India Antitrust Body Imposes $1.1 Billion Fine on 11 Cement Firms
06/21/2012| 08:52am US/Eastern
--India body imposes penalty on ACC, Ambuja, Ultratech, Jaiprakash
--Penalties also on Lafarge unit, Madras Cements, India Cements
--Antitrust body asks cement firms to pay fine within 90 days
(Adds context and background in 5th and 7th paragraphs, details on order in 6th paragraph, executives' comments in 9th and 10th paragraphs)
By Prasenjit Bhattacharya
NEW DELHI--India's antitrust body Thursday imposed a penalty of a combined 60 billion rupees ($1.1 billion) on 11 cement companies for price fixing, in the biggest fine during the regulator's three-year-old existence.
The companies penalised by the Competition Commission of India include ACC Ltd. (500410.BY), Ambuja Cements Ltd. (500425.BY), UltraTech Cement Ltd. (532538.BY), Jaiprakash Associates Ltd. (532532.BY), India Cements Ltd. (530005.BY), Madras Cements Ltd. (500260.BY), and the local unit of France's Lafarge SA (>> LAFARGE).
"The commission has found that the cement companies have not utilised the available capacity so as to reduce supplies and raise prices in times of higher demand," it said in its judgement.
It said the penalty on each company amounted to 50% of profit for the financial years 2009-10 and 2010-11.
The commission started accepting cases in 2009, replacing a relatively toothless antitrust body that had been in place since 1970, and has been becoming increasingly assertive. The biggest penalty it had imposed so far was last year when it ordered DLF Ltd., India's biggest property developer by sales, to pay $120 million for abusing its dominant market position by changing agreements signed with some property buyers.
Thursday, the regulator said that the cement companies' action of limiting supplies to the market through an "anti-competitive agreement" was not only detrimental to consumers but also to the economy, as the building material is a critical input for infrastructure projects. The regulator asked the companies to pay the fine within 90 days.
The judgement comes at a bad time for cement companies, as demand for the construction material is weak due to sluggish economic growth and a fall in spending on infrastructure projects. The cost of raw materials such as coal is on the rise as well, pressuring margins.
Also, the order isn't likely to result in any reduction in product prices by manufacturers, said Sanjay Ladiwala, president of the Cement Stockists & Dealers Association of Bombay.
Cement makers were cagey after the order.
"We haven't yet received the order," said Ultratech spokeswoman Pragnya Ram.
Ambuja Cements spokesman Nandkumar Sanglekar said the company hasn't got a copy of the order, which it would study before making any comment.
Companies can challenge the regulator's orders in the Competition Appellate Tribunal, a quasi-judicial body, and can then appeal to India's Supreme Court.
Write to Prasenjit Bhattacharya at firstname.lastname@example.org
Stocks mentioned in the article : LAFARGE