India’s competition appeals tribunal has upheld a decision imposing €784 million in fines against 11 members of an alleged cement cartel that agreed parallel prices and exchanged commercially sensitive information.
In a decision issued today, the National Company Law Appellate Tribunal upheld a 2016 decision by the Competition Commission of India to re-issue fines against members of the cartel for fixing the price, distribution and supply of cement – including to ACC and Ambuja Cements, which are Lafarge’s Indian subsidiaries.
India’s now defunct Competition Appellate Tribunal, which was replaced by NCLAT in 2017, quashed the fines in December 2015, after finding that the commission had infringed the companies’ right of defence.
NCLAT said the most “significant and clinching” evidence of the cartel conduct came from minutes of meetings organised by the Cement Manufacturers Association that showed the alleged cartelists met regularly to discuss pricing and sensitive information relating to production, capacity and cement distribution.
The tribunal also said the alleged cartel’s members discussed circulating data relating to production, capacity and exports among themselves, and that the association was used as a platform for the cartelists to agree maximum and minimum prices in the cement markets for which they were comfortable supplying price details.
The association argued that it was collecting cement prices at the request of government authorities, but the tribunal found that it was also sharing the data with its members.
NCLAT said it made its decision on the balance of probabilities and disregarded arguments from some of the cement companies that the standard of proof should be beyond reasonable doubt. Cartel conduct is not a criminal offence in India.
“What is required to be proved is a strong probability in favour of a pre-concerted agreement and the factors which we have highlighted go a long way in that direction and as plus factors,” the judgment said.
The cement companies argued that the commission had failed to establish the existence of an agreement among the 11 accused cartel members because of a lack of direct or indirect evidence.
Cement company Ambuja argued that the commission “simply assumed” the existence of collusion because market prices increased in the first two months of 2011.
Rahul Rai, a partner at AZB & Partners in Mumbai, said the decision establishes the principle that cartel conduct will be assessed on the balance of probabilities, but he noted that the order appears susceptible to challenge because the quantum of penalties is so “huge”.
He also said the tribunal has not provided a clear reason as to why it thinks the increase in prices was pursuant to a cartel arrangement.
“It has not provided strong reasons why it disregarded the applicants justification for the increase in prices,” he said. “It recognised the but for test but did not deal with this in greater detail. It is a worrying order.”
Chandhiok & Associates partner Karan Chandhiok said the cartel was the first “mega fine the CCI issued and from that perspective it is a win, despite the procedural and due process issues”.
“It is also the first important ruling to come out of NCLAT since it took over from the Competition Appellate Tribunal, and it will give a deeper insight into how the tribunal conducts analysis of competition cases,” he said.
Nisha Kaur Uberoi at Trilegal, who represented Ambuja Cement and Nuvoco Vista, said the fines imposed on both of those companies are unjustified and they have sufficient ground for a successful appeal, confirming that they intend to do so before the Supreme Court of India.
A source speaking to GCR on the condition of anonymity because they represented one of the cement companies said the case has been one of the most high-profile, long standing and contentious cartel matters since India’s Competition Act came into force in 2009.
“While it is open for the cement companies to appeal [against] the NCLAT order to the Supreme Court, this decision marks one of the first few substantive orders of the NCLAT in the competition law space,” the source said.
A spokesperson for LafargeHolcim said it continues to believe that the fine is unjustified and it intends to file an appeal with the Supreme Court.
“LafargeHolcim and its Indian companies Ambuja Cement and ACC Ltd have a comprehensive fair competition compliance program including detailed policies, training and a detection and remediation process,” the spokesperson said.
Counsel to Ambuja Cement
Partner Nisha Kaur Uberoi in Mumbai assisted by Soumya Hariharan, Gautam Chawla, Atreyee Sarkar, Ankita Gulati and Harshita Parmar
Counsel to Nuvoco Vista
Partner Nisha Kaur Uberoi in Mumbai assisted by Nandita Sahai, Shravani Shekhar and Nandini Pahari
Counsel to Ultra Tech
PH Parekh & Co
Partner Sameer Parekh in New Delhi assisted by Sonali Basu and Tanya Choudhary
Counsel to Shree Cements
Khaitan & Co
Partner Manas Kumar Chaudhuri in New Delhi
Counsel to Jaypee Cements
Luthra & Luthra Law Offices
Partner GR Bhatia in New Delhi assisted by Nidhi Singh and Modhulika Bose
Counsel to ACC
Shardul Amarchand Mangaldas
Harman Singh Sandhu in New Delhi