CCI on Bid-Rigging under the Competition Act- Pune Municipal Corporation case

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June 01, 2018

In a case (In re: Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste Processing) recently taken up by the Competition watchdog, the Competition Commission of India (CCI) got the opportunity to elucidate on the law relating to bid-rigging and collusive bidding.

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The entire case can be accessed here.

In the case suo motu taken up by the Commission, it was of the view that prima facie OPs (Opposite Parties) appeared to have engaged in practices which directly or indirectly resulted in bid rigging or collusive bidding in contravention of the provisions of Section 3(3)(d) of the Act.

Bid rigging occurs when two or more competitors agree that they will not compete with each other for particular tenders. Thus, this concept allows one of the competitors to participate in the tender and win the same. In Re: Aluminum Phosphide Tablets Manufacturers[1]it was observed that bid rigging is the practice whereby firms agree amongst themselves to correspond the response of a tender.

While deciding the case, the Commission observed that:

  • That under the provisions of Section 3(3)(d) of the Act, bid rigging shall be presumed to have adverse effect on competition independent of duration or purpose and, also, whether benefit was actually derived or not from the cartel.
  • That in terms of the provisions contained in Section 3(1) of the Act, no enterprise or association of enterprises or person or association of persons can enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.
  • That by virtue of the presumption contained in subsection (3), 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;
  • (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.
  • Thus, in case of agreements listed under Section 3(3) of the Act, once it is established that such an agreement exists, it will be presumed that the agreement has an appreciable adverse effect on competition and the onus to rebut the presumption would lie upon the OPs.

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[1] Suo Motu case no. 02/2011