- (1.) THIS case has been received on transfer from the Office of the DG (IR), MRTP Commission under section 66(6) of the Competition Act, 2002 ('the Act'). The MRTP Commission had taken suo moto cognizance and initiated investigation on the basis of press reports published in the business daily, the Economic Times on 09.05.2006 and 29.06.2006 regarding increase in cement prices. Subsequently, a letter dated 16.9.2006 of the Builders' Association of India ('the BAI') was also received by the MRTP Commission through the then Ministry of Company Affairs on 26.09.2006. Allegations, in brief, are noted below: 1.1 It was alleged that the cement prices were stable at the rate of Rs. 125 to Rs. 145 per bag between 2003 and 2005, but the prices started upward movement in December 2005 and were hovering around Rs. 210 to Rs. 230 per bag from January 2006 onward without any corresponding increase in limestone price, royalty, excise duty, sales tax, railway freight or demand -supply mismatch warranting such abnormal increase. It was also alleged that the cement manufacturing companies had resorted to unfair trade practices by under -production or choking up of supply in the market, thereby raising the sale price. 1.2 As per the complaint, the installed capacity of cement during 2005 -06 was 179.25 million tonnes spread over 129 cement plants owned by 54 cement companies. Consolidation process in the industry initiated since last 4 -5 years had given 26.38% of market share in the' hands of multinational cement companies and 17% in hands of Kumar Birla Group aggregating to 43.73% of total capacity enabling them to control supply and cement price movement. 1.3 It was narrated that alarmed by such unwarranted price rise, BAI represented to the Secretary, Industrial Policy & Promotion (IPP), Ministry of Commerce & Industry and the latter arranged a joint meeting with Cement Manufacturers' Association (hereinafter referred to 'the CMA') on 2nd May 2006. The CMA in its presentation to the Ministry bearing No. 177 (Price)/2006 dated 3rd April 2006 stated that price of cement including profit was Rs. 147.80 per bag. The Secretary (IPP) directed members of the CMA to bring down the price from Rs. 230/ - per bag to a realistic level by 12th May 2006. Cement Industry did not give positive response to that direction. The Minister of Commerce & Industry, therefore, warned that Government might impose ban on cement export, and called meeting of cement manufacturers on 15th May 2006. Cement Manufacturers offered 5% discount on government purchase. As per the complaint, this offer was deceptive and meaningless as the Government did not purchase cement for supplying to construction entities. 1.4 It was also mentioned in the complaint that in the absence of any deterrent action by the Ministry, cement companies were emboldened to charge higher rates. As per the averment, this fact was apparent from abnormally high operating profit earned by four cement majors in 4th quarter of fiscal 2005 -2006 and first quarter of 2006 -2007 compared to third quarter of October - December 2005. Increased profit was a result of higher sale price charged by them. 1.5 As per the complainant, cement industry from the year 1990 onwards was resorting to unfair trade practice either by underproduction route or choking -up supplies in a given market for a short period, thereby raising the sale price.
(2.) FOLLOWING the receipt of the complaint the erstwhile MRTP Commission ordered an investigation into the matter. Accordingly, the DG (I&R) asked all the cement manufacturing companies to furnish their comments as well as break -up of cost of cement per metric ton including state levies. The Builders' Association of India was also asked to substantiate its allegations with regard to increase in prices. The replies of 41 cement manufacturers were received wherein the allegation of formation of cartel were denied. From the record, it appears that the DG (I&R) could not finalize the Preliminary Investigation Report (PIR). At this stage, consequent upon the repeal of the MRTP Act, 1969, the matter was transferred to the Commission. After receiving the matter the Commission considered the matter in its meeting and passed an order dated 24.06.2010 under section 26(1) of the Act directing the Director General to conduct an investigation into the matter. In pursuance of the direction of the Commission the DG conducted the investigation into the matter and submitted his investigation report dated 31.05.2011 to the Commission. It is pertinent to mention here that a separate information was also filed by BAI bearing Case No. 29 of 2010 under section 19 of the Act against 11 cement companies and Cement Manufacturers Association with similar allegations. The Commission has already passed an order dated 20.06.2012 under section 27 of the Act in Case No. 29 of 2010 holding that the cement companies named in that case are parties to a cartel in violation of section 3 of the Act. By this order, the Commission is disposing of the present matter viz. Case No. 52 of 2006 received on transfer from the MRTP Commission, as noted earlier.
(3.) FROM the report of the DG in the present case, it is noticed that the DG has examined the conduct of various cement companies. The DG found CMA and 11 cement companies viz.(i) Associated Cement Companies Ltd.(ACC), (ii) M/s Ambuja Cement Ltd, (iii) M/s Ultratech Cement Ltd, (iv) M/s Jaiprakash Associates Ltd, (v) M/s India Cements Ltd, (vi) M/s Shree Cement Ltd., (vii) M/s Madras Cement Ltd, (viii) M/s Century Textile and Industries Ltd, (ix) M/s J.K. Cements Ltd, (x) M/s Binani Cement Ltd and (xi) M/s Lafarage India Pvt. Ltd in contravention of the provisions of section 3 of the Act. It may be also be mentioned that as cement business M/s Grasim Industries Ltd., was de -merged into M/s Samruddhi Cement Ltd from 18.05.2010 and the same was merged into M/s Ultratech Cement Ltd., with effect from 01.08.2010, therefore, a combined reply of M/s Grasim Industries Ltd and M/s Ultratech Cement Ltd., was filed by the latter. Reply of the parties;