CCI Rejects Cartel Allegations on Price Manipulation in Gujarat Ship Recycling

Introduction

In the case of Uday B. Bhatt v. Sarfarazbhai Rafique Bhai Ravani[i], the Competition Commission of India (‘CCI’) addressed allegations of anti-competitive practices within the ship recycling industry. Mr. Uday B. Bhatt, representing the Ship Recycling Industries Association (‘Informant’), accused the respondents of manipulating market prices by spreading false information via WhatsApp groups, thereby violating ss. 3 and 4 of the Competition Act, 2002 (‘Competition Act’).

Brief Facts

• The Informant filed a complaint alleging that the respondents (‘OPs’) acted as intermediaries in the market for ship recycling materials, specifically scrap iron. The OPs, based in Gujarat and Punjab, were accused of manipulating prices by disseminating false rates through WhatsApp groups, adversely affecting sellers and customers.

• The Informant claimed this behaviour constituted an indirect agreement among the OPs to form a cartel, violating s. 3 of the Competition Act. Additionally, he argued that this manipulation would lead to an abuse of dominant position in the future, contravening s. 4 of the Competition Act.

• The Informant supported his claims with an FIR filed against unknown individuals and two newspaper articles detailing the complaint of spreading false prices. He requested interim relief under s. 33 of the Competition Act to restrain the OPs from continuing these activities during the investigation.

Held

The CCI directed the closing of the information filed under s. 26(2) of the Competition Act, and the request for interim relief under s. 30 of the Competition Act was also denied on the following grounds:

1. No Prima Facie Evidence of Cartelisation: The Informant did not provide substantial evidence of cartelisation. The presence of multiple buyers and sellers in the market and the day-to-day negotiation of prices suggested a lack of coordinated effort to manipulate prices. Hence, no contravention of s. 3 of the Competition Act.

2. No Inquiry into Joint/Collective Dominance: The CCI noted that the Competition Act does not provide for inquiries into cases of joint or collective dominance. Therefore, the allegations that the OPs might collectively abuse their dominant position in the future were not actionable under s. 4 of the Competition Act.

Our Analysis

The CCI’s ruling reinforced the standards for proving anti-competitive practices under the Competition Act. Mere allegations, backed by preliminary documents such as FIRs or media reports, are insufficient without clear proof of a coordinated effort among the OPs. This set a high evidentiary bar for informants, necessitating thorough evidence collection and documentation before filing complaints.

The CCI’s observation regarding the presence of multiple buyers and sellers and daily price negotiations are very vital parameters for assessing the competitive nature of the market and the likelihood of cartelisation. Moreover, the decision reiterates the legal position that the Competition Act does not cover joint or collective dominance. This limitation narrows the scope for addressing concerns of coordinated market behaviour unless individual dominance can be clearly established.

End Note

[i] [2024] 163 taxmann.com 324 (CCI)

Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.