Oct 31, 2021

CCI Refrains from Imposing Monetary Penalty against Entities Involved in Railways’ Axle Bearings Cartel

On September 17, 2021, CCI concluded that several Research Designs and Standards Organization (‘RDSO’) approved vendors (‘RDSO vendors’)/ opposite parties (‘OPs’) manufacturing and supplying axle bearings were involved in cartelization and bid rigging.[1]

CCI had directed the DG to investigate this case upon a reference from the Senior Deputy General Manager of Eastern Railway (‘Informant’). RDSO vendors supplied axle bearings to the Informant which was used in motor coaches to assist in the rotations of axle motors. The product was standardized as per RDSO specifications and hence any vendors supplying axle bearings had to be approved by the RDSO.

The Informant floated tenders inviting bids for the supply of axle bearings and several RDSO vendors had quoted the same prices as their competitors, in three different instances. Further, the Informant had previously negotiated the prices with RDSO vendors and even after reducing prices, certain RDSO vendors quoted the exact same amounts as their competitors. Informant referred this matter to CCI, which analyzed the bids and observed that prices quoted by the RDSO vendors in response to each of the three tenders, and even those after negotiation, being exactly the same could not be a coincidence. Subsequently, CCI had prima facie reason to believe that several RDSO vendors were in agreement to quote the same price for Informant’s tenders, in contravention to the provisions of Section 3(3) of the Act. Accordingly, the DG investigated the matter and submitted its report to CCI on September 30, 2020.

Investigation by the DG revealing cartelization

The DG noted that Indian Railways was the only buyer for axle bearings in India, which was to be procured only from RDSO approved vendors. Due to the monopsony of the
Indian Railways and the approval process of RDSO, there were limited sellers for the product, which resulted in high concentration and homogeneity in the market. In its investigation, the DG issued notices to email and mobile phone service providers requisitioning email and Call Detail Records (‘CDRs’) of the RDSP vendors and third parties in order to ascertain whether there was any contact amongst one another. The DG found that the several RDSO vendors and some third parties, who were also bidders, were exchanging emails/sharing information with regard to the allocation of axle bearings among parties/suppliers in the railway tenders floated by various zones of the Indian Railways. Further, the DG found that five RDSO vendors, as identified by CCI, as well as some third parties were in regular contact through voice calls as well as SMS (text messages).

The DG found that records of the allocation of tender quantities were diligently maintained, updated and shared amongst these RDSO vendors as attachments to emails. Evidently, there was an agreement to share this information and establish a cartel. The purpose of sharing this information was to arrive at an accurate account of the quantities of axle bearings received by each cartel member from various Railway tenders, so that allocations for future tenders could be decided as per the agreed share. Further, the cartel members also assisted each other in case of any shortfalls from the agreed share of any member by submitting cover bids or not submitting bids (bid suppression) in future tenders.

Some parties also admitted that they were in regular communication through telephone calls and SMS with their competitors and were sharing the quantities of axle bearings in the tenders. However, three RDSO vendors and other third parties submitted evasive, vague, contradictory and untruthful replies, and suppressed vital information when confronted with evidence of their role in cartelization and bid rigging. The DG observed that all RDSO vendors had different manufacturing and overhead costs and profit margins and were located in different cities. Hence, the DG concluded that there was no other explanation for the bid prices of to be exactly the same in the said Eastern Railway tenders except through bid rigging and cartelization. Accordingly, all the aforementioned entities were found to be in violation of Section 3(3)(a) read with Section 3(3)(1) of the Act.

CCI’s Findings

Based on the statements of representatives of OPs, communicative evidence of e-mails exchanged amongst the OPs and other material on record, CCI found that there was overwhelming evidence to conclude that there was an agreement/arrangement/understanding amongst the suppliers of Axle Bearings to share quantities offered in Railway tenders issued by different Railway zones, and under such arrangement, they rigged the price bids for the three Eastern Railway tenders, namely, Tender Nos. 20125122, 20131138 and 20141116.

In evidence, CCI found that Mr. Subrata Chandra, Partner of M/s Chandra Udyog (one of the OPs), Mr. B.N. Palit, CEO of M/s Sriguru Melters & Engineers (one of the OPs) and Mr. Krishnakant Singh, Partner in M/s Janardan Engineering Industries (one of the OPs who had also filed a leniency application), admitted in their statement on oath that there existed a cartel of Axle Bearing suppliers to the Railways, which was sharing Axle Bearing quantities in Railway tenders, including the three Eastern Railway tenders. They also admitted that the price bids for the three Eastern Railway tenders were discussed and decided through telephonic calls and informed individually through SMS/telephonic calls. M/s Sriguru Melters & Engineers had also filed a leniency application under Section 46 that was rejected by CCI for failure to meet the requirements of the Lesser Penalty Regulations. Because M/s Sriguru Melters & Engineers’s priority status stood forfeited and a leniency application cannot be filed after the issuance of the investigation report, CCI observed that an admission of cartelization can be at best considered as a mitigating factor while deciding penalty.

CCI found that some other OPs, in their statements recorded on oath submitted evasive, vague, contradictory replies and suppressed information when confronted with evidence of their role in cartelization and bid rigging. Nevertheless, CCI believed that the evidence on record, such as emails and CDRs supported by the statements of the key persons/partner/proprietor of the above-mentioned OPs were sufficient to conclude that the OPs were members of the cartel for the supply of axle bearings to the Railways and colluded to rig bids in the three Eastern Railway tenders referred by the Informant.

The emails recovered by the DG show that the OPs discussed quantity allocation with respect to the tenders of the Indian Railways for axle bearings amongst themselves and rigged the bids in accordance with their agreement. They also discussed the compensation mechanism if some of them did not win the allocated quantities, as agreed amongst them, from previous or earlier tenders. CCI was of the opinion that such emails, along with the other evidence of CDRs and the statements given by the officials of the OPs, were sufficient to hold the OPs liable for the contravention of the provisions of the Act. However, CCI decided not to impose any monetary penalty because of the impact of COVID-19 on MSME sector, some of the OPs’ admission of guilt, limited staff and small turnover, lack of awareness about competition law, etc.


[1] In re: Eastern Railway, Kolkata v. M/s Chandra Brothers and Ors., Ref. Case No. 2 of 2018, Order dated October 12, 2021.




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