Flyash Based Bricks Manufacturers & Promoters Association vs Chief Secretary, Government Of Uttar Pradesh Sachivaliya, And Ors

The information in the present case has been filed by Flyash Based Bricks Manufacturers & Promoters Association (hereinafter, the 'Informant') under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, the "Act") against the OPs, alleging contravention of Sections 3 and 4 of the Act.

The Informant is stated to be an association constituted and established for the welfare of fly ash based brick manufacturers and for promotion of fly-ash bricks and green technology in the construction industry. The Informant is stated to be registered under the Societies Registration Act, 1860.

The Informant has averred that the OPs include Departments of Government of Uttar Pradesh and Government of India and enterprises owned by them, which are involved in building and construction activities. Some of the OPs are involved in construction of buildings as well as in regulation of construction related activities like approval of plans, sanction of maps, etc. It has also been submitted that (a) the area of operation of OP-1 to OP-44 is exclusively the State of Uttar Pradesh; (b) OP-45 to OP-48 are enterprises under the Government of India which are inter alia engaged in civil construction activities in the State of Uttar Pradesh; and (c) the remaining OPs i.e. OP-49 to OP-70 are financial institutions which inter alia finance public and private sector enterprises in building and construction activities.

The Informant has submitted that the Ministry of Environment, Forests and Climate Change (MoEF&CC) issued two notifications i.e. S.O. 763(E) dated 14/9/1999 subsequently amended vide S.O. 979(E) dated 27/8/2003 and S.O. 2804 dated 3/11/2009 subsequently amended vide S.O. 254 (E) dated 25/1/2016 (hereinafter, "Fly Ash Notifications") which made it mandatory for every construction agency engaged in construction of buildings built within a radius of 300 kilometers from lignite/coal based thermal power plants to use only fly ash based products for construction.

It has been further averred that for violation of the mandate as contained in the above stated Fly Ash Notifications, the jurisdiction of the National Green Tribunal, Principal Bench, New Delhi ("NGT") was invoked in O.A. No.102/2014 titled Sandplast (India) Ltd. and Others v. MoEF and Others. In the said matter, the Hon'ble NGT passed the following order on 24.9.2014 -

"In the meanwhile, we direct all the State Government/Public Authorities and Corporations to ensure that the aforenoted two notifications should be adhered to strictly and every tender for construction works issued by any of the State Government/Public Authorities shall contain stipulations and specifications as contemplated under these two Notifications."

Further, as per the orders issued by the Government of Uttar Pradesh in 2016, it is mandatory for every agency involved in construction activity within a radius of 300 kilometres from coal based thermal power plants to use only fly ash based products. However, even after passage of 17 years since the Fly Ash Notifications have come into force, these notifications are still at infancy and the OPs have not taken any concrete action to implement these notifications.

It has been alleged by the Informant that the OPs have an un-written understanding and anti-competitive agreement with the lobby of clay brick kiln owners and registered contractors due to which the OPs are defying mandatory provisions for use of fly ash products in construction activities.

The Informant has also alleged that the OPs are enjoying absolute monopoly and dominance in civil construction activities in the State of Uttar Pradesh as they control more than 90 per cent of all public sector construction activities across the State of Uttar Pradesh. Further, these OPs are abusing their dominance by not implementing the above stated Fly Ash Notifications and the judicial orders of the Hon'ble NGT.

The Informant has also alleged that OP-49 to OP-70 are dominant enterprises in the loan sector in the State of Uttar Pradesh as more than 75 per cent of loans for civil construction projects are financed by these OPs. Further, these OPs are abusing their dominance by not including a mandatory clause in the loan sanction documents that advocates for necessary use of fly ash products in construction activities in the State of Uttar Pradesh, in accordance with the Fly Ash Notifications.

On the basis of above, the Informant has alleged contravention of Sections 3 and 4 of the Act by the OPs.

The Commission has perused the information and the material available on record. From the facts and circumstances of the case, it appears that the Informant is aggrieved by the non-compliance of Fly Ash Notifications issued by MOEF&CC and orders of Hon'ble NGT in relation to use of fly ash based construction material in the State of Uttar Pradesh by various state agencies involved in civil construction activities. The Informant has also made financial institutions, financing building and construction activities in the State of Uttar Pradesh, as OPs for failure on their part to enforce implementation of Fly Ash Notifications in their loan sanctioning documents. The Informant has alleged that there is an un-written anti-competitive agreement amongst the OPs to restrict the use of fly ash bricks in civil construction activities, which is alleged to be violation of Section 3 of the Act.

In this regard, the Commission observes that the Informant has not placed any material on record to suggest that non-implementation of Fly Ash Notifications is because of any concerted action or agreement /understanding between the OPs inter se or between the OPs on one hand and the lobby of brick kiln manufacturers and contractors on the other. Further, there is no evidence available in the public domain to suggest any such concerted action in respect of non-implementation of Fly Ash Notifications on the part of the OPs. Mere allegations are not sufficient to form a prima facie view that non-implementation of Fly Ash Notifications is due to concerted action on the part of OPs. No agreement of the nature prohibited under Section 3 of the Act is discernible from the facts and allegations levelled by the Informant.

In addition to violation of Section 3 of the Act, the Informant has also alleged that the OPs are enjoying dominance in civil construction activities in the State of Uttar Pradesh and non-compliance of Fly Ash Notifications by the OPs amounts to abuse of their dominant position in violation of Section 4 of the Act.

For the purpose of analysis under Section 4 of the Act, the first requirement is to delineate the relevant market as per Section 2 (r) of the Act. The next step will be to assess the dominance of the OPs in the defined relevant market as per the factors enumerated under Section 19 (4) of the Act and once the dominance of the OPs is established, the final step would be to look into the allegations of abuse of dominance.

The Informant has not specifically delineated the relevant market in the information and plainly submitted that the OPs are dominant players and are abusing such position to deny market access to bricks manufactured from fly ash. The allegations in the instant matter relate to procurement of fly ash based bricks for construction activities. As per the Informant, fly ash is a by-product from coal based thermal power plants and is considered a hazardous waste material; in the past, its disposal had posed numerous ecological and environmental problems. However, due to their pozzolanic property, fly ash bricks and blocks are considered a solution to preserve the fertile lands and to fulfil the ever increasing demand for bricks in the construction industry. The other kind of brick that is primarily used in construction activities is the red coloured clay based brick.

The Commission observes that both kind of bricks can be used in construction activities interchangeably. However, use of fly ash based bricks is recommended over clay based bricks due to certain properties of the former like higher strength, uniform size of bricks, lower water penetration, etc. Further, the price of two types of bricks are very close to each other. Thus, the two types of bricks seem to be substitutable with each other. Therefore, the relevant product market in the instant matter would be 'market for procurement of bricks for construction activities'.

In relation to the relevant geographic market, the Informant has submitted that the area of operation of the OPs is primarily the State of Uttar Pradesh. Further, it is observed that members of the Informant are manufacturers of bricks/blocks made out of fly ash located in the State of Uttar Pradesh. The Commission notes that bricks are a high volume and low value product and as the proportion of transportation cost in the total cost of bricks is high, bricks cannot be sold in distant markets. Further, the Informant has also submitted that in case of OP-1 to OP-44, the area of operation is limited to the State of Uttar Pradesh. Therefore, they would procure bricks only from kilns spread across the state for their requirements. Thus, the relevant geographic market would be the 'State of Uttar Pradesh'.

Accordingly, the Commission is of the view that as far as OP-1 to OP-48 are concerned, the relevant market is the "market for procurement of bricks for construction activities in the State of Uttar Pradesh".

The Informant has submitted that OP-1 to OP-48 are operating and are involved in civil construction activities in the State of Uttar Pradesh in a significant manner and together they control more than 90 per cent of the public sector construction activities across the State of Uttar Pradesh. From the submissions given in the information, it appears that the Informant has alleged collective dominance of OP-1 to OP-48 in the relevant market whereas Section 4 of the Act stipulates that only one enterprise or one group can hold dominant position. Further, the Informant has also not provided any information regarding procurement of bricks establishing dominance of any of OP-1 to OP-48 in the relevant market. Hence, the present argument of the Informant regarding collective dominance of the aforementioned OPs cannot be entertained under the provisions of the Act.

The information available in public domain also does not indicate dominance of any of the aforementioned OPs in the relevant market. The Commission also notes that the Informant has taken into account the construction activities undertaken only by the departments/public sector while alleging abuse of dominance by the OPs, completely overlooking the construction activities undertaken by the private sector in the State of Uttar Pradesh. The Informant has submitted that OP-1 to OP-48 are consuming more than 60 per cent of the total bricks production in the State of Uttar Pradesh indicating that 40 per cent of brick procurement/consumption is done by private entities. Based on the foregoing discussion, it can be concluded that none of the aforementioned OPs appear to be dominant, individually, in the relevant market. Further, the aforementioned OPs are also not part of one group, which can be construed as dominant in terms of Section 4 of the Act.

As far as OP-49 to OP-70 are concerned, the Informant has alleged that these OPs are dominant in the market for financing of construction activities in the State of Uttar Pradesh. Thus, the relevant market may be considered as the "market for provision of financing services in the State of Uttar Pradesh". In relation to dominance of OP-49 to OP-70 also, the Commission notes that the Informant has not alleged dominance of one single OP in the relevant market and has not provided any information establishing dominance of any of these OPs in the relevant market. The information available in public domain also does not indicate dominance of any of the aforementioned OPs in the relevant market. Moreover, there are a number of private sector institutions also, engaged in similar activities in the relevant market apart from the aforementioned OPs. In view of the above, it can be inferred that none of the aforementioned OPs appears to be dominant, individually, in the relevant market. Moreover, they cannot be also considered as a part of a group as required under Section 4 of the Act.

In the absence of any dominant position being enjoyed by any of the OPs in the relevant market(s), the alleged abuse cannot be examined under the Act.

In the light of the above analysis, the Commission finds that no case of contravention of the provisions of Sections 3 and 4 of the Act is made out against the OPs in the instant matter. Accordingly, the matter is closed under the provisions of Section 26(2) of the Act.

The Secretary is directed to inform the Informant accordingly.