D.E.

S’S SHRI NAVALMAL FIRODIA LAW COLLEGE

___________________________________________

BEFORE THE HON’BLE SUPREME COURT OF INDIA

__________________________________________________

CIVIL APPEAL NO. 3546 OF 2014

IN THE MATTER OF

RAJASTHAN CYLINDERS AND CONTAINERS LIMITED

APPELLANT(S)

V.

UNION OF INDIA (UOI) AND ORS.

RESPONDENT(S)

MEMORIAL ON BEHALF OF THE RESPONDENT

________________________________________________________________

COUNSEL FOR RESPONDENTS

Mukta Bahirat, 3rd Year LLB (B), Roll no. 79
 TABLE OF CONTENTS

TABLE OF CONTENTS ..................................................................................................... 02

LIST OF ABBREVIATIONS .............................................................................................. 03

INDEX OF AUTHORITIES ............................................................................................... 04

TABLE OF CASES ………………………………………………………………………. 05

STATEMENT OF JURISDICTION .....................................................................................06

STATEMENT OF FACTS …............................................................................................... 07

ISSUES RAISED ................…............................................................................................... 09

SUMMARY OF ARGUMENTS…………………………………………………………… 10

ARGUMENTS ADVANCED ............................................................................................... 12

PRAYER CLAUSE ............................................................................................................... 22

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 LIST OF ABBREVATIONS

COMPAT Competition Appellate Tribunal

V Versus

UOI Union Of India

Ors Others

IOCL Indian Oil Corporation Limited

OMC Oil Marketing Companies

DG Director General

CCI Competition Commission of India

OECD Organization for Economic Co-operation and

Development

SC Supreme Court

Hon’ble Honorable

AIR All India Report

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 INDEX OF AUTHORITIES

Statues:

 The Competition Act 2002

 The Constitution of India

Dictionaries:

 Black’s Law Dictionary Ninth Edition

 Oxford Advanced Learner’s Dictionary

Websites referred:

 www.manupatra.com
 www.scconline.com
 www.google.com

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 TABLE OF CASES

Name Citation Page No.

Competition Commission of (2010) 10 SCC 744 12

India vs. Steel Authority of
India Limited and Another
OECD Glossary of Industrial - 12
Organisation Economics and
Competition Law.
Excel Crop Care Limited. (2017) 8 SCC 47 18

Technip SA vs. SMS (2005) 5 SCC 465 19

Holding (P) Ltd. & Ors

CIT v. East Coast (1967) 1 SCR 821: 20

Commercial Co. Ltd. AIR1967 SC 768

OECD Policy Roundtables - 20

Prosecuting Cartels without
Direct Evidence 2006

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 STATEMENT OF JURISDICTION

The Counsel for the Respondent, Union of India (UOI) And Ors., hereby
humbly submit to this hon’ble court’s jurisdiction to try the instant matter
under section 53T of the Competition Act, 2002.

Section 53T of The Competition Act 2002 provides for the appeal against any decision
or order of the Appellate Tribunal to Supreme Court. The Appellants aggrieved by the
orders dated 20th December, 2013 passed by the Competition Appellate Tribunal has
filed the present appeal before this honorable court u/s 53T of the act.

1. Sec 53T - The Central Government or any State Government or the Commission or any
statutory authority or any local authority or any enterprise or any person aggrieved by any
decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within
sixty days from the date of communication of the decision or order of the Appellate Tribunal
to them: Provided that the Supreme Court may, if it is satisfied that the applicant was
prevented by sufficient cause from filing the appeal within the said period, allow it to be
filed after the expiry of the said period of sixty days.

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 STATEMENT OF FACTS

1) The appellants were suppliers of LPG cylinders to Indian Oil Corporation

Limited (IOCL) and other Oil Marketing Companies [OMCs] namely,
IOCL, HPCL and BPCL.

2) LPG Cylinder Manufacturers had formed an Association in the name of

Indian LPG Cylinders Manufacturers Association.

3) The Indian Oil Corporation Ltd. had floated the tender for the supply of
105 Lakh 14.2 kg capacity LPG Cylinders with SC valves in the year 2010-
11.

4) The date for submitting the bids in the case of the concerned tender was
3.3.2010.

5) The two days prior to the date for submitting the bids, two meetings were
held on 1st and 2nd March, 2010 in Hotel Sahara Star in Mumbai.

6) The Competition Commission of India initiated Suo motu proceedings

against suppliers of LPG cylinders on receiving information regarding
occurrence of unfair practices (bid-rigging) in tender floated by Indian Oil
Corporation Ltd. for the supply of 105 Lakh 14.2 kg capacity LPG
Cylinders with SC valves in the year 2010-11.

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 7) A Director General was appointed by CCI to investigate the same.
8) The Director General (Investigation) (DG) discerned a pattern wherein
parties submitted their bids in various states at the same level to prove price
parallelism.
9) Based on DG’s report the CCI ruled the existence of element of collusive
bidding/ bid-rigging on the following factors-
(i) market conditions; (ii) small number of suppliers; (iii) few new
entrants; (iv) active trade association; (v) repetitive bidding; (vi)
identical products; (vii) few or no substitutes; (viii) no significant
technological changes; (ix) meeting of bidders in Mumbai a few
days prior to submission of the bids; (x) appointing common agents;
and (xi) identical bids despite varying cost.

10) The CCI imposed penalties against 45 companies for entering into the
arrangement of bid-rigging. The companies filed appeal before the Competition
Appellate Tribunal.

11) COMPAT upheld the decision of CCI that the suppliers of LPG Cylinders to
IOCL had indulged in cartelization, thus influencing and rigging the prices, which
amounts to violation of provisions of the Competition Act, 2002 namely- Section
3(3)(a)1 and Section 3(3)(d)2.

12) Aggrieved by the orders dated 20th December, 2013 passed by the
Competition Appellate Tribunal the appeal has been filed by the appellants
before this honorable court.

1. Section 3(3)(a) - Agreement directly or indirectly determining purchase or sale prices shall
be presumed to have an appreciable adverse effect on competition and hence prohibited.

2. Section 3(3)(d) - Arrangement directly or indirectly resulting into bid rigging or collusive
bidding shall be presumed to have an appreciable adverse effect on competition and hence
prohibited

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 ISSUES RAISED

1. Whether there was any collusive agreement between the participating

bidders which directly or indirectly resulted in bid rigging of the tender
floated by IOCL in March 2010 for procurement of 14.2 kg. LPG
cylinders?

2. Whether the nature of the markets and the prevailing conditions therein
have led to price parallelism?

3. Whether the appellants have acted in contravention of Section 3(3)(d)

read with Section 3(1) of the Act?

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 SUMMARY OF ARGUMENTS

1. Whether there was any collusive agreement between the participating

bidders which directly or indirectly resulted in bid rigging of the tender
floated by IOCL in March 2010 for procurement of 14.2 kg. LPG
cylinders?

The findings of the CCI as approved by COMPAT and submitted that there was
strong economic evidence of collusion which is evident from the following
aspects:
(a) Identical or near-identical bidding by all 50 empanelled LPG vendors
resulting in bid rigging.
(b) Results of the tender revealed that these bids were made in such a way that
all the bidders were awarded some portion of the tender and no bidder was left
empty handed, i.e., Market Sharing Arrangement.
(c) Geographical/Territorial allocation of market, i.e., the bids were placed in
such a way that entities located in the northern parts of the country were
awarded the tender in the northern States, entities located in the southern parts
were awarded the tender in respect of southern States etc.
d) No plausible economic rationale or explanation was forthcoming for the
identical bids, despite obvious difference in cost of production, location, input
cost etc.
(e) The overall effect of increase in price of procurement of LPG Cylinders over
previous years.

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 2. Whether the nature of the markets and the prevailing conditions
therein have led to price parallelism?

The counsel contends that in a market with a few numbers of buyers and sellers
price parallelism is bound to happen. Even a few similar bids can be understood
but bids where the quotations match up to the last decimal cannot be said to be a
mere coincidence. Further, almost all of the appellants being awarded contracts
cannot be a coincidence as well.

3. Whether the appellants have acted in contravention of Section 3(3)(d)

read with Section 3(1) of the Act?

The courts held that: The Act, which prohibits anti-competitive agreements,
has a laudable purpose behind it. It is to ensure that there is a healthy
competition in the market, as it brings about various benefits for the public at
large as well as economy of the nation. In fact, the ultimate goal of competition
policy (or for that matter, even the consumer policies) is to enhance consumer
well-being. These policies are directed at ensuring that markets function
effectively.

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 ARGUMENTS ADVANCED

1. Whether there was any collusive agreement between the participating

bidders which directly or indirectly resulted in bid rigging of the tender
floated by IOCL in March 2010 for procurement of 14.2 kg. LPG
cylinders?

1.1 The counsel would like state the objective of this Act as emphasised by this
Court in Competition Commission of India vs. Steel Authority of India
Limited and Anr. (2010) 10 SCC 744:

“It will be useful to refer to some of the common objectives of competition law.
The main objective of competition law is to promote economic efficiency using
competition as one of the means of assisting the creation of market responsive
to consumer preferences. The advantages of perfect competition are threefold:
allocative efficiency, which ensures the effective allocation of resources,
productive efficiency, which ensures that costs of production are kept at a
minimum and dynamic efficiency, which promotes innovative practices. These
factors by and large have been accepted all over the world as the guiding
principles for effective implementation of competition law.”

1.2 The terms “bid rigging” or “collusive bidding” have not been defined under
the Act but their meaning has been made clear in various cases as well as
international conventions.

1.3 According to OECD Glossary of Industrial Organisation Economics and

Competition Law “Bid rigging is a particular form of collusive price-fixing

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behaviour by which firms coordinate their bids on procurement or project
contracts. There are two common forms of bid rigging. In the first, firms
agree to submit common bids, thus eliminating price competition. In the second,
firms agree on which firm will be the lowest bidder and rotate in such a way
that each firm wins an agreed upon number or value of contracts.”

1.4 The counsel humbly submits that according to the CCI Report, there was an
association of cylinder manufactures; namely the Indian LPG Cylinders
Manufacturers Association.

1.5 All the appellants were members of the said association. This association
was an active association; it held two meetings on the eve of entry tender
obviously for discussing tenders, its conditions etc.

1.6 These meetings were attended by representatives of at least 19 appellants;

and these appellants had six common agents at Mumbai who were instructed to
watch the prices offered by the others.

1.7 This is a matter of serious public concern because these cylinders were to be
used to supply Liquefied Petroleum Gas (LPG) for domestic consumption
across 25 States. A rise in price resulting from anti-competitive activities would
affect the cost of living for the common man, and has serious ramifications for
the economy as a whole.

1.8 The findings of the CCI as approved by COMPAT and submitted that there
was strong economic evidence of collusion which is evident from the following
aspects:
(a) Identical or near-identical bidding by all 50 empanelled LPG vendors
resulting in bid rigging.

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(b) Results of the tender revealed that these bids were made in such a way that
all the bidders were awarded some portion of the tender and no bidder was left
empty handed, i.e., Market Sharing Arrangement.

(c) Geographical/Territorial allocation of market, i.e., the bids were placed in

such a way that entities located in the northern parts of the country were awrded
the tender in the northern States, entities located in the southern parts were
awarded the tender in respect of southern States etc.

d) No plausible economic rationale or explanation was forthcoming for the

identical bids, despite obvious difference in cost of production, location, input
cost etc.

(e) The overall effect of increase in price of procurement of LPG Cylinders over
previous years.

1.9 The counsel submits that pattern of identical and near identical bids, which
was all pervasive throughout, could not be brushed aside lightly as that was the
clear indicator of price bidding as a result of agreement between the parties. The
analysis of the bids also shows that it had already been decided amongst the
LPG Cylinder manufacturers as to who the L1 and L2 bidders were going to be
prior to submission of bids.

1.10 Not only this, in order to achieve the pre-decided outcome, some of the
bidders hastily made corrections to their bid documents. One such case is that of
M/s. Jesmajo Industrial Fabrications (Appellant in C.A. No. 4868 of 2014). In
the bid documents, the bid of Rs. 1103 was cut-corrected to make it Rs. 1103.60
even though the calculation of VAT was done only on the figure of Rs. 1103
and the same was upheld by the Direct General.

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1.11 It can therefore be reasonably inferred that there was no reason to
disbelieve that the parties had an access to each other through their association
which was an active association. The existence of such an association under the
aegis of which meetings took place just before the submission of tender has
been noted as a very relevant factor to come to the conclusion that the was a
collusive agreement between the parties.

1.12 The CCI has referred to the evidence of Mr. Dinesh Goyal, who was an
active member of the Indian LPG Cylinder Manufacturers’ Association and
noted that he had attended the meeting held along with Mr. Sandeep Bhartia of
Carbac Group. The CCI also noted that he admitted that in such meetings there
were discussions on pre-bid issues.

1.13 Therefore the counsel humbly submits before you that this case is a stark
and clear-cut case of bid rigging as a result of anti-competitive agreement
amongst LPG manufacturers in respect of a tender floated by IOCL for
procurement of approximately 1,05,00,000 (105 lakhs) LPG Cylinders.

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 2. Whether the nature of the markets and the prevailing conditions
therein have led to price parallelism?

2.1 Answering the argument of price parallelism, it is humbly stated that

argument is highly misconceived and that argument of parallelism is not
applicable in bid cases and it fits in the realm of market economy.

2.2 In consideration of the findings of COMPAT, it is submitted that the

quotations of the price did match to the last decimal and the quotations in some
cases were in odd figures.

2.3 Furthermore, some of the oral statements of the representatives of these

parties, who were examined by the DG, could not even justify these identical
prices and tried to say that it was a mere coincidence.

2.4 Counsel submits that the CCI has computed the manufacturing cost of per
cylinder to be in a wide spectrum ranging from Rs.870 to Rs.1095.89 and in
such a wide spectrum of prices, the bids submitted by the parties had to be
different, if they were to be offered in a competitive spirit.

2.5 It must be noted that no material was produced, which would be able to
rebut the presumption arising from the identity of rates. The CCI, therefore,
concluded that this identity of prices was sinister and anti-competitive in nature.

2.6 The D.G. reported that the bidders had agreed for allocation of territories,
e.g., the bidders who quoted the bids for Western India had not generally quoted
for Eastern India and that largely the bidders who quoted the lowest in the group
in Northern India, had not quoted generally in Southern India.

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2.7 The D.G. also concluded that this behaviour created entry barrier and that
there was no accrual of benefits of consumers nor were there any plus factors
like improved production or distribution of the goods or the provision of
services.

2.8 Ultimately, a conclusion was drawn that there was a cartel like behaviour on
the part of the bidders and that the factors necessary for the formation of cartel
existed in the instant case. That product in question, namely, gas
cylinder is of a particular specification which is needed by IOCL in large
numbers every year and there are very few manufacturers and suppliers of this
product to IOCL and two other buyers. For this identical product which is to be
supplied by all the suppliers, there is no substitute and no significant technology
change. Further, there is an active trade association in which most of the
appellants are the members. Their interest is to ensure that no new entrants are
able to join.

2.9 The counsel contends that in a market with a few numbers of buyers and
sellers price parallelism is bound to happen. Even a few similar bids can be
understood but bids where the quotations match up to the last decimal cannot be
said to be a mere coincidence. Further, almost all of the appellants being
awarded contracts cannot be a coincidence as well.

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 3. Whether the appellants have acted in contravention of Section 3(3)(d)
read with Section 3(1) of the Act?

3.1 Your counsel would like to address this issue by highlighting the purpose
for which the Act is enacted and, in particular, objective behind Section 3 of the
Act, which is taken note of by this Court in Excel Crop Care Limited (2017) 8
SCC 47:

It states that:
The purport behind Section 3 and the objective it seeks to achieve. Sub-section
(1) of Section 3 is couched in the negative terms which mandates that no
enterprise or association of enterprises or person or association of persons shall
enter into any agreement, when such agreement is in respect of production,
supply, distribution, storage, acquisition or control of goods or provision of
services and it causes or is likely to cause an appreciable adverse effect on
competition within India.

3.2 In the above-mentioned case, scope of Section 3 of the Act which prohibits
three kinds of practices as anti-competitive, was taken note of as follows:
(a) where agreements are entered into by certain persons with a view to cause an
appreciable adverse effect on competition;
(b) where any enterprise or group of enterprises, which enjoys dominant
position, abuses the said dominant position; and
(c) regulating the combination of enterprises by means of mergers or
amalgamations to ensure that such mergers or amalgamations do not become
anti-competitive or abuse the dominant position which they can attain.”

3.3 The courts held that: The Act, which prohibits anti-competitive agreements,

18
has a laudable purpose behind it. It is to ensure that there is a healthy
competition in the market, as it brings about various benefits for the public at
large as well as economy of the nation. In fact, the ultimate goal of competition
policy (or for that matter, even the consumer policies) is to enhance consumer
well-being. These policies are directed at ensuring that markets function
effectively.

3.4 The Report of the Director General has clearly established that there has
been a violation of section 3(3)(d). The facts that the Indian LPG Cylinders
Manufacturers Association held two meetings on 1st and 2nd March, 2010; just
two days prior to the date of submission of bids cannot be ignored. The
members were interacting through this Association and were using the same as
a platform.

3.5 Even the fact that the Association has failed to produce Minutes of the
aforesaid meetings cannot be ignored.

3.6 The standard of proof which is required is one of probability, which is a

principle accepted in Technip SA vs. SMS Holding (P) Ltd. & Ors. (2005) 5
SCC 465 wherein the Court stated and discussed this aspect in the following
manner:

The standard of proof required to establish such concert is one of probability

and may be established “if having regard to their relation etc., their conduct, and
their common interest, that it may be inferred that they must be acting together:
evidence of actual concerted acting is normally difficult to obtain, and is not
insisted upon”

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And the same was upheld in the case, CIT v. East Coast Commercial Co.
Ltd., (1967) 1 SCR 821 : AIR 1967 SC 768.

3.7 The counsel would also like to draw your attention to the OECD Policy
Roundtables Prosecuting Cartels without Direct Evidence 2006 which
discuss the nature of evidence that is required for proving cartel agreement,
relevant portion thereof contained in para 2 of the said Policy is reproduced
below:
“Available evidence for proving cartel agreements 2.1 Categories of evidence
Evidence used to prove a cartel agreement can be classified into two types:
direct and circumstantial. Circumstantial evidence, in turn, consists of
“communication” evidence and economic evidence, which include firm
conduct, market structure, and evidence of facilitating practices.”

3.8 The counsel humbly submits that the authorities have arrived at the
conclusion stating that there is a clear violation of the aforesaid sections after
considering the following factors:

 Market conditions
 Small number of suppliers
 Few new entrants
 Active trade association
 Repetitive bidding
 Identical products
 Few or no substitutes
 No significant technological changes
 Meeting of bidders in Mumbai and its agenda.
 Appointing common agents

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  Identical bids despite varying cost.

3.9 The decision given by COMPAT is in the interest of justice and after
considering all aspects and making reasonable assumptions. It is also in favour
of public interest and hence must be upheld.

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 PRAYER

In the light of the facts presented, issues raised, arguments advanced, and the
Authorities cited, the counsel for the Respondent most respectfully submits to
this Hon'ble Court that it may be pleased to:

i. To dismiss the present appeal.

ii. To uphold the decision and penalty imposed by the COMPAT.

iii. To impose the cost of litigation on the Appellants.

And pass any other order that it may deem fit in the ends of justice, equity, and
good conscience. All of which is respectfully submitted.

For this act of kindness, the Respondent is duty bound and shall forever
pray.

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