By way oforder dated
Background
The case was initiatedsuo motupursuant to leniency application ("Application") filed by Schaeffler which disclosed the existence of the cartel to the Commission. The Application disclosed that when the steel prices started increasing 2009 onwards, there was co-ordinated action amongst the five companies to pass on such increase to the automotive and industrial Original Equipment Manufacturer ("OEM‟) customers and in the distribution segment of the market. The Application further revealed that the five companies agreed on the percentage increase in steel price that each of them would represent to the OEMs, to seek a price increase from them. The rationale behind such co-ordination was to simultaneously send out price increase letters to the OEMs and distributors in the aftermarket, specifying the percentage increase in steel prices and a request to increase the existing supply prices, as otherwise the likelihood of getting a price increase was believed to be less certain. On beingprima faciesatisfied that a contravention has taken place, the Commission directed the DG to investigate the issue. During the investigation, NEI also filed a leniency application under Section 46 of the Act.
DG Investigation
DG found that representatives of NEI, Schaeffler,
Accordingly, the DG found cartelisation amongst the four companies namely NEI, Schaeffler,
CCI Analysis
The Commission observed that on
CCI Further noted that Mr.
The Commission, accordingly, concluded that representatives of key competitors in the bearings market, namely, NEI, Schaeffler,
The Commission noted that these companies had attended these two meetings regarding commercially sensitive price related information and had several telephonic discussions with the view to mutually determine the prices of bearings sold by them to the OEM customers during the period from at least
The parties had contended that such agreement between them had caused no AAEC which was evident from the price analysis done in the DG Report itself, and further, even the OEMs when asked by the DG stated that they could not perceive any instance of cartelisation amongst the parties. However, the CCI held that agreements under Section 3(3) are presumed to cause AAEC and prohibits agreements which are 'likely' to cause AAEC. The Commission held that by contending that price revisions quoted by the parties to the OEMs are not in accord with what was decided between them, the parties cannot rebut the statutory presumption of AAEC as specified under the provisions of the Act.
The Commission, however, decided not to impose any monetary penalty on any of the 4 companies or their respective office bearers found in contravention of Section 48 of the Act. CCI directed the parties to cease and desist from such cartel like activities in future.
Comment: This is a peculiar case of a cartel forced by buyers, which was considered as a strong mitigating factor by CCI to avoid imposition of any financial penalty on the parties. Admittedly, it was a buyers' market in which each OEM was unwilling to increase the prices of the automotive bearings on being approached individually by any of the parties , which , forced them to coordinate to send price increase letters to OEMs. Interestingly, none of the customer/buyer-OEMs had any complaint against the parties to the alleged cartel. The case also illustrates how strong oligopsony can become and why there is need to protect the interests of input providers and how buyers' cartels may supress the price of the purchased products below competitive levels. In my view, the CCI ought to have investigated the conduct of the buyers which led to such "forced cartel" of suppliers.
Footnotes
1 The leniency application by Schaeffler had disclosed Timken as a member of the cartel.
Originally published by Antitrust and Competition Law Blog,
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