In Re: National Association of Container Freight Stations Vs Trailer Owners Association (CCI)
Commission finds that, in the present matter, the thin line has been transgressed by Opposite Party-1 (OP-1) to OP-10. Fixing prices and restricting provision of services under the aegis of trade associations cannot be held as a legitimate activity under the Act. Moreover, these justifications cannot be used as a reason to decide and enforce a blanket increase in prices, collectively by the OPs. Decisions related to price fixing and output restriction amongst those engaged in similar trade are recognized as some of the most pernicious anti-competitive conduct. Apparently, owing to their pernicious nature, the Competition Act, 2002 raises a presumption of such conduct resulting into an ‘appreciable adverse effect on competition’ (AAEC).
While the Commission may tend to have a sympathetic inclination towards certain difficulties, which has been expressed by OP-1 that its members face and is cognizant of the facilitative role of trade associations in furthering the collective interests of its members to alleviate the hardships, if any, the Commission cannot be oblivious to such Association providing its aegis to facilitate coordinated conduct which are otherwise falling foul of the provisions of the Act.
Further, as regards the third justification offered by OP-1, i.e. the decisions taken at the impugned meetings were mutual decisions which had an active involvement of the members of the Informant and the Chennai Port Trust, the Commission is hesitant to accept this as a justification for a conduct falling under Section 3(3)(a) and (b) of the Act. The rebuttal of the presumption of AAEC that exists in such cases or is likely to exist, thereby distorting competition, needs to be dispelled by providing concrete evidence to the satisfaction of the Commission on the redeeming nature of the alleged conduct. It has to be shown that the impugned conduct, rather than harming competition has resulted in accruing benefits to consumers or achieving improvements in the production or distribution of goods or provision of services or promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services. Tested on these parameters, the justification offered by OP-1 does not in any manner rebut the presumption of AAEC but has been an attempt possibly to provide succor to its members and nothing more. The participation of Informant or Chennai Port Trust cannot alter the characterisation of an otherwise collusive conduct/practice. Neither can it dilute the responsibility of the associations involved in such collusive decision making. In a competitive market, the prices of goods or services should ideally be determined by a free interaction between demand and supply forces. Any collective collusive action can manipulate the market outcomes under which the independent decisions between each buyer and seller could have been reached. Seen in this light, the collective action by TOAs has manipulated the market forces and narrowed the scope of competition.
In this regard, the Commission also notes the submissions made by the Informant that the OPs were using strikes and lock-outs as a means to make the members of the Informant agree to their illegal demands. Further, since the Chennai Port was following a practice of issuing passes for the entry of trailers and drivers only when such passes were endorsed by one of the trailer associations (OPs), members of the Informant had no option but to agree to the demands of the OPs. Further, the DG had observed that, though the Chairman of the Chennai Port Trust chaired the meeting dated 09.08.2014, his presence seems nothing more than an attempt to safeguard seamless movement of work without any disruption at the Chennai Port.
The Commission thus does not find any of the justifications offered by OP-1 to be sufficient to rebut the presumption and discharge the burden of proof that was on it considering the nature of its submissions and evidence in support thereof. In the event thereof, the Commission concludes that the conduct of OP-1 to OP-10 has led to a contravention of the provisions of Section 3(3)(a) and Section 3(3)(b) read with Section 3(1) of the Act.
In view of the foregoing, the Commission holds that the decisions taken by OP-1 to OP-10, for the reasons adumbrated in this order, are in contravention of the provisions of Section 3(3)(a) and Section 3(3)(b) read with Section 3(1) of the Act. Accordingly, the Commission directs OP-1 to OP-10 to cease and desist in respect of the anti-competitive conduct committed by it and which has been found to be in contravention of the provisions of the Act.
FULL TEXT OF THE JUDGMENT/ORDER OF COMPETITION COMMISSION OF INDIA
1. The Information in the present case has been filed by the National Association of Container Freight Stations, Chennai Chapter (hereinafter, the ‘Informant’/‘NACFS’) under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, the ‘Act’) against M/s Trailer Owners Association (hereinafter, ‘Opposite Party No. 1’/ ‘OP-1’), M/s Trailer Organisers Association (hereinafter, the ‘Opposite Party No. 2’/ ‘OP-2’), M/s Port Contractors Welfare Association (hereinafter, ‘Opposite Party No. 3’/ ‘OP-3’), M/s Chennai Trailer Owners Association (hereinafter, ‘Opposite Party No. 4’/ ‘OP-4’), M/s Tamil Nadu Trailer Owners Association (hereinafter, ‘Opposite Party No. 5’/ ‘OP-5’), M/s Royapuram Trailer Owners Association (hereinafter, ‘Opposite Party No. 6’/ ‘OP-6’), M/s Interstate Container Transport Owners Association (hereinafter, ‘Opposite Party No. 7’/ ‘OP-7’), M/s Confederation of Surface Transport, Madhavaram, Chennai (hereinafter, ‘Opposite Party No. 8’/ ‘OP-8’), M/s Chennai Harbour Trailer Owners Association (hereinafter, ‘Opposite Party No. 9’/ ‘OP-9’), M/s Chennai Kanchi Rhiruvakkur Trailer Owner Welfare Association (hereinafter, ‘Opposite Party No. 10’/ ‘OP-10’), M/s Chennai Thuraimugam Trailer Lorry Drivers Anna Thozhilalalsangam (hereinafter, ‘Opposite Party No. 11’/ ‘OP-11’) and Chennai Thuraimuga AITUC Tractor Trailer and Articulated Drivers (hereinafter, ‘Opposite Party No. 12’/ ‘OP-12’) [hereinafter, collectively, referred to as the ‘Opposite Parties’/‘OPs’], alleging contravention of the provisions of Section 3 of the Act.
2. As per the information, the Informant was established in April 1994 in the Union Territory of Chandigarh. Its Chennai Chapter has 32 members, where the issues alleged in the information had arisen. Members of the Informant consist of operators either of Inland Container Depots (ICD) or Container Freight Stations (CFS), which are custom bound in-transit facilities. Though CFS is located near the port and ICD is located in the hinterland, for the purposes of this case, ICD and CFS have been collectively referred to as ‘CFS’. The CFS helps in the decongestion of ports as it acts as a hub in the logistics chain, wherein the custom formalities for containerised cargo and less than container loads (LCL) can be completed. It is that point from which the consignments are cleared for domestic consumption by the respective importers upon compliance with requisite formalities, and before such clearance, the import is not considered complete under the Customs Act, 1962.
3. The Opposite Parties (OP-1 to OP-12) comprise various associations under which trailer owners, drivers and other personnel engaged in their services are organised. Movement of goods and containers from port to CFS during import and from CFS to port during export is done through trailers, i.e. the members of the OPs. Thus, the members of the Informant, as per the Information, are dependent upon the members of the OPs for continuous movement of goods, since the CFS are stated to have the space to accommodate 3 days’ storage, at most.
Brief facts of the case
4. The Informant has alleged that the decisions taken by the OPs in various meetings during 2010 to 2018 are anti-competitive. The first meeting which the Informant has alleged to be anti-competitive is dated 07.07.2010, wherein it was decided that none of the members of the Informant could ply more than 20 trailers of their own for movement of containers, and such ceiling should include their sister concerns as well. This meeting was attended by the members of the Informant, the Chennai Port Trust and six transport owners associations (TOAs).
5. The second meeting which the Informant has alleged to be anti-competitive was held on 09.08.2014, wherein it was decided that, w.e.f. 01.09.2014, the individual rate for trailer services will be increased across the board, i.e., by ₹900/- for 20 feet containers and by ₹ 1400/- for 40 feet containers. The rates were to be further revised on 31.03.2016 and it was decided that, during the said period, there should be no stoppage in movement of containers. On the same date, a trade notice was published for and on behalf of the OPs to notify the decisions taken at the meeting. The said meeting was stated to be called by the Chairman, Chennai Port Trust, and it was attended by the members of the Informant and various TOAs.
6. Thereafter, a letter dated 27.01.2015 was issued by the Chennai Trailer Owners Association, i.e.,14 Associations and 3 unions, to all the CFS, restricting CFS operations in terms of maximum number of vehicles that they can operate and by declaring that the CFS shall not increase their existing fleet. The reply dated 30.01.2015 was issued by NACFS to the abovementioned letter dated 27.01.2015 from Chennai Trailer Owners Association refuting the decision taken by the associations as being arbitrary and against the interest of its members.
7. Another meeting was stated to be conducted on 14.02.2015 by All Transport Owners Association and Driver and Cleaner Union for declaring that decisions must be taken by all the 14 associations jointly and not by any one association by itself. Also, it was decided that the problems between the members and problems related to business have to be discussed with CFS, customs house agents (CHA) and contractors and the decision should be taken accordingly.
8. A letter was also issued to the Chairman, Chennai Port Trust, dated 16.02.2015 informing the decision taken in the meeting conducted by All Transport Owners Association and 3 Trade Unions, reiterating the restrictions on the CFS that only 20 trailers can be plied and that the existing fleet cannot be increased. Further, the CFSs were supposed to carry their own exports only and not the exports of any other CFS.
9. A letter dated 10.03.2016 was written by NACFS to the Chief Commissioner of Customs explaining the disruptions caused due to frequent strikes by the transporters and meeting with their unreasonable demands.
10. A notice dated 07.04.2016 was also stated to have been released by NACFS that they would withdraw from the transport activity from 02.04.2016 in order to yield to the pressure of the OPs to not to be involved in transportation. However, as a result of the intervention of Customs and some other trade bodies, NACFS agreed to carry on the activity of transportation.
11. Thereafter, on 17.04.2017, a letter was issued by some of the OPs, namely, OP-1 to OP-8, OP-10, and Tamil Nadu Taraus Containers Transport Owners Association to NACFS stating that tariffs for EXIM transport of containers agreed in 2014 were to be maintained. Also, CFS operators and members of the OPs were not entitled to commercially negotiate to reduce the rate from what was decided in 2014. The payment was to be made by a CFS operator to member of the OPs within 15 days, and if any negotiation was found to be continued by NACFS, the OPs would allegedly engage in non-cooperation in any export/ import delivery transport service with that specific member of the Informant.
12. NACFS responded to the aforesaid letter on 19.04.2017, stating that the tariff was not agreed upon in any meeting and the same is subject to mutual agreement between an individual trailer owner and a CFS operator. Additionally, any issue related to billing or delay was to be sorted out between an individual trailer owner and a CFS operator and should be mutually negotiated. On 07.02.2018, another letter was issued by the OPs to NACFS, wherein it was stated that a meeting was held by the OPs on 05.02.2018 and it was found that the members of NACFS paid lesser rates than the tariff decided on 09.08.2014 to various trailer owners. The OPs accordingly conveyed to NACFS that the tariff will be increased by a further 20%, in addition to the rates decided on 09.08.2014 to allegedly account for the ongoing and day to day price increase in diesel, spares, insurance, tyres etc. It was also stated that members of the Informant shall make payment to the members of the said OPs within 15 days. Also, a limit was imposed whereby each member of the Informant could only ply a maximum of 20 trailers of their own. The letter also stated that if a joint meeting was not conducted within 7 days, the OPs would take an alternative step to seek a remedy.
13. The Informant replied to the letter dated 07.02.2018 on 24.02.2018, reiterating in support of individual negotiations. Pursuant to the said reply, the OPs issued a strike notice on 02.03.2018 to Chennai Port Trust pursuant to a decision taken at a joint meeting of the OPs held on 26.02.2018. The said notice contained a threat to go on an indefinite strike from 6 AM on 19.03.2018 until NACFS agrees with the demands of the OPs. NACFS alleged that such interference by the OPs in the tariffs for trailers, which is the prerogative of commercial negotiation between an individual CFS operator and respective transporter, and alleged threats of strike, amounts to violation of Section 3(3)(a) of the Act.
14. NACFS also alleged that restriction was imposed by the OPs upon its members and their sister concerns not to ply more than 20 trailers of their own for movement of containers and any requirement over and above 20 trailers had to be fulfilled through the TOAs. NACFS also alleged that the OPs gave threats of strike on non-fulfilment of conditions levelled by them and such conditions/ threats by the TOAs were stated to be restrictive within the meaning of Section 3(3)(b) read with Section 3(1) of the Act.
15. The Commission heard NACFS and the OPs in the preliminary conference held on 06.06.2018, and vide order dated 26.06.2018, passed under Section 26(1) of the Act, directed the Director General (‘DG’) to cause an investigation into the matter with respect to alleged contravention of the provisions of Section 3 of the Act and submit its report.
16. NACFS also filed an application dated 23.09.2019 under Section 33 of the Act stating that the OPs and their members have engaged in collusive anti-competitive conduct by going on a strike since 16.09.2019, as a means to pressurise the Informant and their members to accept the unilateral and anti-competitive terms, despite the ongoing investigation by the DG. However, vide order dated 01.10.2019, the Commission rejected the said application, observing that the Informant had failed to demonstrate a case stronger than a mere prima facie opinion for investigation, irreparable loss, and balance of convenience in their favour, as envisaged in the Hon’ble Supreme Court’s decision in CCI vs. SAIL (2010 CompLR 0061 SC).
Observations and Findings of the DG
17. After seeking extensions, the DG submitted the Investigation Reports to the Commission on 22.02.2021 and 09.04.2021, in confidential and non-confidential versions, respectively.
18. The DG noted that the Chennai Port is the 2nd largest port in terms of cargo handled in India. The port serves the geographical regions of Tamil Nadu, Pondicherry, South Andhra Pradesh and parts of Karnataka and has now emerged as hub on the east coast of India. A CFS is an extended arm of the port where containers are stuffed, de-stuffed and aggregation/ segregation of export/import cargo takes place till completion of their examination and clearance. With the growing volume of international trade, the need for expeditious clearance of goods at the port within the minimum possible time has been gaining importance. This is more so when the ports are facing congestion at their premises. To move the container from port to CFSs, the CFS operators either use their own trailers or hire the services of various trailer owners and for the same, CFS operators enter into contracts with individual transporters. When CFS operators hire the services of trailer owners/transporters, trailer owners/transporters raise the bill in favour of the respective CFSs.
19. The DG further observed that the members of the Informant are mainly aggrieved by the OPs alleged involvement in fixing the prices for transportation of containerised cargo from port to CFS or vice versa by way of conducting meetings of various trailers/ trucks associations. As per the Informant, fixing the prices for transportation of containerised cargo from port to CFS or vice versa is the sole prerogative of CFS operators and individual trailer owners/transporters.
20. The impugned meeting dated 09.08.2014 was held between the members of Chennai Trade Coordination Committee (CTCC) and members of Trailer Owner Association (‘TOA’/OPs) at Chennai Port Trust. On behalf of CTCC, the National Association of Container Freight Stations (NACFS/Informant), Chennai Customs House Agents Association (CCHAA), Chennai Ennore Port Steamer Agents Association (CEPSAA), South Indian Chamber of Commerce & Industry (SICCI), Chennai Container Terminal Pvt. Ltd. (CCTL), Madras Chamber of Commerce & Industry and PSA Sical Terminal (CITPL) participated in the meeting. On behalf of TOAs (OPs), the said meeting was attended by OP-1, OP-2, OP-3, OP-4, OP-6, OP-7, OP-8, OP- 11, OP-12 and Thamizhga Trailer Owners Association. The OPs are different trailer/truck owner/driver associations. The impugned meeting was held under the Chairmanship of the then Chairman of Chennai Port Trust, wherein the freight tariffs were discussed in order to iron out the differences between members of the Informant and the OPs and to ensure smooth functioning of the transport business. Chennai Port Trust facilitated the meeting in its premises for the parties to come together for a discussion since the issue was of commercial interest to the port and involved smooth functioning of port services.
21. The minutes of the said impugned meeting dated 09.08.2014 are stated as under: “
“… … …
A joint meeting was held on 9th August, 2014 at Chennai Port Trust administrative building premises facilitated by Chennai Port Trust Authorities and chaired by Chairman Shri Atulya Misra, M. The discussion concluded with the following relating to transportation of containers from/ to the Port of Chennai.
1. For carriage transportation of (import/export) containers between ChPT and CFS increased by INR900/ 20′ & INR 1400/40′ from the existing rate.
2. Effective date of implementation of revised rates will be 1 Sept 2014.
3. Next revision will be due on 31 Mar 2016 through mutual discussion and agreement of stakeholders of CTCC.
4. Existing procedure for carriage of Container(s) will continue to follow.
5. No stoppage on movement of containers by any stakeholders and the transport Operating Associations during the ensuing period and all concerns to be addressed through joint meeting of all stakeholders of CTCC.
… … … … … … … … …….”
22. From the reply of the Informant, the DG deduced that its members did not agree to the increase in price. Rather, the increase in price was allegedly forced and coerced upon the CFSs on the threat of strike and actual strikes. The DG also observed that the hike in the price had no correlation to the rise in price of fuel, insurance, spare, tyres, repair and maintenance, driver salary, etc. The Informant also submitted that the different CFSs are located at different locations, some within 10 kms from the port and the others beyond 50 kms from the port and in this scenario, to have a common increase without taking into consideration the most important factor in consideration, i.e. the distance, clearly brings to light that there is no rationale in the common increase in price. Further, the DG observed that the OPs had issued a Notice thanking the Chairman of the Chennai Port Trust and informing their members that the existing transport tariff shall be increased by ₹900/- and ₹ 1400/- for 20’ft. and 40’ft. trailers, respectively. This, as per the DG, showed that the OPs not only convinced/ forced the Informant to increase the rates but also communicated to its members to follow the same.
23. The DG noted that the members of the OPs were in identical or similar provision of services, and through this meeting, they have suggested an increase in freight tariffs, which may result into indirectly determining the prices for providing their services. To further corroborate, the DG collected data related to the transportation rates charged by the respective CFSs for 20 and 40 ft. trailers in the period between 2013 and 2018 and observed that the engagements of transporter/members of the OPs are done on increased agreed rates by a majority of the CFS operators, which supported the allegation of the Informant that the OPs were not allowing the CFS operators to reduce the rate from what was decided by the OPs. It was also noted that, though some of the CFS operators did not increase the prevailing rates as decided in the meeting dated 09.08.2014, they did increase the rates to a certain extent.
24. The DG also noted that the Informant insisted, vide various letters to the OPs, that the tariffs should be mutually agreed between the individual transporter and the respective CFS operators independently. Further, the DG observed that, though NACFS attended the meeting dated 09.08.2014 wherein rates were fixed it does not negate the allegation that the OPs have unilaterally fixed the prices. Even the presence of other stakeholders does not dilute the allegation of the Informant. Rather, it appears from the record that the stakeholders, by participating in the meeting, wanted to ensure seamless movement of the containers.
25. The DG also highlighted that, though the Chairman of the Chennai Port Trust attended the meeting dated 09.08.2014, his presence appeared to be forceful at the behest of threat of strikes by the OPs. Therefore, his presence may have been to safeguard the seamless movement of work without any disruption at the Chennai Port. OPs, as per the DG, may have pressed for the presence of a government official to have an impression of binding effect on members of the Informant. Thus, the DG opined that the decision taken in the meeting held on 09.08.2014, to increase the tariffs, does not seem to be a free decision taken by market forces independently in a competitive market.
26. The DG also noted that two more meetings were held on 19.04.2018 and 11.05.2018 amongst the stakeholders of the Chennai Port. The meeting was organised by Chennai Trade Facilitation Committee and attended by NACFS, some of the OPs and CCBA. Vide meeting dated 19.04.2018, it was, inter alia, decided for a 10% increase in rates over the 2014 agreement from 01.05.2018, pending payment up to 31.03.2018 should be settled by 30.04.2018 and by a maximum of 15.05.2018, the bill would be raised by TOA as per the 2014 agreement tariff w.e.f. 05.04.2018. In the second meeting held on 11.05.2018, the points of the meeting held on 19.04.2018 were discussed. The said meeting was also organised by the Chennai Trade Facilitation Committee and was attended by NACFS, some of the OPs and CCBA. It was informed during the meeting that regarding the payments issue, some CFSs have released while some have not released the payments. Revised prices for the implementation of the 2014 agreement were also stated to be not agreed by some CFSs so far. It was also narrated in the minutes of the meeting that “NACFS requested the TOA members that the matter would be discussed with the CFSs regarding the clearance of pending payment as well as implementation of price individually and in case if not cleared requested them to issue the details. On receipt of same it will be updated”.
27. From the above meetings, the DG deduced that the OPs were not only imposing the prices on members of the Informant but rather, seeking 10% increase in the tariff rate fixed in 2014. This collective demand to increase the tariff was found to be anticompetitive by the DG as no liberty was given to each CFS and the transporter to fix their tariff as per the load, volume of business, distance of CFS from port and vice versa, etc. Further, the DG also opined that the fact that members of the Informant were not making timely payments to the members of OPs doesn’t absolve the OPs from their anti-competitive behaviour of fixing the prices.
28. Based on the evidences and analysis, inter alia, minutes of the meetings of the various associations held on 09.08.2014, 19.04.2018 and 11.05.2018 and various letters exchanged between the Informant and the OPs, the DG concluded contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act by OP-1 to OP-10.
29. As regards the allegation that the OPs have restricted the members of the Informant from plying not more than 20 trailers, the DG observed that such a decision was taken in the meeting held on 07.07.2010. The said meeting took place at the Southern India Chamber of Commerce premises at Chennai and was attended by members of the Informant and OPs, Chennai Custom House Agents Association (CCHAA) (now known as Chennai Customs Brokers Association, CCBA), Chennai Ennore Port Steamer Agents Association (CHENSAA), South India Chamber of Commerce and Industry (SICCI) and Chennai Container Terminal Pvt. Ltd. (CCTL). In the said meeting, it was categorically decided that the CFS Operators can ply their vehicles to the maximum of 20 and that any requirement over and above the 20 vehicles used by them should be given only to members of any of the six TOAs.
30. The DG observed that the restriction of not plying more than 20 trailers, as decided in the meeting held on 07.07.2010, is an anti-competitive condition as it amounts to controlling the provisions of transport services at Chennai Port. The DG also highlighted that it was decided that the existing fleet should continue till the next review meeting and it would be reviewed in next review meeting only. This, as per the DG, showed that OPs were controlling the market of provision of transport services by the members of the Informant for a particular period unless it is reviewed. The minutes of meeting dated 07.07.2010 are as follows:-
“… … ….
