CCI Dismisses Bid Rigging Allegations against Petroleum Public Sector Undertakings

On July 4, 2018, CCI dismissed information filed against Indian Oil Corporation Limited (‘IOCL’), Bharat Petroleum Corporation Limited (‘BPCL’), and Hindustan Petroleum Corporation Limited (‘HPCL’) by certain unnamed informants[1]. The information alleged contravention Sections 3 and 4 of the Competition Act by IOCL, BPCL, and HPCL (‘OPs’), through collusive tendering, price fixing and abuse of dominant position. The informants are individuals who are engaged in the business of providing services in relation to transportation of bulk LPG through trucks. They alleged that the terms, conditions, and price bands of the Notice Inviting Tenders (‘NIT’) of the three OPs were identical across different States. It was alleged that the price bands forced the bidders to quote within the arbitrary band with no commercial basis. Moreover, it was alleged that the OPs had kept the floor as well as ceiling prices of two different truck categories artificially high, thereby restricting competitive bidding.

At the outset, CCI discussed the question of jurisdiction raised by the OPs, who had argued that the correct forum for such complaints was not CCI, but the Petroleum and Natural Gas Regulatory Board (‘PNGRB’). The OPs relied on CCI’s previous orders[2] granting itself the jurisdiction to deal with issues pertaining to oil/petroleum, which were stayed by the Delhi High Court. However, CCI relied on decisions of the Supreme Court[3] to hold that the jurisdiction of the Competition Act extended to all sectors of the economy and sectors regulated by sector-specific laws, for competition-related issues.

On the allegation that the three OPs exercised collective dominance, CCI held that ‘collective dominance’ was not recognized by the Competition Act, and the existence of two strong players in the market was indicative of competition between them, unless they agree not to compete. As for the contravention of the provisions of Section 3 of the Competition Act, CCI observed that cartels generally comprise of sellers who agree to fix pries, and it may not be appropriate to treat a buyers’ cartel at par with a seller’s cartel. CCI noted that buyer power through joint purchasing agreements may lead to direct benefits for consumers in the form of lower prices and therefore, in order to investigate a buyer’s cartel, the informants need to prove potential theories of harm to prima facie establish anticompetitive cartel conduct.

CCI also observed that the OPs had not denied the enforcement of price bands, but had defended them against the calculation of costs of various components and profit margin. In light of the above, CCI concluded that no prima facie case was made out, and dismissed the information under Section 26(2) of the Competition Act.

[1] Case 05 of 2018.
[2] In case 26 of 2010 and Suo Moto case 03 of 2013.
[3] Ashoka Marketing Limited v. Punjab National Bank 1990 4 SCC 406; Competition Commission of India v. Fast Way Transmission Private Limited (Civil Appeal 7215 of 2014).

Published In:Inter Alia Special Edition Competition Law September 2018 [ English
Date: September 14, 2018