Competition Watchdog CCI: Imposed a Fine of Rs. 6,307 Crore On 10 top Cement Companies

The competition watchdog CCI (Competition Commission of India) recently imposed a fine of Rs. 6,307 crore on 10 top cement companies, accusing them of creating a cartel. Those penalised include ACC, Ambuja Cements, UltraTech &  industry body CMA (Cement Manufacturers Association).

The Ministry of Corporate Affairs said in a statement said, “The CCI has found cement manufacturers in violation of the provisions of the Competition Act, 2002, which deals with anti-competitive agreements, including cartels”

ACC, Ambuja Cements, India Cements, Madras Cements, UltraTech Cements, Grasim Cements, Lafarge India, JK Cement, Century Cements,  Jaypee Cements &  Binani Cement are among the others found guilty and penalised.

According to the Ministry of Corporate Affairs statement, each of the 10 firms will have to pay a fine amounting to 50% of their profit during 2009 -10 and 2010-11, within 90 days.

The case had also been investigated by the Serious Fraud Investigation Office (SFIO). The SFIO’s report pointed towards cartelisation among big players in the cement industry.                

Highlights..!

  * The Cemnet Cartelisation probe begins in the year 2010

   

  * SFIO investigates first

  

  * SFIO points towards cartelisation

  * Corporate affairs ministry asks CCI to probe further

   

  * About 10 companies get fines at 50% of their profit during FY10 and FY11

   

 * Penalty notices due in 60 days, fines must be paid within 90 days

The penalty would go to a consolidated government fund, CCI member Mr.R. Prasad said,’’ The commission found the companies had not used the available capacity to keep supplies artificially low and raised prices when demand was higher.

The CCI order says,' "The Commission finds that the opposite parties have institutionalised the system of sharing the prices, capacities &  production among each other using the platform of the CMA to limit the production & supplies and determine the prices of cement in the market” .

The order notes a written agreement is not necessary to substantiate such cartelisation. The CCI has directed companies to ‘cease & desist’ from any activity related to an agreement, understanding or arrangement on prices, production and supply.

Sametime, the order does not talk about any mechanism to avoid such cartelisation in future.

Mr. Prasad also said. “If these companies are found creating cartels in future, the cases can be investigated again & a heavier penalty levied” 

The Indian cement industry, which has always denied such charges, is expected to take legal recourse.

The order is based on an investigation carried out on about 40 companies by the Director General of Investigation, following a complaint from realtors’ body BAI (Builders Association of India).

The BAI had alleged cement manufacturers formed a cartel to fix retail prices and reduced production to inflate prices.

How Much Penalty ?

Firm Name              Penalty (Rs. cr)

JP Associates                  1,327

UltraTech Cem.               1,176

Ambuja Cem.                  1,164

ACC                                 1,148

Lafarge India                     480

Century Textiles                274

Madras Cements               259

India Cements                  188

Binani Cement                 167

JK Cement                       129

CMA                                 0.73

Mr. Lalit Kumar Jain, President, CREDAI (Confederation of Real Estate Developers’ Associations of India), said, “We have said that the steel & cement companies are forming cartels &  artificially hiking the prices. The CCI judgement will now discourage cement makers from forming a cartel”

Firms to contest order on cartelisation

India Cements &  Madras Cements have expressed indignation and disappointment over the Competition Commission of India’s order penalising them for manipulating the cement market. Both companies have said they will file an appeal against the order.

Mr A.V. Dharmakrishnan,CEO, Madras Cements, said ,"Our company will appeal against the CCI order. We are confident we can get justice from the appellate authority. We have done no wrong. The Commission has given 90 days time to file an appeal. The company will have to study in detail the 258 page order before it can react specifically"

India Cements said in a statement, “There was no basis to arrive at conclusions that our company has indulged in cartelisation and anti-competitive practices.It is “retrograde” to direct corporate bodies to desist from pursuing lawful objectives."

Mr O. P. Puranmalka, Whole-Time Director, UltraTech Cement said, ''We has not indulged in cartelisation and will move the Competition Appellate Authority against the CCO order”

Mr Vinod Juneja, Managing Director, Binani Cement, said, ''Our company will explore all the legal options available to contest the ruling. It is a major setback for the industry when it is fighting to overcome slowing demand and excess production capacity build-up"

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