Competition Commission of India dismisses LPG Cylinder manufacturers case of alleged cartelization

Competition Commission of India dismisses LPG Cylinder manufacturers case of alleged cartelization 

The Competition Commission took suo motu cognizance of the matter which related to the alleged cartelization by the manufacturers of 14.2 kg LPG cylinders in response to the Tender dated 13.08.2010, floated by Bharat Petroleum Corporation Limited (BPCL).The Commission noted that the analysis of price bids submitted by bidders were either identical or near identical in various LPG Plants and also the bidding patterns indicated cover bidding or complementary bidding by certain bidders.

Herein,the Tender dated 13.08.2010 was issued by BPCL for procurement of 40.33 lakhs LPG Cylinders at the estimated cost of Rs. 467.9 crores in 55 plants across 18 states. 75 LPG Cylinder manufacturers participated in the tender. All the 75 LPG Cylinder manufacturers qualified for opening of their price bid and 72 of them qualified for orders. The conduct of 6 Opposite Parties has been investigated, in terms of order dated 22.12.2017, passed by the Commission. However, 11 Opposite Parties were excluded from the scope of investigation as the said Opposite Parties had been penalised by the Commission in Suo-Motu Case No. 1 of 2014.

This case has been dismissed by observing that the opposite parties in question were penalised in Tender No. 2 of HPCL in Suo Motu Case No. 1 of 2014.Further, these parties were penalised consequent upon the Commission finding evidence of their conduct of withdrawing their respective bids, pursuant to a common understanding to do so which amounted to manipulation of the bid process in violation of provisions of Section 3(3)(d) of the Competition Act,2002.

The Commission has heavily relied on the judgment of the Hon'ble Supreme Court in the Rajasthan Cylinders and Containers Limited Vs Union of India and Anr. and other connected appeals in Civil Appeal No. 3546 of 2014 ("Rajasthan Cylinders case") and has observed that the Investigation Report has given a finding of price parallelism and that quoting of such identical prices in their respective bids could have been a result of concerted action by the parties. The investigation into the nature of the market in the present case has yielded no different results. However, considering the nature of the market, as disclosed in the Report and in the judgment of Rajasthan Cylinder Case, the case deserves to be closed at this stage, without delving into the individual conduct of each of the parties.

Commenting on the specific nature of this market, the Regulatory Authority has observed that for finalising the L-1 rate, BPCL negotiates with the bidders and, it is the procurer i.e. BPCL which decides the price at which the tender has to be awarded.

The 14.2 kg LPG cylinder is procured solely by the OMCs (Oil Marketing Companies) as per quantity determined by them.

The statutory and licensing requirements do not permit the LPG cylinder manufacturers to sell their product to any third party. It is a market largely driven and controlled by the OMCs and the manufacturers have to adhere to the framework and tender conditions stipulated by OMCs and with no scope for innovation, efficiency gains or product differentiation and price discrimination.