Compat’s ruling on CCI only cements dispute contours

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New Delhi | Updated: December 12, 2015 4:47:22 AM

Compat also directed the CCI to refund the 10% of the penalty amount the companies had to deposit with the fair trade regulator.

cementAs per the order, four cement companies had to shell out penalty exceeding Rs 1,000 crore. These included Jaypee Cements, promoted by Jaiprakash Associates, which had to pay a penalty of Rs 1,323.60 crore followed by UltraTech (Rs 1,175.49 crore), Ambuja Cements (Rs 1,163.91 crore), and ACC (Rs 1,147.59 crore). (Photo: Reuters image for representation only)

Giving interim relief to the major cement manufacturers, the Competition Appellate Tribunal (Compat) on Friday set aside the Rs 6,316.59-crore penalty imposed on 11 such firms in 2012 by the Competition Commission of India (CCI) for reported cartelisation and asked it to hear the matter afresh and announce its verdict within the next three months.

Compat also directed the CCI to refund the 10% of the penalty amount the companies had to deposit with the fair trade regulator.

However, the development also underlines that the tiff between the CCI and cement firms will be a long-drawn matter now. This is because Friday’s relief to the firms was not on the merits of the case but on the procedure followed by the CCI in deciding the case, which Compat felt was not in consonance with the principles of natural justice. The chief issue highlighted by it was that the CCI chairman did not hear the arguments but was party to writing the judgment and signed the same.

cement

In the light of this, Compat also directed the CCI to evolve a protocol and system to conduct investigations.
Analysts said that a fresh order, if it goes against the companies, would once again be challenged in Compat, so the matter is set to be an extended battle.

“Before parting with this order, we consider it necessary to mention that we have referred to various provisions of the Act (un-amended and amended) and Regulations and analysed the same to emphasise the proceedings held under the Act and the Regulations should be just and fair and in consonance with the principles of natural justice as engrafted in the Act and the Regulations,” Compat said. “We also feel the time has come for the Commission to evolve a comprehensive protocol and lay down guidelines for conducting investigation/inquiry in consonance with the rules of natural justice,” it added.

In June 2012, the CCI had imposed a hefty penalty of about Rs 6,300 crore on 11 leading cement companies including ACC, Ambuja Cements, UltraTech and Jaypee Cements for alleged price cartelisation during 2009-10 and 2010-11. As per the CCI order, these 11 cement firms together control a market share of around 58% and enjoy a position of dominance and indulged in arbitrary increase of cement prices.

The CCI had found them guilty under Section 4 of the Competition Act (abuse of dominance), and had levied a penalty of 50% of their profits during the period under consideration and in line with Section 27 of the Competition Act which allows the competition watchdog to impose a penalty up to three times the net profit of the company in the last three years or 10% of the gross turnover of each year, whichever is higher.

The CCI had passed the order following a probe by Director General of Investigation on a complaint filed by Builders Association of India.

The charge was that the cement companies did not utilise the available capacity, thereby reducing the supplies in the market, which helped them in keeping cement prices high.

As per the order, four cement companies had to shell out penalty exceeding Rs 1,000 crore. These included Jaypee Cements, promoted by Jaiprakash Associates, which had to pay a penalty of Rs 1,323.60 crore followed by UltraTech (Rs 1,175.49 crore), Ambuja Cements (Rs 1,163.91 crore), and ACC (Rs 1,147.59 crore). The other companies found guilty were Grasim Cements (now merged with UltraTech), Lafarge India, JK Cement, India Cements, Madras Cements, Century Cements and Binani Cements. The industry body Cement Manufacturers Association (CMA) has also been fined.

The cement companies had challenged this order in Compat.

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