CCI Clears Procurer of Cartelisation and Dominance Abuse Allegations in Tender Criteria

Introduction

The Competition Commission of India (‘CCI’), Chennai Bench in XYZ v. The PCMM Integral Coach Factory[i] held that a procurer of articles, being a consumer of goods, has the freedom to specify the conditions of procurement and such conditions could not be deemed to be anti-competitive.

Brief Facts

• An informant filed information under s. 19(1)(a) of the Competition Act, 2002 (‘Act’), against entities involved in the procurement and supply of certain equipment for the coach factory.

• The procurer released a tender for the supply of certain equipment for coach sets. The informant alleged that the eligibility criteria (‘EC’) mentioned in the tender allowed only certain specific suppliers to submit bids and participate in the tendering process.

• The EC reduced the effective competition to only two vendors. The informant alleged that the EC ignored past bulk suppliers regardless of their performance and proven record but recognised and approved sources irrespective of their non-performance and non-participation.

• Further, it ignored the Railway Board Guidelines for weeding out non-participating and non-performing vendors and included past suppliers in the vendor list. Furthermore, it was alleged that examination of quotations revealed that the procurers and the vendors were involved in cartelisation.

• The informant averred that the procurer's standard bid documents provided that offers from different tenderers from the same IP address should be treated as suspected cartels and rejected. Such conditions allegedly restricted fair competition.

• Based on the same, it was averred that the two vendors were acting in collusion and submitting bids, resulting in cartelisation in contravention of s. 3 of the Act. 

Held

• The CCI noted a significant difference of more than Rs 20,000 in the bid quoted by the two vendors and a minor difference of Rs 10 in the remaining two tenders. Further, there was no evidence to substantiate that the remaining part of the two tenders was awarded to the said two vendors.

• Further, the bids quoted by other bidders were in the same range or higher than those quoted by the two vendors. Hence, apart from bid quotations in two tenders with minor price differences, there was no evidence to support cartelisation.

• It was further reiterated that it is no longer res integra that mere price parallelism was insufficient to arrive at a finding of cartelisation.

• Further, the CCI, relying on its past decisions, noted that the informant did not indicate any other factor that indicated a meeting of minds or collusion. Accordingly, no case of cartelisation was made against the vendor and contravention of s. 3 of the Act was established at the procurer's behest.

• On allegations of violation of s. 4 of the Act, it was held that one vendor, Nanda Engineering, has been actively bidding in railway tenders. Hence, the allegation pertaining to violating Railway Board Guidelines of a minimum of five active members when only two were active did not hold good.

• Furthermore, the CCI held that the procurer, being the consumer of the items, has the freedom to specify the requirements/EC, and such criteria cannot themselves be deemed anti-competitive. Thus, the procurer was not contravening s. 4 of the Act. Accordingly, the matter was closed in terms of s. 26 of the Act.

Our Analysis

The findings of the CCI in this pronouncement were inclined towards the factual matrix, especially in light of the allegations. Relying on its past decisions, the CCI reiterated its established principles and observed in the present case that the procurer, being the consumer of goods, had the right to specify the EC of procurement. As such, the same could not be termed as anti-competitive. Further, it was held by the CCI that in the absence of consensus-ad-idem, no allegation of cartelisation could be sustained.

End Note

[i] [2024] 164 taxmann.com 419 (CCI).

Authored by Huzaifa Salim, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.