Tyre industry: Questioning cartelisation

Print edition : December 14, 2012

At Anna Salai in Chennai.-VINO JOHN

IN an order passed on October 30, the Competition Commission of India rejected the allegations of cartelisation raised against major tyre manufacturers by the All India Tyre Dealers Federation (AITDF). The order says there has been no substantive evidence of the formation of a cartel by the companies Apollo, MRF, J.K. Tyres, Birla, Ceat and ATMA (Automotive Tyre Manufacturers Association). However, informed sources in the commission said that an interim order passed two months earlierwhich this correspondent is privy tohad found violations of competition guidelines by the manufacturers and slapped a fine of about Rs.1,200 crore on the erring companies. Cartelisation is prohibited under Section 3 of the Competition Act. Interestingly, one of the senior members of the board had expressed dissent in the October order.

The final order said there wasnt sufficient evidence to indict the tyre-manufacturing companies of forming a cartel, a senior official in the commission, who is familiar with the case, told this correspondent. However, an interim order was released two months before where it was decided to impose a total fine of about Rs.1,200 crore on the manufacturers, which was later on altered. In fact, there is a factual error in the final order as it states that the order has been passed under Section 27 of the Competition Act, 2002, whereas the order should have invoked Section 26 of the Act, the official said.

Section 27 lays down guidelines for dealing with anti-competitive measures by a company. Outlining Orders by commission after enquiry into agreements or abuse of dominant position, it reads: Where after inquiry the commission finds that any agreement referred to in Section 3 or action of an enterprise in a dominant position is in contravention of Section 3 or Section 4, as the case may be, it may pass all or any of the following orders. The orders are outlined in detail, including the directions to the dominant entity to discontinue any agreement leading to abuse of its dominant position and on imposing a stringent penalty.

Section 26 (2) of the Act states that where the commission is of the opinion that there exists no prima facie case, it shall close the matter forthwith and pass such order as it deems fit and send a copy of its order to the Central government or the State government or the statutory authority or the parties concerned, as the case may be.

Meanwhile, the AITDF has decided to approach the Competition Appellate Tribunal, challenging the judgment.

Sagnik Dutta
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