The Competition Commission of India (CCI) claims that cement companies in
India had been organising themselves in a cartel for a while now, colluding,
during industry body meetings, to fix production levels as well as the price of
a bag of cement - in this case doubling it between 2004 & 2011- so they could make windfall, illegal
profits.
If the allegations turn out to be true, everything that involves
construction& infrastructure, from
the taxes you pay for your roads, to the rentals you pay for your stores and by
extension the products you buy from those stores are much more expensive, thanks to this
illegal activity.
Consequently, the CCI has slapped a penalty totalling Rs 6,307 crore on
the top-10 cement companies here and the industry body CMA (Cement
Manufacturers’ Association). The cement companies accused in CCI’s report have
denied all allegations of cartelisation and are determined to appeal the
judgement.
What is a cartel?
Cartels are agreements between enterprises to attempt to control the
production, distribution, sale &
price of goods and services. This could involve, say, allocating market
share or sales quotas, or engaging in collusive bidding or bid rigging in one
or more markets
For consumers, cartelisation results in higher prices, poor quality
& less or no choice of goods and
services In 2000, the European Commission
fined 5 companies euro 11 crore
for global price fixing cartel for lysine. Lysine is the most important amino
acid used in animal foodstuffs for nutritional purposes
EU imposed a fine of euro
99.2 crore on 4 lift and escalator
manufacturers for partaking in market rigging and price fixing
The EU imposed a fine of euro
85.52 crore on various pharmaceutical companies for colluding to fix the price
of vitamins.
The top 5 Indian tyre
manufacturers, who control 95% of the market, along with the ATMA (Automotive
Tyre Manufacturers’ Association), allegedly colluded to fix prices. It is alleged that 8 to 10 big polyester
manufacturers such as Grasim, Modi Polymer & Bombay Dyeing, collude together to dictate
pricing & sale terms in the market
Src: BS
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