The Competition Commission of India (CCI) today slapped a penalty of over Rs 6,300 crore on 10 cement companies, including ACC, Ambuja Cements, UltraTech Cement and JK Cement, for indulging in “cartelisation” and “anti-competitive” agreements. This is the largest-ever penalty ordered by the increasingly assertive regulator.
The competition watchdog also penalised the industry body — Cement Manufacturers Association (CMA) — for providing a platform to these companies for engaging in cartelisation.
“The commission decides to impose a penalty of 0.5 times of net profit for 2009-10 and 2010-11 in case of each cement manufacturer....The opposite parties (cement manufacturers) should cease and desist from indulging in any activity relating to agreement, understanding or arrangement on prices, production and supply of cement in the market,” the order of the commission said. The companies in total will have to cough up Rs 6,306.59 crore in form of penalty.
The CCI also instructed CMA to “disengage and disassociate itself from collecting wholesale and retail prices through the member cement companies and also from circulating the details on production and dispatches of cement companies to its members”.
The other companies found guilty are Grasim Cements (merged with UltraTech Cement), Lafarge India, India Cements, Madras Cements, Century Cements, Binani Cement and Jaiprakash Associates. The companies have been asked to deposit the penalty within 90 days.
The CCI in its order said that the cement manufactures were instrumental in limiting and controlling supplies in the markets and determining prices through an anti-competitive agreements. The case was probed by the director general of investigation on a complaint filed by the Builders Association of India on July 26, 2010. The period during which cement firms are alleged to have colluded on prices is between December 2008 and February 2009, when the Government had reduced excise duty as part of the stimulus package.
Reacting to the order, O P Puranmalka, whole-time director of UltraTech Cements said, “We have not indulged in any cartelisation. We will approach the Competition Appellate Tribunal and challenge the order”.
The CCI investigation found that the cement companies had not utilised the available capacity so that there are reduced supplies in the market and they can raise prices in times of higher demand.
The commission stressed that such anti-competitive agreements are detrimental not only to consumers but also to the entire economy as cement is very crucial input in construction and infrastructure industry, vital for economic