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CCI finds cartel among cement manufacturers

CCI finds cartel among cement manufacturers

In an order dated 20 June 2012, Competition Commission of India (CCI) has found a cartel among certain cement manufacturing companies in India and has imposed an aggregate penalty of INR 6,307.32 crores (USD 1.26 billion approximately) on the Cement Manufacturers’ Association (CMA), Associated Cement Company Limited, Ambuja Cement Limited, Binani Cement Limited, Century Textiles and Industries Limited, India Cement Limited, JK Cements Limited, Lafarge India Private Limited, Madras Cement Limited, Ultratech Cement Limited and Jaiprakash Associates Limited.

CCI acted on a complaint filed by the Builders’ Association of India in July 2010.

CCI found:

a)  the existence of price parallelism among the cement manufacturing companies;

b)  increase in prices after CMA meetings;

c)  low levels of capacity utilization and reduced production which were not linked to market forces;

d)  dispatch parallelism among the cement manufacturing companies; and

e)  super-normal profits earned by the cement manufacturing companies.

In addition, CCI also found some inconsistencies in the statements made by various parties (about whether or not they attended certain meetings of the CMA) and observed that the parties were not being completely forthright.

It appears that the Builders’ Association of India had filed the complaints against these companies – CCI has stated that it is these 11 companies that are the “major players” and that the other companies only follow them. The other case, involving around 40 cement companies (also filed by the Builders’ Association of India before the MRTPC) is still pending before CCI.

As concerns the penalty CCI has compared 10% of the turnover of each of the companies with 3 times the profit and found that in all cases, 3 times the profit was higher. As per the proviso to Section 27(b) of the Competition Act, 2002, therefore, it has imposed a penalty of 0.5 times the profit of each company (although the maximum would be up to 3 times the profit for each year of continuance of the offence).

In a recent order, CCI has imposed the maximum penalty of 10% of the turnover for each year of continuance but in this case, for the first time, it has compared 3 times the profit with 10% of the turnover of each of these companies, to determine which is higher. However, it has limited the penalty to 0.5 times of the profit, which is perhaps a welcome concession given the magnitude of the penalty.

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