The Competition Commission of India (CCI) on Wednesday found the Trustees’ Association of India (TAI) and three debenture trustees guilty of fixing benchmark fees for trusteeship services but decided not to impose a monetary penalty after taking into account various factors relating to their conduct. The three trustees include IDBI Trusteeship Services, Axis Trustee Services and SBI CAP Trustee Company.
Muthoot Finance Complaint
The case was brought before the CCI by Muthoot Finance which alleged that fees charged by its debenture trustee – IDBI Trusteeship Services – had increased sharply after TAI introduced a benchmark pricing structure. Every company making a public offer of debentures is required to appoint a debenture trustee. At the centre of the case was a March 2021 meeting of TAI, where its members agreed that their pricing for listed debt securities would not fall below a benchmark floor price. The arrangement also allowed action against members who did not follow the benchmark.
The CCI found that the conduct went beyond an agreement among TAI members. Even non-member trustees were asked to follow the benchmark while TAI monitored fee quotations to check compliance. In one instance, trustee MITCON was asked to withdraw a bid to HUDCO because its fee was below the benchmark and submit a higher revised bid.
“Earlier before that meeting, members used to charge different prices for DT (debenture trustee) services, but after the meeting, it was decided to charge uniform price,” the order said while quoting a former TAI office bearer.
In the order, the CCI also noted that the pricing arrangement had been discussed as early as 2018 and that TAI members had themselves considered whether common pricing could amount to cartelisation.
The regulator found the parties in contravention of Sections 3(3)(a) and 3(3)(b) read with Section 3(1) of the Competition Act. However, the commission did not impose a monetary penalty saying that TAI had no income during the period of the violation, and the three trustees had charged fees below the benchmark in many cases. The CCI also considered the limited role of the individual trustees, absence of prior competition law violations and their cooperation during the probe as mitigating factors. The order has directed the industry body and the trustees to cease and desist from the anti-competitive conduct.