Case Law Details
Apaar Infratech Private Limited Vs Maharashtra State Road Development Corporation Limited (Competition Commission of India)
In the present case, looking at the nature of averments and allegations, the relevant product market in the present case may be taken as “Crystalline Durability Admixture (CDA) in HIPs”. CDA as a waterproofing material used in any civil structure involving cement/concrete in HIPs, such as expressways, dams, hydro or thermal power projects, etc. Furthermore, HIPs are not limited to the State of Maharashtra and are also being developed all over the country. Therefore, the demand for CDA is not restricted to the State of Maharashtra, and hence, the relevant geographic market appears to be whole of India. Further, the Informant has submitted in the Information that it had supplied the Xypex CDA product to other smaller projects in India as well. Therefore, the relevant market may be delineated as “Market for procurement of Crystalline Durability Admixture (CDA) in HIPs in India”.
As noted earlier, Maharashtra State Road Development Corporation Limited (OP-1) is a corporation established and fully owned by the Government of Maharashtra, mainly dealing with the properties and assets comprising movables and immovables, including land, road projects, flyover projects, toll collection rights and works under construction vested with the State Government and under the control of the Public Works Department. These have been subsequently transferred to OP-1. But OP-1 is responsible for the development of HIPs in the State of Maharashtra only, and not all over India. There are many public and private sector companies such as National Highway Authority of India (NHAI), Larsen & Toubro Infrastructure Development Projects Limited, etc. in India that are presently involved in developing numerous HIPs across India. Thus, OP-1 cannot be said to be the dominant player in the relevant market delineated supra.
In view of the foregoing, the Commission is of the opinion that no case of contravention of the provisions of the Act is made out against OPs, and the matter is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act.
FULL TEXT OF THE JUDGMENT/ORDER OF COMPETITION COMMISSION OF INDIA
1. The present Information has been filed by Apaar Infratech Private Limited under Section 19(1)(a) of the Competition Act, 2002 (‘the Act’) against Maharashtra State Road Development Corporation Limited (‘Opposite Party No. 1’/‘OP-1’/‘MSRDC’), Nagpur Mumbai Super Communication Expressway Limited (‘Opposite Party No. 2’/‘OP-2’/‘NMSCEL’), Penetron India Private Limited (‘Opposite Party No. 3’/‘OP-3’), Penetron International Limited Inc. (‘Opposite Party No. 4’/‘OP-4’), Crystal Deep Seal Corporation Limited (‘Opposite Party No. 5’/‘OP-5’), CD Seal Waterproofing (‘Opposite Party No. 6’/‘OP-6’) and Slurry Inc. (‘Opposite Party No. 7’/‘OP-7’) (collectively referred as ‘the OPs’) alleging, inter alia, contravention of the provisions of Sections 3 and 4 of the Act.
2. The Informant is stated to be an authorised representative of Xypex Products (waterproofing products) in India since 15.11.2006. As per the Information, brief profiles of the OPs are as follows:
(i) OP-1 is a corporation established and fully owned by the Government of Maharashtra and mainly deals with the properties and assets comprising movables and immovables, including land, road projects, flyover projects, toll collection rights and works under construction which were vested with the State Government and were under the control of the Public Works Department. These have been subsequently transferred to OP-1.
(ii) OP-2 has entered into a tripartite concession agreement between OP-2 (concessionaire), OP-1 and the Government of Maharashtra, whereby OP-2 has the right to develop, maintain and operate the Nagpur–Mumbai Super Communication Expressway( MSM Project/ the Project) for a period of 40 years starting from 29.05.2018.
(iii) OP-3 is a private limited company engaged in imports of ‘Penetron Products’ in India.
(iv) OP-4 ‘Penetron’ is the brand of the waterproofing product of OP-4 that OP-3 sells in India.
(v) OP-5 is a USA-based domestic business corporation.
(vi) The other OPs, viz., OP-6 and OP-7, are stated to be non-existent but had been included in the List of Vendors Identified for Material Procurement by OP-1, as per the Information.
3. It is stated in the Information that the MSM Project is being constructed by OP-2 in State of Maharashtra under the overall supervision, guidance and direction of OP-1. According to the procedure for identification of various input materials in construction, the entire identification and approval of all the materials was with OP-1. It identified and prepared an ‘Identified Vendors List’ for different materials, including Crystalline Durability Admixture (CDA), which is being used as a waterproofing chemical in the MSM project. The contractors executing different packages of the project are duty-bound to source CDA from one of the vendors included in the Identified Vendors List and not from outside. Therefore, to be eligible to supply its product/material, a vendor can only succeed if its name is included in the Identified Vendors List.
4. The Informant stated that its product Xypex has been a quality leader in the field of CDA and therefore, it was approached by one of the contractors of the MSM project to supply CDA for MSM. In view of the same, the Informant intended to be included in the Identified Vendors List of the MSM project as per the due process of law for the supply of CDA. In this context, the Informant got hold of the ‘Guidelines, Specification and Variation’ (‘GS&V’) set up by OP-1 for the MSM project. The Informant found that, despite being the first to introduce crystalline waterproofing technology in the country, it was not eligible if the GS&V parameters were strictly adhered to. The main hurdle for the Informant to get into the Identified Vendors List was the inclusion of a qualifying criterion of Indian Road Congress (‘IRC’) accreditation. Further, in the Information, it is stated that the Informant enquired and found that the Identified Vendors List for CDA has three names in the list, as under:
(i) Penetron India Private Limited (OP-3)
(ii) CD Seal Waterproofing, USA (OP-6)
(iii) Slurry Inc., USA (OP-7)
5. It is stated in the Information that the Informant further discovered that, out of three vendors in the Identified Vendors List, only one, viz., Penetron India Private Limited had IRC accreditation, with the other two, OP-6 and OP-7, not having any IRC accreditation at all. It is also stated that one of the vendors in this list, viz., Slurry Inc. did not even exist; apart from its website, there is nothing to establish that OP-7 actually exists. Further, it is stated that OP-6 is nothing but a virtual extension of OP-5, dealing in waterproofing products or as a proxy for OP-5 with another name, with no existence or foundation. It is also stated that the IRC Accreditation is for New Materials/Techniques, whereas the product supplied by Informant, which is Xypex, had been existing in the international market for almost 50+ years; therefore, mandating the Informant to have an IRC accreditation is unreasonable, particularly when Xypex has been in the Indian market since 1991.
6. It is alleged by the Informant that OP-1, by way of inserting IRC accreditation as a condition for inclusion in the Identified Vendors List, violated the provisions of Section 4(2)(a)(i) and Section 4(2)(c) of the Act. The Informant has also alleged that OP-3, OP-4 and OP-5 entered into agreement regarding provision of CDA to OP-1, with the objective of directly or indirectly determining the sale price of the CDA, controlling the production and supply of CDA and getting the entire market share for OP-3, thus causing an appreciable adverse effect on competition and violation of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act.
7. The Commission considered the Information in its ordinary meeting held on 13.07.2022 and decided to forward a copy thereof to OP-1, with a direction to file its reply by 30.07.2022, with an advance copy to the Informant. OP-1 did not file any reply by the due date. In these circumstances, the Commission considered the matter in its ordinary meeting held on 10.08.2022 and decided to pass an appropriate order in due course.
8. Having considered the averments and allegations made in the Information, the Commission notes that the Informant is primarily aggrieved of alleged cartelisation by OP-3, OP-4 and OP-5 in supply of goods to OP-1 and also of alleged abuse of dominant position by OP-1 by way of insertion of IRC accreditation as a condition for procurement of CDA for MSM.
9. At the outset, the Commission notes that the case relates to the MSM Project being constructed by OP-2 under the overall supervision, guidance and direction of OP-1. MSM Project is a Heavy Infrastructure Projects (‘HIPs’), which requires CDA for waterproofing. CDA, on account of its proprietary chemicals, ensures that even micro pores in the structures are totally blocked by the changes in the chemical on coming into contact with water, resulting in near-100% waterproofing of these structures, therefore leading to the higher life of the projects. OP-1 identified and prepared an ‘Identified Vendors List’ for different materials, including CDA, which is being used as a waterproofing chemical in the MSM Project. The contractors executing different packages of the project are duty-bound to source CDA from one of the vendors included in the Identified Vendors List.
10. The Commission also notes from the Information inter-connections between OP-3, OP-4 and OP-5 with OP-6 and OP-7. As per the Information, OP-3 is an importer of ‘Penetron Products’ in India from OP-4, and OP-5 is stated to be related to OP-4, an international enterprise, which is situated in New York, United States, having the same address as well as the same CEO. The Informant has also submitted that OP-6 is a dummy entity and a virtual extension of OP-5, whereas OP-7 is a totally non-existent entity created by OP-4.
11. The Informant has alleged that OP-3, OP-4 and OP-5 entered into an agreement regarding provision of CDA to OP-1 and getting the entire market share for OP-3, thus causing an appreciable adverse effect on competition and violating the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act.
12. Having considered the Information and the averments made therein, it is appropriate to first outline the regulatory framework as enshrined in the Act relating to the prohibition of anti-competitive agreements, particularly with respect to horizontal agreements. Section 3(3) of the Act deals with horizontal agreements. In terms of the provisions contained in Section 3(3) of the Act, any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; or (d) directly or indirectly results in bid rigging or collusive bidding, is presumed to have an appreciable adverse effect on competition.
13. It is abundantly clear from the provisions of Section 3(3) of the Act that horizontal agreements are arrangements between entities at the same stage of the production chain, generally between two rivals, for either fixing prices or limiting production or sharing markets, etc. In the present case, as per the Information, OP-3 is an importer of ‘Penetron Products’, importing these products from OP-4. Therefore, the relationship between OP-3 and OP-4 is vertical in nature. As regards OP-5, it has been alleged that OP-4 and OP-5 are related by way of a common registered address and CEO.
14. In this regard, at the outset, it is apposite to note that, on a number of occasions, the Commission has previously held that common ownership is not sufficient to record any findings of contravention of the provisions of Section 3 of the Act. In Re: Alleged cartelisation in road construction work in the State of Uttar Pradesh (Suo Motu Case No. 03 of 2018), it was held by the Commission that:
“Having examined the DG report and the material available on record, the Commission, at the outset, notes that as regards related parties submitting bids or parties having common ownership, the Commission is of the opinion that mere commonality of ownership of participating firms, in itself, is not sufficient to record any conclusion about bid rigging in the absence of any material indicating collusion amongst such bidders while participating in tenders. The Commission has consistently held that mere common ownership is not sufficient to record any findings of contravention of the provisions of Section 3 of the Act. In this regard, reference may be made to a few of such previous orders passed by the Commission. In Re: Ved Prakash Tripathi v. Director General Armed Forces Medical Services & Ors. (Case No. 10 of 2020), the Commission held that: “…mere commonality of directors or ownership of participating firms, in itself, is not sufficient to record any prima facie conclusion about bid rigging in the absence of any material indicating collusion amongst such bidders while participating in the impugned tender….
Further, In Re: Reprographics India v. Hitachi Systems Micro Clinic Pvt. Ltd. & Ors. (Case No. 41 of 2018), the Commission held that: “…merely having common business linkages between the OPs as projected by the Informant, cannot be the basis to suggest collusion in the bidding process. Moreover, there is no material on record to suggest that the OPs were engaged in Bid Rotation etc. Therefore, the allegation of supportive bid does not find favour with the Commission….”. Resultantly, mere commonality of ownership does not imply contravention of the provisions of Section 3(3)(d) of the Act, unless there is material on record to substantiate the allegations of bid rigging by way of collusion.”
15. In view of the above and having considered that, save and except making bald allegations, the Informant has not adduced any evidence whatsoever to show any collusion amongst OP-3, OP-4 and OP-5, which can be examined within the statutory framework as enshrined in Section 3(3) of the Act, the Commission, prima facie, does not find any contravention of Section 3(3) of the Act.
16. The Commission now proceeds to analyse the case on the touchstone of the provisions of Section 4 of the Act. For analysing the allegations brought out in the Information under provisions of Section 4 of the Act, the delineation of a relevant market is required, followed by the assessment of OP-1’s position in the said relevant market, after which the alleged abusive conduct needs to be examined.
17. In the present case, looking at the nature of averments and allegations, the relevant product market in the present case may be taken as “Crystalline Durability Admixture (CDA) in HIPs”. CDA as a waterproofing material used in any civil structure involving cement/concrete in HIPs, such as expressways, dams, hydro or thermal power projects, etc. Furthermore, HIPs are not limited to the State of Maharashtra and are also being developed all over the country. Therefore, the demand for CDA is not restricted to the State of Maharashtra, and hence, the relevant geographic market appears to be whole of India. Further, the Informant has submitted in the Information that it had supplied the Xypex CDA product to other smaller projects in India as well. Therefore, the relevant market may be delineated as “Market for procurement of Crystalline Durability Admixture (CDA) in HIPs in India”.
18. As noted earlier, OP-1 is a corporation established and fully owned by the Government of Maharashtra, mainly dealing with the properties and assets comprising movables and immovables, including land, road projects, flyover projects, toll collection rights and works under construction vested with the State Government and under the control of the Public Works Department. These have been subsequently transferred to OP-1. But OP-1 is responsible for the development of HIPs in the State of Maharashtra only, and not all over India. There are many public and private sector companies such as National Highway Authority of India (NHAI), Larsen & Toubro Infrastructure Development Projects Limited, etc. in India that are presently involved in developing numerous HIPs across India. Thus, OP-1 cannot be said to be the dominant player in the relevant market delineated supra.
19. In view of the foregoing, the Commission is of the opinion that no case of contravention of the provisions of the Act is made out against OPs, and the matter is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act.
20. It is, however, made clear that nothing stated in the present order shall be tantamount to an expression of opinion on the allegations made in the Information, and the Informant shall be at liberty to avail its remedies in accordance with law, if so desired.
21. The Secretary is directed to communicate to the Informant and OP-1 accordingly.
