The Supreme Court recently sought the response of five tyre manufacturing companies in an appeal filed by the Competition Commission of India (CCI) against a National Company Law Appellate Tribunal (NCLAT) order that asked the Commission to review its findings of cartelization by the companies.
The division Bench of Justices Sanjiv Khanna and MM Sundresh also issued notice to the Union Corporate Affairs Ministry and the Automotive Tyre Manufactures Association (ATMA).
CCI in 2018 imposed a collective penalty of ₹1,500 crores on the companies and the ATMA for indulging in cartelization. It also passed a cease-and-desist order.
The case against the tyre manufacturers had been initiated based on a reference received from the Ministry of Corporate Affairs, which in turn was based on a representation made by the All-India Tyre Dealers Federation.
Therefore, the CCI found that the companies and the association acted jointly to increase the prices of ‘cross-ply’ variants sold by each of them in the replacement market, and limited & controlled production and supply in the said market.
The following penalties had been imposed:
-₹425.53 crore on Apollo Tyres;
-₹622.09 crore on MRF Ltd.;
-₹252.16 crore on CEAT Ltd.;
-₹309.95 crore on JK Tyre;
-₹178.33 crore on Birla Tyres;
-₹8.4 lakh on ATMA, along with an order to disengage and disassociate itself from collecting wholesale and retail prices through member-tire companies or otherwise.
The CCI’s probe in this regard had been challenged before the Madras High Court citing procedural irregularities.
Subsequently, the competition watchdog’s findings were kept in a sealed cover on the High Court’s orders. The High Court eventually ordered that it wouldn’t interfere in that manner.
The tyre companies’ appeals against this ruling that was dismissed by the Supreme Court on January 28 last year, after which the 2018 CCI findings were made public. The Supreme Court gave liberty to the tyre companies to pursue their alternate remedies, after which they moved the NCLAT.
The Appellate Tribunal, among other things, held that there was no conclusive evidence of ‘price parallelism’ as found by the CCI.
The CCI challenged this order, which also said that the Ministry couldn’t have referred to the matter in the way it did.
The appeal adds that, “The Hon’ble NCLAT has erred in directing the CCI to review the penalty to ‘save domestic industry’ and for ‘promotion of domestic industry’. While holding so, the Hon’ble NCLAT has failed to appreciate that the [Competition] Act is based on the principle of “competition neutrality” and ignored the objects and reasons for enactment and enforcement of competition law in India.”