Jan 13, 2023

CCI Issues Cease and Desist Order Against Kraft Paper Manufacturers and Their Associations

On October 12, 2020, the CCI agreed with allegations of cartelization against several Kraft paper manufacturers and their regional associations (collectively ‘OPs’). The complaint alleged that various associations of Kraft paper manufacturers direct their members (i.e., paper mills) to: (i) increase the price of the Kraft paper; and (ii) create a condition of shortage to enforce the unjust price increase and shut the operation of the paper mills in a region collectively. Therefore, the complaint alleged violation of Section 3(3)(a) and 3(3)(b) of the Competition Act.[1]

The DG in its investigation, found that some of the OPs conducted meetings, and also ran a WhatsApp group discussing increase in prices of Kraft paper, controlling prices of waste paper and collective shut–down of mills.

The CCI observed that there was no evidence put forth by the OPs to substantiate their argument that the collective decisions taken on their respective platforms were to ensure the survival of the paper mills in the market or that, in the absence of the cartel, the paper mills would have gone out of business. Therefore, the CCI concluded that it is correct to presume that the impugned conduct of the OPs caused an AAEC in the market within India. The CCI also held that from the minutes of the meetings of these associations, the collective shut-down of mills was directed in order to increase the price of Kraft paper in the market and it was not an independent decision of a mill with unsold inventory to halt production. Based on incriminating WhatsApp group messages, e-mail communications, and oral evidence gathered by the DG from testimonies, the CCI observed that the OPs implemented the directives of price increase of Kraft paper and the collective shut–down of plants, fully or partially. The associations also monitored whether the decision of collective shut-down was being adhered to by the members or not.

Therefore, based on the evidence collected by the DG, the CCI concluded that all but two OPs fixed prices and limited supply of Kraft paper and therefore violated Section 3(3)(a) and 3(3)(b) of the Act. One of the OPs fixed prices buy did not participate in the collective shut down of mills and therefore, the CCI held that that particular opposing party contravened Section 3(3)(a) of the Act only. One another opposing party, though a trade association, did not assist in fixing prices or shutting down mills, and the CCI held that it did not violate the provisions of the Act.

The CCI directed the OPs to cease and desist from indulging in any anti-competitive conduct. However, the CCI refrained from imposing any monetary penalty upon the OPs because; (i) several OPs are MSMEs and first-time offenders; (ii) several Kraft mills were sold/ closed post the pandemic, and several other OPs were in financial stress; (iii) the cartel was formed as a result of prevailing market circumstances due to rising input costs and lack of individual bargaining power; and (iv) several OPs were lesser penalty applicants and several others have also admitted to their wrongdoings during the investigation.


[1] Case No. 24 of 2017.




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