Cylinder bid rigging case: CCI slaps Rs 40 crore fine on 51 entities, officials

Fair trade regulator CCI has slapped penalties totalling about Rs 40 crore on 51 entities for bid rigging in supply of cylinders to oil marketing company HPCL. Besides, the regulator has imposed a total fine of Rs 45.26 lakh on officials of the firms for violating competition norms.

The 51 firms are based in different states of the country. In a 131-page order, CCI said, "any collusion in rigging tenders in public procurement costs exchequer on account of anti-competitive bids, besides resulting in higher cost to end-consumers for whom a cylinder is a necessary input for their daily requirements".

The penalty follows an allegation of collusive bid rigging for tender floated in January 2013 after the commission received an anonymous complaint. The tender pertained to supply of 40 lakh cylinders to HPCL (Hindustan Petroleum Company Ltd) to its bottling plants located in 18 states.

After prima-facie finding evidence of alleged bid rigging, CCI in 2014 directed its investigation arm, Director General (DG) to conduct a detailed examination in the matter. Based on the findings of DG and the commission's examination, it was found that 66 cylinder manufacturers had participated in the tender process and only 4 firms emerged eligible. As many as 10 bidders did not meet the criteria, while 51 entities withdrew from the process.

Notably, 46 bidders withdrew their papers on the same day, and of the four qualified bidders, two entities quoted identical prices. Moreover, the probe revealed that there were six common agents working for all the cylinder manufacturers and these agents met one another frequently and were aware of the decisions of other companies, CCI order said.

The strategic information pertaining to price bids of tender "points towards the fact that the said the OPs (51 opposite parties) were not acting independently but in concert with each other to manipulate the process of bidding" in contravention of Section 3 of Competition Act. Section 3 pertains to anti-competitive agreements.

Accordingly, a total penalty of Rs 39.74 crore was imposed on Asian Fab Tec Ltd, Bhiwadi Cylinders Pvt Ltd, Saboo Cylinders Pvt Ltd, Tirupati Cylinders Ltd, among other 51 entities. "The Commission is of opinion that though size of the enterprise in itself may not be a decisive factor while quantifying the penalty, it may be taken among other things as a mitigating factor while considering the issue of penalty," the regulator noted.

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