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Judgment
The present information has been filed by Association of Registration Plates Manufacturers of India ('the Informant') under Section 19(1)(a) of the Competition Act, 2002 ('the Act') against Shimnit UTSCH India Private Limited (OP-1/ Shimnit), Real Mazon India Private Limited (OP-2/ Real) and TEST Security License Plates Private Limited (OP-3/ TEST) (collectively, 'OPs') alleging, inter alia, contravention of the provisions of the Act.
The Informant is an association of registration plates manufacturers. It is stated to have filed various cases in High Courts/ Supreme Court for "larger interest of competition and public interest in the implementation of the High Security Registration Plates (HSRP) Policy'.
The information has been filed seeking investigation into the anti-competitive manner through cartelisation of implementation of the mandatory HSRP Policy in various States by the aforesaid OPs.
It has been stated that the HSRP Policy was promulgated in the aftermath of the Parliament attack in 2001, which sought to address the lacuna in registration and monitoring of vehicles in the country as the same had led to the usage of counterfeit registration plates over the vehicles and misuse thereof. The Policy is implemented in pursuance to Rule 50 of the Central Motor Vehicle Rules, 1989 and the Motor Vehicles (New High Security Registration Plates) Order, 2001.
It is alleged that the OP companies were type-approved on three consecutive days in the year 2001 by the testing agency i.e. Central Road Research Institute (CRRI).
It is pointed out that the Hon'ble Supreme Court in Association of Registration Plates v. Union of India, WP (C) No. 41 of 2003 decided on 30.11.2004, has held that the State shall have the power to select a manufacturer through notice inviting tender (NIT) and can impose tender conditions, for the purposes of manufacturing, supplying or selling of the HSRP.
The Informant has alleged that the tailor-made tender conditions ensured that only the OPs qualified for participation in the bids. It was highlighted that the rates quoted by the OPs in the bids were very high and the same could only be secured through a cartel if there was lack of competition in the selection process.
The Informant has alleged that a pattern was followed by the OPs in procuring the HSRP contracts whereby they connived with the officials of the Transport Departments to come up with tailor-made tender conditions so as to collectively bid and quote high prices to procure the contracts by subverting competition. Subsequently, when open NITs were floated by various States, the OPs were unable to eliminate the other competing HSRP manufacturers at the pre-qualification stage of the bidding process which led to steep fall of HSRP rates in those States. Thus, it is alleged that to circumvent competition and sustain their monopoly in the market, the OPs re-strategized their modus operandi and started dexterously quoting lower rates and connived to quote predatory prices in response to NITs.
Based on the above averments and allegations, the Informant has sought the following reliefs from the Commission:
(i) Direct the Director General to initiate an inquiry/ investigation on the cartel formed by the three companies namely, M/s Shimnit Utsch Pvt. Ltd., M/s Real Mazon Pvt. Ltd and M/s Test Security License Pvt. Ltd (formerly known as Tonnjes Eastern Security Pvt. Ltd.) and its appreciable adverse effect on competition in the HSRP contracts awarded to the same Companies;
(ii) Pass any order or direction which the Hon'ble Commission deems fit and proper.
The Commission has perused the information and the documents filed therewith.
The sum and substance of the allegations made by the Informant Association against the OPs essentially centres around the tendering process of various States in awarding HSRP contracts.
The Informant has stated that the OP companies have formed a cartel to engage in collusive bidding in various States to get HSRP contracts. It is alleged that OPs have been rigging bids with the connivance of officials of Transport Departments to come up with "tailor-made pre-eligibility criteria" which ensured erection of artificial barriers at the pre-qualification stage for other manufacturers. To buttress the allegation, the Informant has stated that in June 2014, CBI wrote letters to Chief Secretaries of Meghalaya, Mizoram, Arunachal Pradesh, Manipur, Sikkim and Nagaland requesting State Governments to grant requisite sanction in terms of Section 6 of the Delhi Special Police Establishment Act, 1946 for enabling CBI to investigate offences under Section 120B read with 420 IPC and Section 13(2) read with 13(1)(d) of the PC Act against Shri Nitin Shah, Director, Shimnit and some unknown officials of the Transport Departments.
Further, the Informant has shown through charts the rates at which tenders were awarded to the OPs in different States over time. Initially, when tenders were floated with "tailor-made" conditions, the OPs were awarded tenders at exorbitant rates in case of north-eastern States whereas after open NITs (i.e. without "tailor-made" tender conditions) were floated, the OPs re-strategized their modus operandi and started quoting unreasonably lower/ predatory rates for securing contracts. The charts containing the details provided therein are excerpted below:
Before Open Tender
States
Year
Rates
2W
LMV
MCV/HCV
Meghalaya
2008
924
2044
Karnataka
2008
627.75
1336.5
Goa
2008
696
1578
Rajasthan
2008
555
1130
Mizoram
2008
924
2044
After Open Tender
States
Year
Selected Manufacturer
Rates
2W
LMV
MCV/HCV
Andaman &
2011
Real Mazon
212
328
328
Nicobar Islands
Jammu &
2012
Real Mazon
169
401
401
Kashmir
Chandigarh
2012
Real Mazon
79
183
189
Rajasthan
2012
Real Mazon
75
220
232
It is also alleged that owing to aforementioned reasons, various States (Goa, Rajasthan, UP and Karnataka) cancelled the contracts initially awarded in favour of Shimnit (one of the OPs).
From the above detailed factual matrix, it is evident that the substratum of allegations made by the Informant rests upon "tailor-made" tender conditions which have been allegedly incorporated in the tenders floated by various State Governments for awarding HSRP contracts. These conditions are stated to be included with the connivance of officials of Transport Departments. The process for initiation of CBI investigation in this regard appears to have been set in motion.
The Commission notes that the Informant has made unique allegations against the OPs. Initially, when these companies quoted exorbitant rates, the Informant alleged cartel formation by them. Subsequently, when the tender conditions were eased, the Informant has alleged that they started abusing their dominant position through predatory pricing.
From the averments made in the information, it is observed that the OP companies succeeded in getting contracts initially when tender conditions were favourable to them and most of such tenders pertain to the year 2009 or earlier period. In fact, the Informant has mentioned that some of such contracts were subsequently cancelled by the respective State Governments. Post-relaxing of norms, prices have fallen and other manufacturers have got contracts as well. This is reflected from the chart furnished by the Informant itself which clearly indicates that other manufacturers have got tenders in various States:
States
Year
Selected Manufacturer
Rates
2W
LMV
MCV/HCV
West Bengal
2011
M/s Celex
282
441
469
Himachal Pradesh
2011
M/s Link Utsav
105
304
315
Punjab
2012
M/s Agros
100
295
315
Madhya Pradesh
2012
M/s Link Utsav Auto
98.65
296.03
228.19
System Pvt. Ltd.
Uttarakhand
2012
Link Utsav HSRP Pvt.
215.78
373.23
293.87
Ltd.
Pondicherry
2012
M/s Promuk
105.55
369.83
345.83
Delhi
2012
M/s Rosmerta HSRP
61.25
189.55
195.55
Ventures
Haryana
2012
M/s Link Utsav
107.02
321.91
247.19
Bihar
2012
M/s Link Point
131
335
310
Gujarat
2012
M/s Agros
95
295
280
On a careful consideration of the matter, the Commission is of the opinion that the allegation made by the Informant does not make out any specific case of bid rigging in any State tender post-2009. No conduct nor any evidence amongst the OPs post-2009 has been detailed in the information. The allegations, at the most, may indicate misconduct by public officials in connivance with some of the persons associated with bidding entities as also hawala transactions through shell/ front companies, however, same does not concern the Commission and cognizance of the same has already been taken by the Government and the CBI.
In view of the above, the Commission holds that no case of contravention of the provisions of the Act is made out against the Opposite Parties and the information is ordered to be closed forthwith in terms of the provisions contained in Section 26(2) of the Act.
The Secretary is directed to communicate to the Informant, accordingly.