartel i.e., July 2015 – December 2016, to create benchmarks for comparative analysis. To conduct the investigation in a time-bound manner, the DG investigated top 12 importers of Phenol accounting for more than 95% of the total sales volume of Phenol. The DG conducted a Herfindahl-Hirschman Index (HHI) analysis and found that the market for Phenol during the alleged cartel was highly competitive. The DG further conducted a price co-relation analysis to assess price parallelism and observed that the co-relation of prices was strongly positive between Phenol suppliers during January – March 2016, and weakened drastically during April – June 2016. A market level analysis of the profitability showed that the 12 importers of Phenol made profits during the alleged cartel.

The DG also perused the call detail records, emails of employees responsible for conduct of business of the 12 importers of Phenol, and minutes of certain meetings. However, the DG did not find any evidence indicating collusion.

The CCI compared the average domestic and international prices of Phenol during the alleged cartel and observed that contrary to the allegations, during February – March and May 2016, both the domestic and international prices of Phenol had increased during the alleged cartel. Further, noting the profitability analysis and price parallelism among the 12 Phenol importers, the CCI observed that the conduct prima facie raised suspicion of collusive behavior. However, in the absence of any evidence indicating meeting of minds or an agreement, the CCI concluded that mere price parallelism does not indicate collusion as pricing behavior of enterprises can depend on independent response to the economic conditions which indicated rise in demand of Phenol.

The CCI accordingly dismissed all the allegations and passed a closure order under Section 26(6) of the Competition Act.

 

[1] Case No. 61 of 2016, Order dated 8 October 2020

Published In:Inter Alia Special Edititon - Competition Law - November 2020 [ English
Date: November 13, 2020