Alleged cartelisation for increasing pulse prices in India Vs Viterra India Private Limited (Competition Commission of India)
On perusal of the material available on record, it appears that the findings of the DG are, inter alia, based on analysis of data of domestic production, imports, exports, domestic consumption, surplus/deficit, monthly average wholesale and retail prices, SMS/e-mail communications, etc. In this regard, the Commission observes that the investigation has not brought out any price parallelism amongst the OPs. Investigation has also not examined the role of global prices in determining domestic prices, the nuances of the industry and market dynamics. The DG has relied mainly on the internal communication recovered by income tax authorities but has not analysed the nature of trade carried out by importers and whether such information regarding stock positions is available to the public and to all competitors and buyers. Pertinently, the DG itself noted in the investigation report that during investigation “no evidence was unearthed which indicate that the OPs were jointly hoarding the stocks of pulses”.
Furthermore, it is seen in the replies of the Parties that there also exists a buyer–seller relationship between various OPs and, in such a scenario, any interaction or exchange of any information amongst them need to be analysed keeping in mind multi-faceted relation amongst the various OPs. Against this backdrop, sporadic communications between OPs exchanging information, which is already available in public domain, cannot be construed as collusion between OPs.
It also cannot be ignored that OPs, who are traders of pulses, deal with other traders and dal millers through brokers/agents/intermediaries who may be common, and in these circumstances, dealing through common brokers and agents can result in transparency and organic dissemination of information in the market.
On careful perusal of the Investigation Report and considering the response of the OPs, the Commission is of the considered opinion that there is not sufficient evidence on record to establish cartelisation or action in concert. Resultantly, the Commission is of the opinion that no case of contravention of the provisions of Section 3 of the Act is made out against OPs. As such, the matter is directed to be closed forthwith.
Before parting with this order, the Commission, considering the nature of agriculture trade and multi-faceted relations amongst the various OPs, directs them to take due care that their communications do not transgress the permissible boundaries of the Act.
As a result, all pending applications, including application seeking cross-examination moved by some of the OPs, stand disposed and no separate orders or directions are required to be passed thereon.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
The present case was initiated by the Commission suo moto under Section 19(1) of the Competition Act, 2002 (‘the Act’). The case owes its genesis to an article titled ‘When the Nation Could not Feel the Pulse’ (‘the article’) written by Mr. Subir Ghosh (‘the author’) and published in the Economic and Political Weekly, Vol. 52, Issue No. 25–26, dated 24.06.2017. The said article was related to alleged cartelisation, which led to increase in the prices of pulses in year 2015–16, by various agro-commodity companies including, inter alia, Glencore Grain India Pvt. Ltd (‘Opposite Party No. 1’/OP-1), Agricore Commodities Pvt. Ltd. (’Opposite Party No. 2’/OP-2), ETC Agro Processing (India) Pvt. Ltd. (‘Opposite Party No. 3’/ OP-3), ETG Agro Pvt. Ltd. (‘Opposite Party No. 4’/OP4) Edelweiss Commodities Services Ltd. (‘Opposite Party No. 5’/OP-5), Jindal Agro International Pvt. Ltd. (‘Opposite Party No. 6’/OP-6), Superior Agro Crops Pvt. Ltd. (‘Opposite Party No. 7’/OP-7), SV Agri Trade LLP (‘Opposite Party No. 8’/OP-8), Sharp Corp. Ltd. (‘Opposite Party No. 9’/OP-9), Arihant Future & Commodities Ltd. (‘Opposite Party No. 10’/OP-10) and M/s Surya Foods (‘Opposite Party No. 11’/OP-11). During the course of investigation, the India Pulses and Grains Association (IPGA) was also added as an Opposite Party (OP-12). The OP-2 was merged into OP-1 in 2018 and the merged entity renamed as Viterra India Private Limited (‘Opposite Party No. 1’/’Opposite Party No. 2’ or OP-1/OP-2). The OP-3 and OP-4 also merged in the year 2019 and became a single company ETC Agro Processing (India) Pvt. Ltd. (‘Opposite Party No. 3’/ ‘Opposite Party No. 4’ or OP-3/OP-4).
2. As per the article, OP-1 to OP-5 are leading agro-commodity companies with operations in procurement, warehousing, distribution, processing and trading of agricultural products. OP-6 to OP-9 are also engaged in activities similar to that of OP-1 to OP-5, and it was alleged that these OPs procured and hoarded local pulses stock, besides helping offload the stocks of OP-1 to OP-5. Further, OP-10 and OP-11 are entry operators who provided bogus bills to OP-1 to OP-9 to reduce their profits and evade taxes. The India Pulses and Grains Association (IPGA) (later added as OP-12 by DG), based in Mumbai, is registered under Section 8 of the Companies Act 2013 (earlier Section 25 of the Companies Act, 1956) with a membership of over 400, including various regional associations of the pulses industry.
3. As per the article, Appraisal Reports (ARs) prepared by the Income Tax Department, disclosed for the first time, showed that the pulses trade in the country is prone to manipulation. Moreover, the said article, on the basis of these ARs, alleged that the increase in the prices of pulses in the year 2015–16 was a consequence of the formation of cartels by OP-1 to OP-11. The IT Department, in its ‘Appraisal Report in case of Pulse Importers and Trading Group’, states that “…the abnormal price situation in India was created by coordinated collusive activity orchestrated by few trading and financial entities. The physical stock of pulses (were) cornered in domestic and international markets. Significant long positions on future were taken on exchanges to create artificial scarcity at wholesale and retail levels…” The article also states that OPs rigged domestic rates to an unprecedented level to offload their stock, which was procured at much lower rates.
4. From the article, it emerged that the prices of pulses before 2015–16 were quite stable and fluctuated normally as per the demand-and-supply gap in the spot market (in respect of pulses such as Tur and Urad) and future market (in respect of Chana). However, the prices of pulses increased abnormally during 2015–16.
5. Additionally, the Commission noted from the article that the production of pulses in the crop years 2014–15 and 2015–16 had fallen significantly. The fall in supply was matched by increase in import and followed by an abnormal increase in the price of pulses in 2015–16, particularly during January 2015 to February 2016. The Commission also observed that the direct evidences and indirect evidences collected by the Income Tax Department, taken together, prima facie indicated possible collusion, meeting of minds and existence of anticompetitive agreement amongst the OPs.
6. The Commission also observed that the fall in production of pulses in 2015–16 had provided a conducive environment for easy manipulation by concerted act on the part of the OPs through the accumulation of pulses stocks, trading on the commodity market in a cohesive manner by taking long position, etc. Such conducts of OPs were noted as not only to control supplies in the market but also to indirectly determining the prices of pulses, both in the spot market and future market.
7. Accordingly, the Commission, vide its order dated 09.11.2018, directed the Director General (DG) to cause an investigation into the matter under Section 26(1) of the Act for investigating contravention of the provisions of Section 3 of the Act. The DG submitted the investigation report on 22.04.2022.
Investigation by the DG
8. To examine the allegations, the DG issued notices to the OPs and third parties to collect relevant information/data. Additionally, the Office of the DG carried out search and seizure operations at the premises of OP-1/OP-2, OP-3/OP-4, OP-5 and OP-12. This information/data was analysed to identify the evidence. The investigation report was prepared on the basis of documentary/digital evidence and the oral testimonies of the witnesses who were examined by the DG during investigation.
9. A brief summary of the issues identified by the DG for investigation along with findings thereon are noted below:
Issue (a)
Whether there was an abnormal increase in the price of pulses in India during the period January 2015 to February 2016.
Findings:
The investigation found that there was an abnormal increase in the price of certain pulses during the alleged cartelisation period. These pulses were Chana, Tur, Urad and Masoor. Therefore, the investigation focused on these pulses. The percentage increase in price of these pulses during January 2015 to February 2016 are presented below:
Table 1
