Builders Association Of India vs Cement Manufacturers' ... on 20 June, 2012

Competition Commission of India

' Before The

Competition Commission of india

Case No. 29]*201l]

Oate of Order: 20.06.2012

Builders Association of india - through Shri o. P. Oua Si Shri Rahul Goel - informant

1. Cement Manufacturers' Association · through Shri Askok Oesal Si Others

2. Associated Cement Co. Ltd. - through Shri K. Venugal and Ms. Pallavi Shroff

3. Gujarat Amhoja Cement Ltd. - through Shri Ramji Srinivas St Ms. Anu Tiwari rl. Grasim Cement - through Shri Ask] Chinov Et Shri Pravin Parekh S. Ultratech Cement Ltd. - through Shri Aski Chinov St Shri Pravin Parekh E. lavpee Cement - through Shri ParagTripathi St Shri G. R. Bhatia T. The India Cements Ltd. --through Shri Harishankar S. J.K Cements {JK Group] · through Shri P. K. Bhalla

9. Centurv Textiles St industries Ltd.[Centurv Cement}- Shri Pramod Agarvvala St Others

10. Madras Cement Ltd. -- through Shri T. Srinivas Murthy

11. Elinani Cement Ltd- 'through Shri Aditya Narain &Shri Ft. Sudhinder-

12.Lafarge India Pvt. Ltd. · through Shri A. Haskar &Shri Samir Gandhi -- Opposite Parties

Order under Section 27 of the Competition Act, 2l102 The present matter relates to an information filed under section 19 of the Competition Act, 2002 [herein after referred to as the Act] on 26.07.2010 bv Builders' Association of india [herein after referred to as the _ _ ' informant] against the Cement Manufacturers' Association {herein after referred to as the Opposite ¤artv--1 or OP-1] and 11 other cement manufacturing companies __ he 12] for alleged violation of the provisions of section 3 · gd?

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2. The facts efthe case, as per the infermatien, in brief, are as under: 2.1 The infermant, a seciety registered under the Secieties Ftegistratien Act, 13E.U is an asseciatien ef builders and ether entities inyelyed in the business ef censtructien. 2.2 The DP-1 is an asseciatien ef the cement manufacturers ef India - in which beth public and priyate secter cement units are members. As per the infermant, the tetal strength ef the C¤P·1 es en iylarch 31, 2[IDEI, cemprising ef mest ef the big cement manufacturer stands at 45 in number.

' 2.3 The infermant has submitted that cement manufacturers, namely, Asseciated Cement Ce Ltd. {hereinafter referred te as C¤P-2 er ACC], Gujarat Ambuja Cement Ltd. {herein after referred te as DP- 3 er ACL], Grasim Cement [hereinafter referred te as ClF'--·¢1 er Grasim], Ultratech Cement Ltd. {hereinafter referred te as CIP-5 er Ultratech], laypee Cement {hereinafter referred te as CIP-E er jaypee], India Cements Ltd. {hereinafter referred te as CIP-? er Indie _ Cements], 1.K Cements ef Greup {herein after referred te as ClF'·B er .iK Cements],Century Cement {hereinafter referred te as C¤P·3 er Century], lyladras Cement} _ J Z hereinafter referred te as ¤P·1U er lyladras Cement], {hereinafter referred te as DP- 11 er Binani] and cl. {hereinafter referred te as i?`;?'Fi?r *:--&"5`$©Q

{]P--12 er Lafarge] are alse the members ef DEL 1 and are the leading manufacturers, distributers and sellers ef cement in India. 2.11 A.s per the infermant, the respendent cement manufacturers under the umbrella ef DP·1 indulge directly and indirectly inte menepelistic and restrictive trade practices, in an efiert te centrel the price ef cement by limiting and restricting the preductien and supply ef cement as against the avaliable capacity ef preductien. The cement manufacturers in cennivance with the DP- 1 have alse been indulging in 'cellusive price fixing'. They have divided the territery ef India inte five {5] zenes se as te enable themselves te centrel the supply and determine er hx exerbitantly high price ef cement by ferming a cartel in centraventien efprevisiens ef sectien 3 ef the Act. 2.5 Further, the DP·2 te UP-9, by virtue ef the fact that they ' cellectively held mere than 52.23% ef market share in India, enjey a pesitien ef deminance and arbitrarily increase the price ef cement. As per the infermant, the acts ef these cement manufacturers, under the aegis ef the {]P·1, tantameunt te abuse ef deminance under sectien 4 ef the Act.

2.6 The infermant has further submitted that the DP-2 and DP-3 are U the leading cement manufacturers having appreximately 21% market share in India. It has been alleged that altheugh with effect fre-m Nevember 1, 2DiZl9, DP- H_._lwf _ re ne lenger the members ef the DP- 1, resignatien fre is enly te keep their activities ef cartelizatien und are still actively participating in til

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the "benchmarl<ing exercise" of OF'·1. As per the informant, despite having resigned from the membership, {JP-2 and 3 have been successful in keeping their prices per bag similar to the prices per bag of other cement manufacturers who continue to be members of the ` OP-1. The informant has also alleged that the reasons stated bv DP-2 and 3 for discontinuing their association from the CJP·1 is an admission of cartelization amongst the dominant plavers as is evident from the following portion of news release:-- · " There is widespread feeling in the industry that CMA indulges in cartelization ond holds up cement prices artificially high. r Holcim feels that being associated with CMA would get them in trouble with competition commission in the EU and therefore they have withdrawn frarn the body. "

2.7 As per the informant, the DP·2 and 3 bv virtue of being the members of ¤P·1 in the past, have not onlv been active participants in the cartel but are also leading the acts of 'carteIitation* by the r cement manufacturers over the past couple of decades which is evident from various inquiries caused into the functioning of their holding companv, Holcim, bv various Courts and Commissions. Action has been taken against and Holcim group has been penalized and held guiltv of acts of anti-competitive activities all over the world. The informant has further out that the OP-12, "Latarge India", a subsidiary of ; materials major 'Lafarge*, has alreadv been fin d? nd 2008 for committing o e

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irregularities in different jurisdicticins which shpws that it is a habitual ciffender cnf prcryisicins cnf the cpmpetiticin laws. n 2.3 The infcrrmant has stated that due tcl their large market share in Indian market, DP-2 and DP--3 are in a ppsitipn tp fix price and alsp curtail ccimpetiticin by ccintrcnlling the supply cnf cement in the market. Relying upcin certain newspaper repc.·rts, it has been alleged · by the infprmant that the DP-2 and UP-3 in cpllusipn with the DP-1 has sbught tc.· cartelize, limit the prpductipnfsupply bi cement in the n market and fix the price pf cement thereby eliminating ccrmpetiticin ' in the market.

2.9 The infcrrmant has further alleged that in additicin tcl UP-2 and 3, the Dpppsite Parties listed as tZiP--·<l tp DP-12 haye alsp indulged intci yaricius anti-ccimpetitiye actiyities and haye cpllectiyely sclught tp cpntrpl the supply cnf cement. Accbrding tcl the infprmant, despite haying large capacities, the cipppsite Parties with the sple intentipn tcl cc.·ntrc»l the supply, prcnduce less cement and increase the market price pfthe cement deliberately.

2.1lJ The infcrrmant has alsci alleged that in additicin tc· limiting prpductipn in brder tb create artificial scarcity, the Dpppsite Parties thrpugh their ccrncerted W W I; in alsci rescirt tcl the practice cnf restricting the supply e builders and ccinsumers, causing artificial incr alsé cement. Acccirding tb the infprmant, irrespecti egicins and irrespective pf I ®__LQI*l•*

availability cnf cement cir artificial scarcity therecif in the markets, the cement prices have been increasing ccrntinuciusly. The acts cnf cement manufactures, in the past as well as in the present, have an adverse effect cm the ccmmpetiticin in the real estate sectbr and affect the interest cif the cbnsumers at large.

2.11 As per the infcmrmant, the cement manufacturers under UP- 1 . are ccintinuing with their i|l--intended acts cif price increase thrbugh the act af cartelizaticin, despite a *cease and desist c·rder' ccmtinuing under the directipns cnf the Hc1n'b|e Supreme Cclurt bf India. The Apex n l Cciurt had cinly relieved the cement manufacturers held guilty pf cartelizatian and restrictive trade practices under RTPE 99,*19% and RTPE 21,l2UU1 frpm filing affidavits pf ccampiia nce and therefcnre the 'cease and desisti ncrtices passed there under ccantinue in full fcrrce. The acts ef crmissicin and ccimmissicun by all the Gppclsite Parties are, therefcire, in vicilaticin cif the abcuve menticined 'cease and desist' cirder cnf the Apex Cciurt. I

2.12 Giving details cnf the ccintraventicin cnf the prcivisibns pf the Act ccimmitted by the Crppasite Parties, the infprmant has submitted that the cement manufacturers, including the Dlls - 2 tp 9 have set up their cement manufacturing units at different places in India, keeping in view the availability pf raw materials, pbwer, cbal etc. and accprdingly have diff hx J? raductipn. As per the infprm ant, in spite pf the af e fact that the manufacturing units cmfthe DPs ar _ persed and are having different "' fa af

costs of production and transportation, the DPs have in a concerted action uniformly and simultaneously increased their prices at the same time. The price of cement has been increased in ali the five zones [North, East, West, South and Central}, in which they are operating, without any direct link or correlation to increase in input costs in the respective zones. .

2.13 In order to put forth the acts of cartelization and undue increase in price of cement clue to anti--competitive behaviour on part ofthe DPs, the informant has submitted the following: 2.13.1 As per the informant, the construction and housing are the l sole consumers of cement. The growth in the construction sector decreased from 1U.1D% in 2DD?--DB to 125% in 2i]UB--D9 and was further projected at 6.5% for the year 2UlJEl·1D. Similarly, the growth in real estate sector came down from 3.52% in ZDDT-DB to ?.??% in 2nnS--D9 and was projected at 8.10% in 2uuQ-1D as per data published by National Account of Statistics, 2DDQ and press reports for 2lIllZ}El--1lZ}. Due to slowdown in the growth of construction and real estate sectors, growth in cement sector witnessed a downward trend from 9.%% in ZEIDS-El? to B.1396 in ZDDT-DB to ?.EllZ}% in ZEIDS-DS. As a result of this slowdown, utilization of installed capacity also came down to B5.5596 in ZDDS-EIS { ____I 3,,,;.;;; io in ZDDE-DB. The growth in cement sector increased ar ZDDS-1D due to revival in housing segment of r m April ZDDS. in spite of "" S

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growth in production of cement, the utilization of installed capacity got reduced to 82.AE% in 2{Zl{ZlEl--1{Zl. n 2.13.2 As per the informant, in spite of slowdown as discussed above, the cement industry during the year 2{ZIDB earned an Operating Profit Margin {UPM} of 26% on turnover of Fls. fi5,?1? crore, the highest DPM amongst 15 major industries save and except mining as reported by Capital Market, dated November 2, Zoo?}. 2.13.3 The informant has averred that the cement manufacturing units had deliberately reduced their production and produced much less than their installed capacity to create an artificial scarcity and ` raise the prices to earn abnormal profits. · 2.13.A According to the informant, despite various concessions and stimulus packages announced by the government in the wake of financial crisis of 2{ZIUS in form of reduction in excise duties, reduction in the price of coal, petrol and diesel, instead of reducing the price as was anticipated and expected by the government and consuming industries such as construction and real estate, the cement industry through an agreement caused an increase in the price per bag by Rs. 5,f- between December, 2ooB and February, ZUDH. In addition, the cement manufacturers increased the price from a minimum of Rs. 1Uf- to a maximum of Fls. 2 1__I_ , ___,__g g between lanuary·lv1arch 2DDS and April--lune ZDD9 Business Line, dated Zltifh November 2[H]9.

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2.13.5 The infbrmant has alleged that having increased the price cif cement per bag by Rs. 10 te Rs. 22 in the first six mcrnths af 2009, the cement industry, further increased the price tci the tune cnf Rs. 5 tp Rs. 15 per bag between December, 2009 and January 2010 as reparted by Financial Express cnn Sth February 2010. Tp make artiticial and unjust pretits at the cast ef the ccinsumers, atter the annciuncement caf budget ef 2010-11. the Uppcisite Parties further increased the price between Rs. 5 tb Rs. 15 per bag cm a plea that excise duty an cement had increased by 2% and that the price pf ceking ccral, being une ef the raw materials had alse increased by 2%. 2.13.6 The infcurmant has alsci submitted that the cement manufacturers admittedly have been centinupusly increasing preducticin pf PPC and reaping benetits available tp them by using *f|y-ash* in prcrductien which meant that the quantity pf preducffpn ef cement increased manifeld witheut any increase in the cast af prpductien er input ccists. The 'fly-ash' is being previded tci the n cement manufactures by the thermal pciwer plants, which are primarily crwned cir ccrntrcrlled by the gbvernment cir semi gcrvernment undertakings, at zere cest. The cement manufactures use ardund 15-20% fly--ash as raw material te preduce cement, amciunting tci direct reducticin bf 15-20% in the cest pf raw material used fer preducticin ef cement. _._I _. ,the cement manufacturers have net passed en the enjciyed by them te the censtructipn and real esta nsumers therecif. si fat: ·.~ta`*"<`J

2.13.7 The infcirmant has further submitted that netwithstanding the * slciwdpwn in the real estate and ccinstructien sectcir, the installed capacity cnf the cement industry, which was 219.131.1 millicin tennes as an Iylarch 31, 211-.*19 increased tc- 243 millicin tpnnes by March 31, 211113. In spite cnf increased installed capacities, the capacity utilizaticin which was 33% in 213133-139 came dciwn tcl 32.45% in lylarch, 213113. ` 2.13.3 As per the infermant, the cement manufacturers during April- .|une 213139 increased their respectiye installed capacity frem 219.17 millien tennes [as an lylarch 31, 213139] te 229.211 millicin tcmnes [by June 313 213139] and prpduced 5iJ.2¢1 millicin tcinnes. lilriclr tcl the unset pf mcinscicin seas11n'the demand fcir cement increases in the first quarter pf April-June ef any financial year. Due tc· the higher ccinsumpticin in this quarter, the cement manufacturers increase the prpductipn cif cement.

2.13.9 Due tc· this trend, the cement manufacturers c·ught tci haye increased the utilizatien cf their installed capacity frem 33% in 213133-

119. Hciweyer, the capacity utilizatipn declined tcl 33.33% in April 213139 and tcl 72.51% by June 213139. 13n the ccintrary, the DPM which was 26% in 211113--c1i1, increased tc 33131% i.e. 2.413% mcire cempared tp ' 213133-139. The ayerage prcifit margin pf six lead players pf the cement industry alsci was 35.111%, ahciut 1.713% mcire than ayerage industry ` as reperted by Capit ji 19"` Dct. 21*31139- 1"Ney. 213119. i 1 :133*

2.13.1lZl as per the infcirmant. frcim the afclresaid it is clear that the cement industry despite increased demand and increased capacity cpntinupusly utilized less pf their capacity with the intentian' and mptive pf increasing sale price pf cement thrpugh pripr arrangement ampngst themselves while wrpngly defending the same act tif increase in price due td reduced demand.

2.13.11 The infarmant has further braught aut that the trends with respect ta the installed capacity and utilizaticun pf installed capacity · far the pericud between July-September, 2DU9 were different than the trend in the previaus quarter. During July-September 2[it}9, due tp the rnensppn pericid, majcrr ccinstructien activities experienced a slewdawn and as a result, the cement praductien went dawn tram 5i].24 millipn tcinnes in first quarter tc: 43.32 miliicin tpnnes and utilizatican caf installed capacity alsa came dawn frem average 26.54% in first quarter tc: average pf 59.69%.

2.13.12 Hcuwever, acccirding tp the infcurrnant, the cement price per bag [during the lean periddl instead pf cpming dawn actually climbed up tram an average caf Rs. 255 per bag [in Aprildune, 2iZ}i]9] tp an average af Rs. 25B.5i] per bag {in .Iuly¢September, 2i]iZ}9}. As per the infermant, despite the slawdpwn in censtructipn activities and lczwer utilizatipn df installed capa a verage eperating prefit df six leading players [Dil 2 ·· by 5.5*9% cempared te industry's average pf as repprted by Capital iviarket dated Bpih Neve lltxér, iéiiaiil ' r' _·aeii

2.13.13 As per the infcnrmant, the ccanstructipn actiyities gained mpmentum during the 6ctc·I:·er--6ecen1ber 2669 and the cement prpductipn went up marginally tp 49.55 millipn tcnnnes cpmpared tp 48.32 miliipn tpnnes in the preyipus quarter pf July- 5eptember .The utilizaticin pf installed capacity aisp increased frpm 69.59% tp 76.73%. Hnweyer, the DPM reduced substantially frpm 27.14% tn 15.69% due tc: the reduced turnnyer pf Rs. 12,129 crnre against the turn-nyer pf Rs. 12,534 crpre nf the preyicius quarter as alsp repprted in the Capital Market dated April 5, 2616. The lpwer DPM was due tp the fall in the ayerage price pf a cement bag frpnt Rs. 258.56 per bag in the lean peripd tp Rs. 24l per bag in the busy quarter pf Dctpber- December, 2669.6espite the industry's DPM falling tn a meager 16.96%, the ayerage prpfit margin pf six dpminant players remained at 25.18%.

2.13.14 The cement industry picked up mpmentum in January-lyiarch 2616 wherein the industry added 14 millian tpnnes tn its installed capacity and prnduced 54.73 millien tpnnes cpmpared te 49.55 millipn tpnes nf Dct--6ec. 2669. With the increase in prcaductipn, the capacity utiiizatipn alsp increased frpm 76.73% tp 74.86%, thereby leading tp an increase in the turnpyer tp Rs. 12,569 crpre in Jan-Mar, 2616 as against Rs. 12,129 crpreh.,The 6Fiy1 alsn increased te 17.58% cnmpa red ta the 16.96 rter.

2.13.15 nccerding tn nntewprthy paint in the whale matter was tha fit margin {DPM] within the *' ala .·n¤>i"

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industrv et the big six deminant plavers was 2133% as against the 17.6B% et the industrv en the whele. The tact that price increases due te cartelizatien becemes evident trem higher price et cement * per bag during the peried. The price et cement per bag was made te escalate bv a minimum ef Rs. 5 te a maximum et Rs. 39 per bag acress the entire ceuntrv during Januarv - ivlarch 2010. 2.13.16 The infermant has centended that in view et ateresaid the reasens advanced bv 0P-1 and all ether Dppesite Parties that higher prices are due te higher demand de net held geed. Accerding te the intermant, the arbitrarv increase in prices bv the 0ppesite Parties is net determined bv terces ef demand and supplv. The demand and supplv ecenemics cannet remain same ter all the five zenes and weuld varv due te climatic, territerial and varieus ether reasens. Therefere, change in price et cement in all the zenes [acress India] cannet be directlv attributed te increaseidecrease in demand. The acts et the Uppesite Parties te unreasenablv increase price et cement are selelv determined bv their intentien et prefiteering bv means et indulging in anti-cempetitive practices.

2.13.1T·' Accerding te the intermant, if it is assumed that there has been an increase in price ef 2 _1_;d _ .:5:: t due te higher demand particularlv trem April 200 e decrease in capacitv utilizatien trem 94% durin 2008-09, and further te B2.4696 in 2009-10 see ntienal act en the part ` x";,P,;;& MG\Hg?>

ef Dpppsite Parties tp gain by arbitrarily fixing and escalatingjinflating price af cement per bag. 2.13.1B The informant has submitted that in case ef higher demand, all the Upppsite Parties wpuld haye wprked at mere than 93% pf capacity. instead, the Dpppsite Parties wcirking as a cartel chese te intentianally underutilize their plants and cpntinueusly preduce less than the demand fer cement, as is clear frem the fact that the capacity utilizatien shews a centinucius dpwnward trend frpm 93.33% in April 2D[19 tp 79.53% in iyiarch 2l71[}. 2.13.19 The infermant has further braught put that the cement industry has added 78 miilicin tennes between 2i7[i5-[17 and 2[ii79-1[i tp its installed capacity and the fact af this capacity additian being much mere than demand was alsp admitted by Sh. N. Sriniyasan, Managing Uirectpr pf India Cement Limited, the fciurth largest cement prpducer in the cpuntry in his interyiew tp Business Line as reperted en February 13, 2i71i7. Despite this, the price pf cement rpse by Rs. lifif- per bag ta Rs. 27,7*- per bag between January-iyiarch 2iZi[i9 and April-June 2[ii]9. The price af cement per bag further rese by Rs. 5;*- te 15;*- per bag between December 2i7ii9 and January 2[i1i7 as stated in Financial Express dated February 3, 2i71[i. 2.13.2D in iight ef the abpy K umstances, the infprmant has alleged that the price t was net due te higher demand but as a result ci the Dppesite Parties in cpllusipn with and under th · -1.

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2.13.21 In brder tb buttress its arguments further, the infcnrmant has breught but that the DP-1 by its membrandum bearing N0. 181,l'8E3,»*'2008 dated 15th Nbye mber, 2005 addressed te the Finance Minister, Llnibn bf india, had mentibned per bag cpst et cement te be Rs. 180.80. The intbrmant has brbught but that by taking Rs. 180.80 as base rate including prbfit bf cement cempanies; rate per bag during 2009-10 shpuid haye been Rs. 198.10. Hpweyer, the cement industry and the lead players raised the price upt0 Rs. 350}- per bag which shpws that the prices were increased by them under an agreement.

2.13.22 Accprding tb the infbrmant, the prcnductibn pt cement substantially increased during 2009, in ccimparisen te 2008 and with the increase in prpductibn, the unit cpst bf prbductien had substantially reduced. Despite the fact that the cpst pf preducticm had reduced, the unit sales price pf the cement went up by uptb l 8.55%, in cemparispn t0 the last year. As a result, the gap between cbst bf preductibn and sale price widened. Due tp this, there had been steep rise in grass prefits bt the 0Ps. ln case bf ACC, while grass prbtit rese trbm 34% in 2008 tb 80% in 2009, in the case at Gujarat Ambuja Cements Ltd., the grbss pretit increased tram 58% tp 80%. 2.13.23 The infbrmant has ayerr _$._,,_;m;|.S;gf_%e nbrrnal cdurse, in an unregulated market, if the de d the prpducticm bf the gbpds increases, then, th cts shpuld reduce; 15 w>_,»= ,.,;,,e""

particularlv, when cast pf praducticn alsa reduces. Hcrwever, in the present case despite the fact that the prdductian df cement had . increased and the ccist bf prbducticrn had substantiallv reduced, the average sales price during the vear 2ljiD9 had increased upta 8.55% in cbmparisbn ta the average sales price during FY ZDUB. This demcinstrates that the market prices were net determined bv the - demand and supplv, but, thev were regulated bv the Dppbsite Parties and thev had been able td bank high prefits, bv regulating the price despite reductibn in cpst and increase in prcrductinn. 2.13.24 Accarding ta the infermant, anather relevant, a canclusive fact evidencing the calluding nature bf the Dppcisite Parties is the fact that all cnf them acting in ccincert ccillectivelv decide ta increase the price per bag in all the zbnes. The advance knciwledge nf unifbrrn increase in price is evident frarn variaus repbrts which appear in the _ newspapers as is seen frpm news item appearing in 'Ecdnpmic Times' dated Nev. 2B, 2l§iD3 which fdrecasted the increase in prices df cement in future. As was published in the said newspaper repprt, all cement manufacturers increased prices per bag unifbrmlv in December 2[JD9. This act bf unifarrn increase in prices nf cement per bag was alsp repbrted bv Business Standard in its issue dated Dec. 3, 2DU9.

2.13.25 The infprmant has submitted that pericidical price increase fixed in advance is unequivbca/X J} the Gppasite Parties are acting in cbncert and are ind rice fixing. _ Eg §_.·is-_.: *5-

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2.13.25 The infcnrmant has averred that it has taken uppn the cause pf its membersfaffiliates and the ccinsumers at large and have · explicitly cnmplained cn several pccasipns befpre cpncerned authprities against the artificial ccrntrcllflimit pn prcnductidnfsupplv chains caf cement bv the manufacturing units as a means tp ccrntrcll the markets and inflate the prices pf cement td unreasclnable levels dnlv td unjustlv enrich themselves. Several leaders representing the cause pf cclnsumers in the Parliament and State Legislatures have shclwn ccrncerns and raised their vpice in suppprt bf the cause pf the builders and the end--c¤nsumers whe are being victimized due tp anti-cpmpetitive acts uf the cement manufactures. 2.13.22 Pursuant tcl the persistent ccmmplaints bv the builders, varipus cpmments in press bv the ministers cnf ccmcerned ministries as well as leaders cnf the crpppsiticlnt a Standing Ccrmmittee was apppinted bv the Tvlinistrv crf Cpmmerce and industrv pn the issue af the suspected acts cnf deliberate reductipn in prdductipn df cement caused due tp suspected cartelizaticln. The representatives pf the infprmant were called can Jan. 11; 2·1Z'.¤1C¤ tp make a representaticmn befcnre the Standing Ccmmmittee wherein details were submitted bv them.

2.14 Accprding tc:· the infprmant, cpmbined with deliberate withhplding pf prdductian, the D_P--1 A/MQ Dpppsite Parties have been reviewing the price, pr tch periddicallv and therebv maintaining and can ncl maintaining s.A,.·. l-;se;.<.ikv 1 ge

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high prefits. The representatives frem these Dppesite Parties have at ene eccasien er anether cerne fervvard te repert an expected hike in price ef cement per bag in the near future. The pgier knewledge ef n n trends in price hikes enlv gees en te shew that the prices ef cement have been artificiallv determined amengst the DPs themselves in erder te make abnermal prefits.

_ 2.15 The infermant has further submitted that the DPs due te their past recerds ef having feund te be indulgent in cartelizatien activities have beceme vigilant, therebv making it difficult te establish andfer . preve their acts ef cartelizatien and price-fixing. Accerding te the infermant, hesvever, facts ef the case as abeve shevv that Dppesite Parties agree an iixing prices, apart frem determining tetai industrv eutput, market shares and alse allecating territeries amengst themseives.

2.15 ln light ef the aferesaid, the infermant praved that the Cemmissien mav institute an inquirv against the DPs fer alleged cartelizatien and anti-cempetitive trade practices under sectien 3 and. 4 ef the Act. it vvas praved that the Cemmissien might pass suitable directiens se--·`_I_._;__1IF_|Tthg;;}--Ps might desist frem engaging in ca rtelizatien, cell and ether anti--cempetitive practices as men tien.

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3. Prima Facie Dpinibn

3.1 The Cemmissibn after farming an epinibn that a prima-facie case ' exists in the matter, vide brder under sectibn 2E[1} dated 15.U9.2D1U directed the DG tb investigate the matter and submit a repbrt.

4. Findings uf DG

il.1 Miter receiving the brder under sectibn 2E·[1} bf the Act, DG investigated the matter and submitted his repbrt bn 31.D5.2U11. 4.2 The findings bf DG, in brief, are discussed as under; -4.2.1 Giving details bf prnfile Dt cement industrv, DG has submitted that in India, there are 49 cbmpanies bperating with mere than 1?3 large cement plants. In additibn, there are manv mini plants Iecated arbund iimestbne clusters.

-*11.2.2 The pdsitibn bf installed and utilized capacitv as regards cement preductien, in different vears is as under; Year install ed capacity Pruductiun Capacity utilizatiun in Els in MMT in MMT

r¤¤5 at

=¤¤r

mug-na gg

mus-1e 245. l as

2¤1¤~11 zss. e { jg as

>_E`:- H {.-"-.r-- 4. rl.

'{i?»*»:;r ¤°$¥Q`\t

4.2.3 As regards prevailing market structure in cement industry, [JG has submitted that there are twe greups cemprising ef three cempanies whe have pan-India presence. The i-Ieicim greup which centrels ACC and Ambuja and Birla greup which centrels Ultratech _ . Cements. The tep three cempanies namely, ACC, Ambuja Cements, Ultratech have abeut AD96 ef the tetal market share. During the year 2Ule-11 their cembined preductien was abeut XXX millien tennes which was abeut }{}C<% ef the tetal preductien ef abeut 210 millien _ tennes by all the cempanies. The share ef i-Ielcim greup alene is mere than 2U% and ef Ultratech abeut 13% during 2[i1[i-11. #1.2.é There are ether big majer players whese presence is net pan India but have a streng presence in ene er twe regiens ef the ceuntry. In this secend categery, Jaiprakash Industries has the largest capacity efabeut 2[i MMT, whereas india Cement with abeut 15 MMT, 5hree Cement with abeut 13 MMT, Madras Cement with abeut 12.5 MMT and .I|< greup with abeut 12 MMT are the majer players. This categery cemprises ef abeut 18 players whe centre! mere than 50% ef the market share ef cement lndustry. ·r1.2.5 DG has alse reperted that the abeve lwe categeries cemprising ef 21 players centrels abeut 9U% ef market ef the cement lndustry. ACC, ACL, Ultratech cenx $[1% and 1B ethers in the secend categery ef the tetal preductien capacity. The third c ent manufacturers is ef e

l`":"E$

varieus small and mini cement plants with 1 te 2 MMT capacities n which nermallv eperate in a limited territerv. 4.2.6 As per DG, tep 12 cempanies, ACC Ltd., Ambuja Cement Ltd, Ultratech Cement Ltd, laypee Cement Ltd., India Cements Ltd., Shree Cements Ltd., Madras Cements Ltd., Century Cement Ltd., LK. Cements, JK Lakshmi Cement Ltd., Binani Cement Ltd and Latarge India Pvt. Ltd. centre! abeut 25% market share et cement in Endia. Therefere, the CIE tecussed his investigatieh primarily en the tep cempanies te investigate whether the cement manufacturing . cempanies have induiged in anti-cempetitive practices. ·¤l.2.? En ceurse ef investigatien, DG gathered that ter the purpese ef marketing, the cement industry has been divided in 5 regiensfzenes. AEE the cempanies teilew this geegra phical divisien and prepare their marketing strategies en the bases ef these zenes. Accerding te DG, the five regiens and the distributien et the tep cempanies in such regiens having the maximum market share are as under; Nerth .l&I·E,HimacI1al Pradesh, Punjab, Chandigarh ACC, ACL, Shree, Binani, Haryana. Uttarakhand, Delhi, Rajasthan lJItratech.1ai,ipee, .lK.. Centufvi JK Lakshmi

Chhatisgarh, Orissa, Bihar, Assam, Sikkim, ACL, Lafarge, ACC, Jharkhand, West Bengal, Tripura,Mizeram, Liltratech, Century, lavpee - Aruriachal Pradesh, Mani _ _Nagg_land, Meghalaya A I

west eujarseman aras iggag _-_' jig eg ACL, acc, einem, umaieca, `-L E India cErn'Ent; JK,. centuwg

·F *° :·€'

i . lx -_ .;;1_é;i,*i;.

JH Lakshmi, India Cement,

Jaypee

5¤·uth {ina, Daman &Diu,Kera|a, Itarnataka, India Eament ,I'vtadras ` Tamil Nadu, Pundicherry, Andhra Pradesh Cement, Ultratech, Dalmia, ,Andaman and Nicebar Islands Kesaram, ACI;. ACL, Ehetinad

Uttar Pradesh, Madhya Pradesh AEC, U|tratech,Jaypee, Century,

Biria Enrp,5hree. JK Lakshmi

ACL

4.2.8. DG has alse submitted that the maximum preductibn capacity is in Sciuth fcillciwed by the Nerthern regien. Andhra Pradesh is the biggest cement manufacturing State with a share nf 2D% ef the tetai prciducticin, fellnwecl by Rajasthan with abput 1?%. The demand nf cement is derived primarily frnm hnusing, infrastructure, Cnmmerciai ccinstructipn and Industrial segments. 4.2.9 DG has breught nut that the primary ingredient fcir cement is Lime stcine, which makes it necessary tci install the plant near the mines nf Lime stcine nnly. The transpnrtatipn pf cement being a Iciw ' value high vcilume prnduct, ever a Icing distance is unecnnnmical which makes the transpertatien nf cement an impprtant cast . cnmpcment. The high trans _ ' n cnst has created fragmented i ·='~ ?'-iii ._..

markets, which are . g_rgdQ;tj_§,Lthg;p nts Iecatecl in the vicinity, making tne cement i cia§rni.;i,aréhiv réei rir-=| i¤ nature. accarclinsiv. i~,:·i,,i_e.e., ,, QE

3 f<¥TT·=L`;}i°E*' ti

ii ip vsar;"?°'i** Fi

tl'- `- If;-E"

{Fei , ,'$•"'

xl Ir jj-I_-__j|:1I _

the factors of demand and supply situation vary from region to region.

¤l.2.1lJ As regards marbet characteristics, DG has submitted that the cement industry in India is oligopolistic in nature. Cement as a product has only 2 or 3 categories; viz; Drdinary Portland Cement {UPC], Portland Pozzolana Cement {PPC] and Portland Blast Furnace Slag Cement {PBFSC] though white cement is also produoed by some plants. The nature of product being almost homogeneous in nature facilitates oligopolistic pricing. Further the cement industry has . witnessed a lot of consolidation and concentration of market in the last decade. However, in terms of market power none of the company has strength to operate independently. DG has submitted that the price of cement charged by all the companies is not at _ competitive levels and the cement manufacturers have been operating at a profit margin of more than 25%. 4.2.11 DG found out that after the closure of the office of Development Commissioner of Cement Industry {DCCI] in 1989, the Department of Industrial Policy and Promotion, Ministry of Commeroe & lndustry, Government of lndia had directed the Cement lv1anufacturers* Association {Clv1.¤dLto collect and submit data which were earlier being collect under the instructions from DIPP, has been coll ail and wholesale prices of cement from across

f._%:i::.;`[" NE{.!©`;

4.2.12 Acccirding tcl DG, the analysis bf price data fcir cement has reyealed that there has been a ccintinucius ppsitiye grciwth in cement prices ciyer last 5-5 years. Further, there has been a cpntinupus divergence between the cement price index and the index price cnf · yaricius inputs like cc·a|, electricity and crude petrpleum and the gap ' has widened since 2[IDU-[11. The price ef cement is rising faster than input prices.

4.2.13 It has been ncnted by the DG that the price cnf cement has been ` en the rise since 2D[i4-D5 frcim abeut Fis.15D}'- per bag tc: clpse tu Rs.3UlIy'· in March ZU11, whereas during the same peripd, the cast ef sales has cmly increased abput 30%. As such, the price caf cement has been independent pf the ccist_c¤f sales. The price bf cement is changed frequently by all the ccimpanies. 5c¤metimes, the price changes are made twice a week.

4.2.14 Fer making an analysis pf the reascms behind centinucius rise in prices c·f cement, DG ccmducted inquiries frcim the cement cpmpanies including the Dppcisite Parties. It was gathered that prices caf cement depend cm its demand in the market and the decisicins _ relating tp change in price are taken cnn the basis pf the market feedback. It was gathered that althciugh increase in ccist cir taxesfleyies caf gciyernment a iieylluggtics and transpcirtaticrn ccusts in a particular territciry price determinatipn but cince the basic price is s tc, dll net haye any impact can the regular price mbyem ngtgg,

24 _

4.2.15 Based upcm the submissicms df the Dppcisite Parties, it was alsa gathered that althpugh their clecisipns pf price changes are taken independently but the price pf campetitprs are regularly mcmitcrred te respc:-nd te any price change made by them. The cast pf preducticrn dees net play an impdrtant rele in the decisibn af pricing af cement except when there is substantial change in taxes er the past cnf raw material. The frequency pf price changes cnf cement by all the campanies alsp indicate that the decisipns relating ta price are nat based pn the change in the cast af prciductipn. 4.2.15 Further, the price is alse affected by the price changes made by market leaders and the price cnf cather players is regularly cibseryed. It was alscr fciund that the prices mciye in a band width due te which similar trends are ebseryed in the price mcryement pf the Dppasite Parties in a gecigraphical area. n 4.2.1}* DG has feund in ccrurse af inyestigaticrn that change in price is mainly effected by external factcirs and nat by internal factprs like cast, preducticm etc. The inyestigaticin lay DG reyealed that althceugh it has been claimed by almpst all the parties that the price is decided cm the market feedback, nb fdrmal br systematic mechanism pr dpcumentaticm system was lay any caf the parties TD substantiate cnf reliance cm market ` feedback fc:-r affecting ef the prpcedure 2 t

adcipted by cement manufactures shbws that all the ccimpanies are having a centralized decisiclns making system. The cclmmunicaticins · between the cclmpanies and the dealers reflect merely the prices te - be charged and net the reascin cir any data tcl shew that there is mcire demand. Accbrding tcl DG, this shclws that the prices are fixed and changed in a discretibnary manner.

4.2.18 D-G has further repcirted that since as per the submissicrns bf the Clppbsite Parties, the prices mclve primarily bn the basis cnf demand, it was examined whether there was same authentic and reliable data cnf the demand bf cement in the market. l-iclwever, it has been gathered that there is nb fclrmal system cir mechanism cnf ccillecticln cnf data in place in case bf any cif the ccimpanies tcl l ascertain demand bf cement in a particular market tc- make decisibn relating te change in price. The cclmpanies were unable ta explain as n ID hclw the demand cnf cement was measured at a particular pclint cnf time. The cbmpanies have nnly stated that whatever quantity they prbduce is scild in the market and their dispatches reflect bcith n demand and supplies.

4.2.19 in such circumstances, when there is nb evidence cnf cclmpanies having reliable ur authentic sciurce uf data as regards demand ef the cement in @1 en the changes in price are made in shclrt intervals d that the cuntentien ef ccimpanies that the pric ,is§c»|e éper§iel t upun the assessment cnf market feedback is net t _ ;_e.-ll Sign; iéalsci be cclncluded that the ' =-if-.+, _-ig,·a'*

26 _

moyement of price of cement in India is solely dependent on the market forces.

-. 4.2.2G Eince it was found that the price was not determined by the market forces, DG made further investigations to examine whether there were other factors which are behind rise in the price of cement, in the light of allegations made by the informant that the Dpposite Parties were manipulating prices through their anti· competitive acts and conduct.

` 4.2.21 DG has noted that Tariff Commission, which is working under Department of Policy and Promotion in its report submitted in September 2lJ1cl to Department related Parliamentary Standing Committee on Commerce has indicated that the prices charged by the cement companies are unreasonably high and there is a lot of scope for correction in their prices. n

4.2.22 DG has submitted that the analysis of the margin of these companies including DPs also shows that they are operating with unreasonably higher profit margin. After conducting analysis of Cost Audit Report of these companies, DG has submitted that cost of sales which also includes the cost of production yaries from unit to unit within a group and also between companies. Howeyer, the data show that cement industry has been able to post consistently good performance and has been a f;_:I1_l;_l_'§se good margins during last 3- 4 years. Dn analysis o that on an ayerage the margin per bag of ce irngis §s.45f- which shows that the rs '-i_.¢Z· .. ;-- ·

`/`P?l¥_r Nssdqj

DPs are able te charge prices which are quite high and abcive the ccimpetitive level.

l 4.2.23 Un the basis af afpresaid, DG has submitted that the cement · cempanies have enpugh sccnpe te reduce price cnf cement. The cpmpanies have been trving tci utilize the demand pull tp imprcive " the margins rather than tci supply at cempetitive price. The ccimpanies have been taking advantage ef demand tp earn better margins an sales rather than meeting put the demand bv prciducing and dispatching the cement bv utilizing the capacity at aptimurn level.

4.2.24 In prder te lind ciut whether there is an agreement and cencerted acticin amcing the cement manufacturers tcl raise prices in a ccinsistent manner, in the absence pf ncl direct evidence, _ circumstantial evidences including behaviaural indicatars were analvsed bv the DG.

·=i.2.25 In this regard, it was fciund bv DG that the data an prices gathered during investigatien shaw that the prices ef all the cpmpanies mcive in the same manner, tciwards similar directicin. The ecenpmic analvsis ef the data canfirms that the cpetflcient ef cerrelaticin ef change in prices cir the mevement ef prices ef all the cempanies is pcisitive and are verv clpse tb each ether [mare than D.5%] giving a strcing in !_h__,lpn.-__,;_ rice parallelism. Price ef the cement af the Opppsit d in a particular directipn in {Ei-} r-,NExK-

the entire cduntrv in a given peripd pf time. The range pt price mbvement has aIsc· been tclund sa me ter all these cbmpanies. Accprding tp DG, this price parallelism is indicative dt prlclr H ccmsultaticm amdng the Dppclsite Parties. 4.2.25 DG has further tpund that the prices are alscl affected bv the price changes made bv market leaders. The examinatipn bl? small piavers revealed that thev simplv fcllipvv the trend pf maipr plavers. n 4.2.2}* Acearding tp DG, ncl specific reasprr far price parallelism has been given bv the cdmpanies. Since the cdst pf prpductidn, transpclrtaticm charge etc. varies frclm cempanv tcl cpmpanv, the price pf individual cpmpanles must alsd varv. Therefpre, the mdvement df price pf all the cdmpanies in the same range and in the same dlrectipn is nclt pdssible unless there is pridr cpnsultatipn and discussicm abc·ut the prices ambng them.

4.2.2S Based pn analvsis pl? cprrelaticlns c:·f absplute price, pribe change- and percentage price change, it has been cpncluded bv the DG that the prices df the Uppclsite Pa=rties shdvv a pclsitive cprrelatien n in everv State df dperatipn. Accprding tp DG, price parallelism amdng the Clppesite Parties stands established which is indicative ef their cclllusive behavidr.

¢l.2.29 DG has further feu capacitv at cement has increased frpm 1S? 2S? MMT bv the end pf `i -{Ps--s-ir I"=`i*"` n

March 2i]11. Hpweyer, the capacity utilizatinn is nn a cnntinunus dpwnward trend frcim 2DU·3·i]3. During the F.Y.2U1U-11, the capacity utilizaticrn has came dawn tn 23%. The Uppdsite Parties were nat able ta substantiate reascns far law capacity utiiisatipn eyen during the peried when the demand was high.

4.2.3U Acccrrding tp DG, reductinn in capacity utilizatinn is nat in line with ciyerall grciyyth crf Indian Eccincrmy. Further, as far as the cnnsumptinn is cnncerned whateyer is prciduced by cement manufacturers is cpnsumed in the market. Therefcire the argument ef cement manufacturers that the capacity utiiizaticin has been lewer in recent years cnn accpunt nf lpw demand is nut tenable. 4.2.31 DG has submitted that data relating tn capacity utilizatipn cnf Ultratech, ACC, Ambuja Cement, iaypee, lndia Ce-ments, Shree Cements and Madras Cements reyeal that utilizatipn pf capacity by them has been belew the ciptimum leyel despite the fact that na majcir additicin in- the capacity was made by them during the Financial Year 2i]1i]-11.

4.2.32 DG alsci cnnsidered the arguments af the cement manufacturers that the reducticin in demand had resulted in reductipn cnf prpducticin as it created prnblem cnf stprage and piling pf stack and faund that th M __ J_ _: EI as net suppbrted with any data and :1 anu ments.

+-- ii".

_,... .-.2- QQ?.

tiiiair .·'$i"`i`

¢i.2.?·?· Acccnrding tp DG, the afcnresaid facts establish that there was a ccnnscibus decisicin tb maintain law level bf capacity utilizatibn by the tfippcrsite Parties se that higher prices can be charged and abncnrmal prcsfits may be earned.

éi.2.?··<i The data furnished by the Uppbsite Parties in respect caf the plant wise mcnnthly prciductibn was analysed by DG te examine as tcm whether there is any cerreiatibn in change in prpducticsn cnutput ambng the cement manufacturers. The analysis carried but by the UG has revealed that there is a ppsitive cerrelaticin in prcnductipn putput arneng all the leading players cnperating in a particular regipnfstate. The analysis bf dispatch data fer the peribd twcs years frbm January EDD9 tci December 2DlD shciws that the changes in dispatches cnf cement by the tep ccnmpanies were identicals 42.35 Acccnrding tb DG, the cerreiatibn cbefficient cnf the dispatch _ data shcews a very strung cerrelaticnn arncsng the tcsp ccsmpanies. The decisiens relating tb increase br decrease in dispatches are sci clbse _ that it is indicative bf same kind bf meeting cnf mind. ··1i.2.36 UG has further stated that ever since EDGE-GT, the capacity utilizatien and cement price index are mcuving in crppcnsite directicun. While the capacity utilizaticnn has been declining, the price index has been increasing. This, accc¤r _Q_ _ r____ ¤ UG, is result cnf a deliberate li ",'· "

u "`?&=gs_- ;~Jie`i'°Q-

attempt te reduce supply by nc-t utilizing full capacity and thereby increasing price nf cement in the market. 4.2.37 Accerding tn DG, the Dppnsite Parties were giyen sufficient cppnrtunity tc justify the reascin fer reduced capacity utilizaticn but _except general reply nn specific reascin alengwith releyant reccirdsfdncuments cduld be furnished during inyestigatinn. DG has ccncluded that the reductinn in capacity utilizatinn during 2DU3-1D and 2DlD-11 was deliberate in crder tc limit the supply in a ccincerted manner tn charge a higher price. i 4.2.33 The analysis carried nut by DG alsa ccinfirmed that there was a prcducticn parallelism amcng the Dppcsite Parties which strcngly indicates their cderdinated behayidur.

4.2.33 DG has alse ccincluded that the Dppnsite Parties are charging unreasnnable and higher than cnmpetitiye prices. The last quarter nf F.'*i'r.2D1D--11 witnessed a price increase cf 2D-5D% thrnugheut the cnuntry in ccmpariscin tn prices in 3"" quarter c>f2U1D-11 which was a 1'esult cf reducticn in capacity utilizaticn and ccntrnlling the supply in the market.

4.2.4U Acccirding tc- DG .· Cement Industry in india is geegraphically nc single dciminant ccimpany whe has the market -- a leader in all the markets.

The cement manufactures have divided the market in five regipns and share pf each cempanv varies frnm market tp market. It was neted bv DG during investigaticm that the tclp cempanies have market leadership in cine pr mere market. This, accprding tp DG. allews them tcl ceerdinate their strategv tn maximize the prnfit bv charging unreasenable prices and facilitates the cnllusive price leadership in the market.

4.2.41 DG has submitted that the demand cnf cement is inelastic. ln such canditians anv ane firm can increase its share cnf the tptal bv cutting its price but this is likelv tcl cause a cnunter respense bv ether firms alsp. Such cpmpetitien will net increase tetal sales but will cut - prnfits pf all the firms. Under these cpnditipns all the firms can increase their prpfits bv reaching a tacit agreement as tcl the nptimal, ar near eptimal price level. Price leadership is ane wav af signaling ' the apprppriate price level.

4.2.42 DG fpund frpm the statements recerded during the cpurse ef · investigaticln that the prices are changed bv cement manufacturers cln the basis ef prices ef market leaders. The big plavers hcllding the . maximum share narmallv triggers the price increase which is fellawed bv the ether mi The cellusive price leadership is thus plaving a great nga;-&§;rple£'in iigei ancertecl acppn af cement manufacturers,

gf,. "·~.a;s=» Er

4.2.43 DG alscr fcsuncl that the cement cpmpanies are using the press and media fer signalling the price increase. The big players anncrunce in press ar Tv channels that there is a prcrbability cnf cement price ` hike in ccrming days which serves the purpcise pf price signals tu the ccmmpetitprs. n n

4.2.44 Accbrding tp DG, aithciugh the Uppbsite Parties and CMA have denied that the prices and prcrducticin related issues are ncrt discusseclfexchanged pr ccrvered under the activities cnf CMA, there _ exists a system pf exchange crt price infcrrmaticmri amcing the members pf Civi.4 an weekly basis aerpss the cbuntry. The CMA has ncmminated different cpmpanies in 34 different centers tcr cailect and disseminate the retail as well as whelesale price tcr the CMA. This infcmrmaticin is either cpilected can phpne pr thrciugh e·mails. 4.2.45 When asked by DG as tu why this activity crf ccrllecticrn and n disseminatipn crt price data shciuld nat be treated as a vicriatipn crt the prcuvisibns pf cbmpetiticun Act, it was stated by Civi.4 that they were dcring it under the instructipn cnf DIPP. DG, hawever, has fcrund the practice pf ccrllecting the weekly infcrrmaticrn pn prices by the member ccrmpanies as raising seribus cancerns under the prcnvisicuns crt the Campetitibn Act. Accprding tu DG, the eprnmpn platfcrrm ef Civi.4 is used fer ccmllecticin an _ piiss~em_inaticrn cnf the infcmrmaticrn an prices at different cpmpa infcmrmatipn the different cbmpanies came tb kn sbt all the cpmpanies prevalent in the different y. This price infnrmatiun

I helps them to take collectiye decisions about the future price changes. ·

4.2.45 During inyestigation it was also gathered by DG that the CMA has formed a High Power Committee of its members. The prices of n cement are discussed in the meetings of this Committee, For instance, meetings of High Power Committee of Cement Management Association were held on l]3.U1.2·.'jl11, 24,l§l2.2Cl11 and lZl4.[13.2lJ11, after which prices of cement of all the top companies who were present in these meetings had increased. The meetings dated 2-4.l]2.2lJ11 & Cl-=l.Cl3.2C|11 held in Hotel Orchid, Mumbai were also attended by ACC and ACL, although they haye resigned from the membership of CMA which establishes that ACC and ACL are still working in coordination with CMA to achleye the ulterior motiye of profiteering by wav of fixing price and controlling the production of cement in the market.

-=l.2.-A? DG has concluded that in the guise of the meetings of High power committee, the cement manufacturers are entering into sorne arrangements and understanding to manipulate the price of cement in yioiation of the Act. Further CMA's publications which are internal circulation meant only for members, contains the details of production in respect of each pla member companies. The publications in the form of * ry -- Cement lndustry* and *Cement Statistics -- ement of Cement* ik la, _l`l.__

`·' lrggizeisis-* *

I ;i>_I;?:?-F-;.¥--:¤'E·¥x@¢EQ}"-'

released every manth fdr circulatidn amclng the members cmly prdvide the minute details pf prc·ductic·n, dispatch pf each cclmpany which facilitates the member cdmpanies tc· exchange the prdductian n related infcnrmaticln and decide prcnducticln strategy in line with clther member cclmpanies.

4.2.48 Acccnrding tcl DG, it is clear that the CMA is prcvviding a platfc·rm fclr the member cement manufacturers as well as tcl ACC _ and ACL tcl act i_n a cclclrdinated manner tcl decide the pricing and prciducticm strategies in cc·ntraventic•n cf the pravisicns df the Cem petiticm Act. n

4.3 Based upcm findings c·f his investigaticln as abcnve and after ccnnducting analysis cnf factclrs mentidned in sectic·n 19{Ell cnf the Act, DG has ccnncluded that it is established that the Dpppsite Parties are cclntrcllling the supply df cement in the market by way pf same tacit agreement. it has alsd been cpncluded that the Dppclsite Parties have indulged in cbllusive price fixing.

4.4 In light pf afciresaid, DG has ccnncluded that the allegatidns ` against the Dppclsite Parties that they have entered intc· anti- cclmpetitive agreement amang themselves tcl manipulate the supply and price cnf cement are substantiated. Accdrding tcl DG, the act and cclnduct cnf the Dppclsit _____ Q aTrt`ie'_s-_ are anti-cclmpetitive in ccintraventicnn cnf the Bill, 3{3]{al, 3{3][bl ef the Cpmpetitidn Act, 2DU2. ln _

t H .r*l`f:l'§L_`l,=Z' +

5. The Ccnmmissien cunsidered the repert ef DG and decided te fqrward the same tp the parties fer their cnbjecticnns, if any. The ' parties submitted their written dbjectibnsfreplies in respdnse td the findings cnf DG. ln additipn, eral arguments were alse made by them in cqurse ef inquiry prqceedings befere the Cqmmissien. The repliesf ebjecticnns cnf different parties, in brief, are as under; 5.1 Re ply cif Cement Manufacturers Asscrcia tien {DP-1} 5.1.1 Cement lvianufacturers Asseciatiun {CMA} in its written and caral arguments submitted that it was establishecl in 1951 under the Sdcieties Registratien Act, 1BED as an Asseciatien caf Cement Manufacturers tc: prcimete ccnmmcin interest uf its members and tci cqmmunicate and represent gcwernment in relaticin te the affairs and grievances bf its members. lt alse assists Planning Ccimmissien and Parliamentary Cemmittees as and when required with data pertaining te the industry. It dees net indulge in disseminating ccnmmunicatien amcing the members and it_has ncn ccimmittee cin prices.

5.1.2 Acccarding tb CMA, it has Q2 cement ccnmpanies as its members. _ There are a number ef cpmpanies which manufacture cement and have large, medium and mi. ____` }___ | ` but are net the members df CMA. Fer instance, A are the leaders amengst cement manufactures iid-! abciut 21% pf the market :>s*T JH 4.9/'

Q ll.?<*5il 'llillb .

resigned from CMA in November, Zooa and are no more its members. _

n n 5.]..3 Denving that respondent cement manufacturers along with it have been indulging in 'collusive price lixing* and also that the territory of India is divided into five zones so as to control the supplv and determine prices, CMA has submitted that description of cement market into five different zones is in existence since the time cement was a controlled commodity. This cannot be the basis to sav that the n cement manufacturers under its aegis have controlled the supplies or fixed prices.

l 5.1.4 CMA has also denied that the DP-2 and 3 withdrew from its membership since it indulges in cartelization. The apprehensions of OP-2 and 3 cannot form the basis for an allegation of cartelization against it.

5.1.5 According to CMA, the report of DG is based upon surmises and conjectures and ought to be rejected. DG has examined various non-members of the association without providing anv opportunity of cross examination. Further, rnanv materials have also been collected at its back. M"

.;Q;e¥ .lr..%

_ 5.1.6 lt has also bee ti ment being a bulkv product with si limited shelf ifferent prices in different \£;:;__ in rg

geegraphical markets. Further these prices vary frbm week tp week and semetimes even twice a week. The prices dbnlt meve in bne " dire•:tien' but they ge up and dbwn depending pn the market - cnnciitiens. There is a time gap in between cnllectipn ef data pn - prevailing price at the time when supplied tc· it and when it sends it te the Gevernment. The price which is cpllected, usually, has always ' a time gap ef pver a week c·r sp.

5.13 CMA has averred further that the eellectipn ef infermatipn bf price is spught fer by the gevernment itself. lt dbes net cc·llect prices tram each pt its members. It is a matter at recprd that after clasure ef the crffice pf Develcipment Cbmmissibner pf Cement Industry {DCCI] in 19BE, it was directed by the Department cnf industrial Pelicy and Prbmetipn, Ministry at Cemmerce and Industry, Gcrvernment pf India tcl cpllect and submit data regarding prciducticln, capacity additipn, which were earlier cellected by DCCI. Under instructiclns frpm DIPP it has been cbllecting indicative retail prices ef cement en weekly basis fer whcilesale price index frclm acress the Cpuntry. Ne adverse inference can be drawn frpm mere histerical cellectipn pf indicative range ef prices at 34 centres fer the previclus week. _ 5.l.B In fact after the Cempetitien Cpmmissien was established, it had alsp written a letter ,;.2 _ er Secretary {DIPPI, Ministry ef Cemmerce and Indus seeking clarificatipn as tp whether it shpuld ish retail prices tc· the wei

Gevernment. Only after getting ned frem DIPP, it has been cellecting and sending te the Ministry the statement ef indicative weekly retail cement prices frem varieus seurces. As late as en 1I·'"" January, ZU11 Under Secretary te the Gevernment ef india, Ministry ef Cemmerce and lndustry, Department ef Industrial Pelicy and Premetien directed it te furnish infermatien in prescribed fermat fer a meeting ef Greup ef {Jfficers en infrastructure which was te be held en 31SI January, 2C·11.

5.1.9 Further, in a meeting cenvened under the Chairmanship ef the Ecenemic Adviser, Ministry ef Cemmerce and Industry en dm February, ZUDS te discuss the issue ef data en cement prices frem varieus cement cempanies fer new series ef Whelesale Price Index, the asseciatien was requested te ensure that price data fer li] cities cevering all the five regiens be supplied te the Ecenemic Adviser en menthly basis fer the calculatien ef Whelesale Price Index. 5.1.1D The Under Secretary, DIPP in anether meeting earmarked the cempanies which sheuld furnish data fer specific centrefregien alletted te them. Censequently a circular was issued te the cencerned cement cempanies te cemply with such directiens issued by the gevernment. l

5.1.11 Accerding te missien censiders the said l cellectien ef data whi in histerical being vielative ef 5;-* ._c. ""

IJ if-Ngelgql

any pf the pruvisipns pf the Act, it wpuld step the said practice fcirthwith. Hpwever, np adverse inference fpr its cpllecticin cnf data can be drawn againist it, The said data are alsp available in . - newspapers and magazines including Indian Cement Review, [liv-'llE'5 - lvlcrnthly review etc.

5.1.12 Elvle. has alsp submitted that it has alse taken ppinibn bn whether their activities are in any manner vielative pf any pf the prpvisipns ef the Act and in the ppinicin pf legal luminaries like the _ ' Hbn'ble Retd. Chief Justice, P.l-il. Bhagvvati, ncnne of its activities is viblative pf any pf the prbvisibns bfthe Act. 5.1.13 Accbrding tc- EMA, a bald allegatipn has been made that there exists a system pf exchange pf price infprmatipn ampng its members pn weekly basis withput any material basis. In sp far as lZIlvlA's rele is cpncerned, the idea that it cpntrpls the price pf cement pr that it indulges in cpllusive price fixing is tptally unfpunded. 5.1.14 lt was alsp submitted that Elvin cpllects the prices npt pf a particular brand af cement but cement as an articlefprpduct in a given market. It dues net callect price mbvement pf each pf its members Of each cemen _·_1 Z C _-fwuring cempany but is infbrmed pf the average preval `'``' et fer the purpbses bf bnward l trensmissi-an iv ¤»

5.1.15 CTv1A has alse denied that price ef cement increased after three meetings ef the High Fewer Cemmittee dated C·3.C·1.2C·11, 2·=LD2.2D11 and D·1.Ci3.2D11.The prices varv frem week te week and semetimes twice a week. Therefere these three meetings cannet lead te an inference that thev. had anv impact en fluctuatien ef prices. In anv event there is net the slightest evidence that prices were discussed at these meetings ner is there anv explanatien as te whv enlv these three meetings have been referred te when meetings ef its High Pewer_Cemmittee take place periedicallv. 5.1.16 After each such meeting the prices ef the cement have either gene up er dewn er have remained stagnant in natural ceurse as the prices ef cement vary frem week te week er at times with mere frequency depending en 1he market trend.

5.1.1? Accerding te CMA, it is incerrect that ACC and ACL attended the meetings ef Clv1A en 2¢i.e2.2C·11 and DA.D3.2e11 as alleged since after ACC and ACL ceased te be the members ef the asseciatien, thev have net attended anv High Fewer riemmittee meeting ef the asseciatien.

5.1.15 CMA has breught eut in their arguments that in a hemegeneeus preduct lib? impessible te guide and bind all cencerns te felle such dietates were and are never issued and ceu déet ued under its ebjects te its sgi; ';3.;§¤*

ite? ,-·i-ie*i°

members fer regulating prices. It has ne disciplinary pewers ner has there been any instance ef exercise ef any such disciplinary pewer in an alleged actiyity ef price fixatien. The DG had examined its President and senier efticials ef ether Clppesite Parties as alse ethers and nene ef them have said that CMA plays any rele in price fixatien ef cement er has any autherity te fin; the same. 5.1.19 Accerding te CMA, there is alse a reference te a judgment ef the MRTP Cemmissien in the repert ef DG abeut it being guilty ef yielatien ef ly1RTP Act yide its erder dated 2lZltl" December, 2[ll]?. Heweyer, the said erder was stayed by the Supreme Ceurt and it cannet pessibly be used against it. '

5.1.2D CMA has further submitted that it is a fundamental right ef an industry te censtitute an Asseciatien whether they are traders, manufacturers, retailers, residents, shepkeepers etc. lt is an accepted _ fact that the Asseciatiens whether ef Manufacturers, Traders, Empleyees, Labeur etc. play a pesitiye rele in deyelepment ef the seciety and, haye cellectiye bargain pewer te take up issues cencerning its members with geyernment er ether autherities. Therefere, the mere fact that cement manufactures fermed an Asseciatien dees net imply that the said Asseciatien was fermed te l indulge in any aetiuityw l`··'- |gw_ 5.1,21 lt is well settled an *agreement' which is alleged te be anti--cem explicitly established fer tri sf;-'

-' yae"·;·"

finding ccmtraventicin under sectipn 3 ef the Act. The DG has failed in adducing anv direct and cegent evidence tc: satisfy this primarv " criterian. The threshclld fer establishing the existence cnf an- agreement has net been met in the present case and therefbre the accusaticlns must stand dismissed and shcuuld net be entertained n further. Even if it is cclncedecl fer the sake ef argument that indirect ecbncumic evidence can be admitted fer the purpese ef speculating the existence at an agreement, it is indisputable that such evidence n . must be unimpeachable. Hewever, in the present case, even the indirect ecenemic evidence prpduced is highlv vague and suffers frbm numercuus infirmities. The DG has emplcived an arbitrarv pcilicv with respect te chaesing the gepgraphical market. 5.1.22 Accbrding tp Cl'v'lA, the DG in the present case, has spught tc: reveal price parallelism bv aggregating the data ef varipus regians te farm five zenes whereas tc: indicate similaritv with respect tb preductien dispatches, the DG has shifted his fbcus en data ef individual status. The methcudcllclgv ef the DG tp shift the geegraphical market as per his whims and fancies gaes against the tenets ef Cbmpetitien law. .

5.1.23 CMA has alsp stated settled law that mere price _ parallelism cannbt lead cartelizatien since such price parallelism is bpu in gasl s where a hembgencius praduct is seld in the sa ctrine which is recpgnized "ieii .·ae*"©

its

as 'paral`|elism pIus* by U5 as well as European Courts has been n accepted also by the Commission in the recent case of 'ln re Glass _ Manufacturers of India ·lvlRTP Case l*~lo.1E·1,l'2DUB dated 2¢l.o1.2o12.* Competition Commission of Singapore has also noted that similar . prices or changes of prices at the same time does not always reveal price fixing since prices may move in tandem in a highly competitive market because of market forces.

_ 5.1.2él CIvlA has contended that cartelization is a serious allegation and leads to penal consequences and therefore the same cannot be imputed against a personfassociation on surmises and conjectures alone. There is no evidence, either direct or circumstantial to implicate the association. Proper and fair investigation is the backbone of rule of law as held by the Apex Court in the case of 5asi Thomas vs. 5tate [EDGE 12 SCC -*121]. l-lowever, in the instant matter the DG has failed to conduct proper investigation and meet the n standards required by the law.

5.2 Reply of ACC Ltd. [DP-2}

5.2.1 ACC Limited submitted its oral and written arguments before the Commission on different dates. Along with its written submissions, it also e_,_;_ leconomist report from Nathan Associates inc. on DG. ln its replies, ACC has submitted that the lbé ,-produce any direct evidence /. ` .b?~

which suggasts that ACE antarad intc· any illagal agraamant in yialaticin at sactian 3[1] raad with sacticun 3[El} af tha Eampatitian _ ' act. Tha DG has cpmmittad a fundarnantal arrar in failing tc· astaplish tha tirnafrarna in which tha allagad cartalfanti-campatitiya actiyitias tack placa, which lis assantial ta many aspacts af tha casa, including tha pariad during which sacticin 3 af tha Ec·mpatitic·n Act was nc·t in farca.

5.2.2 Accarding ta DP-2, it is cc·rnmcinly undarstcicid that, far a cartai tp suryiya thara must ha machanisms in placa fc·r ia} ccnardinating tha cartal agraamant and ta ansura its functicining [ti] manitaring tha _ bghayiaur and ccnduct af tha mambars c·f tha cartal and [c} punishing mambars af tha cartal wha da nat fall in lina with tha dacisian af tha cartal. Tha DG has failad ta praduca any ayidanca which suggasts that any af tha abc·ya manticinad alarnants ara prasant in tha lndian camant industry.

- 5.2.3 Tha DP-2 has furthar submittad that as adrnittad by tha DG, prica yc·latility is a parmanant charactaristic cif tha camant industry. Cansidaring this yalatility, na rncinitaring c·r punishmant machanism can affactiyaly cc·ntrc·I rnarkat campatitars, which is pracisaly tha raasc·n that na such machanism axists. Tha DG has maraly raliaci c·n tha parallal natura cnf pri and dispatchas ta suggast that thara axis thaxgln ian carnant industry, which is a basalass ccinclusia af tha markat canditians. l ac _

5.2.4 it has npt engaged in limiting the supplv bf cement as it has been ccmsistentlv running at apprciximatelv KKK [cnn an average between 20D? and 2i'J·lDl bf their available capacitv. which' is significantiv higher than the inclustrv average calculated bv the DG I and alsci exceeds the glc·bal benchmark fer capacitv utilizatipn. 5.2.5 Accprcling tc· GP-2, prices caf cement are net abc·ve the ccimpetitive levels as manv cement prciducers have repcirted lcisses in scime quarters, and all have repcirtecl a fall in prcifits and margins · civer manv quarters. Further, the cement price·rise has been far belciw the general lndian inflatibn level, ancl, the increase in cement prices have been the lciwest within the ccmstructibn materials n inclustrv. The fact that the market cnf cement is verv ccimpetitive is apparent frcim the fact that HHI cf the Indian cement inclustrv is ESB. In fact, the HHI index fer the indian cement industrv decreased frcim TSB tp EBS civer the last tive vears, indicating that the industnv has beceme even mcire fragmented and, therefcire, mbre ccimpetitive, in spite cnf sci called big-ticket mergers like merger between Ultratech and Grasim.

5.2.5 Accerding te ACC, barriers tb entrv in cement inclustrv are quite lciw which has led tcl demand fuelled expansicin in the cement industrv. ln additibn te entrv caf large internatibnal cement ccimpanies, Lafarge in- P} ti in ZDDD, CHH in ZDDQ and _ vicat in 2u1D, the has alsp witnessed significant entrv and .· bv small and mid-size l°"?...·--» 1Qr?"

ries .··a--a*'

entrants, ncrtwithstanding the high capital ccsts in setting up a cement plant. in additicn tc new capacitv that has been added bv the incumbents, manv high prclile large infrastructure ccimpanies and. cthers have alsci entered the cement market. India's largest prcducer cnf steel {i.e. Steel Authbritv ef lndia Limited] has alscr entered the cement market thrcrugh a ],cint venture with Javpee Cements with plants at Bhilai and Bdkarcr.

5.2.}' Further manv cpmpanies like 'lvivheme Cement, Penna Cement, Sagar Cement, Deccan Cement have increased their scale and are ncl ienger mini cement prcducers. in additicrn, there are manv new entrants at an advanced stage cf setting up cement plants like - Reliance ADAG, Wander Cement, AEG Shipvard etc. New entrants like Emami Pcwders, Nirma Scraps, Rain Cdmmcrdities, Cement Ccrpcraticn cf India ia whcllv cwned subsidiarv df the Gcvernment cf India, has restarted prcducticn] ivieghaiava, Cement lnternaticinal and Saraf have annbunced new cement plants. lt alsd has lcrst its share cnf the market c·ver the vears between 2DDS and 2DDS in all regicns, which can be attributed td new entrants entering the market and creating space fdr themselves.

5.2.8 ln light pf afcrresaid, in cdntrast tcr what DG has brcught nut Indian cement industrv can cnlv bexswaid td be a ccimpetitive industrv. sr,. `'.` .

5.2.9 As regards capaci additicrns, ACC has submitted that data frdm fundamental errdrs. Indian cement industrv capacity and the l Ii ·f-i'a_=5· .·*d'~i`i"{`}.

ria

capacity utilizaticvn is much higher than what the DG has claimed. The capacity and capacity utilizaticin have ta be analyzed using the capacity available far prpductipn and actual prcuductibn, as crppcvsed - ta ccimparing nameplate capacity and actual prpductipn. Further, _ capacity utilizatipn heavily depends can varipus extrinsic factprs, such as, the availability af railway rakes, shartage af key inputs, labaur shcrrtages, pawer blackduts, palitical stability in a particular State, availability af trucks, late arrival cnf inputs etc. 5.2.1C- Accarding ta ACC, DG's Repart alsb acknawledges significant capacity additipns npting that apprpximately E-D millipn tpnnes af new nameplate capacity was cammissianed between the first quarter cnf 2UlD and the secpnd quarter pf 2C·Zi.1. Almpst all the rnajpr I praducers in the Indian cement industry anncuunced capacity expansian pragrammes fram 2DiJ5--UE· anwards, encpuraged by impraving ecanamic ¤utIc·c·k in india. The capacity additians were made an a quarterly basis fram EDDB anwards, indicating that the industry was aggressively adding capacity. These trends are just appasite ta the behaviaur expected in a carteiized industry. - 5.2.11 It has further been submitted that between EDGE and 2U1D, B5 miliibn tannes af new capacity was added which, means that capacity additicins equal _I__ ' ately 4i}% pf the capacity in ZUDS have been bunch ftwcm years. Further, since - all the capacity additi cnr abbut the same time, this had a significant an the capacity utilizatibn ·i?>r:_r-y I.-y._y.;,»r'=Q"'

_ nurnbers. As a result pt significant capacity additipn and gestatipn peripd cf apprcntimately 3-4 years, the actual available capacity in 23*33 and 2*313 was* significantly lpwer than the an npunced nameplate capacity. Cdntrar'y tp the repprts pt DG that the capacity utilitaticm ter the lndian cement industry as a yvhple has drcnpped frpm 33% in 2UIZi3-2U1IZi, tp 73% in 2*313-2311, capacity utilitatidn acrbss the cement industry in 2*313 was at 31%, based dn available capacity {taking intp cclnsideratibn ra mp up adjustments} instead df nameplate capacity.

5.2.12 ACC has alsp cdntended that ever a twenty year peridd {i.e. frpm 199D-2D1U], the capacity utilizatibn levels in the Indian cement - industry have ranged between 75-35%. Uut UF these twenty years, it is dnly an tdur pccasicns that the capacity utiiizaticn has exceeded 35% which clearly indicates that the benchmark level fdr capacity _ utilizaticin in the Indian cement industry is between T5-35%. Theretbre, capacity utilizatipn in India is in line with histpric pertcrmance crt the industry.

5.2.13 As per DP-2, cement is a ccunmpdity prpduct and there is very little difference in the prclduct acrpss prpducers. Given the similarity pf the prpduct acrpss 'v'Bl'l¢3__?._;E.LQE'UCEf5, all at the prdducers' prices ` BFE 5¤blE•¤T W the 5 supply tactprs. The cast at prcnducing and distr" l and the prpductidn capacity will therefcre deter "lincge hat can be supplied by each

prdducer tp the market at varipus price levels. DE has adcrpted a generalized cest benchmark vvitheut appreciating that different manufactures have different cest structures depending can factprs such as plant vintage, lpcaticin, distance tc- sciurce c·f raw materials, distance frcim and access ta market etc. Cement industrv has faced steeplv rising input 'cpsts and ever time, these ccist increase have been ahscirbed bv it because pf the inabilitv tp pass can cpsts thrciugh price increase due tcl intense cpmpetiticin at the market place. 5.2.14 The DP-2 has submitted that DE"s repcirt states that 9EI% pf the market is ccintrcilled bv 21 prpducers and there are large number ef lecai and small preducers vvhich wciuld ccrnsequentlv acceunt fer the remaining 1D% ef the tetal cement market in India. These numbers clearlv indicate that the indian cement industrv is fragmented and alsci is highlv ccimpetitive. Further, even if the Indian market is cpnsidered tcl be an uligcipcilv, the market cpnditiens lead tu a highiv ccimpetitive cutceme.

5.2.15 Althuugh the DE has claimed that its acticms ameunt te breach pf secticins 3[1]· read vvith sectiuns 3[3] [a] and 3 [3] [b] df the, he has fai_|ed tp estafblghthke required elements tu make put a sustainable case. pf sectipn 3 [1]

` read with 3[3] pf t be reached, there must be evidence pf an ag betvveen cempetiters,

which is claarlv missing in this casa. Thata must ha diract avidanca tcl prcwa that an agraamant axistad. I-iclwavar, tha DG has failad tcl damcinstrata that am; diract avidanca axists in this casa, and instaad, has built its casa cnn pura spacuiaticins. . 5.2.15 Whila tha AAEC causad iw a hcirizcintal agtaamant ta fix pricas may ha prasumad bv tha Cammissian, thara must ba pracif at tha agraamant itsalf, in cirdar tar this prasumpticin tcl ccima intci piatr. in tha instant casa, tha agraantant has baan prasumad frcim tha hahavicnur af pricas, which isnat sufficiant praaf af an agraamant. 5.2.lT Citing tha casas dacidad by this Ccimmissicln, MRTPC, EU and U5, DP-2 has submittad that mara patallai hahavicir is ncit ancnugh. Furthar, whara parallal hahaviclr is pravalant as a rasult af tha structura cnf tha markat, than such bahaviaur cannat ba cansidarad tcl ba in tricnlaticln df ccimpatitidn law prcwisians. 5.2.lS lt has baan submittad by GP--2 that in absanca cif ditact anvidanca availabla with him tcl prcwa infringamant at tha prcwisiclns af tha Act, DG has raliad scilaly cnn accnnclmic avidanca uf markat _ bahaviaut td trs,·· and prcwa that thara is scima kind dt maating df · minds. I-icnwavar, as ncntad bv $_____,___ts0~agistanca at a iarga numbar af small prdducars in tha any ailagad cartal arrangantant hatwaan t by pricing thair camant baldw tha prica sat th; th

I-i??°F¤_?[ .'i'i'¥i`b

5.2.19 DF'--2 has further brc·ught but that given that price might . mean different things TD different prcidupers, [i.e. list price, sale price, price after discciunts, freight, etc.}, it is impertant that the prices used ter cemparisen shc·uid have the same definitic·n acrciss all the prciducers. l-lcivvever, the prices given bv the cc·mpanies betbre DG are divergent and therefcire nc· meaningful ccinclusicms Dil cartelizatibn can be dravvn.

5.2.2D Accerding tc: DP-2 , fdr the purpc·5»es ef the cbrrelatidn analvsis the DE has selectivelv used price and ether infprmatidn pnlv fdr the large prbducers. Given this selective sample selectibn, the DE has intrc·duced a bias in its analvsis bv ignciring the pricing behavipr ef the vast majc·ritv cit the industrv.

5.2.21 Given the structure ef the cement industrv and the ccimmeditized nature ef the prciduct, accc·rding te UP-2, it is c·bvic·us that cine vvc·uld ebserve price parallelism in this industrv. Therefcire, the DE has ncit shbvvn anvthing nbvel vvith this analvsis. If the aim bf the DG's analvsis vvas tci prbve the existence cit a cartel, then mcire rigprcius analvsis was requirgdcgfgrther, the cbrrelatipns in the percentage changes in DG are markedlv lcnvver than the cerrelatibn in is indicative c·f the fact that B l¤E'f€E*`*tBEE Cha pfcid ucers dbes ncit mpve sa

as clc·sely as abscilute prices, implying that parity in relatiye prices is ncit maintained.

· 1 5.2.22 nccprding tc- GP-2, frc·m analysis c·f the dataf relating tcl price bands preyalent in iyladhya Pradesh, fer year 2i.]iZ1? - 2·lZi1·lZi, fpr majclr . manufacturers like ACC, ACL, Jaypee and Century, it can be cibseryed that the minimumfmaximum price bands cif yaripus manufacturers dci ncit haye any semblance c·f price parallelism cir any cprrelatipn which shc·ws that price changes are dynamic. l 5.2.23 ncccircling tc- Acc, based c·n demand prciiectipns made in EDGE, the industry had respclnded ratienally by planning capacity additipns tc· meet the demand and made significant capacity aciditicins since 2iJiJ?. its nwn existing nameplate capacity is apprcntimately >i}<}i% higher than it was in 20D?. Therefpre, it is clear that if it wanted tc· limit cement supply, it wciuld haye nc~t inyested in new capacity. Despite the fact that it has been adding significant capacity, its reyenue share has cclnsistently fallen c·yer the last few years clearly indicating that the market is dynamic and incumbent . manufacturers face significant ccimpetitiye ccinstraints. 5.2.24 DP-2 has argued that as cipppsed tcl lciwer industry wide · capacity-utilizaticvn cnf apprp its ciwn ayailable capacity utilizatien was apprpx. which is much higher. Hciweyer, eyen withpu amp up adjustment, in 2n1iJ-11, its capacity util ximately >ti<>t%. Since its fl 2:.:% I:1$i_Gw

capacity utilizatipn is higher than the industry ayerage, it is clear that it is net part ef any agreement with any cement prciducer tp ' artificially limit its capacity utilizatipn. It achieyed a capacity utilizaticm cif apprcix. i<i·0<E'»'é in 2001 }0·0·i% in 200B, >0<>i% in2009 and i·0·£K% in 2010, which means that c.~n an ayerage the capacity utilizaticin eyer last fciur years was apprciximately i·0<>i%. As per industry analysis cnf Ernst St ypung glcibal capacity utilizaticin cnf cement is currently at 32% and this percentage is expected tp remain stable in the near future. Therefpre, eyen ccinsidering the glcibal benchmark fcir capacity utilizaticin, its capacity utilizaticin is clese tci the glebal industry ayerage.

5.2.25 it has been submitted that capacity utilizaticin during January 2010 was lciwer due te the reaspns cif shut dciwn and mcidernizaticin ef its plants at yaricius lcicaticins like Wadi, Chandla, Bargarh, Kudithini and Thcindebayi. Further, ciyer the last twe years, it has added signiiicant cement prpducticin capacity especially in the sciuth which was already facing capacity surplus. With speciiic reference tp 2010 [i.e. January sate - December 2010], it had XXX millipn tennes pf capacity which was ayailable fer use, ciut ef which its prciducticiri was XXX millicin tpnnes. As a` __`I _:sqelt,_its capacity utilizatien when cpm pared with capacity drcipped tram

apprex. >0·0<% in 200B [Ja 2008} tci appreximately KKK96 in 2010 [Ja nuary te

5.2.25 As regards prbduct and dispatch parallelism, DP-2 has submitted that the fact that there exists parallelism in the industry is n ncit because cf any ccillusiye arrangement, but because ef the inherent market characteristics i.e. ccimmciditized nature bf cement, cyclical nature bf cement industry and ability bf the ccimpetitcirs tc: intelligently respcind tc: the acticins df their ccimpetitcirs etc. which make such cenduct ineyitable.

L n 5.2.22 It has further been submitted that current prciducticin in India has been ccinsistent with expected demand. The year-bn-year grciwth bf demand fcir cement in India was rciughly between 9.2T% and - 11.45% frcim 2005 tc: 2010. Demand is fcirecasted tD grbw at a yearly rate bf abcmut 10% in the peribd frcim 2011 tc: 2015. ln keeping with _ this demand grciwth, prciducticin during the 2005 tb 2009 pericid grew at an ayerage pt 5.3% per annum. .

5.2.23 As regards demand assessment, it has submitted that it has a well established prbcess bf estimating the lung term assessment, a medium term assessment and shprt term assessment bf demand which is dcine regularly in the quarterly and mcinthly reyiew meetings which wa5 explain an which has been cbnyeniently ign¤rE_d_

as -;;°'*;E-E 5

5.2.29 The fact ndted bv DG that that as against the actual ccinsu mptien ef cement pf 2[M.?5 millicrn tcrnnes fur the vear ending 31 December 2D1D, the prcrducticrn was 2D?.¢l? millien tunes indicate that prciductidn crt cement in 2¤ZliiD was actuallv higher than ccinsumptiun and actual prciducticrn was clcise tcl the fcirecasted demand cnf 212 millicrn tcmnes. ·

5.2.aD Acccrrding tcl DF-2 , since 1 lilcivernber ZDDQ, it is net part af CMA. Additicmallv as pf Julv ZDDQ, ACC had stupped prc:-vlding anv data td CMA. lt tcicik a unilateral decisicrn tD withdraw frdm the activities uf the CMA tdrvarieus reasuns which were explained tcl the DG during the ccrurse af the investigatiun. It is net invulved in anv data ccrllaticin cir submissicin exercise carried aut bv the Clvlifi in view uf the DG's ciwn findings in this regard. - 5.2.31 Further, as recentlv as 141uIv 2D11 the DIPP [cement secticrnl has directed it tcl furnish detailed infurmaticin abcrut its business eperatiuns te the CMA, despite tullv being aware that it was nu. lcmger member crt the CMA. This clearlv illustrates that, it is being ccimpelled bv the lvlinistrv caf Ccimmerce and Industrv, Gevernment crt lnclia, thruugh DIPP IG cuntinue tu furnish its ccimpetitivelv sensitive data tcl the CMA. Such sharing pf data bv it under ccimpulsiun df the Gcivrm i__e;nI;t_g ng net under anv circumstance be ccmsidered tcl be in v` has been alleged, there is ncl relatidnship bet aeg `and price changes, and such

prices changes are purely randpm and nbt as a result bf any ccrllusiye agreement.

5.2.32 it has been submitted that an analysis cnf prices at each bf the fcrur centres [i.e., Delhi, Maharashtra, Tamil Nadu and West Bengal] identified by the DG in its repert te allege cerrelatipn between price rises after the_ct·.r1.»¤». meeting can 24 February 2011, reyeals that prices were already bn the rise eyen befcrre the Ciyih meeting bn 24 February 2011 an acccuunt ef rising cement demand and preyailing market ccrnditicuns. This prcryes that there was nb ccrrrelaticrn between the cryia meetings and the subsequent price rise, and it is a merely a ccrincidence that the CMA meetings teak place during a . phase pf rising demand and censequently rising prices. 5.2.33 Further, Cpal India Limited had increased prices fer certain high grade ceals between 100% and 130% _and eyerall by cwer 30% an 22 February 2011, which had a significant impact can the ccrst bf cement. The Unicrn Budget alse intrcrduced changes in the excise duty structure an 28 February 2011. As a result bf the changes in the excise duty and increase in the price caf ccral, the price pf cement increased in March 2011 tc: accbunt fcrr these significant cbst increases. The CMA m?y;»g;;e=f~s!r\ iyiarch 2011 alse happened te ceincide with a pe rice due tc: the abbye factcrrs and had np cbrrelati which tbbk place after ri Fyiarch 2011. in ?f§,_.-,;.;.,`.'gy55=*

5.2.3-fi ACC has argued that the DG has cpnvenientlv picked up a few select meeting tp draw la link between price rises and the Clvl:1. meetings. There are several examples ef meetings in 2DUB where the prices have remained stable cir have even decreased. Hence, the DG*s cpnclusipn in this regard is illcigical. ln fact, the number ef weeks in which the prices pf cement decreased after the CMA meeting was higher than the number cif weeks when the prices pf cement increased. Out pf 5 meetings cnf Clvla in 2U[i5, 7 times the prices remained same and it is bnlv ence that the prices bf cement · went up which clearlv reveals that there exists np link between CMA meetings and price increase.

5.2.35 arguing that prices ef cement are net abeve cempetitive levels, with specific reference te the ebservatipn bv the Tariff Cpmmissipn, cited bv the DG in his Ftepcirt, DP-2 has submitted it is incerrect that the retail price pf cement is secpnd highest next tp Japan. in fact, .'.effries* research indicates that price af cement in India is cme pf the lpwest acrbss a significant number efjurisdictibns acrass the glpbe.

5.2.35 Accbrding tp DP-2 , it isnqalsp ihcprrect that the prices ef cement have registereLI_§g;gl§i;gr.igiaii?;.iiggrease, since prices have increased bnlv bv 5.1% 2DEi¤i which is less than everall increase in the which increased bv 5.2% CAGE. The CAGE ef s increased mere than the ss

cement price. Further, the price ef cement has registered an increase ef apprex. 5.9% as against ether cemmedities such as Cepper [which increased by 19.4%] and ceal [which increased by 15.2%}. 5.2.3? ACC has further centended that cement prices are belevv eptimal level te sustain reinvestment inte the industry. Tariff Eemmissien alse never came te a cenclusien that price ef cement is very high. It has merely stated that the cement cempanies ceuld have seid at higher prices. This shevvs that the DG has seught te selectively use the findings ef the Tariff Cemmissien and even then i has misstated the findings centained therein. 5.2.33 Accerding te DP-2, DG*s evvn calculatiens clearly indicate that its net prefit as percentage ef sales has fallen ever last fevv years and in 2D1D its net prefit as percentage ef sales was ene ef the levirest ameng larger cement preducers. DP--2 has further submitted that DG*s cenclusiens that the tep ten cement eempanies have had very high eperating prefit margins [between 2D-¢lB'5'·'E»] is fundamentally tiavved because the DG has net even Ieeked at the eperating prefit margins ef cement cempanies. Censidering the capital incentive nature ef the cement industry, the critical fecus is the net prefit that is available te the cempany. Analysis ef quarterly results ef cempanies shew that fe ____ ;:__ rter ending 31 iviarch 2U1D, many cement cempanies Iesses due te steep rise in cests and the inabil cQgm` threugh price increase in the

market due te intense cempetitien. This less. making trend centinued in september 2D1D quarter and December 2e1D quarter alse.

5..2.39 As regards charge ef cellusiyel pri-te leadership. OP-2 has centended that the DG has net presented any eyidence te suggest that it is a price leader in any ef the abeye mentiened regiens. Further, the mere fact that there are at least 3-4 preducers in each ef the abeye mentiened regiens which cempete head--te-head with ` each ether, the questien ef leadership dees net eyen arise. The DG has net adduced eyen a single piece ef empirical eyidence te preye that price leadershipfsignaling exists in this market. 5.2.4D As per UP-2. there is ne territeriai allecatien ef the market n and there is ne specific ailegatien against it with reference te territeriai aliecatien. DG has made bare assertiens that there is territeriai allecatien witheut establishing it. 5.2.41 The DP-2 has summed up its arguments by saying that there is neither a direct aliegatien ner eyen a single piece ef eyiclence which eyen remeteiy suggests that it yielated any preyisien ef the Act. The plus facters that haye been leeked by the DG in the ferm ef capacity utiiizatien, prefit margins ef the cement manufacturers de net, in any way, sugl cement manufacturers haye celluded. The DG h that an eiigepely is yery clese te cartel like si _ simply chesen te ignere the J" ll-

fact that there are a large number of oligopolies around the world which are not cartels.

5.2.42 AEC has also contended that its conduct is guided by the market forces and any direction to stop intelligently responding to the market conditions would be counterproductive. It is not the purpose of the Competition act to inhibit the intelligent conduct of business operations. accordingly, the findings of DG must be dismissed and it may be exonerated from ali the allegations. l Reply of Ambuia Cement Ltd. {DP-3]

5.3 The written and oral arguments of DP-3 haye been submitted almost on the similar lines as that of AEC and therefore the contentions taken in case of ACE are not repeated herein. The repliesfarguments, in brief in case of ACL {UP-3}, are submitted as under; .

l 5.3.1 according to DP-3, for a cartel to suryiye, there must be mechanism in place for coordinating the cartel agreement. Howeyer, DG has failed to produce any iota of eyidence which eyen remoteiy suggests that any of the aboy gtioned elements are present in i the indian cement indus that the Indian cement market is frag Iigegi number of producers l E[ti'l,i'E QH B |"`°|.ati\:li"|HljirEgil:I Eigrlificafllt if·ltEf-'rE'gi¤rlBi sz

meyement ef cement as there are regiens such as Seuth and Central where there is surplus capacity and ether regiclns like East where _ _ there is high demand and lclwer supply. * n 5.3.2 The DP-3 has asserted that it is net engaged in limiting the supply ef cement as it has been censistently running at areund Xi·rX% ef its ayailable capacity {pre rate,i'ramp--up], which is significantly higher than the industry ayerage giyen by the DG and alse exceeds the glclbal benchmark fer capacity utilizaticin. n 5.3.3 Accclrding tcl UP-3 , there is ncl relatienship between CMA meetings and price changes which are purely randern. Further, the mere fact that en a few eccasiens the prices en seme instances haye mciyed up and dewn areund the CMA meetings dees net prclye, eyen an a balance ef prbbabilities, that the cement preducers fix prices since such yariaticins are purely uncennected eyents and are in respense te market dynamics.

5.3.4 Accerding te DP-3, in the last decade, the industry witnessed a treugh cycle during 2Di]1-2DiJ5 peried, since significant capacities added during the up-cycle ending in year EUUU, cclntinued tcl be underutilized due tcl the reduced grewth in cement demand. The industry witnessed a recclyery frem EDUE with rise in dispatches and resultant capacity peaked during ZDDBQUUH. Further, the year 2D1 tn prices and fall in margins due tcl cemmissieni %f in the ceuntry. The significant capacity ad '-lbhs a `ll been acknewledged by DG ss

since in his repert it has been neted that appreximately ED millien tenes ef nameplate capacity was cemmissiened between the first , quarter ef 2lZ11lZ1 and the secend quarter ef ZD11. Since all the capacity additiens came abeut the same time, this had a significant ` dewnward impact en the capacity utilizatien. 5.3.5 It has further been argued that fer the purpeses ef the cerrelatien analysis the DG has selectively used price and ether infermatien fer the large preducers. Fer instance, frem analysis ef the data relating te price bands prevalent innlvlaharashtra, fer years 2C·i}B--2lZi1D, fer majer manufacturers like ACC, ACL, Century and India Cement, it can be ebsenred that the minimumfmaximum price bands ef varieus manufacturers de net have any semblance ef price - parallelism er any cerrelatieh. I

5.3.6 Accerding te GP-3, the decrease in capacity utilizatien leads te _ decrease in PAT and vice versa. Therefere, there is'ne incentive te artificially limit its capacity utilizatien, as this weuld reduce its PAT. 5.3.7* The DP-3 has submitted that it has added significant capacity ever last few years which cempletely.discredits any argument made by the DG that it restricted supply ef cement in cellusien with ether f preducers. Its nameplate cement grinding capacity in EDU5 was XXX millien tenes, which increased te XXX millien tenes by lvlarch 2C·1lZl, an increase ef XXX millien __Aes"c1fi'j63%, at CAGR ef 1D.3%. This allewed it te add capacit and meet future needs ef its custemers. Its ce 2C·D5 were XXX millien TJ .. ii-. "

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tcinnes which increased tc XXX millicn tcnnes in 2010, i.e. an increase ef 3]*% at CAGR cf 6.5%. This clearly indicates that its capacity and dispatches have been increasing substantially frpm ZDDS enwards, which ccmpletely disprcves any allegaticn 0f supply · iimitaticn against it.

I 5.3.S Acccrding tc UP-3, the Indian cement industry has added capacity in dcuble digits during the last three years, which is unprecedented in the last 2D years. High capacity additicns in a few years leads tc Icwer capacity utilizaticn far a few years, till demand _ catches up with capacity, leading tc a rise in capacity utilizaticn levels. Hcvvever, even with higher capacity additiens; the industry maintained a capacity utilizaticn cf abcve 31% ever` the last few ' years. Cement lndustry has been acting raticnally by basing its capacity additicns cn fcrecasted demand and in a manner that is ` quite centrary tc the behavicur ef cartelists whc wculd suppress capacity and prcductien in crder tc maintain prices at an elevated level. ' _

5.3.9 Accerding tc UP-3, as cppcsed tc a Icvver industry wide - capacity utilizaticn of apprcximately B1%, fcr the same period, its _ capacity utilizatien was XXX ivgjthheut ramp-up}, which is much higher. Therefcre, its is much higher than the industry average, whi that it is net part ef any HFFBNEEMEWT with HN cer te artmcially limit its capacity utilizaticn. /Hii"~'-i.* .--' Naiiifj ss

5.3.19 The GP-3 has submitted that the vear on vear growth of demand for cement in india was roughlv between 9.3% and 11.5% from 2995 to 2919. In keeping with this demand growth, production during the 2995 to 2999 period grew at an average of 9.3% per ._ annum. l

5.3.11 As regards role of CMA, it has been stated that in E out of 9 meetings of CMA in 2999, prices eidwer decreased or were stable. The remaining 3 meetings coincide with the construction season, when prices tend to increase because of rise in demand. Gut of 9 meetings in 2999, 5 times the prices remained same and 3 times decreased and it is onlv ence that the prices of cement went up which clearlv reveals that there is no linkage between the meetings of CMA and price increase in cement.

5.3.12 According to UP-3 , the average margin ofcement companies has consistentlv fallen from 26% in 2995-299Y to 22.9% in 2998. Its margin has also fallen from }99{% in 2992-93 to }9·9{% in 2993-99 and its net profit was >99{% for the vear 2919 representing a decrease of more than 5% when compared vvith its net profit of 2211% in 2998. This shows unlike part of a cartel arrangement since cartel agreements will be to earn supernormal profits. Fieplv of Ultratech Cements and Grasim [GP-4 and DP-5} _·''-..

5.4 In its written a Ultratech Ce ments has submitted that the c §i?asim has merged with it. As '-'i'

l .

such the present reply is filed en behalf ef beth the parties. The ' replies in brief are as under;

5.4.1 lt has submitted that the repert ef DE is erreneeus in law and . in facts. DG has enly en the basis ef what he terms "circumstantial evidence" reached a cenclusien that seme kind ef cellusive behavieur fer determinatien ef price Ei supply ef cement amengst the tep cement cempanies was clearly neticeable and that there was celiusive price leadership, by way ef infermal cartel ameng the tep enterprises te determine the price ef cement, te be fellevved by ether small manufacturers and that there was tacit agreement and seme kind efcartelizatien.

5.4.2 Accerding te DP, the finding ef cartelizatien can result in very serieus penal, cemmercial and reputatienal censeciuences and when such harsh penal censequences are previded, the degree ef preef applicable sheuld be stringent and beyend any reasenable deubt. lvlere suspicien ef cellusive behavier, er ef a "tacit agreement", er ef "cellusive price leadership" cannet be the basis fer taking steps ' under sectien 3 ef the Act. hier can findings ef alleged "Price Parallelism" er "Dispatch Parallelism" establish the existence ef an "Agreement" er "Llnderstanding".

n 5.4.3 Accerding te the DP, declining Net Prefit establishes that prefit margins have net been maintained as alleged and have in fact decreased. lt is submi the Net Prefit and the Net Prefit Margins, incre wl nt dewn in 2DlU te belew -.-=

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2CICl3 ieveis. Fer Ambuja Cement the Net prefit and the Net Prefit Margins in 2CiCl'3 decreased sharply Er then went up in 2Cl1C| but remained substantially belew 2ClC»3 levels. In its ewn case iUltratech}, the Net Prcifit and Margins decreased sharply in ZCIUB and aithdugh the prcifit margins impruved slightly in 2Cl1iZ} they were substantially belciw the 2[}Cl3 levels [PAT 16% as ccimpared te 13%]. lt further came dciwn tu 13% in the year 2C»1C»-11. _ 5.4.4 Even fer the ether ccrmpanies there was ne unifcirm trend, The n Net prcifit and Prcafit margins declined in the case uf India Cements . and Madras Cements and increased in the case ef Jaypee Cement & Lafarge Cement. Further, Pre Tax and the Pest Tax margins fer the pericid 2DD7-2D11 shew that there has been a decrease in the margins caf the cement cempanies. The Pre Tax margins ef Ultratech have reduced frcim 313% tc: 21% St the Pest Tax Margins have reduced frem 15% te 1D%. The Pre Tax margins ef Grasim have reduced frcim 31% tci 23% 3i the Pest Tax Margins have reduced frum 1Ti% tc: 13%. ' Mereever there is alsci a wide disparity in the prefit margins ef different cement cempanies. Such disparities in the prdfit margins and the reducticin in prcifit margins ef Ultratechf Grasim, ACC 3i Ambuja Cement dearly negate the existence ef any cartel agreement. 5.4.5 The UP has submitted thatccihntrary te the allegatidn ef the UG in the Repert, prices caf C far less than the east ef inputsfcpst uf sales -2311. CiG's allegatipn cnf deliberate Iew Capacity cri suppliesfdispatches sa

is ccintrafy tc: the findings in his repdrt since the repprt itself recprds that frcam ZDDY- 2iZi1D installed capacity increased frem 1TB tp 2`M by 95 MMT, an increase cif 55%. In fact capacity utilizatican pf the pid} existing plants has remained high. The apparent reducticin in capacity utiiizatidn is attributable tc: large extent pf new manufacturing capacity added which takes anything frcim 1 tc: 3 years tcl attain dptimal prdductipn levels.

5.·<i.6 Accprding tc: DP, there are certain macrci features which are inevitably present if a cartel exists. The first feature is that there wpuld be stability in the installed capacity df cement and the same wpuld remain near cpnstant. During this peripd, acccirding te the repdrt itself, the installed capacity cnf the cement industry has increased frcim 179.1 MMT tp 236.33 MMT which is an increase pf abciut 5D%.The secpnd feature is that there wciuld be stability in the players in the industry. ln the present case, 1D new large players have entered the market with the tetal capacity c·f12.3 MMT and 16 players have dpubled their capacity frcim 26.42 MMT tc: =16.2[} MMT and cither new players are in the prdcess df entering the market with " large capacities. The third feature wpuld be stability in prices. The faurth feature weuld be censtant er increasing prefit margins. These features taken tegethar ccympietely negate the ppssibility pf caftelizaticin in the The C|·G's Repcirt itself establishes that nen

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5.·ll.? It has been further submitted that a cartelized industrv would be static and not dvnamic in nature. Even a cursorv look at the above facts of the Indian Cement lndustrv wodld establish that there is rio cartelization on this parameter. The report of the DG has also not identified when cartelization commenced and does not compare the market behaviour before and after cartellzation.

5.·*1l.S According to UP, DG has made a fundamental and serious error bv considering average monthlv prices at retail level at State and National Level. In the process, the DG has missed the individual facts of individual parties and has accordinglv arrived at erroneous conclusions.

5.·ll.5 The DP has submitted that its facts are quite to the contrarv of what the DG has interpreted. its figures do not show maintenance of profit margins, or low utilization of installed capacitv. its gross and . net prollt margins have decreased over the period 20D?-ED11. lvloreover installed capacitv has also been increased substantiallv. Capacity utilization of the old existing capacitvfplants has remained high. Capacitv utilization at the new plants has fluctuated from 3D to 50%. Accordinglv the allegation that it was or is involved in a cartel is ex facie incorrect & unsustainable.

5.·'1.1lZ`.l The {JP has brought outthat the DG in his report has relied considerably on the fa Inll of the cement in various 5tates has moved in the reliance bv the DG on a price parallelism is vv ces of all commodities in a ` x`s:__, __<3l` n

free market wcruld tend ta canverge and mcrve in a band and in the same directipn. Prices af all gcrpds, and in particular cemmpdities like * cement, steel, aluminum, alsa generallv mbve in tandem. Price parallelism bv itself dcres nat sufficient tcl indicate existence df a cartel, a fact which has been accepted bv the DG himself. ' 5.11.11 Further, fer the purpcises af determining price parallelism, the ` DG has ccinsidered the facts bf13 States and 2 Llnicrn Territcnrv. Out ` df the 15 5tatesfL1nic+n Territprv, its prices have net even been shpvvn in T Statesftlnien Territcrries such as Bihar, Chandigarh, Rajasthan, Gujarat, Maharashtra, Assam, ivladhva Pradesh and Kerala. Further the prices mentipned and the charts dcr nat deal with the price data submittedfprpvlded bv it, .

5.:1.12 The repart af DG aisca dues nat indicate whether the prices ccrnsidered in the repert are at the facterv gate, at the whalesale level ar at the retail level. The DG further prcrceeds an the basis that a ccrrrelatibn and ccrefficient c·f D.5 shcrws clcrse cprrelatian. In fact, in cammenlv accepted statistical terms this is net the case. lt is submitted that the Pearsc·n's carrelatibn ccreflicierit shauld be clase tcl {+l 1 cir IQ-] 1 DF certainlv greater than {1.8 tcl shcrw significant relatipnship. The analvsis shciws that there is vast variati-cnn {between [1% and 6U%] between the prices being charged bv varipus manufacturers ih the -

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5.4.13 Acccrrding t<il `llZlP,.|lirc¤dEl len and dispatch parallelism I much like price anv industrv and dcres nat i

indicate any cartelizatien. when demand is mere, preductien and dispatch will cerrespendingly be mere and similarly, when demand is less, preductien Ei dispatch weuld 'ee lewer. Similarly, as demand n - increases, capacity utilizatien increases. 5.4.14 It has alse been argued that the repert ef DG relies en alleged lew capacity utiliaatien. Heweyler, factually there is ne general reductien in capacity utilizatien. The capacity utiliaatien depends en ' yarieus facters such as menseen, weather cenclitien, festiye seasen, seasens ef cultiyatien and haryesting ef yarieus creps, ayailability ef railwagensftru cks, Iabeur, ceal, pewer ayailahility, plant shutdewn, sterage capacity etc. lylest impertant ameng the facters influencing capacity utilizatien is the gestatien peried required [ene te three years] te achieye fullfeptimal capacity utilizatien when new plant and capacities are added. Thus, where there has been 5D% increase in installed preductien capacity in the last feur years, tetal capacity utilizatien is 'eeund te decrease.

5.4.15 Accerding te DP, the capacity utilizatien ef its eld {existing plants in its case has been rising frem XKK56 te X}{}<% [and had eyen reached >l}·iZK--}{KK%} while the capacity utilizatien ef new plants has increased frem xxitiis te xKX%. 5imilarly fer Grasim the capacity utilizatien ef its eld existing plants has ranged frem KKK96 te KKK96 [and had reached KKH55 - XKK96} w i_leT_the capacity utilizatien ef new plants has increased }<xx%. lyiereeyer

year-en-year its [Ultratec lg en increasing and frem * ih .

»pre*i`@

2D·IIl}'--ClS tc: 2C·1D·1l it has increased T. TS |v'livlT which is about 25.56%. Fpur plants pf Ultra Tech, namely, 1-ltjvv {>t>t>i%], JCW {>tiO•Z%], . Hcitgi [>t>Ot%] and tvlagdalla l>t}i>·i%] are all pperating ever }i>i}£% capacity even in the year 2DlD-11. n

5.4.16 The DP has argued that all industries whether it is the infprmant, 5teel lvlanufacturers, Hptels, Cc·ttc·n lvlanufacturers etc. have their pwn Asspciaticns. Elvin. is relevant far the cement industry since it deals with varipus prpblems ccmmpnly faced by the industry. . Further, by prder cf gcnvernment, price and supply data has tc· be supplied tp Department pf Industrial Pplicy and Prpmpticn [DlPPl which is dpne by the cement manufacturers thrcugh {Irvin. The prices which are supplied by the CMA tc: DIPP are ncnt Ex-Factcry Prices, but, retail prices c·f varicius iccaticns which are npt brand specific, and are histcirical prices. These prices wciuld net help in fixing future prices. 5.4.1? The DP has brpught but that the allegaticln that prices have gene up immediately after the meetings pf CMA are net bcrne but by ` the facts. DG has ncit even 'ccnsidered the actual price mpvement cf the varicnus Dpppsite Parties befpre and after the CMA meetings but has c·n|y cpnsidered average mc·nth|y price, which is clearly errpnepus.

5.4.13 The DP has cpntended that the DG has relied pn eral testimpny cnf scnme cf the _nsu_rners pf cement. It is submitted that l the said testimcn net suppnrt the finding pf -_'·,'

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cartelizaticnn. Further, it has alsci ncit been given appprtunitv tp crciss examine the said witnesses.

5.4.19 It has further been submitted that the repert ei the DG arisesl inter alia tram lack el understanding cnf hew the cement industrv functiens. Marketing at cement has its ciwn unique structure. _ Generaliv cement cempanies divide their preductien inte nen-trade and trade segment. The ncin-trade segment invelves direct sales ta large canstructien cempanies and te gevernment entities while the ' trade sale is thrpugh nermal distributian channels invelving whelesalers and retailers. Ncin-trade sale invelves sales ta gavernment prcliects threugh eempetitive tendering precess and can alse include directlv negcitiated centracts with large censumers at cement e.g builders, infra sectar campanies and plavers in gclvernment and private sectar.

5.4.2U Acccirding te CrP--5, split between trade and ncin trade in its case is arpund 3D% for nan-trade and 7Cr% far trade segment during ` 2IZi1U--11. Cement is mcnstlv scild thrpugh dealers in the trade segment. It has aver 15,DDU independent dealers, wha are net exclusive and stack and sell cempeting brands pf cement. There is a difference in the price at which the cement is seld bv the manufacturers te the dealers andthe price at which the whelesale dealers sells the cement Cement is actualivseld thrceugh dealers whe sell te their customers based an the demand an prgrvjgliling price at the time ei ln I ¥·.'·:-ii ·"*`-`;v'/

purchase by the custpmers whci have wide chpice tci make frcim different dealers cif the same cir cither ccimpanies selling different brands af cement up tcl the limit cnf the lv1RP. As demand picks up the ' dealers pu_rchase mcire cement and in turn the manufacturer increases the price and vice--versa.

5.4.21 Apart fram the demand and supply, varicius cither facts including cast ef prciducticin, seasnnality cnf demand, variaticin in - demand due te varipus facters e.g. weather canditicin lpcal gpvernment spending, agriculture crpps lcigistics {availability cif trucks and railway rakes}, taxes, etc determine the price pf cement.- Whenever the ccist increases, depending upcin demand scenarici, the cast increase is passed pn tp custpmers and if demand is weak, the ccist is abscirbed by manufacturer and reccivered later when demand picks up depending upcin the prevailing market prices at that time. 5.4.22 The DP has submitted that DG has based his findings cin ' varicius presumpticins and assumpticins withciut any analysis cir basis fc·r reaching such cpnclusipns. The DG, fpr example, has asserted that the cement market is an c+|igc+pc·|y. Even if cine were tc:· ccinsider the cement industry ta be an aligcipcily in terms pf number cif prciducers and their respective market shares in an academic sense, the cement market is in reality highly cc·mpe ' _ ture given the degree pf inter-firm rivalry, the variati between firms, large number ef deale s, afigijr litpansien by existing prciducers. :3.*

` c. .

5.··ii.23 Pls against the assertien efthe DG that there are entry barriers in the market, the DP has submitted that the data ef the last three years shews that 1lZl small cement manufacturers have mere than deubied their capacity frem 2{l.¢i2 lvln. Tens te ··ilE.2lIl lvln. Tens., while lil new players have entered the market with a tetal capacity ef 12.3 lvllv1T. Further, 12 Cement manufacturers have increased their capacity frem BB.92 lvln. Tens in twe years up te 2UlD - 11 te 7'?l.l[l5 lvln. Tens. The decuments relied en by the DG de net in any manner demenstrate entry barriers.

5.·il.2-ii The DF has alse centended that the findings ef DG based en parallelism is fundamentally erreneeus. As has been netedfrecerded by the DG himself in the Repert, Cemmissien and Ceurts in varieus _ jurisdictiens have held that price parallelism is in itself net sufficient te reach a cenclusien that there exists a cellusive agreement between the parties. Cement is a hemege neus cemmeclity. the n preduct is standardized with BIS markings, and the cempanies eperate in the same ineustryjmarkets, using same er similar raw material inputs, electricity, technelegy, ameng ether facters. Accerding prices weuld be breadly similar and weuld breadly meve in the same directien. Such cerrelatien in prices alse exists in intensively . cempetitive industries er market basis ef this enly, ca rtelisatien ca nnet be ·_-· ._._

5.¢l.25 Accerding te DF, t e §erre_la.t?i;ens£§pr' sented by DG are erreneeus. He has relied en hQ1/l'lyli`irrel`ev%aterial.s like findings l as

of Compatition Commission of Poland, Pakistan, Romania, Garmany, Europa and Taiwan. Tha DG has also raliad on an aarliar dacision of iyiRTPC. All thasa facts ara wholly irralayant for a finding of an agraamant prohibitad undar tha Act.

5.4.25 According to DP, thara was crronaous assumptions that camant pricas ara unraasonabla and is bayond tha compatitiyaniayal. Thara is no modal or analysis built by tha DG to show what pricas would prayail in a compatitiya markat and how thasa diffar from thosa in tha ca mant markat. Furthar although tha DG indicatas that ' sinoa profit margin is graatar than 25%, camant companias ara aarning supra-compatitiya profits, tha profit margins ara not _ banchmarkad against othar industrias or what camant companias may aarn clsawharafin othar jurisdictions. 5.4.2? Tha DP has also submittad that ona of tha major flaws in tha DGs raport is tha failura to dafina tha ralayant markat for tha purposas of analysis. Tha ralayant markat has to ba considarad in this casa with rafaranca to tha gcographical markat sinca cost of transportation of camant is yary high and accordingly ca-mant is not transportad long distanca unlass tha prica diffcrantial is yc-ry substantial. it may ba partinant to nota that DG statas that thc- camant industry is diyidad into fiya zonas: North, South, {Zantral, East and Wast. Howayar no concantr _ or markat shara statistics ara prasantad to astabli g tha raiaya nt gaographic markat. Thasa zona `flagra historically ast * a

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for other reasons during the control regime. Besides, relevant geographic market, the DG has also not considered the relevant product market in terms of the different grades and categories of cement. .

5.4.23 According to CIF}, the DG also failed to note that the prices of Cement Corporation of India, a Public Sector Undertaking also move along with the prices of all other manufactures. However, DG has not alleged the Cement Corporation of India to be part of anv alleged illegal cartel.

5.4.29 The oF has also argued that the oo*s Report is Liable to be Set Aside for Non--5upp|v of various documents relied upon in his report, in view of which the opposite Parties are handicapped in dealing with the findings of the Director General. The CIP has also submitted that the substantivefrelevant provisions of Competition Act [i.e. section 3 and Section 4] have been notified on 15.o5.2oo'§l with effect from 2o.o5.2oo'§l. As such, the oo has erred in considering a period from Zoo? to 2o11 for the purposes of his analvsis. 5.4.Eio According to C1F'·5, an Agreement or Understanding under 5EC 3 read with sec 2 lb] is a sine qua non for initiating action or even for requiring cause to be shown before taking action. In order to buttress its point on the issue, the CIP h Ti`.relle_d upon the case of Consumer Dnline Foundation versus dated 24* fviarch, 2o11} and the case of " lv1_alfilotra;vijLioeutsche Post cb -- .'._ T sn,

Bank Et ·Drs" {decisipn dated 2.12.2UlU in Case 5 bf ZUUB] decided by n the Cpmmissipn. .

5.4.31 The DP-5 has alsp filed an affidavit df a Senier Eccnncamist, Dr. Shyam Khemani tp the effect that there are ne eyidences, np seund analysis carried put by DG tp suppbrt existence bf any cartelizatibn in India. In the years in questidn namely 2iZ}Ei?·2iZ}11, price pf cement haye been extremely yculatile [as fciund by the Ld. DG himself] changing pn an ayerage twice a week. Such high yplatility in price negates any ppssible cartelizaticin. Analysis cnf Dr. A Ftanade and Dr. D. Singhnhaye alscv been submitted bringing put that fdr the pericud df questien, there haye been rapid changes in the market shares caf all the leading players and such a situatibn dempnstrates dr negates any pcussibility cnf cartelizatibn.

Reply df1aiprakashAsspclates Ltd. {·DP·E] 5.5 The ·DP--E· submitted its written and eral replies and pbjectibns tp the repcurt bf DG alpng with a repcirt prepared by G:ENESIS. The submissidns made lay DP-E, in brief, are as under; " 5.5.1 The GP has submitted that the DG has "cherry-picl<ecl" cvnly these dpcumentsfsubmissien that support the pre-determined cpnclusidn ef the repcirt. Instead ef substantiating en the parameters that ccurrcubbrate the allegatibns ef tAlyafprr?pa_nt, the repbrt c·f UG is primarily based DH the presu ricius cement manufacturers aleng with {NI per se anti- ccumpetitiye actiyities. tk in

5.5.2 According to UP, as per the report of DG, the 5outhern region l has the maximum production capacitv of about =1iZi% of the total . production. Since it has no presence in the 5outh as admitted bv the DE in his Report, therebv it cannot be charged with the allegation of cartelization.

5.5.3 DP-E- has submitted that DG has not calculated market shares based on sales. Further, it is untenable in law that while some cement manufacturers have been charged with the allegation of collusion whereas the others have been left out for no reason. 5.5.4 DG while conducting his investigation in the matter has . incorrectlv delineated the 'relevant market', which is the first and most critical element in anv Competition assessment. In the instant case, the DG has defined the 'relevant geographic marketi as being a scattered market which is to sav that the market of cement is divided into five regionsfaones. The DG has furthers classified the market of cement industrv into three categories viz., fviaior Plavers having Fan India Presenceg iviajor plavers having regional Presence, Local and small Plavers. These classifications do not provide anv explanation as to whv cement manufacturers with scattered regional presence and varied commercial objectives would engage in concerted practices. 5.5.5 Further, it ia misleading to confclude.__n·iarket shares of the cement manufacturers based o _ __I? without analvzing the actual production reasons for not producing to the extent of the ina such cement ll». 2

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manufacturer. DG has failed te take inte acceunt the market shares previded bv JAL [appreximateiv 5.23%}, calculated en the basis ef actual sales and calculated market shares en the basis ef preductien capacities witheut previding anv seurce fer arriving at such - erreneeus findings.

5.5.6 Accerding te UP-6, DG has alleged that the Cement lvlanufactures 'Asseciatien prevides a platferm te its members te cartelize. Hewever, it is impessible te identifv and establish that ' eleven eut ef the lfertv feur members ef the asseciatien cartelize and the rest have ne rele te piav. This analvsis has ne feundatien and as such cannet be relied upen. The DG has taken inte acceunt enlv a few cement manufacturers even theugh all the manufacturers have the pewer te influence the market. Therefere, until the cerrect analvsis is carried eut bv the DG, the analvsis and the subsequent findings arrived at bv the DG cannet be relied upen. i 5.5.}* The GP has further submitted that an eligepelistic market structure dees net alwavs lead te a ceeperative eutceme as alleged as it needs te be carefullv examine whether a firm's cenduct can alse be described as unilateral actien in seIf--interest absent an agreement te actjeintiv threugh an agreement.

5.5.3 Accerding te OP-E, the DG has 'cherrv- picked" the instance ef price rise witheut previding anv refe _ee---tegperieds wherein the price ef cement was reduced in in the cest ef raw materials. DG has state -.-. hei sales has eniv ·>i ._ i hi avi

S1 ...-.*9*

increased abeut 30% frcim 2UU··ii-2UiJ5 te lvlarch 2011 withciut - previding any seurce efsu ch infermatien. n f 5.5.9 The UP-E has submitted that cest ef raw materials required fer the preductien ef cement is pne ef the impertant facters that impact the prices ef cement. The prices ef cement have shewn an upward trend due te substantial increase in the cest ef transpertatien and ether raw materials used in the preducticin ef cement. Every cement manufacturer has its ewn set ef parameters te determine the price I ef cement and there is ne single facter which is the sele reasen fer ali the cement manufacturers te determine their pricing strategy as pertrayed by the DG.

' 5.5.1e The DP has alse cpntended that the trends feilciwed by it in the precess ef pricing decisien is generally gpverned by the market f ferces which is determined by market feedback received frem the marketing effices. The prices keep varying frem seasen te seasen; during menseens the demand fer cement weuld gb dawn resulting in a dewnward mement in prices. when the demand is mere the prices weuld autpmatically rise adding td the ever increasing cests ef inputs which tend te increase the prices ef cement further upwards. 5.5.11 It has further been argued that the DG has failed te. take inte accpunt the fact that upte 35% ef its tpta__i sales during the financial year 2UlU-2011 was threugh _nt'tgcts':¤tb,gthe_ nen·trade segment. The prices fer such centra cts frequently as that ef trade segment. The substan fsegment cdmprises ef

construction companies, builders, infrastructure companies, institutions, government departments, etc., who purchases the cement directiv from cement manufacturers for their owni n usefconsurnption and the same is not intended for resale. The prices in the non·trade segment are lower than the trade prices. l 5.5.12 Thus, as per DP-6, there is no conceivable explanation which can be attributed to the allegation of concerted practices between producers catering to different categories of buvers. l 5. 5.13 According to UP-6, DG has missed the pertinent aspect that price transparencv, a kev requirement for the abilitv to maintain a cartel is not met in instant case. JAL does not publish its prices on its website or maintain anv records of its list prices. Furthermore, for a cartel to be maintained members should be accuratelv able to monitor the prices charged bv the participating firms. This requires that the firms known the true prices being charged bv all the alleged cartel members. Keeping in mind that the prices gathered and shared bv Clvle are indicative and not real prices, the alleged price fixing cartel is not sustainable in the absence of appropriate sharing of relevant pricing information. Further, everv cement manufacturer caters to its own customers and is differentiated on account of its branding, networking, regional presence gncl ;:;_i._is`tomer service etc. 5.5.14 The DP»5 has submitted few selective extracts of the Tariff Commissi ____ Iitslicbzdusion without providing it with the complete r Commission is E3

ccintrarv te the established principles ef natural justice. The claim pf the DG that the pricing mechanism adapted bv varicius cement manufa-;tur'ers an the same lines is baseless since a mere perusal . cd the statements ef the representatives af the varieus cement _ I manufacturers reveal that each ccimpanv has its pwn set parameters fcir determining the pricing pf its prc·duct. l 5.5.15 DG has admitted tp fact that there is ne evidence tp substantiate whether the respcindents had decided abciut the price increase in cencert with each c·ther. Accerding te established and recegnized Cempetitien jurisprudence, bc- preve a vielaticn ef Campetitien law bv wav df a cartel, it must be shawn that there has been "meeting c:·f minds" tciwards achieving a ccimmcin gpal pr ciutccirne. Further tp prpve a vicilaticin cif secticin 3 under the Act, there must be an agreement, which includes an arrangement cir an understanding, amcingst the enterprises engaged in identical cir . similar trade ef gcicids cir prcivisicin cif services. 5.5.15 Acccirding te GP, the cprrelatien analvsis cpnducted bv the DG suffers frcim numercius lapses. The DG's ccirrelaticin analvsis has examined whether the prices have mcived in the same directipn, but net whether anv such trend is due tp ccicirdinated acticin c·f the named cement preducers. The DG's failure tp investigate the causaticin issue has rw ggzgidliivasaxcxdrrelatien analvsis irrelevant far this investigatien. F te infer price parallelism tram the cerrelatipn fi ar%is dlljdiilmpr""'mpertantlv, tcl use them as -

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evidence of collusive behaviour without investigating the factors responsible for the rising prices. DG has also arbitrarily chosen U.5 as the benchmark correlation coefficient and does not find anv mention in the Act or anv other international Competition jurisprudence. Furthermore, the use of the benchmark is quite unusual and there is no benchmark like this in empirical economics. 5.5.1? DG's analvsis on price parallelism does not shedanv light on the allegation of cartelization and there are gross inconsistencies between the monthlv price data used by the DG for his analvsis and the actual data submitted bv the different cement manufacturers to the DG.

5.5.1Ei According to DF'·5, there is no apparent justification for the DG to restrict its pricing analvsis to a shorter period. There is also no reason behind arbitrarilv dropping a few months' prices for certain manufacturers despite the same data being available. DG has claimed to compare prices for different manufacturers across states which in realitv reflect citv prices. Even if one chooses to consider the price in a citv to be representative of the price prevailing in the state, . it is necessarv to consider the price in the same citv for each manufacturer. Ev using these different tvpes of prices the DG's analysis compares apple making the exercise meaningless. `''` L _'.·

5.5.19 The DP has that even if the

l DG has found characteristics lll-·" riee< if allelism, it does not in itself as

establish that the varidus cement manufacturers have been acting in cpncert cir is resultant df an agreement between them. It is vvidelv recpgnlzed in Cpmpetitlpn lavv that evidence cf price parallelism alcine ls npt a sufficient prbbf bf a cartel agreement. "Facilitating" pr "Plusl factcirs are needed in additipn tb parallel pricing evidence tp - cpnclude abciut anv ppssibilitv pf a cartel. 5.5.2D The DP alsb denied that the cement manufacturers are trving TD limit the supplv caf cement in the market bv under utilizing their n installed capacities. It has argued that certain factcirs vvhich have been hindering the full utllizatipn caf the plants, such as availabilitv caf the kev ravv material, erratic ppvver supplv, break dpvvn df machinerv cir stpppage pf plant, far up-graduatipn, high inventprv level caf clinker, lpgistlc ccinstraints, demand grcivvth, labpur disturbance vvere igncired bv the DG vvhile analvzing capacitv utillzatldn. 5.5.21 Accprding tc: DF', it has increased its installed capacitv frdm T millidn tcins in 2tltl?--Da TD 19.1*3 millicin tpns bv the end cf 2UDa-1D. The DG has npt taken intb accpunt the fact that whenever Ta nevv plant is installed, the ramp up pf the capacitv utilizaticln tddptimum level takes ccinsiderable time due tp the teething prdblems encpuntered in the initial perlcid. DG has calculated its capacitv " utilisatipn in 2IZl1IZl-11 as x>c~r%. The DG instead pf using prp-rated capacitv, has taken the A' installed capacitv caf the vvhdle n Tear. Calculated ;a-ctlyl§l"·cHiJacitlf utilisaticln fpr EDUB- 2[l1D is >c·<>c%, vvhich the Diils calculatibn. i ._.-.

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5.5.22 According to DG tho growth rato of production has boon siowing down and that tho growth rato of production during financial yoar 2010-11 was 1oss than xxx% whoroas during 2005-10 it was aboyo xxx%. 5uch biankot statomont of surmisos of tho DG cannot bo _ roiiocl upon as tho incroaso in its production in 2010-11 oyor 2005-10 has boon xxx%.

5.5.23 Tho {JP has contonclocl that it is incorroct as roportod by DG that tho pricos chargod in 2010-11 woro aboyo tho pricos chargod in 2005-10. In sorno of tho months of tho yoar, tho ayorago prico actualiy camo down. For instanco, tho pricos chargod by JAL for a bag n of cornorlt Lucknow in ian 2010 was Rs. xxx, howoyor, tho prico chargod in ian 2011 was Rs. xxx. Sirniiarly, tho prico chargod in Ghaziabad in Dctobor 2005 was Rs. xxx, whoroas in Dctobor 2010, it was xxx. Thus, 0G*s anaiysis cannot bo roliod upon. 5.5.2d Donying that its dispatch showod a positiyo corroiation with othor manutacturors, it has boon statod that it had tho largost incroaso in dispatchos rnoro than any othor comont manutacturor during January 2005 to 0ocombor 2005. DG has not royoaiod tho corroiation coofticiont that has boon considorod to arriyo at tho aliogod conciusion. Tho truo arid corroct anaiysis of dispatch paraiioiism as conduct __.by._(:y_§NE5|5 in its Roport statos that tho corroiations for comont rnanufacturors* rangos botwoon 0.03 al and 2010. Thorotoro, thoro is no D ·_._ I

eyidence to demonstrate that its dispatches are "yery strongly correlated" with the others.

5.5.25 According to C¤P·E, it is not a market leader in any of the regions in which it has presence and hence, cannot possibly pose as the market leader in determining the price of cement as alleged by the DG. ln the absence of any express or implied agreement between the cement manufacturers to fin-: prices, any change brought about by following any player in the market cannot be construed as yiolating the Act. it is settled jurisprudence in Competition law that changing prices by following the leader to meet Competition should not be treated against the fabric of the anti-trust law in india. 5.5.25 DG has giyen incorrect findings it is one of the dominant players in the west region comprising of Gujarat and Iylaharashtra. DG himself while conducting economic analysis on price parallelism, has not included it for comparison of prices in the state of Maharashtra. ln the case of Gujarat, it entered the market in September ZDDH and since then shows a price range lower to other players in the said region. This amplifies the submissions that it is merely a price follower and not a dominant player in west or any other region as stated in thelleport. As stated by the DG, the south region constitutes the of cement production, where it has no presence. cog-l"yed that .|Ai. is a top cement manufacturer when thgrée e of JA]. in the biggest region in india. nrt-FF

5.5.2? Accerding ta UP-E, DG has stated that the big players anrieunce in press cir Ty channels that there is a prebability cnf . cement price hike in cciming days. It has never made such an - annciancement, which alscr gcres tc· shew that it is net a daminant ar - big player in any ef the market fer the reascins stated abc·ve. 5.5.28 The DP-E has aIsc· stated that it is inccirrect that the cement manufacturers have been eperating at a very high prefit margin cnf abeut 22.9% in 2DDB--2DlIi9 since the prefit margin ef several cempanies are much higher like TCS, Wipre and Infcisys, which have ever 39% prefit margins can average, and cempanies dealing in cepper, nickel, and zinc mining, whese prcifit margins are said te be abeve 50%. Thus, it cannpt be said that since cement manufacturers have a high prcitit margin ef abeut 23%, they are part cifa carte!. . 5.5.29 Accerding te DP-Ei, DG has a|sc· used inapprepriate tcncrls tci measure prefitabiiity. The grciss cir eperating margins by itself de net reyea! anything abc·ut the excessiveness pf prices. The Office cif Fair Trade {OFT`) discussien decu-ment can prcifitability argues that internal rate ef return {"IRH"l, net present value {"i'~lP'v'"] and rate ef return can capital empleyed {"HDCE"] are apprcipriate prc·fit measures tc· use.

5.5.3p The DP-E has alsb ccnntended that Clv1A's basic ebjective is TD develcnp and industry in India and alsb represents the cci _;t.he%f·Ei`dpstry befere the apprcnpriate departments cnf it has been a member c·f the

Civliii, it has never indulged in any activity threugh CMA [er etherwise} that ceulcl be censtrued as a vielatien ef the Act. Furthermere, in all meetings ef the CMA that have been attended by l ir, me ¤IZerne--:ti·!;i=-r~ ·1nsitive infermatien has been discussed. Elvin under the instruci;i·.;n ei DLFF has been cellecting indicative retail and whelesale prices which are histerical. Further, data cellected by CMA is net cempany specific and Clvle. alse deels net maintain any recerds ef the same. Hence the whele allegatien by the DG in its Repert that CMA is previding a cemmen platferm fer cellectien and l disseminatien ef the lnfermatien ef the prices ef the different cempanies is baseless and deveid ef merit. · 5.5.31 As regards High Fewer Cemmittee meetings, DG has net taken inte censideratien ether such meeting ef the CMA where the prices ef cement remained stable er, in fact, saw a decrease. Fer instance, DG has net taken inte censideratien the High Pewer Cemmittee Meeting which was held en 23.[i2.2D11i.. Pursuant te this meeting, in Lucknew, there was ne immediate change in prices. Further, even pest the meeting en which the DG has placed reliance held en D·il.U?·.2[i11, there was a decline in prices in Lucltnew which seems te have been cenveniently ignered. iviereever, there was ne effect en iw prices in Delhi after the meeting ef 23.D2.2Dl1. The DG fer the purpcise ef submitting the;/Eieipefitlajas\'cherry-pic|r.ed' these meetings which demenstrate between the High Pewer Cemmittee meetin ef price.

5.5.32 The DF has also argued that DG in his report has relied upon statements of various third parties alleging the coordinated behavior l of the cement manufacturers regarding the price and sale of cement to the different segments of the consumers without even analvzing _ them, without anv evidence to show the alleged coordinated behavior amongst the cement manufacturers. 5.6 Replv bv India Cernents {DP-?}

5.6.1 India Cements {DP-?] in its replies has submitted that the Report of DG being premised on the retrospectivitv of section 3 of the Act, which is not authorized bv anv provisions of the Act, is illegal and ultra vires. The report of DG is accordinglv liable to be rejected. 5.6.2 According to DP-T, the report of DG is not valid as the report has evidentlv considered extraneous matters such as acts prior to lvlav, 2D[l'3. Further, the materials relied upon in DG report are not provided to the parties. This act is in violation of principles of natural justice. i

5.6.3 The Opposite Partv has further submitted that even the facts mentioned in the report of DG taken as a whole, fail to establish the existence of an agreement or understanding between the [lpposite Parties in contravention of section 3 of the Act as alleged. it is settled law that in the absence of an agreement being conclusivelv established on the facts o A §iiEa,sje,._the question of inferring an anti- competitive practice of section 3 of the Act does not arise. In the p acéitt thigreg is absolutelv no shred of ·.-_` -"-_- --__

\E ·'·' F

eyidence tc indicate such an agreement between enterprises pr asscciaticn er perscns in the cement industry. 5.5.4 Accprding tcl UP-Tr', in the present prcceedings, what is sciught ' l tp be inferred is that the rise in prices pf cement by yaripus manufacturers in tandem shpuld lead te the presumption pf an agreement between the manufacturers tp raise prices. Such an inference spught tcl be drawn is net cnly against the prcnyisicin pf the Act, but alse factually incprrect and baseless. 5.5.5 The OP-? has argued that the DG has scuught tc rely primarily uppn fiye ecpnpmic factcrs, namely {ii high prpfit margin, [ii} absence ef cc-relatien between increase in price and increase in input cpsts pf prcductien, [iii} price and preductiunfdispatch parallelism_and {ly} under utilizatipn ef preducticn capacity tp infer the existence pf an agreement between the Dppcsite Parties with a yiew te fixfcentrpl price and cnbtain unreascinable prcifits. These actiens can yery legitimately be justified an independent decisicns taken by a prudent businessman with a yiew tc maximize prefits. The afciresaid factprs taken tcigether, as such, canncit be said tc ccinciusiyely establish the existence ef an agreement actipnable uncler the preyisicun ef the Act. 5.6.5 Accerding tc DP-Tr', it is settled law, and in fact admitted in the DG's Repprt itself that Parallelism is at best, cmly indicatiye pf the H><iSt€¤ce Di H i2=t¤¤'ilC the price changes uf .·.\_i'._g:`;;;`j>_ .1L. ' ~.¤

cpmpetitprs. Such igcylntext pf the cement market, being cligppplistic i chiiarjgicterized by inelastic demand sT""

and standardized and undifferentiated praducts, wcruld be justifiable as a prudent business decisicin.

5.6.? Further, the reccrgnitian df the alleged cartels in the cement ind ustrv as being regibnal in nature in the repcirt bf DG, renders a finding pertaining tcl the existence bf a naticinal cartel implausible and amaunts te a rebuttal af anv presumptian as tb the existence bf a cartel having an adverse effect can Cbmpetitibn within India. There is nn case regarding the existence bf a natic¤n--wide cartel which causes cnr is likeiv tb cause an appreciable adverse effect an Campetitian within India in terms bf sectibn 3 af the Act. l 5.6.6 The OP-? has submitted that there are ne specific allegatians as tb haw it has viblated the prcivisicm bf the Act. The allegaticins are tcici general in nature and the infcirmatibn submitted bv the Infarmant viz., Builders Assbciaticrn bf India alsci is nat based can anv evidence prbduced bv the infc·rmant befbre the DG DF befcrre the Cdmmissibn.

5.6.5 Acccirding te the OP, in the vear 2iiii5-261D, its market share was crnlv 6.55% bf the Indian Cement Market which wcruld indicate that it dcnes nat have the market share tb aclverseiv affect the l Cdmpetitibn in the market.

5.6.].D It has been submitted that in the present praceedings, what is sbught td be is that the rise bf prices af cement bv varibus lead te a presumpticin af their existing an the manufacturers ta rise

prices. If an inference as seught te be drawn in the present preceedings is allewed, then the rise in prices by the members ef the infermant's asseciatien witheut cerrespending rise in prices ef raw materials er ether facters sheuld alse lead te an inference ef anti- cempetitive agreement being entered inte by them in cencert. 5.6.11 Accerding te DP, the findings ef the DG are based en suspicien ef parallel pricing by the cement manufacturers. Hewever, such suspiciens are net backed by any evidence er preef ef the same. DG's . repert alse centains several general statements that are net true with respect te individual manufacturers. The allegatien with respect te capacity utilizatien cannet be made en a general basis against the n entire industry as the individual manufacturers, including it have increased their capacity utilizatien and net decreased the same as. prejected in the repert.

5.5.12 The Clif- T has in nutshell argued that the price ef cement in its case is determined by the market facters and there is intense cempetitien ameng the varieus cement manufacturers. in such n circumstances te suggest that it has acted in cencert weuld net be cerrect. Further. varieus allegatiens in the repert made en the basis ef inferences drawn abeut prefitability ef cement manufacturers are erreneeus. All manufacturers have net always made prefits. The entire findings against the Cement Manufacturers Asseciatien are based en general ¤¤sar@ii>f-_a¤a witheut any material evidence. The reliance has been the earlier enquiry in RTPE Ne. saflaalfi which is net iir%i{s§ible._in Law, as an appeal against the

said ene uirv is pending befere the Apex Ceurt and interim stav has ' alse been granted in the said appeal.

5.7 Replv ef JK Cement Limited {DP-B]

5].1 In its repliesfarguments, C¤P--S has submitted that it is net even named as a respendent in the infermatien. lt has been submitted that respendent Ne. S in the infermatien is seme 'JK Greup', which is different than JK Cement, which is a dulv censtituted legal entitv.

5.`i'.2 A grave errer has been made bv cembining the capacitv, preductien and market share data ef anether independent and ` i unrelated cempanv eperating under the name and stvle ef 'JK Lakshmi Cements Ltd' with it te make the se called 'JK Greupi As a result ef this grave errer, the entire repert ef the DG is vitiated and deserves te be rejected.

5.7.3 It has been submitted that its installed ca pacitv, preductien and market share data sheuld be censidered independentlv frem JK Lakshmi Clements. Its installed capacitv is TA? millien tens per annum which is abeut 2.6% ef the tetal installed capacitv ef 236.38 millien tens in the ceuntrv. It is, thus, relativelv a small plaver in the cement industrv which, even bv the criteria adepted bv the DG dees net figure even in tep ten plavers in the cement industrv in the ceuntrv. This pesitien sta -56 bv the DG alse in his ewn repert and that is wh in anv ef the charts er TEDOTTB submitted bv Qieign hich essentiallv relates te { . '..'· if l .

_ tep ten cement manu cttiiflreml ceuntrv Further, given the as

. cemparatively small size ef its installed capacity and its dispatches in the Nerthern lndia [less than 1D%] and Western India {less than 3%], it is net even a significant Regienal Player. 5.3*.4 Accerding ' te DP-B, due te the sheer size, reseurces, and ecenemic advantage ef cempetiters, it is sufficiently censtrained and dees net have any significant pesitien ef strength by virtue ef which it can eperate independently ef cembetitive ferces. Given the relatively small size ef its eperatiens, it neither has, ner ceuld it ever have, any influence en the prices ef cement er regulating the capacity utilizatien in the industry. The repert ef the DG suffers frem material and grave factual errers as n far- as it is cencerned and therefere it deserves te be discharged frem these preceedings being a smali player net ceuntable in tep 1D cement cempanies er dees net have capacity ef mere than 1D millien tennes which seems te have been the criteria adepted by DG te array the eppesite parties. 5.7.5 The 0P-B has submitted that there is net even a whisper ef any l aliegatien ner has any reiief been seught by the infermant against it. I ln fact the prayer clause ef the infermatien by Builders Asseciatien dees net anywhere mentien its name at ali. The infermatien previded by the Builders Asseciatien ef India [BAI] is based en seme newspaper gessibs and spensered steries by the vested interest. Builders Asseciatien ef lx? net ceme befere the Cemmissien with clean in neglecting the fact 'ereught te its netice tha yféjileli;.e'niient?ccl5i¤stitubes enly 12% ef the

input costs for the builders, they have raised the prices of their products many times over and thus have themselves indulged and are indulging in huge profiteering. initiating investigation on the basis of information by a vested interest group would set a very dangerous trend for the future where unscrupulous entities will use the office of Commission in utter abuse of process ot Law to settle their personal scores.

5.7.6 According to DP-3, it is not conclusively established that the ` opposite parties agreed to any particular price or on any change in the prices. The members of Cement Manufacturers Association also include some Govt. of India undertakings which also sold their cement at the then prevailing market price. lt cannot be alleged that action of selling the cement by such Gill undertakings at the same price as others was consequent upon any concerted decision.

5.?.? The UP-B has submitted that in a cartel inquiry it is of critical importance for the investigation agency to establish the alleged _ members of such a cartel failing which any such allegation would only be theorizing. The investigation report hasalso not established that the actions of the opposite parties caused any AAEC in the _ market. Thus, there is no substance in the allegation of violation of the provisions of section Sl?.] ia] of the Act. There is no conclusive evidence that the cement acted in concert to control or limit the supply the market of cement. In fact the record of the i that there has been a Eg? *' ere, _.-<y;»_e.'¥ E

consistent increase in the production of cement in the country over all these years and therefore it cannot be said that the cement , ·· manufacturers tried to limit or control the production or supply. Since there is no evidence to substantiate that any central or limit on production or supply existed or has been caused, there is no case of contravention or violation of section 3(3](b] of the Act. 5.7.B The entire case of DG proceeds on the suspicion of price _ parallelism by the opposite parties but the DG has failed to produce any evidence to link alleged price parallelism with a tacit agreement or understanding amongst the parties. Llnsubstantiated allegations by DG cannot be the basis of any proceedings particularly when such proceedings are penal in nature resulting into leyy of penalties. 5.7.9 According to DP--B, the methodology adopted lay DG in selection of the "Dpposite Parties" is arbitrary and discriminatory. There is no explanation about the basis adopted by DG for selection of only 11 cement manufacturers from the entire country to be arrayed as "Upposite Parties". In a cartel enquiry the least what must be done by the investigation agency is to clearly identify the alleged members of the cartel and not leave a scope for any apprehension that there has been a pidt and choose of members ofthe alleged cartel. _ 5.`?.1D The DP-B has submitted tha_t is not a leader but a follower. It is not a dominant player _ not in a position to influenoe or control the price or the productionylsupply of cem

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5.111 It has alse been submitted by DP-B that DG in his repdrt has mentipned that in the year 2C·1C·-11 the capacity utilizatipn cf industry has came dawn te I='3%. This is nbt a cc·rrect' statement EG far its pwrl capacity utllisatipn is ccncerned since its capacity utilizaticn at its plant in Ncirthern India has been arpund :•c><><% cr mere except in the year 2lIl1lJ-11 when it was xxx% because df majbr l maintenance activity and alsp due tc change in blending ratici frcm PPC tc DPC. Additipnally, its Scuthern Plant is a new facility and _ therefcre is taking time fcr stabilizatipn. Hclwever despite teething treubles fer a green field prbject, the capacity utilizaticn at this plant has alse has gene up frbm matte te ><><><%. These facts clearly prcve that it has been nperating its plant at cptimal level and has never indulged in any practices which limits cir ccintrpl the prpducticn pf - n cement in the cnuntry as alleged cr at all. 5.112 Accerding TG DP-B, installed capacities are declared by the manufacturers cn the assumptian ef cent percent perfecticm in · eperaticn and are indicative ef the maximum but in reality the capacity utilizaticln is a functicin pf sc many factprs like availability cf raw material, pclwer, labeur situaticn, demand and the like. It has te be appreciated that in tcday's wcrld and age it is unthinkable that any prudent business/a-l{terpfis_e_';·wpuld purpcsely let its capacity . remain unutilized cir allciw its investment in such capacity ge dawn ·_._. ;i?I.--_l

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5.2.13 The GP--E has submitted that cement being a cyclic industry, its price like any ether cpmmedity is gpverned by the demand pull * and differs frpm Kene tp Eene and place te place. It is a matter ef recerd that while the whplesale price index pf the peried 2Dl]5·1D fer general cemmedities increased frem ELSE te 25-41, the cement price index increased frem 162 te 209. This gpes te shew that there has been ne abnermal increase in the prices pf cement as is being prejected in the repert ef DG

5.7.14 The Uppesite Party has argued that ne inference ef cartelizatien ceuld be drawn en the basis ef price mevement in a particular directipn. By way pf an example the GP-B has submitted that in the very recent past, the prices ef certain vegetables and cereals increased significantly all ever the ceuntry. Hewever, it weuld npt be prudent te infer that the preducers andfer traders ef such geeds fprmed themselves inte a cartel tp increase the prices. Such an l inference weuld be absurd. Equally absurd is the suggestien that n every time CMA held a meeting, the prices pf cement increased within few heurs er days.

5.2.15 Accprding te the Gppesite Party, there are ll} majer players and ether npt se large pla eg_s.in___the cement market and they all cempete with each '"'· Qrbtchance er pessibility at all fer all these cempeting lceme tpgether te ferm any cartel as alleged pr at H2}

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5.7.15 The DP-B has submitted that price pf its prpducts are fixed pn _ the basis pf feedback and input received bv it frc·m its marketing ' team and channel pf marketing. There is ndthing unlawful abeut this practice which is universally fpllpwed bv mpst manufacturers pf varipus pther gcipds . The DG erred in relying uppn the statement pf . cine small lecal dealer TD drive heme the paint that it is part df same alleged cartel. The DG further erred in placing un-due reliance pn the » fact that prices pf cement mpved in the same directipn fdr all the manufactures during a particular peribd and thus all cement manufacturers made huge prpfits pr indulged in prpfiteering. The scape pf the present inquiry is enly limited TD the price fixing and ndt - prpfiteering. lf the Cpmmissipn starts lppking at prefiteering, it wpuld ampunt tp impprting a new cpncept in the Cpmpetitipntaw as it dpes npt exist there.

5.?.1? Further, the allegatitin pf prpfiteering, even thtiugh bevpnd the scape pf Cpmpetitipn Law, is particularly rejected being cpntrary te the facts. lt is pertinent TD nate that DG, while shdwing the net . prcifits pf all the tep cempanies, has net included its results. This cduld be because its net prdfits frem grey cement pperatidn have actually been declining dver the years. The inferences drawn by DG abdut prdfitability pf cementjngnufacturers are dn tptally wrpng premise and misdirejlgertsi-lQi_-E;-ll-'-if ·`·_·_ i `pr_c·fitability is prpjected pn parameter pf Return it will be dbserved that the prpfitability is np gi9,k;g;s .._. bv the DG and is in fact 1lfl·1

cemparable er Iewer than manv ether industries eperating in the ceuntrv. l

5.?.1i.S The DP has further centended that there is alse ne finding against Cement Manufacturers Asseciatien [CMA] except that DG has made certain sweeping ebservatien en the basis ef "circumstantiaI and eral evidence". There has been ne independent appiicatien ef mind bv DG in this matter and he seems te have preceeded with a precenceived netien that cement manufacturers are werking in a Cartel. A cemparisen with cases in ether ceuntries in cempletelv misplaced in as much as the findings in these cases are based bn cegent evidence cellected bv the respective autherities and net en se called circumstantial and eral evidence as in the present case. In his entire repert, DG has net breught en recerd even ene instance er anv decument which weuid suggest that CI'v1A is premeting er facilitating cartelizatien amengst its members.

5.119 As regards cellectien ef cement prices bv CMA, it has been if submitted bv DP--B that CI'v'|A has been ceilecting indicative retail price range frem 34 centers acress the ceuntrv en wee|r.lv basis under instructiens ef Department ef Industrial Pelicv and Premetien [DlPP], a department ef Gevt. ef india. Such price data cellected bv C|`v1A is made available te DIPP enlv and is net circulated te the members ef CIv1A. It is equallv impertan enlv cellects histeric data ef previeus peried which censequence fer further price fixatien bv cemen Cgi -

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5.?.2D The OP-S has summed up its arguments by saying that the finding by the DG that there is "sc:·me kind cnf cartelizatiun amdng the cement manufacturers" is tue tentative tc: be the basis fur any pruceedings against Clv1A cir its ccinstituents. There is net even an ibta ef evidence bf any kind against it DF CMA anywhere in the repbrt pf DG except the cbmpletely unsubstantiated "circumstantial evidence" and sbme very vague statements I bbservatibns by DG tc· ` suppurt his cpnclusiuns arrived at in the repc·rt. The DG failed LD realize that prbvisidn bf sectien 3·[3} pf the Act is based OH presumptibn relating tb appreciable adverse effect en cbmpetitien. These presumptibns are rebuttable in nature. There is nb discussien in the DG's repbrt that there has been 'appreciabIe adverse effect OH cc¤mpetitic>n' due tc· the alleged actibn ef the c·ppc·site parties in terms uf 5ectic·n l9{3} cit the Act which is a prerequisite and tpuch stune tc· attract sectipn 3 uf the Act. It is therefure inevitable tc· cenclude that there was nu appreciable adverse effect un cbmpetitibn.

5.8 Reply uf Century Ceme nts {DP·9]

5.3.1 The DP-9 in its replyfarguments has submitted that althpugh it has been described as Century Cement Ltd., its cc·rrect name is Century Textiles & Industries Ltd.

5.8.2 Accdrding TD UP-9, _:_;iha_s;taW€e_r·r\inte censideratibn incbrrect facts and has accnrdin aittli/iit;p_r_i<_ect cenclusiens regarding it which renders the inve tjigétiditgrelpt}~rt{iib_r:;jlenable and bad in law. The

DG has alleged that there has been a unifcrm increase in price pf cement pf all manufacturers simultanepuslv in ivaripus markets. Hnwever, np dpcuments have been placed cn recclrds which cprrpbarate the same. It has fixed its pwn prices and, its prices dn nnt rise pr fall simultanepuslv with the prices pf ether manufacturers as alleged.

5.8.3 It has been cdntended that the presumptipn against the Dpppsite Parties in the case is based an the allegatipn that CMA prcvides platfcrm fdr cartelizatipnfdiscussinn pf prices. Refuting the said allegatipn, DP--9 has submitted that it is net aware pf anv pf the alleged meetings ccrnducted bv Elvin where manufacturers have discussed the prices pr mpdes cir means tp regulate prpducticin, supplv etc. tc ma ke undue prcufits.

5.S.r?·. The DG has presumed that CMA is prcividing a platfcrm fdr P exchange df infcirmatipn because it has been ccillecting weeldv retail prices pf cement in 34 centres acrpss the ccruntrv. Hcrwever, in arriving at said cpnclusipn, the DG has ccinvenientlv emitted tp appreciate that the said prices which are histprical are nat cpllected bv CMA pn its pwn dr, at the instance pf its members, but were cpllected under the directipns pf Department pf lndustrial Pcllicv and Prcimpticln [DIPP] efthe Gclvt. Df]_[lCij_H:__

5.S.5 Accprding tp DP-9, {L witnesses tp cpme tp the alleged findings c:· bv the Dpppsite Parties. Hcwever, the findings repprt, based pn the i " ws;.

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evidencefstatements ef the said witnesses, cannpt be adapted unless due eppcwtunitv pf crpss examinatican is affprded tp it. * 5.3.3 The DP-3 has ccintended that DG has made blanket statement pf increase in cement price frpm 2-El% TD 50% i.e. Rs. 5U tp Rs. 39 per . bag. In dping sp DG has picked up and chpsen figures and prices which were lpwesl: in a particular peripd pf a vear and has cpmpared the same with highest in the next qucltecl peried. The said U methpdelpgv adppted bv the UG is tptallv cpntrarv tp the settled principle as cine cannpt cprnpare the difference between the highest and lpwest bv ignpring the average which ruled thrpughput the relevant perlpd. Further, the DG has placed undue emphasis pn the alleged inabilitv pf the manufacturers tp explain hdw rhev assess the market demand. ln dping sp, UG has cpmpletelv ignered the fact that the manufacturers have explained that increase in price was due tp demand and supplv pnsitien as alscl market fprces. 5.3.}* lt has been further submitted that the DG has incbrrectlv _ - alleged that thpugh there were large additiclns pf capacitv caf cement, capacitv utilizatipn pf the plant has gpne dpwn since prcductlpn as well as capacitv utilizatipn pf its plants has increased centinupuslv in the last fpur vears.

5.3.3 Denving that it is inwg_ed--in.._anv arrangement TD cpntrcl the price bv limiting and and su pplv pf cement as against the availabl péiiddcupn, DP-3 has submitted that it has supplied its the market. While fer the 1 s·----·'

year ZDU3-D9, its capacity utilizatien was >e·e·c%, fer the year ZDD9-1D, capacity utilizatien was >0e<% and fer the year 2DlD-11, the same was >ee<%. ' _

5.3.9 The GP-Ei has alse centended that it is alse incerrect that . . cement manufacturers in cenniyance with Civle. haye been indulging in fcellusiye price 'ri:·cing'. it is alse incerrect that in cellusien with ether manufacturers er etherwise, the DPs have diyided the territery ef india inte the fiye zenes se as te enable the cement manufacturers _ te centrel the supply and determine er fix exerbitantly inflated price ef cement. it has been submitted that in a large ceuntry like India. it is net uncemmen te refer te a particular area by yirtue ef its geegraphical Iecatien yi:. Nerth india, Seuth India, East India, West india and Central india. Nlereeyer, this nemenclature was preyalent eyen in cement centrel era.

5.3.1i] Accerding te DP--9, eyen if it is assumed that DPs- 2 te *3 cellectiyeiy held a tetal market share ef mere than mixes, the same dees net place them. in a deminant pesitien. DG has alse included its name te determine the aferesaid market share. Heweyer, it denies that it eyer ieined hands with any ef the DPs- 2 te B er any ef the ether cempanies te arbitrarily inflate the prices as alleged. 5.3.11 lt has further that DG has reperted incerrectly that its eperati in the EDDB-D9 was >c><x% since it was enly ;·d·;x% and

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5.8.12 The OP-5 has contended that its all India production is only 3.55%. Therefore, it cannot be a market leader or cannot have maxim-um market share in four {4] regions out of 5 [five] as alleged. Further, increase in capacity of a plant does not necessarily mean that there has to be a proportionate increase in the production also or the plant is liable to utilize 100% increase capacity the moment capacity is available for use. The capacity of pla nt is increased with future requirement in mind and production is increased depending on growth in demand. The DG has placed no eviden_ce on record to shovv that demand of cement had increased in market and despite the same industry had not increased the production by utilizing additional available capacities with them. I 5.8.13 It has also been argued that cement being a commodity and being of uniform quality, is sold in a narrow price band. The records produced would disclose that prices of cement at times have risen and have also come down from time to time. in fact in the year 2010- 11, the average all india price of cement had varied by only Re. >oo·; as compared to the price in 2005-10. Had, the Oligopolistic market in cement industry existed as alleged, average price of cement would have increased by much more. Consequently the theory of 0iigopo|istic pricing cannot be ia_pp§_ed to the facts of the present n case. The fact that the cem product and, being a low cross elasticity pr gfgecessa rily lead to the inference that the indus ly price without facing any significant decrease inn"-el?ci f'tbe product in market as 1oz

alleged. Un the ccintrarv because cnf the said nature bf the prciduct, the manufacturers have tp fcillciw the leader and sell the cement at prevailing market price. ' i

5.8.14 The DP·5 has submitted that npwhere the DG has been able ta establish that the prices were nat determined bv the market farces but had been dictated bv the cement industrv. in the event, cement industrv was in a pcmsitipn tp dictate the prices, the prices wciuld always rise and vvauld nat came dciwn even in lean seascin because the manufacturers in the said seascin cc·uld alsci have regulated the prciductipn, suppiv and market.

5.8.15 The DP has further centended that a cemparispn pf the prices ef the vear 2D1D-11 with 2iJD5-1D, wpuld disclese that average price have in fact decreased bv >c<X%. The DG has alleged that the eccincimic analvsis cnf price data shciws that there is a verv strcmng pcisitive cprrelaticin in the prices cnf all the ccimpanies and the ccirrelaticmn cceefficient af abscilute prices df cement af all the ccimpanies ccinfirm the price parallelism. Hciwever, cement being a hcmmcigenecius ccnmmciditv is sald and can be scild cnnlv in a verv clase price width band. The prices in the market mcive upward cir dcnwnward almast tcigether depending cnn the market fcirces at the relevant time. Censequentlv tp assess and ta infer cartelizatien based pn price parallelism in is unfbunded. ln almest all the markets the has the same ciualitv rncive in the sa me patt lféfidldgti-dn;-pfscaémcie nt ratici cif mare than fi .»

e.s% te allege price parallelism alse dees net held geed in a preduct like cement where the price admittedly meye in clese range.

5.B.1G Accerding te DP·9, the cenclusien regarding capacity · expansien and utilizatien is tetally erreneeus since capacities in an industry are net increased tc- he utilized immediately. if there is a higher than required increase in capacity, utilizatien ef the capacity weuld naturally be prepertienally less it the demand grewth ef preduct has net increased prepertienately. lt is net the case that the cement market grew prepertienately te the increase in capacity er that if 1DD% capacity was utilized, still there was a market ter cement and prcmductien weuld have been censumed er that because ef enly 73% utilizatien ef the increased capacity, cement was in shert supply in the market.

5.55.17* The [JP-?] has centended that DG has ebseryed that there was ' he reasen fer slewing dewn the grewth rate ef cement preductien. Heweyer, ne industry is expected te preduce mere than what market can censumef abserb. If the DG intends te make eut a case en lew grewth rate ef the preductien ef the cement in the year 2iZi1{i--11, it is ebligatery fer DG te place en recerd figures which disclese that in Zell]-11 demand ef cement was mere than preductipn. _.T'."- f' ._E

5.B.1B As regards abner nnzlilpir-lcne ris_e¥,[.jQP-9 has submitted that allegatiens are misleadin a_i.ier;ga.i· rice increase frem the year 2lZl{i'?i-1·.'Zi te 2D1U·1 an Re. 1. The DG has purp-esely net calculated ah.-*1;`n`lr$ia_J__ ge since if the all India 1es

average is cempared; there is a negligible increase cnf less than Re. 1 in price bf cement.

5.9.19 .¤.ccua'ding tcl DP·9, findings ef DG are based en the facts which are wrung and are based cnn lack ef understanding cnf the fu nctic·naiitv_ ef the cement industry in a hc·Iistic wav. In ne wav, it has infringed secticm 3 c·f the Act. The alleged increase in price ef cement dues nclt affect cempetitipn adversely, as the manufacturers are free tc» sell their prclduct in market cnf and, at a price cnf their chcice. It cannct be said that a large number cf preducers in Public and Private 5ectc·r, their dealers, retailers etc. which fc·rm cement industry wbuld fbrm part c·f a cartel. lt is a matter bf reccmrd that capacitv utilizaticin cnf different cc·mparties has ccmtinued tcl van; U between 55% and 99%. in case cf cartelizaticn, such a situaticn will nc·t be pessible. it has aIsc· used its capacity te maximum and has marketed its entire preducticn. Denying vehemently its invc·Ivement in any alleged ca rtelizaticm, DF'--9 submitted that inquiry against it must be drppped. .

Replv bf Mfs lvladras Cements Limited [·¤·F*·1lJ] 5.9 Replvfarguments ef lfviadras Cements advanced in cc»urse cf hearings, in brief, are as under;

5.9.1 It has been submitte _l;i·g*"lv1ar;lr_as Cements thatthe repcirt cnf DG is vitiated by irreg fafdififésil-2-in-lfri3e`tl¤\c:»dci|c·g*y and precedure ef investigaticin. There fiicgdfip_let»gL,'li¤pcengruent and fragmented ii., [gig

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facts and figures that have been referred and relied upnn tp arrive at illngical ccrnciusiens regarding priced parallelism and cartelizatipn. _5.9.2 It has been further submitted that the market share ef the tive large cement cempanies is 59.59% and the cencentratien ratie ef the tep eight manufacturer ameunt tn E·2.9?%. 5ince it has a market share pf 3.33% enlv, there is nn incentive fer the large manufacturers tp icrin hands with it fprm a cartel. Hence, there is ne basis fnr alleging that it is part ef the natinnal cartel, even if such a natinnal ca rtei were te exi st.

5.9.3 The stance ef the DG is incensistent in the repert wherein, the analvsis ef the industrv is dene pn a natinnal level but certain parts cnf the -natien such as Tamil Nadi.1 are ignnred fer reginnal analvsis which clearlv vitiates the entire repert. iviereever, the definitien ef the market has been ccrnstentlv shifted bv the DG in his repcrrt and therefcrre there is np ccrnsistent case made nut init. 5.9.4 Acccrrding tn DP-1D, the statements ef third parties, scrught te be relied upcrn te suppert the alleged ceerdinated behavier between the cement manufacturers, is wheilv immaterial in as much as ncrne nf the said third parties have even prcrfessed, te be privv tp the price fixaticrn pelices pf the ceI'l"h.€'J]'§_ manufacturers er the Elvin. Furthermnre, the said tlj%;ra`rtie-sl,,aTré¤tJuiiders, cement dealers and highwav cpntractcsrs, that pf the BA1, are highlv questinnable. *= -._'.

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111

5.9.5 The DP-1D has submitted that the first and foremost step in an acceptable methodologv towards investigating alIegations_ of * U cartelization would be to identify the period during which the cartelization was alleged to be in operation. There cannot be a general allegation that throughout all the vears and all the time, uninterruptedlv cartelization was under operation. In the present case, the failure on the part of the informant, and furthermore the DG in its methodologv, in defining the period for investigation for cartelization, being a necessarv pre-requisite for formulation of the methodologv, has rendered the procedure for investigation unsustainable.

5.9.6 it has further been contended that the DG has totallv failed to analvze the role of financial institutions who are the major stake holders and nothing has been brought on record as to anv understanding so arrived between manor shareholders of each manufacturer to act in the sa me direction for fixing the priced or controlling the output.

5.93 According to UP-1D, the prices of ce ment quoted for comparison and analvsis in the DG report do not show nor confirm that the said prices refer to? and grade of cement. ' The methodologv adopte -:._· premise that the cement _ is onlv of one qualitv is rther the cement is sold in different forms like package}, Bagged 111

Cement. In bulk cement there is nd package cdst. In the repcrrt it is net knawn as te whether the prices pertain te bulk cement DT bagged cement. Mnrepver, in the bagged cement, thfe bags are ef different types, like Paper Bags, high density pnlyethylene bags, etc.The ccrst nf bags between paper bags and palyethylene bags vary abdut tram Fis. 5 ta 7 per bag. The lack af unifbrmity in standard and character et pricing adapted fdr cemparisbn and analysis has resulted in errdnecrus cenclusicrns in the matter.

' 5.5.8 DG has deliberately neither examined the capacity utilizatien nar the prices bf cement cempanies beldnging te the public sectbr such as Cement Cerparaticm et India. The reply cnf Cement Cdrpdratien af India has shnwed that Cement Cerpbratibn pf India has alse- been cdnducting weekly market survey ID tix their prices. Furthermbre, their tatal instailed capacity is 3.50 MMT and the pred ucticn fdr the year 2DU?·UB, ZUUB-UB and 2009-1D is U.5DMMT, D.95MMT,+U.9Ei MMT respectively. That being se, the capacity utilizatibn df Cement Carpcrratidn dt India is 23%, 24.35%, 24.61% dnly fdr the year 2DU?4iiB, 2UUB·U5 and 2005-10 respectively. UG has ndt given any ccinsideratibn tD this impcrrtant fact and evidence. 5.5.5 The CIP-1[1 has argued that ta undertake an effective analysis and arrive at a ccinclusicrn an the issue df existence nrptherwise df a cement cartel, the DG, dugh $<._t\'i;i`~fl;_ali.Ee_I_stad.ied the dynamics df the market vis--a--vis the ex i_.` dilicldsures scr made by gevernment cdmpanies, l nirsliijrh5ai._has__.·wh_r_ii.I1ylfailed ta de. UG has nat ..r r i r rrr

113 if

mentipned Cement Cerperatien ef India and ether geyernment cement cempanies because en highlighting the preductien, dispatch _ and price trend ef such cempanies in their analysis, DG weuld net be able te bring such a repert te fix priyate players at the behest ef the influential builders asseciatien which is trying hard te pressurize the . cement cempanies te supply them cement at a price which is net ecenemical ly feasible.

5.9.10 Further, accerding te DP-1U, behayier ef dealers ef cement has net been analysed whe are the mest impertant as they censtitute a crucial link in the chain te fill the gap between the demand and supply and they reap the cash benefit immediately. The steck meyements by the retailers are alse crucial in realizing precess by the retailers. Ne study has been cenducted by DG at the retai|er's . leyel as regards prices and steclt layels with them at different peints ef time..

5.9.11 Accerding te DP-1U, the criteria fer cheesing tep cempanies " based en installed capacity by DG is debatable and questienable. Further, analysis ef price and preductien figures fer each state will yary as price yaries frern state te state. Therefere, different inyestigatiens eught te haye been undertaken fer different markets and zenes. DG. ha Njtailed-"te\adept preper teels te identify cartelizatien and structural and behayieural methedelegy. D jcplwwputed capacity utilizatican in

percentage eyer installed capacity, including new added capacity and capacity ei grinding units. It is pertinent te nete that added capacity is at the end ef year and yields inte negligible preductient Further .- _ · such capacity additien has gestatien peried te stabilize the plant and ` fer small increase in expected demand, the cement cempany has te install a minimum capacity ef 2 millien tennes per annum, subject te yarieus parameters. Thus, the capacity utilizatien se calculated weuld be a misleading yardstick te map preductien trends, particularly _ when in last three cencerned years many ei the players haye added substantial capacity. Ne prudent industry weuid cut the preductien in cellusien and run inte less.

5.9.12 The DP-1D has submitted that the DG has seught te rely primarily upen liiye ecenemic iacters, namely, [ii high prdiit margin, [ii] absence ef ce-relatien between increase in price and increase in demand, {iii] absence ef ce-relatien between increase in price and increase in input cests ef preductien, [iy] price and preductienfdispatch parallelism and [yl under utiiizatien ef preductien capacity, te infer the existence ef an agreement ameng the Cippdsite Parties with a yiew te tixfcentrel price and ebtain unreasenabie prefits. Such actiens in terms ef each ef the aferesaid factbrs can yery legitimately be_ju_s`tiiied as independent decisiens taken by a prudent busi _.I-__- tp maximize his er her prefits and they can eenclusiyely establish the existence ef an agree the preyisiens ef the sei. ·

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5.9.13 Accerding tc: ·0F'--10, it is settled Iavv, and in fact admitted in the 0G's Repert itself that Parallelism, even in the absence pf anv c¤~ relatlen ef the same with change in demand and input casts, as alleged, is, at best, anlv indicative pf the existence pf a practice ef fullmvingfimitating the price changes ef cpmpetitprs. Such acticins, in the cpntezt pf the cement market, being ciligppelistic in nature and characterized bv inelastic demand and standardized and undifferentiated prpducts, vveuld be justifiable as a prudent business decisidn. A cpnclusive inference ef the existence ef an agreement based en such factdrs is therefcire svhellv unsustainable. 5.9.14 It has alse been argued that the allegatiens ef earning super nermal prefits bv the 0ppc·site Parties is baseless. The 0G has given the finding that ever the five vears the cement price has been dciubled frem Rs. 150 in 2005 tp Rs. 300 in 2011. Hcnvever, its prices have been shcnving substantial dcnvntvard trend since lvtav 2009 upte 0ecember 2009 and alsp frpm ivlav 2010 tp August 2010 and again in illdvember and December 2010. These figures are centrarv tc: the purperted trend ef increasing prices and prciflts as seught te be pertraved bv the DG in his repprt.

5.9.15 Further, the cement industrv _being a capital intensive industrv, a realistic mea tveuld pnlv be in terms ef return an capitai. Th pf sales criteria bv the 0G fer evaluatipn ef tilileriefere itself misleading. While Q2 ,,5 Q . -.--- N

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its ewn sales has centinueuslv increased frem Rs. 2{111 crere in the FY ZUUT-DB te Rs. 2¢l5E· crere in FY ZUUB-D9 and then te Rs. ZSUU crere in FY 2[liZlEl--1[l, the net prefit in % has been geing dewn frem 4 _ xxx% in 20D?-US te xxx in EUUB-D9 and then te xxx% in 2UtlEl-1lZl. l Further the net prefit is ever investment figures has ceme dewn _ frem xxx% in FY ZUU?-US te a mere xxx% in the FY 2U1iZ1--11. In fact, in the present market, where the rate ef interest is areund 12%, the average returns ranging between xxx te xxx% is itself net abnermal. The cententien, therefere, that it is maintaining verv high margins ` and earning super preflts is whellv baseless and false. 5.9.16 Accerding te DP--1[l, all its plants in Tamil Nadu are eperating much abeve the eptimum level and there is ne restrictien in preductien and supplv. Elv queting wreng and higher installed capacitv arid lesser preductien figures and alse bv aggregating the preductien efthe plants in Karnataka and Andhra Pradesh aleng with the plants in Tamil Nadu, which had censistentlv verv high capacitv utilizatien, the UG has disterted the everall capacitv utilizatlen, instead ef leeking at specifics. Further, the capacitv utilizatipn is a multi-stage precess. But the DG has censidered the capacitv utilizatien enlv when the cement is finallv pred uced. A stage prier te cement is "cIinl·:er" whi precessed preduct tewards the capacitv utilizatien, te take the same inte its censideratien fer ca

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5.9.17 It has been further submitted that the DG while placing reliance upenldata with regard te capacity additiens and lew capacity - utilizatien by it in·the year 2D1D·11,fails te take inte acceunt the fact that such capacity additiens haye taken place during different peints in the year. Accerdingly the said capacity additiens may net haye been ayailable fer utilizatien by the cempany fer a substantial pertien ef the year. Furthermere, such capacity additien in the term ef a new plant takes a certain peried ef time te stabilize, as a result ef which the eifectiye preductien capacity ef the additiens weuld be yery lew. Accerdingly, DG has wrengly analyzed the fact that the preductien has net gene up in prepertien te the installed capacity and has drawn a cenclusien en the restrictien ef the eutput. 5.9.18 Accerding te DP-1D, the cenclusien regarding capacity utilizatien is unwarranted because ef erreneeus presumptien that the day the capacity is increased, it must yield preductien. Technically there is gestatien peried fer stabilizing the eperatiens and it takes twe te three years te stabilize the plant frem the dateef installatien. Therefere, the date ef capacity utilizatien in cemparisen te installed capacity in the year _gthe'ifrstallatien is net a yardstick at all te measure as te whethe *aElij,d?h`ew':_h1`ticlnRrestrictien in eutput has been there as {ar as cemen elblnkerned. " *-- ~ i i ~..izsri .

5.9.19 The UP has breught eut that there haye been reasens why it has underutilized its preductien capacity frem time te time stating that steck efareund 13,999 tennes had gene waste in the year 2919- 11 fer being unable te be seld in the market in time. Further, limited sterage capacity ef the each cement cempany and limited gedewn capacity ef the retailers, shertages in ayailability ef key raw material, pewer scarcity, break dewn ef the machinery er steppage ef plant fer - up-gradatien, high inyentery leyel ef clinker, legistic censtraints, labeur disturbances and seasens ef lew demand alse were legitimate and genuine business censideratiens fer lewer capacity utilizatien. 5.9.29 The DP has submitted that 96 has net werked eut as te what sheuld be the reasenable capacity utilizatien due te the aferesaid - facters befere accusing the cement cempanies fer indulging inte cartelizatien by restricting the eutput fer net eperating their plants at eptimum leyei. There has been ne allegatien by the cemplainant and ne finding by the DG that DP has net supplied its preduct te any buyer whe had wanted its preduct.

5.9.21 The DP-19 has alse argued that the DG has alse arriyed at a wheliy erreneeus cenclusien that the cement manufacturers l regularly meniter and respend te-Lprtces-chlanges by cempetiters as part ef their pelicy en price being influenced er guided by price changes its pricing pelicy 1 yi

is aimed at ccivering fluctuatiens in input c-ast as a|sc· taking the benefit pf preductien efficiencies and demand. The price a|sc:· fact-ars ` in the premium that custamers wauid be prepared tc- pav far the reputed *FU5.iv1CD' brand. DG has made a mistake bv net ccinducting anv studv at what price the cement has been seld bv retailers tc: custemers. Had he dc·ne sa, the studv weuid have shawn the extent _ af abserptibn af increase in price in the market which wcuuld have justified the increase cur decrease pf price pf the cement affected bv the manufacturer.

5.5.22 Accerding te DP--1[1, adverse inference drawn bv DG regarding I precess ef decisien marking can price is unjustified. DG has raised an adverse inference an accaunt ef the price clecisicin making precess net being fermal, methedical and dcicurnented. Hciwever, the price decisian precess has never been a practice in cement industrv. ivlereiv because the price decisien precess is net decumented, the DG has inferred cartelizatien, which is miscenceived. lviereciver, the decisien abeut prices in its case are cemmunicated verballv and aise thraugh its Enterprise Fieseurces Planning [ERP] svstem. its ERP svstem at anv paint pf time shciws at what price cement is inveiced tci the deaiers. ____

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5.9.23 in its su bmiss Sag! iargued that the anaivsis pertaining te price par §rid misleading. Fer instance, ,*`nTi:,7-[il -.\-ih;}

12lZi

while mapping the data an price levels between the ce-mpetiters in the State pf A.P. the DG has cansciciuslv excluded data pertaining ta ' l it, even thaugh it is recagnized bv the repart itself as a leading plaver in the said market. The DG repcnrt itself, cinlv cencludes that there is parallelism is terms cnf the directinn c1frn¤vemEnt df prices. In fact, a reading nf the data as prclduced and relied upcin bv the DE itself shciws that the prices between the varidus ccimpetitcirs crperate within a bandwidth and dp nat lend themselves te identitv in price levels. In the cnntext nf a ccrmmcrditv like cement, which is a law value cammaditv, the absence cnf identitv in price levels even amangst the market leaders defies anv ccnnclusian regarding the existence caf parallelism, mcnre sp a cpnscicrus cine. 5.9.2a Accarding ta DP-1D, analvsis af ca-relatian af praductian is n alsn selective and faultv. ln Karnataka state, it has been included amang fcnur cpmpanies, but in the caefiicient studv, its name has been drcspped. Further, np studv has been made at all far Kerala market. DE has selected the ccimpanv, figures and plavers that suit his pbjective tp map ccvrelatian in praductipn. In Andhra Pradesh, the state where maximum cement is prciduced being abeut 2U% caf the tcstal cement in lndia, cnnlv A ccimpanies namelv india Cements, Kesaram, Ultra Tech and been cansidered but remaining plavers have ```_p has nat pravided anv reaspn fdr clrp-pping ACL, Chettinad and Daimia in particular whe acts and figures af these '

121

cempanies and drese players had been shewn in the DG repert as haying maximum market share in the Seuthern Regien. 5.9.25 The CIP has further submitted that there is ne demenstrable dispatch parallelism in its respect. The DG has mapped dispatch patterns ef cement in ZDDB & 2*310 in an attempt te demenstrate dispatch parallelism. Heweyer, the summary ef the increase and decrease in dispatch in its respect that eut ef 2A menths selected by DG, its dispatch trend shews a different trend in 17 menths as cempared te the 11 ether cempanies preceeded against by the DG · ' fer inyestigatien. Out ef the aferesaid 17 menths, it is enly fiye times that all the industriesfpiayers increased their dispatch and it is enly fer twe menths that the players haye decreased the dispatch shewing the fluctuatiens in demand. Out ef these twe menths shewing decrease in dispatch, price was alse reduced in ene menth {Neyember 2C*1D]. This shews that there is ne cerrelatien in its dispatch patterns with ether players.

5.9.25 Dn the lines ef the ether Clppesite Parties, C•P·1U has alse denied existenee ef a cartel under the auspices ef the CMA stating that the liiepert ef DG centains ne preef whateyer te shew that pricesfprice changes frem part efthxe discussien ef members ef the CMA at its meetings. it ha _ that while it remains a member at the CMA, i ef the CMA eyer _ the last twe years. Furt `krgiit d_be.s'j`he];lr?dIeiye price infermatien ef 112 '--""

competitors though the CMA. Therefore, the question of it being involved in anv price fixation negotiationsfdecisions allegedlv being * conducted under the auspices ofthe ·'.ZZlviA does not arise. ` 5.9.2T Even assuming without admitting that there exists and- _ agreement between anvfall of the Opposite Parties, the facts and materials relied upon bv the DG fail to establish that the same has caused or is Iikelv to cause an appreciable adverse effect on competition within the meaning of Section 3 read with Section ].9[3l of the Act. .

5.9.23 In view of the arguments as above, the DP-1U has praved that the Commission mav declare that it is not guiltv of violation of section 3 of the Act and accordinglv the Commission mav decide to close the instant proceedings against it. 5.1l] Replv of Blnani Cements [DP-11]

5.1U.l The ClF'--Z|.1 has submitted that since it has not been named in rnost parts of the investigation report, its name should be deleted as a respondent from the investigation report. Further it is settled law as held bv the Supreme Court in several cases that no cognizance can be taken of newspaper reports and therefore inquiries should be dropped in the case.

. 5.1U.2_ lt has also been information filed bv the Builders Association of against the multinational cement companies an vrldr£ajoE»_p'laverS.-_igl the market. The limited at '

ambit and scope of the investigation has been wrongly extended in a manner so as to include several cement companies including the DP. This action is clearly without jurisdiction and contrary to law.- ' 5.1U.3 According to CiP·11, the DG does not have the jurisdiction to .- extend the period of investigation, which was confined, if at all, to the period ZDDS to Eilills. The UG, CCI can only act under the supervision of and directions of the CCI and consequently does not have any power to extend the period of investigation from 2UU5 to · 2D11. The unilateral, arbitrary and illegal extension of period of investigation by the DG, CCi is clearly contrary to the provisions of ' section 41 of the competition Act.

5.1D.d According to the DP, the report has ignored the fact that there was an entry of multinational companies in the domestic cement . industry and consequently there was intense competition in the cement market amongst the different players. Further, it does not attend meetings of the Cement lvianufacturers Association in general I and is not a member of the high powered committee of the Cement Manufacturers Association. Any suggestion made of meeting of mind between it and other cement manufacturers is, therefore, wholly misconceived and baseless

5.1D.5 lt has also been no clear and specific allegation made against the cldigtriavention of the Act. An allegation of improper cond with particularity. In the present case it has not e in most of the parts of 124

the inyestigatibn repc·rt. Further, merely because the infcirmatibn [Case Nd. 2B,r'2B1B]· has been filed dcies npt empbwer the DG tb extend the peribd bf the inyestigatibn which was earlier limited ID the pericid 2Bii·5-EBBB in the case befbre lylRTP. 5.1n.B Acccirding tn the ne, the cnntents pf the inyestigatipn repprt are misccinceiyed, incbrrect and therefpre denied. it sells cement pn a principal tp principal basis tp the dealers and retailers, whn are supplied cement against erder bbeked thnaugh the market prganizer fer the territbry. The BP dpes net haye any dealings with the members caf the Builders Assbciatien bf lndia and cbnsetiuently np grieyance can be made by any pf the members against it. There is HD priyity pf cpntract between the UP and any cit the members pf the - Builders Assbciaticin bf lndia. lt sells cement c·n a principal TD principal basis tb the dealers and retailers whe in turn sell the same tp the custpmers included the mem bers pf the Builders Assnciatipn bflndia.

5.1B.? The UP has further submitted that it has an All india market share bf cinly 2% and there are seyeral Cement Ccimpanies with higher market share whci haye net been impleaded in the present repcirt. The principal allegaticin against the Cement Manufacturing Cbmpanies is that they haye resprted tb unfair trade practices by under prpducticin cir chbking up supply in the market thereby raising the sale price. lt alleged that the cement manufacturers are The allegatiens cnn the J.: °`ss:-Z-L _-_._!I-bl`. In I ]

l i§·__aii.i. ...i gi-{iii

face of it are seIf·contradictorv in as much as, thev canit be an under production and choking up supplies. The two are mutuallv exclusive ` and therefore the basic premise on which the investigation has been done is faultv and therefore bad in law. - 5.1o.S According to the DP, the investigation as carried out bv the office of the DG suffers from serious and inherent contradictions. Reliance of the DG is based on irrelevant; un-verified material and . data in arriving to his conclusions. The report pre·supposes that it is a- member of the cartel and proceeds thereon, leaving the inquirv a mere mechanical exercise whereas the DG is to assist the Commission into an independent inquirv as in order to determine the veracitv of the information as provided bv the informant. The methodologv adopted bv the DG, with respect, is riddled with contradiction and the basis set out bv the DG himself in the methodologv adopted for conducting the inquirv has not been followed.

5.1u.9 lt has been submitted that the DG has made fundamental error both in law and fact in his report. He has neither examined its actual market share nor has he examined or enquired about into the total installed capacitv of the cement industrv. ` 5.1D.1u The OP has further argued that the DG has chosen to relv upon the report of Tariff even providing a copv of the said report to it. Commission itself has expressed its inabilitv to oofijre ianiv ebnyilusive finding qua the `" ··¢' - · if iéi-/'

cement industry. Therefere, the reliance upcin the same is misplaced and any finding based en the repert is flawed being peryerse and centrary te law. ' an

5.1D.11 Accerding te the DF', data relied upen by DG is itself self centradictery with regard te its market share. Accerding te iZiG*s repert, market share ef abeut 21 players eentrel abeut 9D% ef the market whereas later en in the same repert wherein extracts ef the Tariff {Zemmissien has been relied upen by the DG in his repert, it states that 23 cempanies cemmand abeut TUBE ef the market share. 5.1U.12 DG has admitted that there are 43 large cement industries in india but has chesen te examine enly 11 witheut giying any reasen as te why selectively it has been included in the repert. It is pertinent te mentien that in spite ef neticing that there are -49 large cement industries in india, the DG has neither analyzed their market shares ner their market behayier but has arbitrarily and whimsically chesen the 11 cempanies. U

5.1D.13 it has further been centended by the UP that the DG has chesen te make assumptiens and presumptiens·witheut actually relying upen any authentic yerified data ner examining the cement industry. it is admitted case that it eperates in the territery ef Rajasthan and Gujarat. lf deijnarjd is se high in these areas ef Rajasthan and Gujaratt te be examined by the DG and same had net s hew many ether players are there in the said r efgtpe fact that it eperates enly "

in regional territory of Rajasthan and Gujarat, DG has chosen to f`ind . it as a member of alleged National cartel. lt is quite surprising as to ·· how it can be operating as a member of the cartel in the areas where it is not even operating a business. -

5.1D.l-4 According to DP-11, the DE has issued summons to certain manufacturers in order to examine them as witness in the light of allegations levelled in the case. However, the DG has not examined these statements in the context of allegations and finding in the report and has mereiv recorded the statements in grave violation of the principle of natural justice.

5.1El.15 According to the DP, DG has relied upon the judgment of the lv1FtTP Commission wherein 44 cement industries have been alleged to be members of a cartel. It is not a party as one of the 44 companies where lv1RTP Commission has found to be a case of cartel. The UP has submitted that the report of the DG proceeds on an erroneous assumption that there is a deliberate attempt to under utilize the installed capacitv to control production and withhold · supplies. For the said purpose the cement produced has been ` compared with the installed capacitv of the grinding mill to allege that the production has reduced over a period of time, although there was no corresponding reduction in the demand. 5.1u.1E· The DP-11 has completely overlooked the most important fa of cement, i.e., the clinker manufacturing Eii'p%ci'c,}i--"'of_I;';th§__cdment plants. The clinker f"' ___<cirQf

capacity is the determining facter fer the preductien ef cement. Clinker is the "the limiting facter" as well. Unless a cement cempany has a prepertienate clinker preductien capacity yis-a·yis its grinding capacity, the installed capacity te preduce cement by crushing clinker is irreleyant and ca nnet be Ieeked inte. 5.1lZl.17 Accerding te the UP, its capacity at the releyant time te preduce clinker was 4 lac MMT. Heweyer, its cement preductien capacity by crushing the clinker aleng with gypsum and ether i additiyes was E.25 lac MMT. The cement as neticed in the repert is ef yarieus grades like GPC, PPE etc. Therefere, the tetal quantity ef cement preduced will depend upen the grade ef cement that is manufactured during the year.

5.1lZl.1B The DP has ayerred that the maximum cement that ceuld haye been preduced by it en an assumptien that it had utilized 1Uu% [i.e. xxx MMT] ef its clinker capacity ceuld haye been enly xxx MMT, altheugh its capacity was xxx MMT. Merely because it has preduced xxx MMT tennes as against its capacity ef xxx MMT tenes it cannet be alleged that it has underutilized its capacity, in as much as the . clinker, which is the limiting facter has been fully utilized te its i installed capacity in the preductien ef cement. {Till;. l i`

5.1l}.19 The DP has als ,the market share data referred te in the repert 1 iii·ijb;tl.`icensisfen,till The DG has net denied that its market share is such insignificant market 12s

share it cannet centrel the market and there can be ne impact en cempetltien. The allegatien that it has been eperating at a preflt ' margin ef mere than 25%, is alse incerrect. 5.19.29 Accerding te DP-11, it had suffered net less en cement sales fer years 1991-1999, 1999-2999, 2999-2991 and 2992-2999. A statement fer the years 1992-1999 te 2919-2911 shews that its financial pesitien ever a peried ef 14 years was extremely peer. it weuld be therefere wreng en the part ef the DG te examine the prefit fer a few years witheut taking inte acceunt the financial pesitien fer the entire peried as mentiened in the statement. 5.19.21 With reference te the finding that average retail price ef cement had increased in Delhi te Rs. 299 per bag in lvlarch 2911 and the whele sale price increased frem Rs. 149 in Jan 2995 te Rs. 151 in Feb. 2995, the DP has denied stating the same te be irlcerrect. 5.19.22 The UP has further submitted that the finding ef DG that price changes are due te external facters like cest, preductien and efficiency, dees net apply te it as is clear frem the statement ef lvlr. P. Acharya where he has clearly stated that increase in price has a direct cerreiatien with the cest ef_ preductien, velume datafsteck available frem the 9'iarke freight charges. The inference made by the reluctant te preduce clecuments relating te pri is tetally unwarranted and baseless since the decu n "nt;,>r_..aigQi$ed;f,dfIwere preduced by it. 1ae

· 5.19.23 The DF'·11 has submitted that the statements uf ether respbndents have been extracted ta arrive at cenclusiens as regards price parallelism which wnuld be clearly inapplicable tb it. The ecnnpmic analysis ef price parallelism, charts and graphs used in the _ repurt bf DG de nat even refer ta it and theretpre cenclusiens drawn . wuuld net apply tp it.

5.1D.2·¢1 Accarding te DP, the cenclusipns regarding n¤n--utiiisati¤n at full capacity is nut applicable tp it since its prpducticm has increased frum 2.95 millipn ten in 2099 te 4.29 milliun ten in 29D9 and 5.23 millinn ten in 2910. There is abselutely ne dispatch parallelism in its case since its dispatch is almbst in a straight line. U 5.1U.25 The DP-11 has cantended that it has nat been named as leader in different markets. The allegatipns viv-a·vis the purperted price increase pre and pest the High Pnwered Cpmmittee meetings _ nf the CMA are incbrrect since it was nat a member ef the High Pawered cammittee and did nat attend any at its meetings. 5.1D.2E· The GP summed up its arguments by stating that the repert nf the DG dcves net establish any yiplatien bf law and the investigatinn, analysis and cc·nclusic·ns are cuntradictery, incnnsistent, incemplete and dcrnnt leave any ne dciubt that it is net in viuiatien ef any pr¤visidp(sig.i_t_he.yEiEt._Hence the infprmatian vis--a-- vis against it must be l"a__"ll:-

"' {If ·._~- _-._L -°',¤.

12.1

5.11 Reply ef Lafarge India Pvt. Ltd.{ClP·-12} 5.11.1 Lafarge India Pvt. Ltd. {DP-12} in its replies has centended that i it is neither a party te any agreement under sectien 3[El} ef the Act ner has it indulged in any ether ferm ef anti-cempetitive practices recegnized under the Act. It has alse submitted findings ef RBB Ecenemics aleng with its reply.

5.11.2 The lZiP·12 has stated that the DG has selectively relied en the eral and written evidence submitted by witnesses, including cement distributers and buyers witheut previding it with an eppertunity te cress-examine such witnesses. The DG has placed significant reliance en the eral and decumentery evidence submitted by the infermant and ether parties and much ef the DG*s case against it and ether "tep cement manufacturers", rests en the averments made during such eral testimeny. The Cemmissien has net hewever, previded it with an eppertunity te cress-examine the infermant er the ether parties that I were interviewed te test the veracity ef their claims and assertiens. 5.11.3 As per DP-12, in erder te shew an infringement ef sectien 3{3] ef the Act, it was incumbent en the DG te shew that the participants have entered inte an "?eeme;~itf_,_`as defined in Sectien 2[b]· ef the Act, which has net be with antitrust laws areund the werld, the Cem at the very least, that the i _'-_._ -_ ,.2i

competitors discussed competitively sensitive matters and arrived at a common understanding about their future conduct. 5.11.¢i It has been submitted by iJP·12 that it conducted itsf competitive behaviour independently and has not discussed competitively sensitive information with competitors. Potentially as a consequence, the DG has failed to explain, in unequivocal terms, the parameters of any agreement and has supported his assertions by illegitimately adducing economic speculation and allegations from other jurisdictions. These attempts are improper and also not factually accurate.

5.11.5 According to UP·12, it conducts its commercial and competitive behavior autonomously and independently and does not rely on competitors or trade associations for competitive intelligence. DG has failed to show that the major cement suppliers discussed competitively sensitive information. The only example of contact between competitors referenced by the DG's Report is in the context of the Cement livianufactures Association of India {"C|VlAl"j. The DG in his report has alleged that the "ClviA has been collecting weekly retail prices of cement in 3A centers across the countty to submit indicative prices to the Department of industrial Policy and Promotion lDlPP]" and that fthe- EMA iithrough its high power committee meetings provi eis?ai_·_·commo,n__i·f}pportunity for discussion for top cement companie fi ilihis not sufficient to show that the top cement co competitively sensitive - 123

infermatien. iviereever, it has ne inveivement whatseever in the celiectien ef retaii prices and dees net discuss er exchange these with cempetiters. It neither reviews ner verifies the pricing data. It never discussed cempetitiveiv sensitive infermatien at anv meetings ef the CMA. As per CiP-12, its empievees are trained net te discuss cempetitivelv sensitive matters with cempetiters and thev de net de . se.

5.11.6 As per Cip·12, the DG has net cited a singie incident er minute ef a Ci'v'|A| meeting where there is evidence ef a discussien en prices er cempetitive cenduct. The CMA's ceiiectien ef retaii price infermatien is net a piatferm fer anti-cempetitive infermatien exchange but rather a iegitimate Gevernment mandated svstem that the CMA is dutv beund te feiiew. The CMA has an active cempetitien cempiiance pelicv and has seught iegai epiniens frem three eminent iawvers te ensure that its practiees de net breach the previsiens ef the Cempetitien Act.

_5.11.? it has aise been submitted that DG's Ftepert refers te a breach ef the previsiens ef the Cempetitien Act bv the "'tep Cement manufacturers" but faiis te demarcate cieariv the terms ef anv aiieged agreement, identity the aiieged cartei participants, the duratien ef the agreement, when cempetitiveiv sensitive infermatidn was discussed, and what the terms afc.t_h`e agreement were. This is particuiarlv neticeabie since a share ef areund 3%, it is nevertheiess regarde aiirted ceiiiireiiit manufacturer whiie .-`''_''_.· ;- -_-. ki

1 A r*rsrsr.r ·'

manv ether cement manufacturers that have a cpmparable share have net been listed as a "tpp cement manufacturer. 5.11.8 lt has further been submitted bv DP-12 that lZlG's ecenemic speculatien is flavved and dees net applv te it. The DG has spught te suppert his allegatipn that the Indian cement in dustrv is cartelized bv suggesting that certain ecpnpmic facters are present in terms ef price parallelism, super nprmal prclfit, lpvv capacitv utilizatipn, and prpductipnfdispatch parallelism. Hclvvever, it is a settled principle ef lavv in lndia, Eurppe, the United States, and elsewhere that ecclnemic factprs such as price parallelism are net, in themselves, sufficient tb establish the existence efa cartel agreement. 5.11.9 Further, D{3's ecenemic findings are net based en accepted legal and ecenemic theerv and suffer frpm_basic flavvs. Accerdinglv, the results are inaccurate and unreliable. Even if all the features identified bv the DG i.e., price parallelism, super nurmal prefits, levv capacitv utilizatipn, preductipn and dispatch parallelism vvere tp exist, thev vvpuid nevertheless be the result ef and cclnsistent vvith, dvnamic effective and strung c¤mpetitic·n. 5.11.1lZl Accprding te l}F·12, DG has spught te argue that certain ecenpmic facturs [e.g., price pa.rijliile,lismi-_arie`circumstantial evidence that clea rlv indicate the m " theiilmilnd and ceprdinated activities. Hevvever, accepte aLp:d_ -'·. theurv prescribes rh.-* .-Q;

alas "

that price parallelism is entirely ccinsistent with ccimpetitiye behayiciur and is net sufficient tc shew an infringement. DG's apprciach finds nc basis in legal c·r ecpncimic thec·ry. Where firms are ccimpeting intensely, an increase in demand will induce them tc increase their prices at the same time. Likewise, as demand falls, suppliers reduce their prices. Prices, therefcire, may mpye tcigether in a ccirnpetitiye market simply due te the cyclical nature cf demand. 5.11.11 DP-12 has alsp denied existence cf any dispatch cr _ prc·ductic·n parallelism. Tp the extent that parallelism exists, it arises frcm external market fc·rces and net due tc· ccllusicn. .5.11.12 It has alsci been stated that it has ncit underutilized its capacity. The DG has seught tc· assert that Indian cement ccimpanies haye regulated the capacity utilizaticin in the last 3 years. This allegaticin simply dc·es nclt apply tc it, whc·se capacity utilizaticn rate _ in the last 3 years has been: xxx% {2008], xxx% {2005], and xxx% [2010].

5.11.13 The DF has alsc· ccntended that it has nct made super ncirmal prcfits, cc·ntrary tc the asserticins c·f DG that cement cempanies haye made "yery gccd prpfit since last 4-5 years." Industries characterized by high fixed cpst inyestments such as cement require a reaspnable return pn capital emplpyed sp as tc enable further inyestrnent in ?paci1:y exparisicns. It has increased its capacity in lndia frprn xxx m` in;2007 tc xxx millipn tpnnes in 2010, is in the prpcess ci millipn tcinne plant in

Jamshadpur, and a xxx rnillipn tpnna plant is undar cpnstructipn in Rajasthan in Karnataka, Himachal Pradash and lylaghalaya. Unca ` thasa inyastmants ara acccmuntad far, it is claar that it has nat rnada supar--nc>rma| prpfit.

5.11.1el Furthar, DG has scmught tc· adyanca a thapry df prica laadarship but has failad tn sat put a cpharant rnpdal and, rnprapyar, failad tc- auhstantiata that such a situatian axists. DG has simply igncirad casa law frpm Eurapaan and LIS ccmurts suggasting that farms pf prica laadarship ara lagal and cradibla fprms pf cpmpatitipn. 5.11.15 DP-12 has arguad that a cartal agraamant may npt ba _ _ infarrad frnrn practica alsawhara. Tha DG is chargad with inyastigating an allagad infringarnant pf sactipn 3 pf tha Cpmpatitinn Act in India and must, tharafpra, Ippk at tha situatipn prayailing in lndia at tha tima pf his inyastigatipn. It is imprcipar tu placa ralianca pn tha basalass and incarract assumptian that cartalizaticm in camant industry has baan datactad and astahlishad all pyar tha yyprld. I

5.11.16 Furthar, DG has failad tp ayidanca that any appraciabla adyarsa atfacts haya pccurrad in India sinca camant pricas haya incraasad at a rata slpyyar than inflatipn and putput has incraasad dramatically industry yyida. Furtha_r,_c_ustc·mars haya alsp hanatitad frcmrn imprciyad prpduct inn '._=` a rtg-tlachnplpgy in camant and tram incraasad raliahility clliggh-as Lafarga. "<2_;'_ _ ni;.

13FU `E-EZ`L"H,Lg;".

5.11.1? The l}F'--12, in vievv of its aforesaid submissions, has requested that the DG's Report be disregarded in its entirelv, and investigation against it must be closed. lt has submitted that there is no merit in the findings of DG and Commission must set aside the Report completelv as the same is based on an erroneous interpretation of the Act.

Replv of the Informant

5.12 Builders Association of lndia {the informant} in its replv reiterated its allegations stating that being among the largest group of consumers of cement in India; its members vvould bear the biggest setback due to the acts of cartelization leading to increased prices and stalled supplv and production of cement. its submissions, in brief, are as under;

5.12.1 The informant has brought out that it is clear from the report of DG that the DPs have been involved in anti·---eompetitive practices including cartelization and have been found guiltv bv the lvlonopolies and Restrictive Trade Practices ["lv1RTF'"] Commission under RTPE El9,J'159[l and RTPE21,J'2i}[l1. The cement manufacturers have been I found in violation of Competition laws fcartelization, resale price maintenance, controlling production etc.] across the globe. The cement manufactures are habitual offenders and have been penalized in several jurisdictiorfgg i"T,j\ 5.12.2 It has further sub sonaellof these international cement manufacturing co fgilfligh demand and heavv tas`; ff

prcfits have aisp acquired cpntrplling stake in several indian cement cpmpanies. Hplcim grpup has acquired stake in ACC and Ambuja , Cements Limited {ACL]. Lafarge has acquired cement business caf Tata's and Ravmpnds. Dther nptable entrants in India are italcementi, Heidelberg, Cimpbr, CHH plc and vicat. Hblcim, Latarge, italcementi and Heidelberg ampng c·ther have been invpived in anti- ccmpetitive activities including cartelizaticm and price fixing; and have been penalized milliclns cf clpllars pn several ciccasipns. 5.1.2.3 ivldst DPs [whether members cri C|'v'L£'i er nat] have admitted tc· participate in Civlefs meetings and fer exchange cpmmercialiv sensitive infprmaticm {including pries] clver phc·nes. Therefclre, there is np refusai tcnvards participaticm in meetings cir exchange crt cclmmerciallv sensitive infprmaticin. The meetings nrganized bv Civle influence the market behavicur caf the cpmpetitcrs and in fact thev actin ccmcert tc increase the prices, regulate prcicluctipn and supplv cf cement in the market. Apart 1'rc·m identitv cnf prices, DPs have alsci participated in curtailing prclductipn in crder tcl demand higher n prices.

_ 5.12.4 ACC and ACL have claimed that thev were nan-members caf clvlii. and therefere cannct be part cri anv agreement ter lixing cf prices, resale price maintenance, abuse cf clcminant pdsitibn. Hcvvever, bath ACC a naizirrnitted participatipn in several meetings cnf CMA in liviarch 2Dll meetings. Further, bath AC been exchanging 1 ..;i-1e2i>»"

1as

cemmercially sensitive data,i'infermati`en with CMA, witheut raising cenfidentiality cencerns, which have been raised befere the _ Cemmissien. '

5.12.5 The infermant has centended that the findings ef DG establish that the Dppesite Parties are acting like cartel and therefere they must be preceeded as per the previsiens ef the Cempetitien Act, 2·DiJ2.

Decisien ef the Cemrnlssien

n E. The Cemmissien has carefully gene threugh infermatien, repert ef the DG and averments 0f varieus parties in the instant case. The Cemrnissien netes that in additien te substantive issues invelved in the matter, the Dppesite Parties have alse raised certain preliminary e'¤}ectiens.

5.1 Befere determinatien ef the substantive issues, therefere, the Cemmissien deems it preper te deal first widi the preliminary ebjectiens raised by the Uppesite Parties in the matter. issue ef fu risdictien

6.1.1 An ebjectien has been raised by the {Jppesite Parties challenging tbejurisdictien ef the Cemmissien ern the greund that the DG ceuld net have investigated inte allegatiens and censidered, leeked inte data pertaining te a peried prier te rviay 2D, 2eUa i.e. the date frem which the previsiens Biefftljie Act were breught inte ferce. The Cemmiasien, in that it is true that the DG has referred te the industry relating iii I.`` ~-.·f if

te the installed capacitv, preductien, utilizatien, dispatch, prices and prefit margins for peried prier te lvlav 20, 2009, the date with effect * frem which the previsiens ef sectien 3 ef the Act have been made effective. Hewever, the 0G has net enlv relied upen the data pertaining te a peried prier te lviav 20,2009, but alse upen the data after that date. lvlereever, the 0G has relied upen data ef earlier peried enlv te relate them te dvnamics ef the industrv as a whele and cenduct ef the parties in general. ivlere examinatien ef data l beienging te peried prier te lviav 20, 2009 cannet be censtrued te mean that the previsiens ef the Act have been applied retrespectivelv.

5.1.2 lvtereever, if the effects ef an actfcenduct, prier te l'··.·"lav 20, ' 2009, centinue pest netificatien ef the previsiens relating te anti- cpm petitive agreements, the (jemmissien n has the necessafv jurisdictien te Ieek inte such cenduct as alse been affirmed bv the Hen'b|e High Ceurt ef Bembav in Kingfisher Airlines Limited v. Cempetitien C.emmissie·n ef India, 'v'v'.P. Ne. 1235 ef'2010. 6.1.3 The Cemmissien ebserves that it is net a case that 00 has enlv used data pertaining te a peried prier te l'v'iav 20,2009. The findings ef 0G place reliance upen data after ivlav 20, 2009 alse and data prier te that have been used enlv te cenduct analvsis which appears te be necessan; fer delineating the-·n*i"ark_et'ce_nstruct and cenducting cempetitive analvsis ef cementgiindustrv-.in'.-ahpxtic perspective. it is net a case where data belenéing te-Zpe_r'i_ed jiiriqir te lvlav 20, 2009 \_ * ei -H-»

have been used and based bn that infringements ef the Act have been established relatable tb that peripd. 6.1.4 The Cemmissicin bbserves that while determining ccintraventicins 0f the prcivisicins bf secticin 3 cif the Act, the Ccimmissibn has the jurisdicticin te relv en material, data and ccnnduct cnf the parties and the industrv under investigatipn relatable tb a peried anteribr te the said date and nb infirmitv can be alleged bn ' this basis either in the investigaticin ccihducted bv the DG er TD the prbceedings befbre the Cemmissipn can this grcnund. The Cbmmissipn, accbrdinglv, hcnlds that the plea raised bv the parties cnn this cciunt is misccinceived and net tenable.

Failurg te grpvicle eggertuniigg ufcress eitamfnabcin 6.1.5 The Dppbsite Parties have alscn argued that DG, in his repcnrt, has selectivelv relied bn the bral and written evidence submitted bv witnesses including cement distributers and buvers witheut previding them with an eppertunitv te cress-examine. it has alsb been ccintended that the DG appears tp have cbnvenientlv ignbred several parts ef their depcisiticin s.

6.1.6 {in a careful censideraticin ef the ccintentiens pf the Dppesite Parties, the Ccnmmissicin bbservesxthat it is net a casa that tha repprt bf DG has net been bv the Ccammissipn fer their ubjectiuns. In prcivisiuns ef the Act, the parties have been repcirts af D6.

el}. `.

142

The parties were given eppertunitv te lav their ewn evidences- beth written and eral in erder te centrevert the Endings ef DG. Therefere, the arguments ef Dppesite Parties en this ceunt alse de net have anv merit sinee in accerdance with the principles ef natural justice thev have been afferded full eppertunitv te explain their pesitien. Reliance en reperts net supplied .

5.1.7 Une argument that has been taken bv the parties is that certain reperts relied upen bv the DG like Flepert ef the Tariff (Iemmissien en the Perfermarlce ef Cement lndustrv, Repert ef the Department Related Parliamentarv Standing Cemmittee en the perfc-rmance ef Cement lndustrv, lnternatienal and demestic case laws cited bv DG in his repert have net been supplied. In this regard, the Cemrrlissien ebserves that the relevant pertiens ef these decuments relied upen bv the DG ferm part ef the repert ef DG which has been made available te the Clppesite Parties. The excerpts ef the repert ef Tariff (Iemmisslen have extensivelv been queted bv the Parliarnentarv Standing Cemmittee whese repert is available en the website and is in knewledge ef Clvle since representatives ef Cl'v1A alse had appeared befere the Standing Cemmitltee. Ivlereever, the reperts and case laws cited bv in public demsin and ceulcl have been easilv acce thei pa rties. Further, it is net a ;i:`*"Li}f

case that DG has relied only upon these reports for his investigation. DG has used them only to supplement his findings. 5.1.8 Therefore, the Commission holds there is no merit in. the contention of the Opposite Parties that they have been denied due opportunity to present their position, more so, when on substantive issues, they were given due and ample opportunity to rebut the findings of OG.

lgcorreg, facts in the Inform ation

5.1.9 The Commission notes that some parties have raised objections that their names have not been correctly reported and used. For instance, OP·9 has argued that though it has been described as Century Cement Ltd., the correct name of the company is Century Textiles and industries Limited. JK Cements Limited {OP-B} has raised a contention that in the information it has not even been named as an Opposite Party sinoe the information mentions of some 'Jl< Group' only. it has also been stated that the informant made a grave error by combining its capacity, production and market share data of another independent and unrelated company operating under the name and style of *JK Lakshmi Cements Ltd} and DG without ascertaining the true facts, simply adopted the data and figures provided by the informant. ____

5.1.10 The Commission ob issued notices to JK Cements, part of JK group noT:fic_efto JK Lakshmi Cement has not been issued. The in JArrKlhalJilt¤hafs-anis?/o/fnentioned JK Cements lm ar , aa --.-

Limited ef JK greup as the respendent partv. The Cemmissien has n alse seught replies frem JK Cements Limited c·nlv. Therefere, at the time ef determining the infringements in the instant case, case ef JK Cements Limited enlv have been taken inte acceunt. As regards ebjectiens ef Centurv Textiles and industries ijmited, the infermatien relates te its cement divisien, therefere, due censideratien has been given te censider the cement divisien ef tjenturv Textiles and Industries enlv.

5.1,11 The Cemmissien alse ebserves that while examining the infringements en part ef the entities named in the infermatien as regards anti-cempetitive agreement what is irnpertant is analvsis ef their cenduct. Therefere, these ebjectiens de net ceme in the wav ef determinatien ef substantive issues invelved in the case. lvlereever, . in the final analvsis, all the cencerns ef the Dppesite Parties have dulv been censidered.

lncerrect reliancg en metlvated infermatien and Press Regerts 5.1.12 The Dppcsite Parties have alse raised an ebjectien that the infermatien filed bv Builders Asseciatien ef India is metivated. lvlereever, reliance has been placed en seme news reperts which have net been made part ef the repert.

5.1.13 In this regard, the Cemmissien ebserves that under the scheme ef the Cempetitien Act,2UD2, while deciding anv case, the Cemmissien is required te?aanine---infermatienlsl filed befere it, make an independent ass preeess ef investigatien bv DG and th reu gh its e nlliigbulirv s_ulb;ei;;i1i'eTt te the investigatien bv - _ . l' -1 ml _

-¤¢._ 1 ..

OG after following due procedure and takefsuggest such appropriate remedial measures as per provisions ofthe Act which may usher mere competition in the market. Thus. even if an information, is motivated, it shall not influence the final outcome in any manner since what is to be finally determined through a process of ino,uiry by the Commission as per the mandate of the Act is whether enough competition is prevailing in the market or the competitive forces are inhibited due to certain anti-competitive acts and conduct in the market.

6.1.14 Further, the press reports relied upon by the OG in his report are also in public domain and cannot vitiate the proceedings. Moreover, such reports are not the sole basis for either findings of OG or final determination of issues in the instant matter. _ 6.1.15 ln view of foregoing, the Commission holds that the objections of the Opposite Parties in the matter are also not tenable. 6.1.16 Having dealt with the objections of the Opposite Parties on procedural issues, we now turn to the substantive issues before us for determination.

6.2 The Commission notes that the following substantive issues arise for determination in the case.

Issuel: Whether the Opposite Parties have violated the provisions of section #1 of the Competition Act,_?_¤;g1_as has been alleged by the informant?

Issue 2: Whether the acts an tfl_e__§)pposlte Pa rtles are subject matter of eitaminatio sectlonéiyif the Act? if ` " {ji

its jj

lssue 3: Whether there exists an agreement er arrangement ameng the cement eempanies named as the Dppesite Parties under which they share details ef cement prices,* preductien and capacities ameng each ether using the Platferm ef CMA? lf yes; Issue 4: Whether they have indulged in directly er indirectly determining the prices ef cement'?

Issue 5: whether they have indulged in limiting and centrelling the . · preductien and supply ef cement in the market? Issue E; whether there is a case ef preductien and dispatch parallelism ameng the Dppesite Parties?

issue 7: Whether the ateresaid acts ef the Dppesite Parties have caused increase in the prices ef cement'? Issue B: If se, whether the Dppesite Parties have centravened the previsiens ef sectien 3 {3} ef the Cempetitlen Act, ZDDZ? Determinatien ef issues

E.3 Whether the Dppesite Parties have vielated the previsiens ef secrjen 4 ef the Cempetitien Act, ZDDZ as has been alleged by the infermant? .

. 6.3.1 The Cemmisslen has Ieeked inte the market structure in the cement industry in india carefully. The Cemmissien ehserves that DG in his repert has hreught eut that there ar 4$--ce_mpanies eperating with mere than 11*3 large cement pl `-'_ I rldlavjkaddltien, there _ are many mini plants scattered areu

'H ll _- '_ I

1a? ""T

3.3.2 The Cemmissien netes that I-lelcim, a glehal cement cempanv acquired management centrel ef ACL [earlier knewn as Gujarat * _ Amlauia Cements Limited] in 2003. it has new mere than 50% stakes in beth ACC and ACL. Heidreind Investments Limited {Part ef I-lelcim greup] has abeut ae.as% and Amhuja Cements India Private Limited has alaeut 9.31% ef share in Ambuja Cements Limited. Further, Heldreind Investments Limited has aheut 0.20% and Amhuja Cements India Private Limited has aheut 50.01% ef shares in ACC Limited. Amhuja Cements India Private Limited new stands amalgamated with Helcim lndia Private Limited. 3.3.3 Eimilarlv, in Birla Greup, Graslm industries helds 30.33% in Ultratech Cement. Pilani investments & industries Cerp helds 13% shares in Grgsim Industries 3i 33.?3'i'»3 in Centurv Textile Industries. Piiani Investments alse has stakes in Keseram Industries which has cement divisien by the name ef lteseram Clements. lviangalam Cements is alse a cencern ef 3irla greup. Anether cement cempanv Iav the name ef Eiirla Cerp. alse belengs te lvIP Birla ef Birla greup. 3.3.3 Thus, beth Helcim greup and 3irIa greup have cressheldings ameng their cempanies engaged in preductien ef cement. 3.3.5 ACC and Ambuja Cements Limited have aheut 20% ef the market share in terms eIEa]_c.ae_acitv and preductien and Ultratech which tzelengs te 3irla 13% ef the market share in India. Thus, 3lrla and ii3e_rd_mand a majer perticin ef the cement market in ind n ___.- I ,,ii.__Jf]1 133 l

8.3.6 The Cemmissien netes that there are etherfirms like Jaiprakash Asseciated Limited, Shree Cement, Lafarge, Binani greup, India Cements, Jiri greup, Madras Cement, Chettinad Cement, DaImia_ Cement whe are haying market presence in ene er twe regiens ei the ceuntry. in additien, there are yarieus amall and mini cement piants with 1 te 2 MMT capacities. *

6.33 The Cemmissien netes that as per the repert ef DG, ACC Ltd., Ambuja Cement Ltd, Ultratech Cement Ltd, Jaypee Cement Ltd., India - Cements Ltd., Shree Cements Ltd., Madras Cements Ltd., Century Cement Ltd., Lk. Cements, .ii=Z Lakshmi Cement Ltd., Binani Cement Ltd and Lafarge |ndia'Pyt. Ltd. centre} abeut 3*5% market share ef cement in india. The market shares ef majer cement cempanies based en preductien has been cemputed by the DG as under; @ $**"¤*"%

1. Ultratech Cements Limited 18.12

Z *~°°

H Amhuja Cements 9.}*8

¤ Jaiprakesh Asseciates Limited 3*.41

¤ india Cements ` 4.88

H Century Textiies

H Madras Cement /,#·'_iJ`?

18. Lafarge India [P} Limite .-_r`-be ---·` l _- '_·_ . `.`` . _ l `''' l

1-ss J

6.3.3 The Ccrmmissipn crbserves that Shree Cement is npt subiect · matter pf inciuirv in the present case. 5imilarlvJl< Grcrup ccrnsists crfJK · ijements Limited and JK Lakshmi iiements Limited. i-icrwever, in the present matter crnlv JK Cements Limited has been made a partv bv the infcrrrnant. Even if Shree Cements and JK Lakshmi Cements Limited are nat ccrnsidered, the abcrve details as regards market share pf cement manufacturing ccimpanies present a picture pf market structure in which np single firm can be said tp be dpminant in india. In fact, the twcr majcrr grpups-Birla and Hplcim are having mare pr less cpmparable market share. There are crfher firms alscr whp are cpmpeting with each crther fpr gaining market shares and nc· single firm pr a grpup is in ppsiticrn tp ciperate independent pf ccrmpetitive fcrrces cir affect its cpmpetitprs cir cpnsumers in its favciur tci make it dcrminant within the meaning pf eirplanaticrn ia] tp sectipn 4 pf the Act.

6.3.9 The Cpmmissipn accprdinglv hcrlds that ncr cpntraventicrn pf the prcrvisicrns pf secticrn 4 ai the Act bv anv single cement firm cir a grpup is made put in the present matter.

6.3.1iJ Since the market cpnstruct suggests that ncr single firm pr grpup is dcrminant, the Ccrmmissicrn pbserves that a detailed determinaticrn pf reievant marka;i6c-iérhei-p`ur_;;{pses crf establishing anv abusive ccrnduct pn the "ib·f'lariiv-C@p_p;asite Partv is nc·t necessarv. #@.3 ..-._ n -'`'· fl, j_i?____}i >fg-. · f `* ·` · *' _<'iJ.·"

5.4 Whether the acts and conduct of the Opposite Partles are subject matter of examination under section 3 of the Act? . 6.5..1 The Commission observes that in order to proceed further to deliberate whether the acts and conduct ofthe Opposite Parties are subject matter of examination under section 3 of the Act, it would be first pertinent to bring out the provisions of section Pill}, ${3] and 3[ii} of the Act. The provisions of these two sub--sections are as under; n

{1} lilo enterprise or associations of enterprises ar person or ossoclotions of persons sholl enter into any ogreern ent in respect of production , supply, distribution, storoge, acquisition or control of goods or provision of services; which couses or is lilcelv to couse on opprecioble adverse effect on competition within lndio. l2}

"l3,l Anv agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried an, or decision taken bv, any ossaciotion of enterprises or association of persons, including cartels, engaged ln identicol or similar trade of gaadspr pravision of services, when- _.`- _ _

lo} directly or in dlrecttv deterrnin osep r rices; ;: -_ JZ-

- 151 '~--~ >;»-·'

{bl limits ar cantrals praductian, supply, markets, technical develapment, investment ar pravisian af services; fc} shares the market ar saurce af praductlan ar pravisian af services by way af allacatian af geagraphical area af market, a_r type af gaads . ar services, ar number af custamers in the market ar any ather similar WU'?}

fd} directly ar indirectly results in bid rigging ar callusive bidding shall he presumed ta have an appreciable adverse effect an campetitian:

' Pravlded that nathing cantained in this sub--sectian shall apply ta any agreement entered in ta by way af faint ventures if such agreement increases e_lj°lclency in 'praductian, supply, distribu tian, starage, acguisitian ar cantral af gaads ar pravlsian af services. ` Explanatian.--Far the purpases af this sub-sectlan, "bid rigging" means any agreement, between enterprises ar persans referred ta in sub-sectian {3} engaged in identical ar similar praductian ar trading af gaads ar pravisian af services, which has the effect af eliminating ar reducing campetitian far bids ar adversely a_lj'ecting ar " manipulating the pracess far bidding .

{4} Any agreement amangst enterprises ar persans at different stages ar levels af the praductian chaln in ddferent markets, in respect af praductian, supply, distrlbutian, pgqie af, ar trade ln gaads ar pravlsian af se.rvice5,lh cl ·. {ifi LI la} tie-in arrangement; _ nl

{bl exclusive supply agreeme

152

(cj exciusive distrihutian agreement;

fd ,1 refusal ta deal;

fe} resaie price maintenance,

shaii he an agreement in cantraveritian af suh-sectian (1) if such agreement causes ar is iikeiy ta cause an appreciahie adverse effect an campetitian in india.

Explana tiari.-Far the purpases af this suh-sectian,-- (aj ........................

fh} ......,................

(cj ............... . ...... ..

(dj ........................

fe} "resaie price maintenance" includes any agreement ta seii gaads an canditian that the prices ta he charged an the resaie hy the - purchaser shaii he the prices stipuiated hy the selier unless it is cieariy stated that prices iawer than thase prices may he chargeal." 5.4.2 The Cammissian further ahserves that in the present matter under cansideratian there is na allegatian at vertical agreement amang the Dppasite Parties ar between the Dppasite Parties and infarmants in terms af pravisians at sectian BM}. The resale price l maintenance is ane at the vertical agreements mentianecl in sectien 3[·=1][e} af the Act. Therefare, the allegatian with reference ta resale price maintenance against the DVslteiPa_f"tie¥s nat sustainable in the present matter. The DppasitJe'»·ilait.ies campanies whe are engaged in the similar busi m'anufa&prlng af cement and 1ss "

are ciperating at same level cnf prpducticin chain. As per prcivisicins ef the Act, the allegaticins cnf agreements, decisicins pr practices amcing entities engaged in identigal pr similar trade cit gcicids cir prcivisicin crt services are tcl be examined under secticin E13] caf the Act.

5..41.3 The Ccummissicin acccurdingiv hcilds that the allegaticans pertaining ta the acts and cpnduct pf the Dpppsite Parties in the instant case are subject matter cnt inquirv under secticin ${3} cit the Act.

ERE l

5.5 Whether there exists an agreement cnr arrangement amcnng the cement ccnmpanies named as the Dppcusite Parties under which ' thev share details et cement prices. prcrducticnn and capacities amcwng each ether using the plattcnrrn ef CMA? 5.5.1 The Ccnmmissicin cibserves that the DG has fcrund the Gppcisite Parties in ccnntraventicin at sectipn $[3} [ai, sectipn 3[3}[b} read with secticin 3[1} df the Act as alsce discussed in the earlier part cnf this c·rder. The ijcimmissipn ncltes that the chief ebjecticin tcl the finding; pt the DG taken bv all the Dppcisite Parties is that there is lack caf [direct} evidence as regards existence cnf anv agreement within the meaning cnf secticen 2ib] pf the Act tcl allege anv centraventican caf the prcivisicms ef secticm Bi?.] read with sectipn 3111] pf the Act. It has been submitted that DG has tciund infringement pf the prcnvisicnns pf secticin 3{3} at the Act based '·_upc·n egcidqmic analvsis and market behaviciur tcl prcive seme{}iiif;d iiit mdetirié minds and there -- rfiv y

is na direct evidence ta suppart anv cartelizatian ar anti-campetitive agreement amang them. _

6.5.2 The Cammissian, in this regard, ahserves that in arder ta deal with the cantentian at the Uppasite Parties an the issue, it is pertinent ta have a iaak at the term 'agreement' as defined in sectian 2lb] at the Act. The relevant prcivisians as mentianed in sectian 2[`a] are as under;

"{h} "agreement" ihciudes any arrangement ar un derstandrhg ar actian in cancert,--

{ij whether ar nat, such arrangement understanding ar actian is farmai ar in writing; ar

{ii} whether ar nat such arrangement, understanding ar actian is . intended ta he enfarceahie by iegai praceedings;" 6.5.3 As is seen tram the canstruct af the afaresaid pravisians, the detinitian ef the term 'agreement' is an inclusive definitian in the Act. It inter--aiia includes anv arrangement, understanding ar acticin in cancert irrespective af whether it is written ,i' farmal ar atherwise ar intended ta he |ega|l~,r enfarceahle. Thus there is na need far an explicit agreement and the existence af an 'agreement' within the n mea ning af the Act. The same can he inferred fram the intentian ar ccinduct af the parties. In the cases at cansniracv ar existence at an··,¢ anti·campetitive agreement, praat cjH_[grm_ai agreement mav net be available and mav he establish evidence diane. The cancurrence at parties a éimangst them een, k i _'''·.'- i

~ii,vi,.,,.

therefcrre, be gathered frcrm their ccrmmcrn mcrtive and ccrncerted ccrnduct.

5.5,d The Ccrmmissicrn crbserves that existence crf a written agreement is ncrt necessarv tcr establish cemmen understanding, ccrmmcrn design, cpmmpn mcrtive, cpmmcrn intent crr ccrmrncrnaiitv crt apprcrach amcrng the parties tcr an anti-ccrmpetitive agreement. These aspects mav be established frcrm the activities carried crn bv . them, frem the crbjects scrught tcr be achieved and evidence gathered frbm the antericrr and subsequent relevant circumstances. Circumstantial evidence cpncerning the market and the ccrnduct crt market participants mav aiscr establish an anti-ccrmpetitive agreement and suggest ccrncerted actipn. Parallel behavicrr in price er sales is indicative crt a ccrcrrdinated behavier amcrng participants in a market.

6.5.5 Ne dcrubt the parties tcr such an agreement mav effer their crvvn sets ef expianatibns behind the existence crf circumstantial evidence. The firms crtten tend te justifv the parallel behavicrur in prices, prctducticrn, dispatch DF supplies ccrnduct in prices, as has been dcrne in the instant matter alsb, bv explaining the fundamentals ef the market fcrrces such a?de'r"h`an;tI]"increasing ccrst pf prcrductidn and crthereccrncrmicfacter .".- in U "-,,*°`\._ 1 ··'' ~ - - j " nr

Q l `''-' r._. _r

**-2 ___. ..¤ _,_.·{.·'

tsa

6.5.6 Hciwever, it alse remains a fact that parties tu an anti- ccimpetitive agreement will nut ccime aut in npen and reveal their identity te be punished bv the cempetitien agencies. This is alscr the reasen that the legislature in its wisdnm has made The detiniticin pf *agreement* inclusive and wide encrugh and net restricted it enlv te decumented and written agreement ameng the parties. Thus, the Ccimmissicrn is net impeded frqm using circumstantial evidences fer making inquiries inte act,. ccrnduct and behavieur Of market participants.

6.5.? The Cdmmissipn in light ef the prcrvisicrns df sectipn 2lb} at the Act and cliscussipn as abave, accprdinglv, halds that in absence efanv dcrcumentarv evidence at existence ef an agreement, it is apprepriate, cerrect and legical te inquire inte cases nf anti- cnmpetitive agreements en the basis ef existence ef evidences which establish that particular set ef act and cpnduct af the market participants cannpt be _exp|ained but for same sqrt pf anti- ccimpetitive agreement and actinn in ccincert ameng them. 6.5.6 The Ctrmmissien cibserves that parallel behavicrr in prices, dispatch, supplv accqmpanied with same trther facters inditating n ctrqrdinated behaviciur am¤ng`the firms mav beccrme a basis fer finding ccrntraventicrn tar citherwisgofirtlje ]iJTcs.visi¤ns relating ttm anti- cdmpetitive agreement ef the ntrtes that the . Dppesite Parties have argued ceiitlairgcapes decided bv the Ls?

Ceurts that unless direct evidences are available, anti-cernpetitive agreement cannet be presumed.

lS.S.El· Hewever, it is net that the cempetitien agencies in ether jurisdictiens have net taken cegnizance ef circumstantial evidences while inquiring and establishing centraventien in cases invelving anti- cempetitive agreements. While neting that the legal svstemitramewerk, market structure, tirmicensumer behavieur etc. differs frem jurisdictien te jurisdictien, the Cemmissien iinds that the basic cempetitien principles are bv and large applicable acress jurisdictiens. Accerding, ieeking at the pesitien in ether jurisdicticins, it is feund that circumstantial evidences have been used in the News Paper Cartel Case [1999) ef Brazil. Similarlv in case ei High Fructese Cern Svrup Antitrust Litigatien ef US Atlantic Sugar Case et Canada Atl. Sugar Retineries Ce. v. A.G.Can., [193*3], 2 S_C.H.64¢i, circumstantial evidences were relied upen. In Latvia- Hen's eggs case alse infringement has been feund based upen circumstantial evidence. It is netewerthv that DECD in its paper *Presecuting Cartels witheut Direct Evidence et Agreement' {February ZDUS] has held as unden

" Circwnstantiai evidence is ef ne iess value than direct evidence fer it is the generai ruie that the law makes ne distinctian between direct and circamstantiai `;s__ .... in erder te pi-ave the censpi'racv,, it is net ne _ ltiie".'*ga`vernment te present preaf pf verbaiar written agr péntifi _ 1. ""Ei __;f_, i, _ _i

"L_··-* j;`::--; ;-;-ii;.-Iran"-.

' 1ss

6.5.10 The Cammissien is net dblividus dt the fact that the anti- cczmpetitive cdnspiracies are dften hatched in secrecv. The Hrms n · engaged in anti-cdmpetitive activities are ncrt likelv te leave anv trace evidencing the same. Therefcrre, in absence ef anv direct evidence df agreement ambng the cdnspiraters, circumstantial evidence is required te be leaked inte.

6.5.11 The Cdmmissien ncrtles that the Uppdsite Parties have cited its decisidns in the case crt alleged caftelizatien in Sugar industry, case at Neeraj lvlalhetra vs Deutsche Pest Bank and ethers -Case ne. 5 et 2009 Banks and Flat Glass manufacturers te drive heme the paint l - that existence et direct evidence is must ter establishing any cdntraventidn under the prdvisidns df the Act. In this regard, the Cemmissien ebserves that in beth the cases the issue vvas decided based dn a detailed market analvsis and it vvas cencluded that the cdmpetitive ccrnstruct at the relevant market ddes nat cause anv cancern far cempetitidn based updn existing materials dn recdrd. The issue befcrre the Cdmmissidn in anv case is inquirv intcr prevailing cdmpetitive ferces in the cdncerned market and evidences are evaluated accerdinglv tD assess that. if direct evidences are ncrt present, but circumstantial evidences cle indicate harm td the cempetitien at a market place, the Ccrmmissien will certainlv take c¤gnizanCe cnf the same,

6.5.12 The Cemmissien dbserv _,;t,i;*at€'amdng:?se`t_ at circumstantial evidences, evidences ef cemmu ;cg1i¤d"§a_mdng_§,hefQ·participants te an 0 s. ,_ -_r

ucu lcllr

anti-competitive agreement may give an important clue for establishing any contravention. Communication evidences might . prove that contravening parties met and communicated with each other to determine their future or present behaviour. Evaluation of communication evidences and Hole of CMA in the present matter

6.5.13 The Commission observes from the findings of DG in his report and records ofthe investigation of DG that it is undisputed that the Opposite Parties participate in the meetings of Cement lvlanufacturersi Association which provides a platform to the Opposite Parties where they interact on regular basis. 6.5.1·4 The Commission also observes that as on date Clv1A collects retail prices and wholesale prices of the cement from different centres and transmit it onwards to me government. The retails prices collected from different centres are transmitted to DIFF, while the wholesale prices are transmitted to the office of Economic Advisor of the same department.

6.5.15 The records reveal that with the closure of the office of the Development Commissionerfor Cement lndustry [DCCI}, at a meeting taken by Secretary, lvlinistry of Industry`, Shri Suresh lvlathur, on 13.11.1551, CMA was asked to 5,dI§c_;t-I-cenméntprices [Minimum and Maximum] on a weekly basis a DCCI. Accordingly, President, ClvlA in his letter Not.? dated 05.12.1551 1so

addressed tp Secretary, iyiinistry pf lndustry, referring tp the decisipn in the afdresaid meeting, assured that CMA wduld cdllect cement prices frprn cement cprnpanies and giye a feedback. td the iyiinistry. CMA wrcite a letter tu L.|nder`5ecretary {DIPP}, iyiinistry pf Ccammerce and lndustry en D5.ti6.2DClB seeking clarificaticm as tc: whether it shpuld centinue td furnish the retail cement prices tp the Gnyernment in light pf enactment ef Cumpetitiun Act, ZDD2. ln reeppnse, Under Secretary [DIPP] yide his letter dated 2Bth July, EDOS _ requested CMA tc: ccintinue tc: turnish retail prices cit cement in different cdnsumptipn centres tp DIPP. Accprdingly, CMA hm been cpllecting and sending it tc DIPP a statement cf weekly retail cement prices.

U 6.5.16 The Cummissipn dbseryes that CMA cpllectr. retail cement prices frdm 34 centres all pyer the cduntny as under; Centre Snurce Cement Cp. lylnde Concerned Dfticlal Delhi Shree Cement Ltd. Phone ly'lr. Pawan Agarwal Kamal, Ftcihtak, JK Lalerhmi Cement E-lylail lylr. Ashwani Sharma Jaipur,

Bhadnda,

Meerut

Chandigarh, UltraTe¤h Cement Ltd. E-mail} ly'lr. Pawan Kpthiyal Ludhiana, Phnne

Jammu, 5·imla _

Mumbai, UltraTech Cement Ltd. E-mail 'iylr. Prashant Nagpur, Pune, ltaduskar

_ Ahmedabad,

Baroda. Surat,

aelmt __

Patna, Ll1traTed·i Cement Ltd. __ QYYPhc{n`e_\ ry'lr.shyam lyiendn Guwahatl, ''"` ._

`.;'_ I} _ _-i '·__-ilu ·., I

Kplkata Century Cement Q- _Iylr.S.i¤Z.su|tania ' _- .. rj |

.__3 . I.

._r 1 ' . I

- 61 .e..,=~ F. L.

' 1 IJ x`-6.. . I .5- I

Bhubaneshwar DCL . E-mail Mr. 5.I<. Pradhan Chennai, india Cements Ltd. E-mail |i.·'lr.T.5.Fiaghl.1pHthy Triyendrum,

Bangalere,

' Hyderabad,

Calicut,

Visakhapatnam.

Gee _ `

Luclcnew Birla Cerperatien Ltd. E-rnail lyir. Manish Maliwal Falzabacl. Jaipralrash Asseciates Ltd. Iylr. Niranjan Singh Bhclpal

Bareilly Prism Cement @ Mr. M.l<. singh

5.5.1? ln additien, whelesale prices et cement are aise gathered trern 15 centres en menthly basis; yiz; Delhi, Jaipur, Kellrata, Elhubane shwar, Mumbai, Ahmedabad, Chennai, Hyderabad, Lucirnew and Bhepal.

5.5.15 The Cemmissien ebseryes that it is established that CMA is ` engaged in cellecting prices --- beth retail and whelesale trern all eyer the ceuntry. The prices et all cempeting cement cempanies are being celleclued. ln such a situatien, when the cement cernpenies neminated by CMA are celiecting prices et ether cempeting cement cempallies eyer telepherles and e--rnaiis, ccrerdlrlaticrn en prices is easily facilitated. ln their replies, Uppesite Parties haye net denied abeut such an institutienalized system et price cellectien threugh a platform preyicled by CMA. They have enly stated that the prices which are cellected are hlsterical and de net giye rise te any ccrrnpetitien cencerri.

5.5.15 The Cemmissien is §e_pinie__n_ that when cempetiters are interacting using the plat they are in teuch with each ether eyer phene a d égmails.-as refgagrds prices-- beth retail and 53* {-·.,_I -SF:-H.- ` EX

562., '_ r

Hi"-Ls};

wholesale, it cannot be denied that there is alwavs an opportunitv of _ discussing the determination and fixation of prices for future, which is prohibited under the provisions of the Act. The fact that it is being ` done under the instruction of DIPP does not absolve CMA or the cement companies engaged in this exercise from running afoul of the provisions of the Act. lvloreover, the advice of DIPP in light of the provisions of Competition Act, 2002 was obtained bv Civ'lA in June 2003, when the enforcement provisions of section 3 were not even notified. Clv1A did not take care to take advice after lvlav 20, 2009, ` when the provisions of section 3 relating to anti-competitive agreement were notified and the prices continued to be collected on a regular basis using CMA as platform.

i 6.5.20 An argument has been raised that Clv1A is collecting prices of cement for onward transmission to the concerned authorities in the government. ln this regard, the Commission observes the cement companies which are collecting prices of all others are the companies holding a major portion of the market. if the prices of all competing cement companies are collected on a regular and repeated basis, the dissemination of information and consequentlv coordination gets facilitated. .

6.5.21 The Commission further observes that CTviA has also constituted a High Power holds regular meetings. Details of the meetings of C Meetings

held during the period Januar **2s§10_;·lto'.i~.#iarciIiiI2liJ11 as reported bv the 0-G are as un der;

163

m Date uf Meeting Venue

1. a·¤..as.2a11 Hatel c=r.:I-IIa Iyiumbar

2. _ 24.CI2.2CI11 Hateiflrchid Mumbai

3. EI3.tI1.2IZI11. Hatel Grand Hyatt Mumbai A. 2S.i]E·.2D1Ci i--1c·tel Orchid Mumbai

5. D9.iZIA.2D1D Hcitel Senar Kalkata

E aa.c•s.2a1a I-Iaten c=rcI-rid Mumbai

i Tr`. 11.D1.2IZI1D Hate! Claridges. New Delhi 6.5.22 As has been gathered by the DG during inyestigatian, prices in respect af the Clppasite Parties increased immediately after the meetings in January and February 2i]11.

PRICES CIF TDP CEMENT COMPANIES BEFCIRE EI AFTER - THE HIGH PDwEIt COMMITTEE MEETINGS DF CMA ·[Rs.per bag}

. FEh1.I3f•.l'|ZU11

- I January ID11 me

SLND. Name uf Cumparry {Pr;E;¢;;muE;rm%;t?ng} {gif-;e;;_r'ry:1|·;1eet|¤g mt-{ng ¤n1··HZI2--11}

- uae

- Maharashtra

- tamu Nadu

- wetsas i

H ae.

- snmaasssa

ulrratwh

¤¤¤=·»=·=·r¤ ·- --'· LQ,.

- iW·¤i =¤¤¤ - 1* *7*:-` ah n

- ¤·¤¤¤¤¤

I- hyper amup _

- aaa IS}

- .=1=><r¤¤' §

'Q`:>- J `_,._.-i.':

1E»A --»·

IH I2.fare¤ _

_ West cencal

HK Centu Textiles

- nnenesee

H came

1 rnere cemem

_ Hvderahad

- --_

_ Ambela

- ¤¤'·¤*r¤r mr §

n Madras ¤¤me¤'=¤

- cemce

- a¤¤r·r¤ cr¤¤¤¤h

El BinanICen1¤n'€

--ElZ

6.5.23 The Cpmmissipn ncntes that the Dppbsite Parties have ncit disputed the abcnve facts in tcntn. it has nnly been submitted that DG has npt Innired intn change in prices after ail crther meetings when ' either the prices had remained the samejcir h_ad\gc¤ne dbvvn. The C¤mmtF·5t¤*`· DUEEWEE that in ¤"'E¤}é.-_ttt|titt€i`.aEtWt,T*f vvhere prices are [ _'_. in _ ·`i fg "i

being kept high aver a ibng peri ddr ti`rne`,eit__is -t1"ID_1E necessan; that prices vvnuicl increase after ever trtteettng,-tan_6;rthat prices had rss

increased after the tvvci meetings as brciught put bv DG in his investigaticin raising suspicidn cnf ccicirdinated acticin and discussicin amcing the Dppcisite Parties as regards prices. ivicire sci in light df the fact that earlier alsc· CMA was fciund tcl be engaged in restrictive trade practices bv iv1FiTP Ccimmissidn. Hcivvever, the assdciatic·n has ccintinued td prcivide its platfc·rm td all the cement ccimpanies fcir interactidn as regards prices- retail and vvhdlesale. 5.5.24 The Cc·mmissic·n alsd cibserves that ClvlA has several publicaticins like Executive Summarv-'Cement Industrif, 'Cement Statisticsi --Interregidnal mcivement df cement'. These publicatlcins l giving details cnf the details df prdducticin, dispatch cnf each ccimpanv are circulated cinlv amang the members. Therefare. the Dppasite Parties ncit cinlv get infc¤rmatic·n abciut their prices, but alsci abciut the details af their prc¤ductic·n and dispatch. The sharing df such sensitive infcirmatian makes cdardinatian easier amang the Dppasite Parties.

5.5.25 The Camrnissicin further cbserves that vvith regards ta the meetings cnf ClvlA there are glaring incdnsistencies in the submissipn cnf Clv1A and Cippdsite Parties regarding meetings held under the banner af ClvlA. ln its submissicins befdre `EFIE Cammissian, ClvlA has submitted that ACL and ACC after having ceased tcl be the members cnf Civ1A in Navember 2555 {never _`attended the High Pcivver Ccimmittee meetings and t gvxéalsd'.did___ntit_ attend the meetings af . High Fcivver Ccrmmittee ci an(Q£m}'53.2511. Havvever, the l

representatives at ACC and ACL had stated before DG that they had attended these meetings along with other cement companies. Their replies in this regard before DG are as under; " Statement of Shri Javanta Datta Gupta, Chief Commercial Officer, ACC Ltd.

Cl.59: Whether your campony ar the senior ajjiicers of your _ company has attended ony meeting with other cement companies in the recent past?

Ans: i had attended twa meetings in the recent post -- one on 24th February, 2D11 and the other on dm March, 2U11 in Mumbai on speci jc invitation ta discuss our initio tives with Cii on concrete road and past budget excise campiexity. in these meetings, ' representatives af other cement companies were aisa present. Statement ot Shri ELL. Taparia, Company Secretary, ACL {1.49: Whether any af yaur ojjicers has attended any meeting af cement industry and where?

Ans: Un 24*** February, 2a:t 1, we made a representation for stimulating demand for cement through concrete roads and on 4** March, 2a11, we requested for understanding the changes in excise law in Union budget. Bath the in/eBtings.t_ook piace at Hotei Orchid in Mumbai. .- _.__ { i".t__ _

CLEO: Wha were the a er§participQants_tm' the above mentioned meetings? big ,.

H {--"`-`-3-ir r·-·5

U ts?

Ans: We did nat attend the entire meeting. Ciur discussians taak place with representatives af Ultratech, JK Lakshmi Cement, ACC and Shree cement."

6.5.26 The Carnmissian abserves that there is a cantradictian in - replies at CMA, ACC and ACL submitted in caurse at inquiry praceedings alsa regarding attendance af the representatives at ACC and ACL in the High Pavver Cammittee meetings. n Reply at Cement Manufacturing Assaciatian dated 12th January, 2612

"With reference ta para 6.1S.6 the Answering Flespandent denies that ACC and ACL have ¤ttended the meetings af CMA an 2-¢l.U2. 26*11 and 04.6*3. 26*11 as alleged ar atherwise. it is submitted that na invitatians was sent ta the said campanies. The recards af the meeting alsa disclase that nane af the representativesv'a_lffice rs af either ACC ar ACL had attended Lhe meeb'ngs an 24. ti2.2Ci1.t and Ud.C·'3.2ti11 as alleged ar atherwise. r

With reference ta para 6.13.9, it is submitted that the aliegatians and inferences drawn by the DG ¤re wrang and cantrary ta recards. After ACC and ACL ceased ta be members af the Answering Respandent they have nat attended any High Pawer Cammittee meeting af ' Answering Respandent as alleged ar atherwise. " Rep ly af ACC Ltd. dated 11lh Jangary,_e2EI_Ql.2 _' ·__- ii-\

'*During the caurse af the D _fs'_·inves'tigaa'bta, ivlr. lavanta Dattagupta, *' if -l Z`? ` 1

an behalf af ACC stated t tiije had atte_rid_ep:l twa meetings af the . IY- ?·?»ir¥ I -l-FII.} `-l

1 ,r. _... L, gr-rj.--'

-__;_

CMA {'i.e., an 24 February, ZUII and 4 March 2t}11.} As stated during the summans hearing, the purpase af discussian af the meeting an 24 ' February 2U11 was ta discuss the issues relating demand thraugh bramating cancrete raads and the meeting an 4 l't4arch 2U11 was ta discuss and understand the camptexities retating ta appticatian af excise duties that wauid resuit past the Unian budget. After discussians an the abaue mentianed tapics, Mr. Jayanta Dattagupta ieft the meeting."'

Reply at Ambuja Cements dated 14* February, 21112 ' "During the caurse af the DG's inyestigatiah, Mr. B.L. Taparia, an behalf af ACL stated that ACL had made a representatian ahead af , twa meetings af the high pawered cammittee af the CMA, i.e,, an February 24, 2tl11 and March 4, 2d11. As stated during the summans hearing, the purpase af discussian af the representatian an February 24, Ztill was ta discuss the issues reiating ta stimuiatian af demand thraugh pramating cancrete raads and an March 4, 2'U11 was ta discuss and understand the camptexities in reiatian ta appiicatian af excise duties that wauid resuit past the Unian budget. in this behalf it is impartant ta nate that ACL did nat attend the entire duratian af the meetings."

5.5.22* The Cammissian further abserueisJtha_t_whi\e CMA has denied the participatian at ACC and M; -·ttt't1;Zt_|'T:Q~¢.g_tft°;L:;E`B._1ithg5 at CMA an

24.b2.2[i12 and D4.U3.2b11, A aaai;di._·ACL__?:dhai;g-:·admitted at their participatian. The Carnrnissian `ttséj, in its reply af ruse

iaiprakash Assaciates, in arder ta rebut the findings af DG, it has been stated that ACC and ACL had nat participated in these meetings and therefare the repart af DG is unreliable. _ Reply at Jalprakash Assaciates Ltd. dated 14* February, 2D12 **139. The DG in the Repart has reached a finding that ACC and ACL have withdrawn themselves fram the membership af CMA, hawever, they have still attended the meetings that taaic place an 24.lJ2.2U11 _ and {J-4.lJ3.2lJ11. lt is hurnbhr submitted that this fact is nat reflected in the mi`nutes af the afaresaid meetings where the presence af all the members af CMA is marked wha have attended it. lt is submitted ' with utmast respect that the DG is misleading the Han*ble Cammissian by making such statements in its repart withaut having any evidence ta prave the same. As stated abave, this clearly demanstrates the nG*s attempt ta reach his pre-determined canclusian that the cement manufactures have cartelized even thaugh the DG has been nat been able ta callect any infarmatian ta prave his baseless allegatians.

MU. Further the DG in its repart has repraduaed partians af the statements by ACC Ltd. where Mr. lbidtt-axmentians the fact that he had attended meetings pljii§'2ériiU2.%'Di&{-E U4.ii3.2U11 in Mumbai an a specific invitatian theniihitiatives with Cll Bs `"--. cf I

an cancrete raad and past budget excise campiexitv. it is criticai ta mentian here that Mr. Datta has nat stated that he ever attended the . High Pawered Cammittee Meeting and the DG has verv canvenientiv presumed that the afficiais af ACC attended the High Pawered Cammittee Meetings ta reach his fia wed and erraneaus canciusians.

141. Further the DG in its repart has referred ta the repiv submitted by ACL dated 19.D4.2D11 which ccmtains infarmatian reiating ta the meetings attended bv ACL where ather cement manufactures were aisa present and 23 accasians where ACL interacted with ather cement manufactures. Dn a mere perusai af the l infarmatian submitted it becames apparent that ACL has nat attended anv af the said High Pawer Cam mittee Meetings and instead attended meetings with Gavernment ajfficiais, Ciinicer Saie ar steei manufactures where ather cement manufactures have been present. This shaws the campiete nan appiicatian af mind by the DG and aniy making baid aiiegatians ta suggest that ACL is stiii attending the meetings af CMA.

142. .iAL humbiv submits that the DG's anaivsis that ACC and ACL are stiii attending the High Pawered Carnmittee Meetings af CMA is wrang and hence denied and the minutes af the variaus meetings that have been submitted bv th?QMA befarejthe afiice af the DG are praaf af the same. n .2 ' _' I

. M3. JAL humbiv submits t e;;§rig vipw! the afarementianed reasans it becames paipabiy daes nat pravide G 111

common piotform for discussing the information reioting to prices to its member?

5.5.255 The Commission observes that on the basis of clear admission of ACC and ACL to have attended the two meetings of High Power _ Committee of Clv1A and denial of this bv Clv1A and laiprakash Associates, another Opposite Partv in the case reveal that the Opposite Parties are not quite forthright in their submissions. The _ inconsistencies in the statements of different OpP.osite Parties establish that thev were keen on hiding material information to the effect that the competing cement companies are interacting among each other using the platform of Cl'v'lA and discussing the prices, production, supplies of each other. On the basis of clear admission of representatives of ACC and ACL, it is clear that in spite of having resigned from the membership of ClvlA, thev are attending the meetings of ClvlA. The fact that prices had increased after the High Power Committee meetings held in lanuarv and Februafv 2011 establishes that thev coordinate their decisions and fix prices after due consultations. Such an act and behaviour of Opposite Parties using the platform of Clv1A would be questionable under the ` provisions of section 3{3}la] of the Act which prohibit anv act which results directlv or indirectlv in fixation of the prices. 5.5.29 The Commissionjg\'Fdj;eIE_doTtes_that as per statements given to press, ACL and ACC for resigning from their memberships from heive that thev are doing it since :3;-r* L"-_··.

Hblcim, their hpiding cpmpanv wanted the same. As per the press statements, Helcim teak this decisibn since it felt that being asspciated with CMA wciuld get it in treubie with cempetitipn agencv in the EU.

6.5.3EI The Ccimmissicin pbserves that althpugh a public statement has been made with respect tp resignatien frem the membership ef _ CMA, ACC and ACL have been fpund participating in the High Fewer Cemmittee meetings. The act ct ACC and ACL suggests that their actipns are divprced frem its public pestures. The public annpuncements have been made pnlv tp save themselves tram pcissibie actipn bv anti-trust bedies in ptherjurisdictipns. 6.5.31 The Cpmrnissipn further netes that the minutes at the meeting pt CMA as is seen frem the recprds pf DG reveal that cement cpmpanies have been discussing prices ef cement using the platterm ef CMA

Minutes df the Bilth Meeting df the Managigg Cdmmittee df the cement Manu§cturers' Assegiatipn held en 15"" March 20D? in Mumbai

"U6. The pest-budget Zdp?-UB ten dnvs were hectic since the President ef CMA eieng with cnptdins ef the industry hed meetings with H'crn'bie Shri P. ChidIr__J_r;i'ii;:~c»rr:i_r·i·i,` Unicin Findnce Minister end Hnn'bi'e Shri Kemei Nut ,_ lblnicrn Mir;/islter cf Ccrrnrnerce und industry cis crisp Dr. Ajdy Dun, {'.lPP};Ml§JCi crnd Others. During the discussinn there hes guvernment tu reduce

cement prices and avail af the excise duty cancessian. All agtemgts have been made ta establish that gre·budget ruling cement grices iFgb.U?i hgge been lavver than the inflatian adiusted grices ggvaiiing in j,9§5 {Aer. S5! - iawer by Rs. 12 ta Rs. 48 ger bag. All l members wauld reiterate that impravement in the GDP has impraved in all sectars af ecanamy and cement is na exceptian. Hawevel; Cement industry has been plauqhing back the prafits in creatian af additianal capacities, which is the need af haur. The cement industry is praducinq at the aptimai level af mare than 95% and ta meet the grawing demand far cement in the Xi Plan ,aeriad i2ClU?·l.i8 ta 2U11· 12}, the cement campanies have planned far additian af adequate capacity, which wauld require huge investment. Farced Price Reductian resulting in rgductian an margin wauld adversely affect cagacity materializatian in time."

Minutes af the 92"°i Meeting af the Managing Cammittge af the Cement l'v`lanu·iaa|;urers' Aseaciatian held an ZE"` Mgrch QIJDQ in New Delhi

*7. la} Supply af Cement in the State af Uttar Pradesh Secretary General, Clvili mentianed that Secretary lDlPP,l had called ¤ lrleetina ai Chief Execvtivggfaf _-`` i:éra_en_r Campanies Supplying cement in the State af UP an ,t_'bi`t§i3.2Uti9, ta discuss the camplaint by the UP Gavt. Qeiéar-t_men=_ts, fiiherein Secretary {DlPP} insisted that the arices be b ght dawn rtdéredsanable levels within 4 1ila

weel<s' time, failing which he would be obliged to resort to recammending withdrawal of CVD ond SAD on Cement lmports and also reintroduction of Bon on Cement Exports. Shri Hohul Kumor, CDU |'Cemen tl, laipralcash Associates Ltd. informed Secretary |'DlPP,i thot while the grawth of cement supplies during the l period April-Dct 'CiB was anly .2.6% ayer the corresponding period af n the preylaus year, the sudden spurt in demand during hloy.ll8 to lon D9 wos 24%.

Shri Rahul Kumar, further aippriged CMA lager attpnding the Megting taken by Chie[ Secretagg, Goyt. of UP in Lucknow an n I?.Q3.ZDtl9, where all the cement manulgctugrs supplying cement to QF were alsa present and an behalf af Jaypee Cement that it was agreed by Jaypee to supply cement ta the Gairt. departggents during the month af Mgrch ZQQH at the rgte ayf Rs. g4S{· gr gg. The UP Govt. was satisfied and orders were being placed for supply of cement. The ather suppliers alsg reppandpd by offering similgr . spgcial rates far Goyt. suppligg ond agsuring to meet tge reguirem en ts. "

5.5.32 The Commission obseryes that while prices of cement ' companies ar collected under the aegis of CMA, company wise, factory wise data regardingeapiacity, production, dispatches, exports etc. are also being `rhfe:_dtecl·-=.ah'-d,Q_li]rnished by CMA to not only Ministry of Co;·nrn : but also to the cement is ii "__ -.-' I

fe- 'Z ·'

campanies as is evident fram minutes af Blit meeting af the Managing Cammittee af CMA held an 10.12.2003 in Mumbai. "3.5 Further Campanv-wise, Factarv-wise data regarding ca pacitv, praductian, dispatches, exparts etc are bging caliected agd l regularly Qrnished bg CMA ta Ministry af Cammerce and lndusggg and alsa circulateg ta Cement Camganie;." E·.5.33 The CMA. alsa pravides piatfarm ta the members far evaluatian and determinatian af impact af incidence cf tax an cast as is evident fram minutes af the Meeting af the CMA High Pawer Cammittee heid an 4* March 2011 in Mumbai; ` **2.1 President referred ta the detailed Agenda Nate an the subject. She referred ta the plus paints in the Budget 2011-12 such as GDP Grawth, enhancement in the pravisian under Rural Hausing Fund etc. While this will help the Cement lndustry, there are certain prapasals in the Budget that will have adverse impact such as increase in Minimum Alternative Tax {i'vL·ai'}, Excise duty an RMC withaut CANVET Credit. Change af Excise Duty Rates an Cement and Cement Clinker pam specific ta advalarem plus fixed {campasite rate}- which wauid further add ta the cast af Cement was alsa cansidered.

2.2 As regards the new excise duty rates an cement, it was mentianed that same af the cement camaanies in their awn capacity have already!f_@ir*jed-:_-_tia`r*-_.i'abtained legal apinian af Experts an variaus as af'its,°d,a=aliEatlans. Shri H.M. Bangun Shree Cement Ltd., thatit advisable ta abtain a legal I " , ....

- "'H6Q.-Q'E£»~"P

apinian an appiicabiiity af excise duty in different situatians by CMA and circuiate it ta members.

2..3 President requested Shri D.P. Puranmaika, UitraTech Cement , Ltd. and Shri 5. Chausicey, .i.K. Lakshmi Cement Ltd. ta farward ta CMA the issues they have farmuiated in this regard far ahtaining ciear cut iegai apinian. CMA may kindly cansaiidate the twa and frame the issues.

_ 2.4 Ciarrficatian/apinian may aisa he saught an treatment af Excise Duty an Ciinker transferred hy Mather Unit ta its Grinding Unit n - where Grinding Unit enjays exemptian fram the Duty af Excise hut - the Mather Unit is nat exempt fram Excise. in such a case whether duty sha ii he payahie by the Mather Unit an Ciinker transferred ta its ather Unit far Grinding and in case such duty is payahie then an what iraiue the duty is ta he caicuiated and paid as there is na 5aie,r'Transactian hy the Mather Unit.

2.5 it was decided that CMA shauid ahtain iegai aainian af Expert in the iight af the discussians heid and circuiate the same ta memhers."

5.5.34 The Camrnissian abseryes that the afaresaid establishes that the cement campanies are interacting at the platfarrn at CMA, sharing infarmatian abaut cast, pricesg praductian and capacities. l 5uch discussians facilitate .iafte'racjtians arnang the mernhers far determinatian and fixat' '_pr·iE`ds__and preductian. 5.5.35 As regards cail prices lternent carnpanies frarn all ayer India as aisa bra -;hE§a_utl_t-_i_n.;.tlwe_._edrIier part af this arder, the str

Cammissian abserves that the minutes af the 95th meeting af the Managing Ccimmittee af CMA heid an 3D.11.2DDEi in New Deihi in this * regard reveal as under,

"' 1D.I Weelrly Retail Cement Prices ta DlPP Iill.2 President infarmed the mee ting that CMA has been furnishing weekly Retail Cement Prices ta DlPP every Wednesday far the periad pertaining ta the previaus week. The infarmatian sa furnished gives aniy the range af prices prevailing in each af the marlrets {Minimum and Maximum} far the relevant periad. CMA, tradigianaiig, has hegn caiiecting this ingrmatign {ram gggresentatives af cgrtain Cement Camppnies.

1D.1.3 in additian, CMA has alsa been required ta furnish whalesaie _ Prices ta Ecanamic Adviser, Ministry af Cammerce and lndustry as an the last warlcing day af each manth hy the ID"' af the faliawing manth. Far this, the campanies have been designated hy DlPP itseh' after a meeting af Cement Campanies and CMA in Feh.2DD5'. This is the infarmatian, which is used by DIPP far warlcing aut Whalesale Price index .;'WPi,l.

1iJ.1.-il President further infarmed that in view af the recent deveiapments, the Statians cavered h y ACC Ltd. and Amhuia Cements Ltd. wauid have ta be served by same ather representatives af the Cement Campanies wha have a presence in ED`Cl'l cine ¤_f thege plageg, an _ 10.1.5 President regu `ilta came forward and valuntariiy take this u r'reguiar sa that a system and M iii·i'·_;;i2?

procedure is put in piace far coiiectian af this infomation. The cancerned Companies were aiso requested ta send the names af their Nominated representatives ta CMA,. with their contact numbers, e-moii detuiis, etc.

1C*.1.E The faiiawing cement companies agreed to furnish range of the Whoiesaie and Petaii cement prices detaiis for the cities mentioned against their names

Co.,{$tgtion Retaii cement Prig Whoiesaie grice Grosim ind;. ltd.

Chandigarh Retaii Cement Price

*·*i***"¤ _

Jimmu _

Uitrofech gernent ttd.

Mumbai iietaii Cement Price fAiready being given by Grasim inds. Ltd. j

Ahmedabad Whaiesaie Price

N ¤gP~ i j

india Cements Ltd.

Gao RetaiiCementPrice

fm"`. F" c

1C*.1.? As regards the faiigaj.n`n`gQ·Q-sta`tians,_T it was decided that iaipraicash Associates Ltd. tarnish? rite sninfarmatian far Retaii Cement Price and aisa Whai Cement

r,u.. aautru

**¤¤¤* Whmir P*¤E

_ 15.1.8 it was aisa decided that ather Members may aisa cantrihute in the exercise far caiiecting the prices giving maximum and minimum range in whichever market they are camfartabie far suppiying the price detaiis."

5.5.35 The Cammissian further alaserves that in a meeting with Under Secretary DIPP an dm February, 2555 a decisian was taking _ that infarmatian in whalesaie prices wauid he pravided by the cement campany ear marked far the regians ta CMA as an the last day af the manth by the 15"` af the iallawing manth far 15 centers as under ' i

Reglnn Centres C¤s._i'LInit ta pravide intarmatian an whalesale price as an the last day at the manth

"¤"" 5***** °m**

**5**m*

°***"·**·=r¤r

'Bhub neehwar Orissa Cement Ltd.

M*·=·"*==·

Hyderabad india Cement

arasimrasisau-ee came as

Ahrne debad Gujarat Ambuja Cement

Bhapai _ ACC

Luclmaw J {T`- Biriatiqrperatian, Satna

5.5.31* The Cammissian nate that irvhiie farjwhaiesaie prices ta he suppiied ta the affice af Eca ii_.dviseryi:5.i?i§•iP has naminated the -*' -*1-T;I.I;_ -.-!I._·._r--`--}_.·"

lgg

cement ccimpanles fcir the designated li] centers, fdr cpllectipn c·f retail prices, the representatives have been npminated bv the CMA itself. Since CMA pn its ciwn is npminating cnmpanies fpr cellectinn pf retail prices frcim different centres, as is evident frpm the afpresaid minutes pf the H5"` meeting ef the Managing Ccimmittee bf CMA held nn 3D.11.2i}DE-l in New Delhi, there are clear pcissihilities and eppprtunities fpr ccicirdlnatipn nn prices. When the cpmpeting cement cdmpanies are ccillecting prices frdm different centres pf the cduntrv df each ether, there are enpugh pccasipns fer cpllusipn i ampng them pn the matters c·f price.

6.5.3B The Epmrnissipn cibserves that the cpmpanies fer cpllecting retail cement prices are npminated bv CMA and ncut bv the gpvernment and prices are ccillected pver phnne, e-mails. Thus, CMA i has prpvided a platfprm fdr all the cdmpeting cnmpanies tcl share cdmmerciallv sensitive infdrmaticin.

I5. 5. 39 The Clpmmissipn alse nptes that certain rules and regal-atipns df CMA which had seripus cprnpetitipn cpncerns remained in the rule bunk pf CMA till a ncitice cif inquirv was received frnm the Cdmmissien. The amendments in such rules were discussed in the meeting pf{1lv'lA held pn 3iJm iiipvember, ZDDH and it was cpnsidered that in drder tc: be clear eff anv charges caf anti·cpmpetitive cnnduct, amendments in certain rules fmav __be carried put. i-lpwever, amendments were npt given lfgect-·tlll ndti.ce\dated 2i.Zl.DB.2iZl1i} was issued td CMA under sectid the the dffice pf DG. Pursuant tb receipt c·f ncrtice frclimhthe pfl~iceic¤rf,iDG, an extra brdinarv 1S-1 if

general meeting of the Association was called on 23rd September, 2DlD in which it was decided to effect the changes in the rules as recommended by the Managing Committee in November, 2DD9. The existing provisions and the amendments carried out in the rules and ' regulations are as under;

Existing provisions Amendment as per December 2l}1[I Memorandum of Association and

n Rules

To increase co--operation and deleted

una nimlty amongst cement .

producers.

To collect and disseminate statistical Addition: "and General Public" and technical information in respect after the word "Assoclation." of cement trade and industry and

other industries to the members of

the Association

3[f) To make representations to Local and Substituted clause: i"ntral authorities on any matter "To make representations to the connected with the trade, oommeroe Local and central Authorities on and manufacturesofits members. lndustry specitic issues prevalent from time to time."

To take steps in the settlement of deleted disputes arising out of commercial

transactions between parties.

For all or any of the purpose deleted

aforesaid or in the interest of all

concerned, to assist lndivticlual

members to commence, continue,

defend or refer to arbitration antf

action, suit or other prooeedings

whatsoever in any Count of iustioe or

beFo·re any other tribunal, authority

or person whatever.

Addition of New clause in ttules_apd Membership in the association shall Regulating; ··, ` he\rec¤gI"IlZE·|:I aa lmplylhg that 'I:l"iE __ _._. _- _- .~ {member ls absolutely free to r ' ' _' Eilfllilllft his business exactly as he Il i¤l$5e1l$ in every respect and

l Y '-.-- __pa`rticular.

:7*;-. L` " ,.5

I- .1; I

;_ -

6.5.-4D The Ccimmissibn crbserves that the act and ccinduct cnf CMA as discussed in the preceding paras raises serieus cbmpetitibn issues with regard tb CMA as well as the Uppdsite Parties whce are the , - members nf CMA. The fact that the prices and prbductibn details cri the ccimpeting cement ccimpanies are discussed, prices pf ccimpeting ccimpanies are cpllected are indicative pf cebrdinated behavicir amengst the cement ccnmpanies including the Gppbsite parties. The rules bf CMA regarding cbllectien and disseminaticin ef statistical and technical infprmatibn TD the members bf the Assbciaticin which were n in rule bcicilc till December 2i}1i} cnntained and had anti·cc•mpetitive ingredients. These rules were sciught tb be changed enlv when the instant inquirv prbceedings cpmmencecl against Elvira and member cement ccimpanies. .

6.5.41 The Cbmmissipn pn the basis nt afpresaid hblds that there are l evidences which are indicative bf existence bf agreement, arrangement and understanding ambng the Uppbsite Parties using the plattprm bf CMA far sharing pf infcrrmatibn, cbmmunicatien as regards pricing and prciducticm amcing the cnmpeting cement cbmpanies. These evidences prbvide strung evidence bf cpcirdinated behavibur and existence cit anti--ccimpetitive agreement ameng the Uppesite Parties. if " .

. 6.5112 The Ccimmissicrn dbs a;ddiii`i_cin TD cpmrnunicative evidence which strbnglv "digatei an-ti-cldnmipetitive ccmduct and behavibur an part bf the Upp ilveuld alscr be pertinent 133

TD evaluate ecdnemic evidences TD find ciut and test the veracitv ef the UPPc•site Parties that they are acting unilaterallv in acccirdance . with the ncirmal ijnarket furces and net under an agreement te ceilude and cecirdinate their behaviciur. While evaluating ecdnamic evidence in the matter, the Ccimmissicin finds it necessarv te first assess whether there are structural iactcirs that exist which help facilitate cellusibn ameng the Dppasite Parties. 6.5.43 An argument has been taken bv the Uppbsite Parties that the l DG has nat delineated the relevant market with respect tb which the alleged cantraventidn has been established. Further, the market ef cement in lndia is fragmented and in such a market, anti--cempetitive agreements and cartelizaticin cannet sustain. While discussing the structural aspects ef the cement industrv, therefdre, the Cemmissien alsb finds it pertinent te cdnsider and deal with the afbresaid arguments ef the Uppbsite Parties.

5.5.44 The cammissibn ebserves that there is nc- requirement under the previsiens ef sectian $[1} and sectibn 3i3} ef the Act as alsd under sectien 19i3]· ID determine and ccinstruct a relevant market, aithaugh that remains sine--¤_ua--nc•n fer the determinaticm bf cbntraventibn under the prdvisians ef sectian 4 bf the Act. Sectians Bil] and 3[3] are ccincerned with effect ef anti-cbmpetitive agreements un markets in lndiaT"rl;here'·;ls\a distincticm between 'market' as in sectien 3 and * defined in sectien 4 af the Act. There is na nee deteeminagicid of relevant preduct market cir relevant geagr markelt-l'fdr the purpcises ef tan W-IH

establishing any anti-campetitiye agreement since the determinatian at releyant market is required while inquiring inta allegatians af cantrayentians under sectian 4 cancerning abuse af deminance te assess an area ar a range at preducts within which a deminant player can exercise its market pawer prafitably at the expense af the n cansumers er the marketer the ccimpetitars. 6.5.45 As has been discussed in para 6.3 abeye, na player can be said ta be daminant in India as per preyalent market structure. DG in his repart has brciught eut in there are 45 ccimpanies aperating with mare than ii.73 large cement plants in India. As regards ayailable . eapacity the data af CMA fer the year 2t}Z|.lZ} reyeals that there were 47 cement campanies haying 142 plants and installed capacity ef 97% at tatal capacity. As has been discussed in the preceding paras, 1.2 cement campanies are haying abeat 75% af tatal preductien capacity in india. Further, DG has reparted that 21 campanies central abeut 9U% af the market share in terms af capacity. 6.5.46 Frem the data and techne-ecanamic characteristics af the cement industry the Cemmissien nates that a few hrms haye a pan india presence with plants Iacated all ayer the cauntry. The remaining firms are cenfined te the regiens af limestane mines and aperate in regianal clusters.

6.5.47 The Cammissian ebseryes that giyen that a few large players central maierity ef the ma rke in---ilh_dia makes the market aligepeiistic in nature. in an sirlce are net many iirms, U interdependence is ineyitabl firmls price; and eutput decisien ;*·s·T ' __,

ms `"--i`IiL.Z3~`·i'

anticipates the prebable actiens ef ether firms at any given time. Each ef the firm has te cencern itself with the strategic cheices ef its cempetiter. These strategic cheices can be price. quantity er quality. in this case, the cheice ef prices by the varieus firms is ene ef the issues fer cempetitien analysis. ln its submissiens. ACC Limited has referred te cement being a cemmeditized preduct with very little difference in the preduct aeress preducers. it has alse been stated therein that given the similarity ef the preduct acress varieus preducers, all ef the preducers' prices are subject te the same demand and supply facters.

6.5.4S in their respenses. the Dppesite Parties have accepted the characterizatien ef the cement industry as eligepelistic. But. pesit that the eligepelistic nature ef the industry dees net imply cellusien and deny that price parallelism was a result ef ceerdinated actien. Fer instanee, DP-li} in its submissiens has stated that price parallelism in the centext ef the cement market being eligepelistic in nature and characterized by inelastic demand and standardised and undifferentiated preducts, weuld be iustifiable as a prudent business l decisien in as much as, ecenemically, maintenance ef iewer prices in the wake ef increase in prices by a cempetiter weuld net be cenducive te eptimizatien ef prefits in an eligepelistic market. The DP-? has alse given its replies aleng the similar lines. The UP·2 and UP·3 have alse in their replie$ltFatecl ithat given the eligepelistic market structure as stated andlth/e-;_cemmeditized nature ef the preduct. it is ebvieus th t égle ilveulcl eblseilve price parallelism in 1ss ..Q'j_=___,'.s~'

_ this industry. Furthermere, an argument has generally been taken by the Uppesite Parties that eyen if market is eligepelistie, the . ' eutcernes are cempetitiye and therefere there cannet be a charge ef cartelizatien er any anti--cempetitiye agreement ameng the cement manufacturers.

6.5.49 The Cemmissien agrees with DG and the DPs that in a market ` - which is eligepelistic in nature, it is mere than likely that each market I player is aware ef the actiens ef the ether and influences each ether's decisiens. Ne deubt, interdependence between firms is an impertant characteristic ef such a market which weuld mean that each firm in such a market takes inte acceunt the likely reactiens ef ether firms while making decisiens particularly as regards prices. 6.5..5U It has been argued and the Clemmissien accepts that I eiigepelistic markets can lead te cempetitiye eutcemes. The peint ef departure is that the eutcemes may net always be market driyen but rather the result ef cencerted effert er cellusien. The Cemmissien ebseryes that the interdependence between firms can lead te cellusien - beth implicit as well as explicit. Knewing that eyert cellusien is easily detected, firms eften cellude in a manner which leads te nen--cempetitiye eutcemes resulting in higher prices than warranted by pure market eutcemes.

6.5.51 A number ef indices ceilusien exist. DG has feund that the Uppesite Pa `th1|e platferm ef CMA te share prices and eutput are ecis`iens{_which ultimately de net if cfg;. *'¤.`.]_,`."° vg.-:,"

1B? i

yield cc·mpetitive eutccimes and establish the presence ef cdllusien and cartelizatidn ampng them. The D5 has given his lindings en the fellcivving parameters; l

al Existence pf Price parallelism ameng the Opppsite Parties invplved in the case.

5] Price increase alter the meetings pfCtv1.¤~.. cl Lew levels pf capacity utilizaticin and reduced prciductipn. dl Existence pf dispatch parallelism.

el 5uper·n¤rmal pretits earned by the Gpppsite Parties. 5.5.52 The Clpmmissien has analysed the aferesaid findings caf D5 in light cnf the submissicins pf the parties ccincerned tcl the ccrntrary and evaluated the same c·n the basis ef materials en recerd. The Endings cf the Ccmmissicn are as under;

Issue 4 _

5.5 Whether the cement partles named as Dppcisite Parties in the case have indulged ln directly er indirectly determining the prices ef cement?

Price parallelism

5.5.1 After analysing the replies furnished by the Dppcsite Parties and ether cement ccnmpanies regarding the price ef cement, D5 has fpund that prices cnf the cement cnf all the cpmpanies meve in a particular directien in a given peridd pf time in different zcines. The range cnf price mcivement has a|s}9.pe'eii"fe'nn-dxte he the same fer all the cempanies and in all tt?h5gjt·`t§r ·trtt"t?tt;ntt--y_ pe tttttgt that whenever the prices pf cem c-ase cllempany gc: up, it is ;=E},» t l in _= fl

1ss text-

fcillewed by ether ccimpanies simultaneciusly in the different zcines acrcrss the cciuntry. i

. 5.6.2 DG has ccincluded that this price parallelism indicates the ppssibility df pricir cnnsultatipn cin price mcivement and its range amcing the cement manufacturing ccimpanies. DG has alsci submitted that na specific reaspn fc·r price parallelism has been given by the ccimpanies. Acccirding tc: DG, the cdst cif prc·ducticin, particularly, transpcirtaticin charge varies frcrm cpmpany tp cdmpany, which may affect the prices cnf particular brand caf cement. This being sp, the price mcivement cif all the cdmpanies in the same range and directicin is net pcissible unless there is pre-discussicrn c·n the price mc·vement. 6.6.3 The data relating tp the price mevements c·f all the tap ccimpanies in different states were analysed by the DG tc· examine the degree ef price parallelism and it was cancluded that the ecancimic analysis af price data clearly indicated that there was very strcing pc·sitive ccirrelaticiri in the prices cnf all the cpmpanies. Accbrding tc· DG, the cpefficient cif cdrrelatidn cif abscilute prices cif cement cif all the ccimpanies ccinfirrns the price parallelism. 6.611 The Upppsite Parties in their replies have centended that DG while cpnducting the analysis pn price parallelism has net been able ta establish that it was due ta any__cpprd_inatian acticnn an their _ part. It has been argued th at the cpfriialatidh -be-n c'n_mark cnf U.5 ta ken by DG is arbitrary and the prices all ceyrnpanies are nat inccimparable since data set take is net prcrper is is ,..r_»¤

1as

and harmpnized as different cpmpanies had submitted different prices, fpr example, same had submitted grbss price, while bthers had submitted deppt prices, average retail prices etc. An argument has alse been taken that DG has failed te establish identitv ef prices and pnlv taken a range pf prices, a band tp allege price parallelism. 5.6.5 It has alsp been cpntended that *plus' pr 'faciIitating* factprs are needed in additicin tb parallel pricing tp cpnclude that there was a cartel and an anti-cbmpetitive agreement under sectipn 3 pf the Act.

n 5.6.6 The Cpmmissipn pbserves that there cpuld be variati-an in the wav pf submissipns pf prices bv cpmpanies befpre D5, hpwever, that dpes nat cprrupt data set far analvsis pf mpvement pf prices in a range pf price mpvements. What has been established in investigatipn is net identitv but parallel mpvement pt prices. 5.6.7 The Cpmmissipn alsp pbserves that ccnrrelatipn results pf- DG shew clpse affinitv with each pther. Even when the cpst structure pf each cpmpanv is different frpm each cither, their prices have mpved in identical fashipn. While furnishing their submissipns, the Dppusite Parties have net altpgether disputed the tact that there exists parallelism in the mpvement ef their prices. This is clear frcim the submissiens pf different Dpppsite Parties as under; l ··

" .... Anv parallelism indianngement industrv can be explained bv the nature and h%racferisti_cs the indian cement market" ll -_.fll

"~i1;zr¢ ati

{QS

" ...... any price parallelism is ccinsistent with ncrmal, effective and dynamic ccimpetitic·n"

" .... A5 explained in REB paper , prices mciving in parallel [ in the sense that when cine supplier's price increases , sp dp the prices pf its rivals] is ccinsistent with a wide range cnf mcidels bf ccimpetiticin. The intuiticn is straight fc·rward. First, as Indian demand increases fcir a prciduct, its price gcies up; if ln dian demand fails, sci dpes the price. The same is true fcr cement. ln a market characterized by seascinal increases and decreases in demand, c·ne wciuld expect tc cibserve prices charged by Lafarge and its cdmpetitcirs tc· rise tpgether [when demand is strcng] and fall tcgether [when demand is weak]. ...". "...l>·.s explained in REB paper where firms preduce a similar prcduct and have brpadly similar prcductipn techncilcigies [ as is the case fc·r cement] , shccks tc· variable ccrst may well impact dn all firms in a similar way. Fcir example, a key variable cast bf prcid ucing cement is the cpst cf energy rises pr falls , sci may the price cnf cement this dces nat reflect cpllusicin, it simply reflects the fact that same ccist I changes impact cn Lafarge and its ccmpetitcrs at similar times." Subrnissicins bf Ambuia Cements

"... Price parallelism is expect d lrr_a_n industry like that cf cement, where the prbduct is cc

~lll

`ggxl.

" .... Sppradic parallel and independent behavipr pf ACL and cither cement prciducers, lresppnding tp the prevalent market cpnditipns, cannpt be demnnstrative cnf an agreement under sectipn 3". _ "----Given that price parallelism itself is tc: be expected in an industrv with hprncigenecius prciducts like cement, this cannnt be cpnsidered as evidence pf cartelizatic·n." .

Submissicins pf Madras Cement Limited

" ...... The [JG repprt itself, cinlv ccincludes that there is parallelism in terms pf the directipn cnf mpvement nf prices. ln fact, a reading cnf l the data as prpduced and relied upnn bv the DG itself shpws that the prices between the varipus campetitcrs cperate within a bandwidth and dp npt lend themselves tp identitv in price levels. " §ul:tmiglc·ns pf India Cggents Limited

" ..... It is settled law , and in fact admitted in the DG's repcirt itself - that parallelism , even in the absence c·fanv ccrrelaticn af the same with changes in demand and input ccists , as alleged is at best , pnlv indicative pf the existence pf a practice nf fpllnwingfimitating the price changes pf cnmpetitars. Such actipns, in the cpntext cf the cement market, being cligppclistic in nature and characterized bv inelastic demand and standardized and undifferentiated prpducts , wc·uld be justifiable as a prudent business decisian in as much as , ecnnpmicallv, maintenance prices in the wake nf increase in prices bv a cpmpetitpr '.,ina"rlg;et_ leader] wculd nut be eenducive tn aptimiz "~-prafitsil in an aligapclistic ` ij +C 1 L_ -if-,·'

market .......... Price parallelism in such cases is as likely tci be metiyated by the self interest ef each player as it is likely te be a . rmult ef an understanding {arrangement cir agreement` between the parties in this respect. "

Submissiens ef Ultratech Cements Limited

" Cement is a hemegeneeus cemmedity , the prciduct is standardized with B15 markings , and the cempanies eperate in the same _ · industryfmarkets, using same er similar raw material inputs , electricity, technelegy, arncing ether facters. Accerdingiy, prices weuld he brciadly similar and wciuld breadly meye in the same directien."

E¤.·E¤.B The Cemmissien alse ebseryes item the findings ef DG as regards the abselute prices ef the cement c·f the Gppcisite Parties aieng with ether cement manufacturers that there exists a cluster ef prices meying in the same directicin at each peint ef time. In ether werds, there exists price parallelism in the cement industry in each state analysed by DG in terms ef high and pesitiye cerrelatien in prices pf Gppesite Parties tegether with ether- cement manufacturers. The cerrelatien results as feund by the DG are unden

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6.6.9 The Clemmissien ehseryes that in Uttar Pradesh, Haryana, Bihar, Delhi, Punjab, Chandigarh, Rajasthan, West Bengal, Orissa and Madhya Pradesh alsci in terms ef absolute prices, all the censidered cernpanies haye shawn high npcisitiye cerrelatians with each ether pl'jCEs.

Uttar Pradesh - March ZDBB- Segemher 261B Price

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M 2.22 2.22 2.211 2.21 - 1

2121 1122 11221 1.212 1

M 2.22 2.22 2.21 2.22 2.21.

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221.2 211.2 1112 1221 4199 121.2 1

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21112 2122 1212 2221 2222 2122 1]*45 2222 Blhag --121·1u2rg 21]1]B--feb1'1.1a[g 21111 Prices J`Hd1;D` C JP 1111111 £¤f¤¤'§f-'

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Prfces ACC ACI. SIIFEE UT C1. 111:11*11 Cement BEFIH - 11:2 -

1111 1111111-1 1

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1112121:21112111 2.212112 2.224122 2.222222 2.1122211 @ 11.211221 2.22112211 2.2212112 2.112221 2.221222 1 Punjab Agrii 211118-August 211111

Prices ACC ACL Shree UFCL JP Fndicrf ·

111: 1 ____-

1121 *1956155 1

211122 2.221112 2.222212 1

1111:1 2.211211 2.2211112 D.EiEL1.2_1§3 1 JP 2.122222 2.21112112 2.-2221312 -2.122221 1 Q I'|"ld1H{; 2.212112 2.22221 1-1221211221 '-1 2. 1122112 2.122222 1 C1121-1d1 21·hA 1i1 2¤nB··]I..II"I '2" 11j'c__ Tg -.= _ ' _ 'Z. |

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122

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9.99

9.99 11.99

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6.66

631 666

Century 322 6941 1

6.64 6.66 6.66

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_ 6.66 6.66 6.66 6.64

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6.66 6.66 6.66 6.66 6.64

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6.66 6.66 6.66 6.62 6.66 6.66

6662 6646 6466 6646 6661 4146 1

6.66 6.66 6.66 6.66 6.64 666 6.66

1666 6666 666 6666 6426 4246 2666 1

6.6.16 The Cammlssian further ahserves frem the findings ef 6G that ` in Gujarat and Maharashtra t66 all the censidered cempanies have shawn high pusltlye cerrelatlens with each ether. Guiarat-Agril 2666- June 2616

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6.6.11 The Cemmnssm l;\.C6:lIZl§`tl'l3t'fTGCm\t!1E c6rrelatn6n data ahcwe as analysed and cenclud the QE, :6 rsfyldent that there is a case ,616-6- .

'`'. -*7-:%; t~1~*'"Q`*'

for existence of price parailelism among the players considered in their respective states of operations.

6.6.12 The_ Commission also observes that there is no documented system of effecting change in price for dealers as is clear from the statement of Sushil Jain of iv1,··'s Noida Cements before DG, who has stated that change in price is communicated verbally over telephone. Thus, simultaneous change in price by any cement company following others consequent to mutual consultations is easily · affected.

6.6.13 The Commission holds that evidences as above are indicative of the fact that the Opposite Parties meet frequently in various meetings organized by CMA and collect retail and whole sale prices using the platform of CMA. It is also evident that the details of actual . production, available capacities of competing cement companies are also circulated by CMA. in view of these facts, price paralieiism does not remain a mere reflection of non-collusive oligopoiistic market as has been argued by certain {Jpposite`Parties but mirrors a condition of coordinated behaviour and existence of an anti-competitive agreement in vioiation of provisions of section aiaiiai of the Act which prohibits any agreemep-t:pt.`ar_rai1gement among the Opposite Parties which directly `-determine the prices in the market. __

1ss

lssue 5: Whether the cement parties named as Dppesite Parties in the case have indulged in limiting and centrelling the preductien * and supply ef cement in the market?

l-?·.?.1 The Cemmissien ebserves that in additien te the exchange ef infermatien en prices and preductien using CMA as platferm, there are ether *p'Ius' er lfacilitating facters ever and abeve the existence ef price parallelism which indicate cellusive behavier ameng the Dppesite Parties. {'Jne ef the *plus' tacters that suggest a cencerted actien ameng the cement cempanies including the Uppesite Parties is finding by the DG as regards everall lew capacity utilizatien and lewer supply ef cement by them during 2D_1D·1l. 6.12 Accerciing te DG, the everall capacity utilizatien ef the cement cempanies came dewn te 73% during 20143-11 frem 33% in EDGE:-1U. The cempanies were net able te substantiate their lew capacity · utilizatien even during the peried when as per their versien the demand was high. DG has submitted that while the capacity utilizatien has been increased centinueusly during the last 4 years, the preductien has net been increased cemmensurately during this peried, which seems te suggest..t`na_t. there is an understanding ameng the cement cempa `egglbiceeiptheipreductien lewer than the demand in erder te cr fer the purpese ef charging higher prefit. if ·_

/-:·r.'IP:-.::-- { ` -rw--I<"·./n'

tee

6.7.3 The Cpmmissipn nptes that the Dpppsite Parties have in their submissipns cpntested the tindings pf DG that there was lpw level pf capacity utilizatipn pn their part. Ultratech, fpr instance, has stated that capacity utilizatipn pf its pld existing plants has risen frpm xxx % tp xxx % and had even reached xxx -- xxx %. It has alsp been stated that in 2IZl1U-11, fpur plants had achieved capacity utiiizatipn pf xxx E'6, xxx %, xxx % and xxx 9-6. Further, UItratech*s new plants capacity utilizatipn had ranged frpm xxx tp xxx%. Fpr Grasim alsp, capacity utilizatipn pf its pld existing plants has ranged frpm xxx % tp xxx % while the capacity utilizatipn pf new plants has increased frpm xxx % ' tp xxx E6. it has alsp been submitted that Ultratech*s prpd uctipn frpm ZDD7-UB tp 2lZl1D--11 has increased year pn year basis by xxx MMT i.e. an increase pf xxx %.

6.7.4 .laiprakash Asspciates Limited in its replies has argued that there are certain factprs which have been hindering the full utilizatipn pf the cements plants, such as, availability pf the key raw materials, erratic ppwer supply, break dpwn pf machinery pr stpppage pf plants fpr upgradatipn, high inventpry pf clinker, lpgistic cpnstraints , demand grpwth and Iabpur disturbance. lt has been argued that whenever a new plant is installed, the ramp up pf the _ capacity utilizatipn tp pptimum level takes cpnsiderable time due tp the teething prpblems encpuntered in the initial peripd and therefpre DG shpuld have ajlnjeiiiprp-rate capacity instead pf the installed capacity fpr th tp JAL, calculated x» 5* l

----~.;i-L~'

correctly, the actual capacity utilisation for 2035-1D is xxx % which is much higher than the iZi{3*s calculation. i .3.7.5 The Commission further notes that Madras Cements arguing along the lines of other opposite Parties has submitted that the right working of capacity utilization in its case works out above 9o% and not as worked out by the D3. ACC and ACL in its replies have also submitted that DG has not considered the capacity available for Production and actual production and instead has considered nameplate capacity which does not account for ramp·up time, maintenance, age of planbs etc. They have also submitted that capacity utilization across the industry in 201D averaged at 31% _ based on available capacity instead of name plate capacity. Further, over a twenty year period till 231D, the capacity utilization levels have ranged between 75-35% and only on four occasions it has exceeded 35%. Thus, the performance of the industry during 2i3i1D was comparable to any other normal year.

3.7.3 According to Lafarge, its capacity utilization in the last three years has been xxx % in ZDD3, xxx % in 2oo5 and xxx % in zolii. It has submitted that installed capacity has outpaced demand and therefore the findings of DG that the cement manufacturers are withholding or limiting the output are erroneous. india Cements Limited in its reply has thatiibigxincorrect to make general assumptions based on t ei_i_;iis.tailed}.caipaAcity, as production depends upon various factors an "li§m)we_r utilizatiionzlof capacity is possible in period of lack of deman lri its replies, Century zo1

Cements Limited has submitted that it has utilized xxx 96 of capacity in 2ci1ci-11, while it was xxx Bs in 2Dti9·1D. 5.17 The Commission notes that Jlt Cements in its submissions has . submitted that its capacity utilization in Northern Indian plant is around xxx its or more except in the year 2ElZi.El·Ci.1 when it was xxx *35 because of major maintenance activity. Its southern plant also is producing at around xxx 96 despite the fact that it is _taking time for stabilization and facing teething troubles being a green field proiect. 6.18 Binani Cements in its defence has brought out that while l alleging that cement industry has underutilised capacity and withheld supplies, DG has compared production with the installed capacity of the grinding mill rather than clinlter manufacturing capacity of the cement plants. It has argued that the maximum cement that could have been produced by it on an assumption that it had utilized xxx % [xxx Lac Iv1Iv1T}, of its clinker capacity could have been xxx Iv'IIv1T and it has utilized almost 1DD% of its installed clinker production capacity. 5.19 The Commission has carefully considered the aforesaid submissions of the Dppcisite Parties. The Commission observes that as per the findings of DG the capacity utilization in 2DlD-11, was the lowest in last few years as can be seen from the figures given below; Installed Capacity and Production of Cement - installed Growth Production Growth Capacity Year Tlalphirégy in *36 m MMT lrl $6 utilization in 9*5 E ruiu rising gn

mas- 155-54 s.2 Z.? .._. __ -;_155`g;f,2 sas m c' Jp:

2%;} 179.1 BR 1EE.31 BM n

2cé;B_ 2Cl5.SE 1459 131.5 1 TBD BB

2r§;lj9- 245*;,5 19.Ei] 2,35 12.ET B3-

zci? zaeas MGE z1o.a5 H5 za

6}.10 The Commission notes that during 2olD-11 the capacity utilization was around ?3%, much below the capacity utilization in earlier years. The capacity utilization as reported by the DG is on the basis of capacity available for production as is evident from the data reported in publication of CMA titled 'Cement Statistics -2o1D' and *E>tecutive Summary --i;ement lndustry, iylarch 2d11'. Therefore, the contention of the Opposite Parties that if nameplate additions and capacity additions for the current year are taken out from the n calculations of capacity utilization vis--a-vis the available capacity, tben the capacity utilization would be higher than assessed and calculated by DG, does not hold good. Further, the growth rate in production lagged substantially in 201*3-11 as against the growth rate n of capacity additions. As reported by DG, in the year ZDDEI-1U, the growth rate in capacity additions was 19,BD% and growth rate in production was 12.S?%. However, in the year 2iJ1t1-11, while the installed capacity witnessed increase in growth rate by 15.U6%, the production grew marginally by 2.SrSja _o_nly. The rate of growth in production was far below than P capacity in 2D1il-11. 6.1*.11 Details as gather the innni gpoylnllcations of i§iv'tA {Executive Summary· Ceme elllgdugtryl-:`L·revegil that the installed zoa if

capacity till 31.D3.2lIl1D excluding the data pertaining to ACC and ACL Limited was 222.E·D MMT which increased upto 234.30 MMT on 3fI..lIl3.2i2·l1. The capacity expansion included new capacity addition of 12.55 MMT and expansion of 1.5D MMT. with deration of 2.45 MMT, the net addition in capacity was to the tune of 11.Ti} MMT, As against that the figures of capacity utilization, the production and dispatches is given in the aforesaid report of CMA as under; ' Capacity as on 315* March 2[I11-234.30 MMT _ {MMT]

-E 'i"'"' '°'1 "°" i°"° T

April-M¤x·=i~

la] 14.zs 1s.s'r 1sa.zs 160.75

Production

[ti] 1s.z1 1-tzs tsoo 1sz.1s 159.54

Dispatches

[including

Export]

io ·e>=¤¤r= Z--1@

stocks ·

Cap.Llti.I_Ei·5]

"°* '" *5 H

5.11*.12 The Commission observes from the aforesaid that the capacity utilization of cement industry in 2D1C··11 has gone down drastically as compared to capacity utilization in EDGE-10. The capacity utilization of '?'E=% excluding the data pertaining to ACC and ACL has been considered by CMA}n·_Titsi'·irepbrt_on the basis of available - capacity of remaining ce eitt-companrie'·s;as-gon 31.i}3.2D11. Thus, the position of capacity utiliz as- per- thgiligiures reported by CMA is IF -;:3 %._ _ - -i`-`-{-I

+C_ { by -I-ly"

' m,y--¢L.-..;=i.·-·*'"

net very different frem the capacity utilizatien ef_73% cemputed by DG en the basis ef installed capacity as breught eut in 5.7.9 abeve. 5.7.13 Further, if the capacity and preductien ef ACC and ACL is alse censidered, then the pesitien vveuld be as under as en 31.53.2511; Tetal Installed capacity Excluding- ACC and ACL as en 234.35 MMT l 31.53.2511 C

Tetal Installed Capacity including ACC and ACL as en 255.35 MMT 31.53.2511

Actual available Capacity excluding ACC and ACL as en 224.41 MMT 31.53.2511

Capacity utilizatien excludlng ACC and ACL en 31.53.2511 155.2*3 MMT *}*5 Capacity utilizatlen excluding ACC and ACL en reperted 7535 l installed capacity et 222.55 MMT as en 31.53.2515 95 Capacity utlllzatien excluding ACC and ACL en actual 25% available capacity ef 224.41 MMT as en 31.53.2511 Bs Capacity utillzatien including ACC and ACL en reperted 73% Installed capacity ef 255.35 MMT as en 31.53.2511 5.7.14 The Cemmissien ebserves that even if the installed capacity ef previeus year i.e. 31.53.2515 is taken te calculate the utilizatien ef capacity in percentage terms in the current year, it is clear that the utilizatien has been enly areund 75%, vvell belevv 55%. Therefe re, the arguments ef the Clppesite Parties that if the nameplate capacity, capacity aeditien ef the curreiirtfygarmis taken eu`t and capacity additiens are censidered epi then their capacity utilizatien vveuld be much ll"'Fel't,hanZlvvh€4:°l1as been cemputed by the DG dees net held geed, egg} iq `_"_ l:_-_ ·` 1 .__ if s , .»-;~"':./ .

255

Ex?.15 Tha Cdmmissicn aisc cibsaryas frprn tha findings caf DG that in casa df iarga cdrnpanias, during 2D1D-11, tha capacity utilizaticin has · ramainad halcw B3%, tha figura cf utilizaticn cf capacity far tha prayicius yaar EDGE-ll`].

SI.Nc. Narna at Capacity Carnant as at Naw Camant in MMT Prcducticn Capacity additicns in Utilizatipn capacity

during tha _

aar

- Ultra Tach Hx my xxx Nil

Garnant

¤ ACC xxx xxx xxx i

3 .•¤hTT`lhL.I]B GSITIEIH xxx xxx xxx

5.7.15 Tha Ccnmmissicin alsp cbsaryas frcirn tha datails cdllactad cut cf tha puhlicaticns cf CMA that in casa cf many piants cf Liltratachy capacity utilizaticin was vary law. Fcir axampla, tha grinding units cnf Aiigarh, Kctputii, Fvanipat, Ginigara had capacity utitizatian at xxx Eta, xxx *}*6, xxx Eta and xxx Eta raspactiyaly. in casa cf cthar ccmpahias alsc, tha capacity utilizatipn has baan quita ipw as par tha Hguras cibtainad frdrn tha rapdrts df CMA during 2D1U-11 ayan whan tha ayailabla capacity is takan as an 31.D3.2U1D and capacity additicns fdr tha currant yaar ara nct cdnsidarad;

Hama at Capacity Ccmant $5 cit Naw capacity as at at campany in MMT as Ptaducttan Capacity Additians an 31:13.11 Capacity an during Llttttzatian daring cunsidaring Litihzaticn

31.tl3.10ZI.tl 1¤1t]-11 2¤10-11 naw ahcr

additions in canstdc ring

I caprtcittr naw

during 10-11 capacity

I- " . additianc

I ` ~y durirt 10-11

'"'°"" xxx . xx`·`-{_- xxx·x{' xxx xxx xxxx [amarita . -` '_ l *_

*·""'**`i*' xxx xxxx il 1 xxx - xxxa

Camahts I - I · '

5.1,11 Tha Ccmrnissid atiséaryas that in/-asa cf Madras Camants, far .-*2 nf.

2U1U-11, tha capacity §Hi.za_tipn;Js·y/as/as tDW as xxx Eta in Kdiaghat _ EDB

grinding unit, xxx iii in Llthiramarur and xxx % in Salam grinding unit. Tha capacity utilization in casa of soma of tha camant plants of India ' . Camants was also yary low Iiisa xxx ills in Parli Plant, xxx % in Sankaridurg, x.xx iii in `farraguntla Plant, xxx % in Vallur Plants. In ' casa of Binani Camants, its 5i|<ar grinding unit utilizad only xxx 'iiii of capacity during 2l1i1o--11.

E·.?.1B Furthar, in casa of .ll< Camants Limitad too, its lilimbahara Plant, tha capacity utilization was only about xxx $6. Similarly, in casa of laypaa group also, its iioorka Plant producad at tha capacity of xxx 96 and Wanakbori unit producad atxxx 'iiii of its capacity. 5.7*.19 Tha fact of low capacity utilization is also substantiatad from tha datails of total capacity utilization raportad by tha aforasaid · companias in thair annual raports. Tha Commission notas from tha annual raports of Madras Camants and India CEl'l"lEl'|t that tha total capacity utilization had baan auita low during 2Ell}9-ll} and 2l1ili}11; _ Hamanf 10CrQ-lo

Company

- capsaw uurisaauli Biof cspsaiw uuiisauan xm utilization utilisation

"""f'*'" W xxx xiociél xxx xxx xxxx

Carhants

Comants

5.?.2l} In casa of othar companias also, tha capacity utilisation as par thair own annual raports haya gona down during 2[ll1i9-lil and 2lJ1D-11. For instanca, whiia capacity utilization in casa of ACC Limitad was xxx 'iiil, xxx Ex. and _xxx 'iiii raspactiyaly during tha yaar ZUUT, EDGE and 2[ll}9, ilfhansi--fallanntlogkabout 7*%% in 2[ll]9-li] and to xxx % in tha Emil-11 ;l"n-jisélsalofi-.1K-iiagnjants also, tha total capacity +I : ' Z.}

gx? 'r hE_,_"//

utilization has come down to about xxx % from xxx % as per its own admission.

Ex`?.21 The Commission observes that details of capacity utilization as per data collected from the reports of CMA suggest that there has been decline in capacity utilization in almost all the months of ZUDB- 10 and 2iZi1[i-11 as compared to previous year. During 2U1[i-11, the decline in capacity utilization has been the most in the months of November and December when the capacity utilization has gone down upto xxx % and xxx % respectively, the lowest in all the years under reference.

IVIQNTH-WISE CAPACI[;' UTILISATIQN [ZODB-DE [D 2DlD-111 2Do5-D5 zoos-DT zoo?-oa ziioa- moo-1o zom- =D9 11

.illlr|ClTll XXX Kill"- KKK l KKK BUG". lvlay W xxx xxx xxx xxx xxx

ixxx xxx xxx xxx xxx

July . xxx xxx xxx xxx xxx xxx

August xxx xxx xxx xxx _ xxx xxx

September xxx xxx xxx M xxx M "

October xxx xxx xxx xxx xxx xxx

November xxx m xxx xxx xxx xxx

December xxx xxx xxx xxx W xxx

1xi'·¤ani xxx xxx M xxx xxx xxx

February xxx xxx M xxx xxx xxx

ivlarch xxx xxx xxx xxx voor xxx

During the xxx xxx xxx xxx xxx xxx

year c.-- ;--- .

s.xz2 The cammissia r¤;;xi`éii.yr»es rns¥_.rrar¤ oars collected, collated and corroborated from dilierennt sourcesylt is undisputed that there 0 .. _

Tr .- xr-I_<;{

.· 7-':···-Z.-.-i.ll3.;"";___,,-·'

has been reduced capacity utilizaticin during the yearg 2009-10 and 2010-11 as cernpared tc previcius years. The Cemmissipn has alsp ccnnsidered the mpnthwise data c·n actual available capacity and prpducticn alpng with details cf ccnsurnpticin in respect cf cement cpmpanies excluding ACC and ACL far the year 2000-10 and 2010-11 as gathered frarn the recards cff.Ztv1A. The Clam rnissicm observes that the pattern that emerges frcirn the aferesaid figures shew that during 2010-11 there ha5 been Icrwer capacity utilizatipn and prpductipn as cernpared tc- 2009-10.

Manths Capacity in |"•··'ll'v'lT Prciductipn in 96 pf capacity MT utilizaticln

- 2000-10 ztxiu- 2009-10 zattstt zaas-ta 2010-11 11

·=~¤ri· 1

vw @ xxx xxx 1

xxx xxx xxx x~=·=x xxx

. .lulv xxx xxx xxx xxx

mesa @ xxx

Sxxtxmbsr xxx xxx xxx

Dctcber xxx xxx xxx W mf M

Npvember xxx UK xxx H lm M

umass @ ax xxx $ =<»==·=

January llllll M mf will

' Fsbruarx xxx xxx xxx

lvlarch M Hx KH xm M xw

tstsi Q xxx xxx M Hx M

E·.`}'.23 The Ccmmissipn ebserves that the aferesaid figures ef prciducticin vis-a-vls actual available capacity shews that the utilizaticn pf capacity in 2010-11 has been lciwer in all rncinths except fer Dcteber, Even in the rnpnths cf Ngveniber --- February, in which the utilizatipn and prpductie _wEas ''.·.·' quite Thigh in 2009-10, the utilizatien pf capacity has be %E1lJ[E_ID'·.I"».t?lf'l ln fact, during hlcvernber 2010, the utilizatip c§.i|d;pn|y`QbeL·i§rg·i1nd xxx %as against sas Fix? .'.- if

xxx 96 during Nevember ZUD9. In December 2UlU alse, the utilizatibn vvas xxx 96 as against xxx % cf the previbus year. Fer the mcnth ef January --February alsb, the utilizatipn had gene deyvn frbm xxx *55 4 and xxx % respectively tp dismal xxx %. It is significant that _ prcmductipn during Neyember and December 2DlU witnessed a negative trend as cempared te the cdrrespcnding mbnths in the year 2i}U9.

63.2-·1l The Cemmissibn alsp nbtes that dispatch in 2DlU-11 vvas nbt n bn the lines ef pattern bf cbnsumptibn bf ce ment during 2[lD9·1U vvhich nermally sheuld be the case since the dispatch by the cement cbmpanies during a year vvduld like te felleyv the pattern bf cdnsumptidn cbserved in previeus year. Data dn dispatch and cbnsumptien as gathered frdm the recbrds ef CMA fdr its member cement cempanies is as under;

. Dispatch in MMT ·E¤nsurnp1:l¤n ln MMT

zn¤s-1n 2D1D·11 EDB5-1D ante-11

April xxx xxx xxx xxx _

MB? xxx xxx xxx xxx

_Jv¤s· xxx xxx xxx xxx

Jvlx xxx 2_____` xxx xxx

August xxx { T __?__ xxx

September xxx . ._xxx xxx

Gctabar gm sagem -·-. U . ____ E F_ ~ __ U lx Hx v T

Naxernber xxx xxx xxx xxx

December xxx xxx xxx xxx

_ January mq mq; mcg gmx

February xxx xxx xxx xxx

Marsh xxx xxx xxx xxx -

6.2.2.5 The {lpmmissicrn crbseryes that as per fclrces cnf demand and supply, dispatch in different mdnths cf 2010-11 shpuid haye been mere than dr equal tp cpnsumpticrn pf cement in the cprrespdnding mpnths cf the year preyicus year [2000-10}, since demand pf cement being inelastic there was np reaspn fer decline pf its demand c·r its ccrnsumpticin in 2010- 11 ccimpared te the preyipus year. Acccrrdingly, in all the mcnths df 2010-11, dispatch exceeded the actual ccrnsumpticin crbseryed in 2000-10. Heweyer, in the twcr mc·nths cnf Npyember and December 2010, as is seen rrpm the figures in table ahpye, the dispatch was Icrwer than the actual ccrnsumpticrn cnf cement in Ncwember-0ecember 2009. ·

6.2.26 The Cemmissicn cibseryes that it is net that the market was net in a pc»sitic·n tp abserb the supplies since in all crther mcrnths the quantity prpduced and supplied was almcrst whplly ccrnsumed. The iewer dispatch in the mc·nth ef N¤yember-- 0ecember 2010-11 than the actual cpnsumptipn in the cprrespending mcrnths cf 2009-10, ccrupled with Icrwer capacity rncrnths as discussed abeye establishes that the ce Lelgitncchmpanies indulged in epntrplling and limiting the supply ef ce -`the_'·marl£et},F 211

E12? The statements recarded by DG in saurse at praceedings alsp carrabarate that the cement campanies indulge in cantraliing the supply af cement in the market.

Statement at Shri B. Seenaiah, ililanaging Directar, 'BSCPL infrastructure, Ltd. recarded by DG an 18* March, ZD11. "O.5: Can yaa give detaim af prahlems faced hy yaa relating ta cement prices in each State separately?

Ana in general in every State the cement campanies create shartage daring warking seasans. When we enaaire ahaut shart supply it is infarmed that there is pawer cats and increase in caai prices etc. The trend af price rise is similar in all the states. Q.6: What is yaar ahservatian ahaat the increasing price af cement?

Ans: i can't see any lagic hehind price increase hy the cement manufacturers. if yau see their capacity af pradactian and actual praducthan yau wilifind that they are nat utilizing the fall capacity and create shartage ta hike the prices. " 6.7.23 The Ccimmissian in view at discussian in the faregciing paragraphs halds that the cement ccrmpanies have indulged in limiting and cantralling the praductian and supplies in the market in vialatian at pravisians af sectian 3i,3lib] af the Act which prahibit any agreement ar arrangement a@rg-t1__enterprises which limits ar cantrals the praductian ar s thefrilagket. J . 1- {lll

2*Z'%»i'. ·· r' '

lysé

5.5 Whether there is a case of production and dispatch parallelism among the Opposite Parties?

Production Parallelism

5.8.1 The Commission observes from the data reported bv DG as ` furnished bv all the companies in respect of the plant wise monthlv n production that there is a positive correlation in change in _ production output among the cement manufacturers operating in a particular regionfstate.

5.5.2 The data collated bv D5 in respect oftrends in production shovv l that during November 2o1D, all the companies had reduced the production drasticallv as compared to Dctober 2D1o, although this was not the case for the corresponding months in ZDD9. ` Tat1"iil|"¤Iadg lnTonnes

Company zoos - emo -

- october November Remarks october November Remarks ACC xxx xxx HL Decrease xxx xxx Decrease

i'L|'El KKK KKK DECTEEISE Xxx xxx DECT-EESE ' lmditl xxx xxx UECFEBSE xxx Xxx UECTEBEE Cements

Raiasthan

¤i¤~ @1 rrri 1

- october November Remarks october November MIC mm mm Decreasxe .xxx xxx Decrease

' Shree xxx xxx lncJpe_ase=§_.-·xxx an _ xxx Decrease Ultra xxx xxx crease-_ xxx Z `'·__ xxx Decrease {_ 2%., _1 Ill'.

Mi Q

"*-c,_`__

Irrdie xxx xxx Decrease xxx xxx Decrease

Cements

ACL xxx xxx Increase xxx xxx Decrease

I _ BIHLA xxx xxx DECFEESE xxx xxx DECTEHSE 'Madhxa Pradesh

Company EDO9 - 2D1O -

- October November Remarks October November Remarks ACC xxx xxx Decrease xxx xxx Decrease

Centurv xxx xxx Increase HK m Decrease

n Javpee xxx \ xxx Increase xxx xxx Decrease |..I'|tra xxx xxx Oecrease xxx xxx Decrease Karnataka

Company EODE - 2D1O -

- October November Remarks October November Remarks ACC xxx xxx Increase xxx xxx Decrease

Kesorem xxx xxx Increase xxx KKK DECYEME

xxx xxx Decrease xxx xxx Decrease

Ultra xxx xxx Increase xxx xxx Decrease

Chhattisgarh

Companv EDDE - 2D1D -

- October November Remarks October November Remarks ACL xxx xxx Decrease xxx xxx Decrease

Centurv xgr xxx Increase xxx xxx Decrease Latarge xxx x.x>< Decrease xxx xxx Decrease Ealaés /s-·"T` a.

Company EDDIE! __.__ ` . Z · ,C_`a `1cI - October November "ovember Remarks

` { I Q . M `I 'I_,

114 gx __1,..·--__."

'·-..____--_ .·»'

PEL xxx xxx lrlcrease xxx xxx Decrease

. Iaxpee i xxx xxx Increase xxx xxx Decrease ultra xxx xxx Decrease xxx xxx Decrease

Andhra Pradesh

ccampanir 2uDD - 2D1D -

- Dcteber Ncwember Remarks Dctcber Nevember Remarks · xxx xxx Decrease xxx xxx Decrease

Keseram xxx xxx Decrease xxx xxx Decrease Ultra xxx xxx increase xxx xxx Decrease

Madras xxx xxx Increase xxx xxx Decrease

5.53.3 The Cemmissien DDSEWES that in l~levernber--December 2DlD the cement cdmpanies including the Dppesite Parties had reduced the prc:-ductien tcrgether, althcrugh in ZDDB while in same CHSE5 there _ was drnp in prnductibn, in mam; cases there was increase alsd. This establishes that there was a cebrdinated effnrt pn part ef the cement cpmpanies including the Dppesite Parties tp reduce supplies bi; curtailing prpductidn.

Dispatch Parallelism

E·.B.4 Further, dn the basis ef the analysis pf dispatch data fdr the peripd twb pears frem Jan 2DD9 tb Dec.2D1D bx the DE, the cnmmissipn dbserxes that changes in dispatch ef cement by the tep cnmpanies were alrnest identical.

Dispatch during. January 2DDsI·· December ZDDEI [in 'DDD tdnnes] Jen' Feb' Apr May Jen Aug Der Nw ras

Cxm an E9 D9 'D9 *09 'DB- .. 'DSF '09 'lllll M M M ""

_T_K_ xxx xxx .xxx"i xxx H xxx xxx W cmu ` · Q _ I--.-,-

Textiles . .-5

rrr rr WHERE

Cement " l

HH W EI s HIIHHHH

·:;J ___I.l I-

Shades.

G **'* M EEEEEEEEEEEE

Cemxuts

M ***·* EE W '"" EEEEE E

Cement

EEEEEEEEE "" E W

Grant

' me EEEEEEEEE W EE

Ceme:1

E EEEEEEEEE E

Indian

Mex E "' M EEEEEEEEE

Cemxnt

EEEEEEEEEE E

Acc Ltd.

EE ""' EEEEEEE "" E

Cement

EEEEEEE '"' EEEE

Cement Dispatches [Jan'1D1D te Dec'2u'1•'J] {in *uDD tennes} HH HHH

Cam en lil lil lll 1iI· lll tn H1

Gmu

*'·'* E "' EEEEHEEEEE

Tezttilw

me EEEEEEHEEEEE

Cement

EE '"' EEEHEE M EE

Indus.

EE "' EE "" EEN W "*

Cements

** '''''* EEEEEEHEEEEE

Cement

EEEEE "' H '" EEEE

Gmu

J**P·* EEEE "' EHEEEEE

Cement

EEEEEEHEEEE

Indie

L *'*'g* EEE EE '" NEW EEE

Critmtnt

EE W M E '" EEEEE

.t.CC

'" E EEEHEE M EE

Cement _

W E "' '" EHEEEEE

6.8.5 The Cemmissien ehsewes that the Dppesite Parties have _ disputed the aferesaid data. JAL has argued that during January- Decemher ZUDB it had the largest incre_as_e in dispatches as cempared .-·-*"' _ "·.`__I

te ether cement manufactur ,_;=-ltgiha_s 'aise.*tpeen cdntenclecl that Llltratech, Amhuja Cements avg increased their d1spatches fer the 21 T5 ~;- $*1.-J

pericid January 2DlD-December 2D1l`J while the rest have shciwn a decline which rebuts the claim pf pcisitive ccirrelatipn put fcirth by the DG. Madras Eements has in its arguments ccintended that there is ncl cibvicius trend cnf similarity in dispatch in all the mcinths amcing all the players tc- establish any meeting af mind amcing the cement manufacturers.

6.E.E The cammissian further cibserves that same at the Dppcisite Parties, fer example, ACC and ACL have accepted parallelism in cement industry. Hciwever, it has been argued that parallelism in l praducticin and dispatch is nat because at any dallusiva arra rigement, but because af the inherent market characteristics i.e. cbmmbditized nature cif cement, cyclical nature cif cement industry and ability cnf . cpmpetitprs tc: intelligently respbnd tcl the acticins cif their ccimpetitcurs.

6.8.7 The Cnmmissian has carefully cansidered the aforesaid - cbntentjcin bf the Dppcisite Parties and has faund that the cbntentibn cit the Clppbsite Parties is nbt ccirrect that there is ncl bbvibus trend cif parallel behaviciur in the dispatch bf the cement ccimpanies since if the data fer dispatch caf cement during C:·ctc>ber--hlc¤vember 2l'J1lJ is seen, it 'pecbmes clear that in the mcunth df Ncivember 2D1lJ the grciwth in dispatch was negative in case cif all the cement ccumpanies including the Uppcisite Parties. The Cammissibn bbserves fram the data farming part af the repbi·t,g=ijlj'<§-a_sin para 5.a.1 and E.a.4 that praductian and dispatch h *·gdi'igqd'bwn__in?c_ase at all the campanias in the mbnth cif Ncivemb was unusual, since in

Ncwember 2D·D*9, the preducticrn and dispatch i;rc·th had witnessed a mixed trend.

Cement Dispatches Oct.- tn Dec·2tiDH and 2ti1D} [in '¤·BD tnnnes} * a... ..- @ iimrii @ isnrin _

W is ***** 11 D '**¤**·

.'i.K.Gr¤¤

E =~·· rr 1 M ' "*['*** KH " 'E[=**¤

Testilru

Cemxnt

I W it M [*"**

Grmm Graxim merged with tlitretech .

tndus.

Cemxuts

-··~= H1 it DE *=·**

Cement

K1 11 Dr i¤**i

.t.;.·pn; M a Increase H ><=·¤=·¤ near-me Grliu

me 1** K1 "*"'"* C

India

Cement

ACC Ltd.

Zvi!-K Dl¢'I!'¢§,5»E DEETEIW

Cxmtnt

H1 "' °''" " if

*5.B.B The Cnmmissinn nbsertres that frnm the analysis cri data tn-n prc·ductic·n, dispatch and supplies in the market it 'necames clear that the cement campanies cnnrdinate their acticrns as is apparent frc·m the data nf dispatch in hlcnrember 2{i1{i which shnws identical and similar 'nehatriciural pattern. in any cartelized hehavinr, the parties tn the arrangement mat; net always cnnrdinate their actinns; periedically their ccinduct may alsn reflect a campetitive market structure. Hciweuer, there will be nericnds when ceurdinatiun rather than ccimpetitinn will be fcrund mare gainful. This is reflective in the similar pattern ef dispatch ebserved amang the cement cempanies during hlcwemher 2iZil[i. _eg_;_cenrd_ina*ti_crn amnng them gets facilitated since CMA circu the and dispatch details iff-_: I}-;. uc.;-. /

. n <·T ff

ef all the member cement cempanies en regular basis. Further, the cempanies are alse exchanging infermatien threugh C.Nl»¤·. as regards retail and whelesale prices. ' -

lssug 7

5.5 Whether the aferesaid acts ef the Dppesite Parties have caused increase in the prices ef cement?

6.9.1 The Cemmissien ebserves that the ateresaid act et limit and centrel ef preductien and supplies in the market caused upward mevement in the price ef the cement. The deliberate act ef shertage in preductien and supplies by the cement cempanies and almest inelastic nature ef demand ef cement in the market resulted inte higher prices in the cement. As per the trend ef the price ei ce ment per bag charged bv seme cement cempanies including the Dppesite Parties during 2u1[i-11 submitted by the DG in his repert, the price witnessed an increase in the menth ef Neuember 2UlD as cempared te September 2[i1[i and there was a distinct upward meuement in the price during Janearv 2U11 and February 2[i11. Cement Prices in varieus Statgs [in Rs.ger Bag} ' · Uttar Pradgsh

Name ef Sept. 2U1iJ· Nev. 2DlO .lan ZD11 Feb.11 Cempanv

ACC xxx xxx __·_ H xxx

Shree xxx _ { T" _xxx xxx

Century xxx xxx

Blfla xxx .'il_" - .; txxx xxx -

+ ia " `l

. O -1.: {P:

§l>.'* »-.` _r"-l

`~--¤'.;*·=s. ii-;;->·'

219 """

Hagana

Name uf Sept. 2D1·D Feh.11`

pany @@

ACC °xxx xxx xxx H

Shree xxx xxx xxx xxx

Birla xxx xxx xxx xxx

· @

Name uf Sept. 2UlD Nev. 2D1D Jan 2{111 Feb.11 I Cem · any

Birla xxx xxx xxx xxx

Lafarge xxx xxx xxx xxx

LEM

Cempany

ACC xxx xxx xxx xxx

Shree xxx xxx xxx xxx

W xxx xxx xxx xxx

Puniab

Name ef Sept. 2¤1¤ Nev. 2D1D Jan 2{111 Feh.11 Cempanv

ACC xxx xxx xxx xxx

Shree xxx xxx xxx xxx

Chandigarh

name er sep:. zum reb.11

Cemparw

ACC xxx xxx xxx xxx

· Shree xxx H xxx xxx

Ralasthan

Name uf Sept. ZDID Jan ZUI1 Feh.11

Cprnpany -- .

ACC xxx xxx xii" -_ xxx"`.~._ xxx

Shree xxx _xx"xJ`; xxx

Birla xxx xx k E '. _ "xxxi H

22 d"-:. QQ n/{

"--£i;*· .·.. "

1'Suiarat

Nerne ef Sept. 211111 Nev. 211111 .1an 21111 Feb.11 Cernparng '

JP xxx xxx xxx xxx

Birle xxx xxx xxx xxx

Maharashtra

Marne ef Sept. 211111 Nev. 211111 .1an 21111 Feb.11 Cumpeny

ACC ' xxx xxx xxx xxx

Century xxx xxx xxx xxx

yest Bengal

Name ef Sept. 211111 Nev. 211111 Jan 21111 Feh.11 Cumpany

ACC xxx xxx xxx xxx

Ce nturx H xxx xxx xxx

@ xxx xxx xxx xxx

xxx xxx xxx

gssern

Marne uf Sept. 211111 Nev. 211111 Jan 21111 Feb.11 Cumpeny

ACC xxx xxx xxx xxx

Ce ntury xxx xxx xxx xxx

Ddisha

Name ef Sept. 211111 Nev. 211111 Jan 21111 Feb.11 Cumpan

ACC xxx __ x xxx _

Century xxx x *" n ' xxx

Leferge xxx l xxx E 'xxx. xxx

_. I-

Madhya Eradesh

Name pf Sept. 2El1*J Nav. 2D1D

Cpmpanv _

ACC xxx xxx xxx xxx

Century xxx xxx xxx xxx -

Birla xxx xxx xxx xxx

Andhra praclesh

Name pf Sept. 2El1*J Npv.2D1u .lan 2Ei11

Campanv

Kespram xxx xxx xxx - xxx

@ xxx xxx xxx xxx

Kerala _

Name af Sept. Zum Feb.11

Cprnpanv

xxx xxx xxx xxx

6.9.2 The Ccmrnissien ebserves frem the data abeve that the price ef cement had gene up in case ef cement manufacturing cprnpanies during Nevember, 2C*1*3 and ianuarv and Februarv 2C*11. ` 5.*9.3 The Cemrnissien alse ebserves that the increase in price cprrespends tp reduced dispatch and prpductien during Navember- n December 2*31*3 vis-a-vis pattern pf cpnsumptien pbsewed in the cerresppnding menths cf the previeus vear which shpws cpardinated actipn en the part pf the cement cpmpanies tp limit supplies and raise prices subsequently which is reflected in the fact that the prices ef all the cpmpanies have rnpved tcgether in January-Februarv 2*311. 6.9.4 The Clpppsite Parties have raigédialn-Fargument that the rise in price in 2*311 must be seen in t épiicbange in excise dutv. gt $-3]. L--:. *.t»- I

222 .,9* "'- ~-'- {iff

However, the change in excise dutv was effected after the budget was presented on 2B.O2.2011 and therefore anv change in the price ' oould have been onlv from 1.9.2011. However, the prices witnessed an increase since Januarv 2011 itself. Thus, the contention of the Opposite Parties that the change in prices was due to change in excise dutv structure is not correct. Similarlv coal price also increased onlv after Februarv 2011, while the prices started rising since Januarv 2011, thus, negating the argument of the Opposite Parties that coal prices had an impact on the price of cement. 5.9.5 The Commission notes that the Opposite Parties have argued fnat the rise in cement prices must be seen in the backdrop of the prices of other commodities. In this regard, the Commission observes that after September 20lO the cement prices have increased more . than other commodities as mav be seen from data extracted from ` the publication of CMA --- Executive lndustrv --Cement Industrv 2011. Indeg numbers Q wholegle grieesjhdgnthlg gveragej Year I Month EOUB-20lO ZOID-2|J11

Ratio between other Ratio between other oommodlties and oommodltlee and cement prloes cement prices Eeeembar M2?

oeaae mr

M·=~¤·¤¤¤r 1-¤P

December L1? OBB

raaaav

Fame to

5.9.5 Another argumen7f,.the_Opposite Parties has been that r I ll -H`\\

production and dispatc _=o§1_r@éspondsto\the demand in the economv . which is assessed bv hg;-in-terna-l tE;j]T`nE; Before OG, however, thev could not furnish the Jocjbrnientarv die%Is as to how the demand is _. ` _' t. fir

223

monitored and assessed by them. The Commission notes that cement is mainly consumed by the construction industry. Therefore, for justification of lower production and capacity utilization in the years 2UUB-D9 and 2DlJ9--1lJ, it is necessary to assess whether there was any slowdown in the construction industry during these years. Details collected from publications of Clylel and website of ryiinistly of Statistics and Programme implementation, howeyer, shows that there was a positiye growth in the construction industry during these years. Howeyer, the growth in cement production was not commensurate to the growth obseryed in the construction_ industry. Revised Estlmatgs of GDP at Factor Cost by Economic Activity |At 2Dl}4--l]5 gricesl @ge Qggge ove;

r vious ;.

two-as zoggto lgt] ZQLQ-11{QQ ggoa-1o 2B1g-1g Constrocoon 331,552 355,91.3 $$4,*.519 to a.1 W 4,152,5DB c,css,2··1s 4,s,:r:·,sc2

Reyigcl Estimates Q GDP gt Fegr Eost Q Economic Activity |At currgnt prices} Industgg Eage chang gr

1 vious ear

;,¤¤=a~l1a zgga-1g ztlgo-11 2ooe-1o 2o1¤-1; lest -

construction 451,414 5D1,TUE 591,BEd 11.1 1B.D I W s,z,az,csa 5,133,23B *r,sos,ss¤ 1s.1 1s.1 uarter Es imates of GD _· 1 1.1 . . 4415 · ices Industry `·-·-·; · préulpusyelr

.s¤ ."""

c¤¤s¤·s-w¤¤ -·*'--'·*· IE et 3

sev so M 1 tlEl ' te E M

quarterly Estimates of GD t*2yE],1[`;leg._{E!_ rrent prices] 224

Indus Béhge change wer previ¤L15'!h'!¤|`

tl"! IBD!-1U 1l]1¤-11

K!·IHKHE-·E- 8*-

ructi

. 21.5 1s.z [E; tv.:

Qrnegt Prugginn @ Dggclteg

l'u1¤n$,'h gment Prncluctinn Cement Dlggalchgs I II1 Ahsulute '%age change in Ahsulute @gg in 1I]-1; ever changg in

zgm-11 znus- EH zntgzzu 20[IE*·1Q 1l]·-L1 We- Q G5-1]]

Wan W W W W @

*444 @@ >¤·=>=

*444 444 4444 ¤·<><>=

.llJll'*|l' W W >·=><>< 1 >44=

4WW W W

444444444r 15 >¤<¤·= 5 >·=>¤·=

¤WW W 444* 4-444

~¤~WW W W >¤<¤·= 1 >4¤=

¤W¤W W W W 1 we

44444*4 @@ M ><=<=··= @

February W W ><>4·< 5 *444

March W W we 444

4-4444 __ 4-4544

EB.? Frern the data alacwe, the Cnmmissien ehserves while ccinstructimn industry grew et 8.1% in 2818-11, the cement lndustry grew at 4.Td% in prpductien and 4*..5T% in dispatches. The censtructien industry has grewn at a much faster rate than the grewth in capacity utill?pirin='l;he>years 2888-1D and 281D-11 and in beth the years, `''`c lapacitqgxtllizatipn had fallen dpwn censlderahly as cum t-cm-_the_pre;8*ilc1l1s years. While the capacity EF- i` "' I

utilizatlen had fallen lem §4l.%__in 2888-08 and 88% ln EUD8-D9 tcl ais

88% in 2888-18 and 78% in 2818-11, the ccinstructien industrv grew at a rate cnf 7% in 2888-18 and 8.1% in 2818-11 at facter ccrst and at rate c>f11.1% in 2888-18 and 18% in 2818-11 at current prices. 8.8.8 The Cpmmissien further cnbserves that in the third quarter {Uctpber-December} ef 2818-11, the cpnstructien ind`ustrv witnessed- a grewth rate ef 8.7% at factcir cpst and 11.7% at market prices ever the cprrespcinding peried cnf the previpus vear. Hpwever, during Npvember and December 2818, the cement industrv had registered a _ negative grewth in prpductipn and dispatches ever the Drevipus vear. During the vear 2888-88 and 2888-18, the ecenemv weuld have abserbed ali the cement prpduced since nc·t enlv censtructicin industrv had a pcisitive grciwth but ether sectcirs ef ecenumv had alse fared well.

8.8.8 it is net a case that the cement preduced had remained unscwld in anv vear pr in anv mcinth. In fact whatever was prpduced was ccinsumed in the market. The capacitv additipns bv the cement cempanies ever the vears shew that thev had anticipated a higher demand. In fact, as per the statement pf ACC., even in Seuth which was a surpius state, capacity additicins were made. This shciws that the cpmpanv had a pcisitive ciutleek abeut the demand ef cement since capacity additicins withciut expectatiuns cnf its chptimal utiiizaticm wciuid net have been made.

8.8.18 {Jn the basis ef abcive, the Cpmmissicm is ef cpnsidered view that there was ne cpnnétgaint an demand fer the cement manufacturers ziqwer capacity utiiizatipn during I -..__ I ll-. _ II;

l 8 -216 <·___"}

2Do9·1iZ¤ and 2Dlo-11 over the previous years. Further, in the wake of positive growth of construction industry in the third quarter of 2D1o- I 11, there was no constraint which would have resulted in negative growth in production and dispatches in the month of November and December 2olD either. The argument that low capacity utilization during 2|Zl·D*9--1D and 2U1D--11 was due to lower demand seems specious in light of the fact that many cement companies in their own submissions like Lafarge and Century Cements have contended that some of their plants utilized close to >orx'i·E--:·otx% of the capacity. The arguments of Lafarge and Century Cements that their plants could utilize close to :·oor% of capacity repudiate the contention ofthe other Opposite Parties that there was a demand constraint in the market which caused lower capacity utilization in their case. . Significant fall in the capacity utilization in the cement industry on the whole as compared to earlier years rather establishes mat the cement companies deliberately utilized lower than the available capacity in order to manipulate and control supplies in the market. The capacities are under·utilised to keep the prices high. 6.9.11 The Commission observes that the act of limiting and controlling supplies on the part of the cement companies over the years has been aimed at first creating shortages leading to built up demand and thereafter raise prices in wake of high demand of the product in the market. $inpe(h;;some.sea{ons, the demand is more, the cement companies thg lust before the peak demand and thereafter 1l§'%jem.ent`art gghi/dher price. This is evident

from the details brought out aaoye. The cement companies reduced production and dispatch of cement eyen when demand was positiye during November and December 2lZJ1lZJ and thereafter raised prices in _ the month of January and February 21311 in times of high demand as _ outlined in discussion above. It is also sigriificant that the price increased in the month of January and February 2a11 after the meetings of High Power Committee of CMA. The statements of third parties recorded by DG establish that the cement companies curtailed supplies ih the month and sold at a higher price in the i i month of January-February 2lZJ11.

Statement of Shri Ankit Gupta, hllfs Key Stone Developers Pvt. Ltd., Noida recorded by DG on Sth March, 21111. "Ct.-¢i: What are the problems faced by your company regarding purchase af cement?

Ans: Recently in the manth oflanuary ZUJI, companies like Ultra Tech, JK Cement, Jaypee Cement and lyiangalom Cement, who were supplying cement ta us in nan-trade segment, increase their prices gradually from Rs. ISU}- ta Rs. 22a,r'- per bag. Therefore, from February ZUII onwards the booking in the non-trade segment was completely stopped by almost all the companies. Also the supplies for earlier booking was not deliuered in time and delayed, despite adyaace payment. For e.¤§;·r1j'ple,i-iiiyej =-placed order to Ultra Tech Cement in the month completed in March,. Zpi 1. Normally, the sup e completed within the time giyen in

aur schedule, but after .ianuary, 2Ciii1 anwards, the campanies were delaying the supplies. The capies af purchase invaice indicating the increase in price is here by furnished ta yau. The capy af the purchase arder relating ta delayed supplies shall be furnished ta yau by 14"` l'v'larc.:h, 2lJii1.

Q.5: Did yau discuss the reasan far delayed supply with the represen_tatives af the campanies? vvhat was their respanse? Have yau made any carrespandence in this regard? Ans: lt was replied by the representative af the Ultra Tech Cement that there is shartage af supply af cement by the campany, ivlastly · there was verbal carnmunicatian thraugh telephanefmabile and na i written carrespandence was made in this regard. After the said purchase arder they have stapped the baaking in nan-trade segment and it is tald that as per the campany palicy nan-trade baalcings are · nat being made with the result were are naw purchasing cement thraagh dea iers, "

Statement af Shri Ravi Mahan Sethi, Chairman Et Managing 'Directar af Stellar Ventures {P] Ltd. recarded by DG. " The Cement prices af UPC 43 grade ajj°ered by leading manufacturers af cement such as Ultratech Cement Ltd., .iai Prakash Assaciates Ltd., .i.i<. Ceme;;tt'ill7ia'_rlEs,`ii>1gngalam Cement Ltd. etc. in the nan·trade segment far u_s.e`E'lgid`-he belaw Rs. ISU}- per bag inclusive af all taxes, eligereid si site; uipira the manth af December, .---

in January, ZU11, nat aniy were the prices af DPC 43 grade increased fram iis. 1BEy'---per bag ta Hs. 22t.i,»"- per bag, but aisa baaking af cement was restricted in nan--trade segment far prajects by mast af the campanies ta create artificiai shartage af cement. in spite af taking 1uU% advance at the time af baaking, suppiies were made partiaiiy by the cement manufacturers ta create artificiai shartage. Fram 1" February anwards the baaking af UPC 43 grade as weii as PPC grade in the nan--trade segment far prajects has tatahy been stapped by the cement manufacturers Since the DPC 43 grade is generaiiy nat avaiiabie in the apen market, the prajects af canstractian campanies using DPC 43 grade as came ta a standstiii _ _ due ta nan--avaiiabiiity af cement.

' Fram market feedback we iearn that cement campanies are presentiy aiiacating their entire suppiies thraagh trade ta get higher saies reaiizatian. Artificiai shartage has aisa been created even in the trade - segment ta increase the prices. The sa ie price af PPC cement in the trade segment which used ta be araand Rs. 2DU,r'· per bag abaat a manth back has been increased ta araand Rs.255,»"- ta Hs. 2?D;"- per bag. The UPC 43 grade cement is being said in the trade between iis. 23uf- ta iis. 29U,»·"-- per bag."

6.9.12 The Eammissian alsp ahserves that statements at representatives af cement cayapiesjtisa ccmtirm that they resart tp cartailmept pt supplies jcdadpctipp in artier ta get better prices frpm the market a mar.it;et_xshare as is evident tram the statement at T.5 Fiagh hétgvtar inltiiaéipiients 'aefpre DG; ` r_;~_J_:- I 'ITJEI-M

" As regards curtaiiment af praductl'an due ta prices, the same depends upan shart term and rang term business strategy, need ta pratect market share at any cast etc. it is nat always that we cut prgductian, whenever prics were drapped. Decisian is taken based an prevailing situatian at that paint in tirntr·". Erj_·;;_eLTrend aver the Years -

6.9.19 The Cammissian nates that 96 in his investigatian has faund cansistent increase in the price nf cement aver last few vears. It has been submitted bv the DG that the prices nf cement have been an the rise since 2994-95 frnm abnut Fts.159,·'- per bag tn clnse ta Rs.999,.·'- in lviarch 2911, whereas the cast af sales has anis; increased - abaut 99*%. Accnrding ta D5, prices nf cement are abnve campetmve levels and increase in price bv the cement campanies is result at anti- campetitive act nn their part. "

6.9.1-4 The Dppasite Parties have cantested the findings af D6 stating that the rise in cement prices has been less than the averall increase whalesale price index and therefare rise in prices af cement was nat unusual. it has alsa been argued that D6 has failed ta appreciate that the {AGR af the input casts has increased mare than the cement price, which caused upward pressure an cement. 6.9.15 The Cnmmissinn nbserves that a lack at the prnductinn and price indices ef cement far periad between 1995-96 and 2999-19 as belaw wauid shaw that/wrhilne till__2·991--92 the CAGE at cement price _ index was 2.9% as a i§.r5.6'i%g_ciii`i:?.fi% in praductian index, it grew upta 6.9% bet seq; 2999-19 registering a high increase. 3;- {

13;;-;-

Cement Price & Production Indices

Year Cement Prod. CAGE Cement Price Index CAGE Index

· 1999- 111.9 119.9 -

EEE -

1999- 199.9 199.9 -

1991

1991- 199.1 - 119.9 -

1999

1999- 199.9 - 199.9 -

` 1999

1999- 119.1 - 119.9 -

1999

1999- 119.9 1.999 199.9 -

1991

1991- 199.9 - 199.1 2.3%

1991

1991- 199.9 - 199.9 -

1999

1999- 119.9 - 191.1 -

1999

2"°" 1 T1 I

1999- 191.9 - 199.1 -

1999 ·

1999- 191.9 - 191.1 -

1991

1991- 999.1 - 111.9 -

1999

1999- " 9.919 119.9 -

1999

· 1919

6.9.19 The lZommi99ion in thi9 regard 9I9o 9h9er9e9 that teriff lZ9mmi99i9r·. in i19 report 9n "Pe1{1rm9ri¤;e of-{ixement |nt:Iu9tr~(' to the Department related Parnengientervj. Stendjng Committee on 129mmeree" h99 9199 9*99991 9 El19t_1he 99e;§ge' price ef cement 9999 191

Fts. 244 per bag in the year 2999-16 as against the nclrmated ayerage fair price pf Rs.192 { at maximum rate pf tax]. 6.9.17 The Ccrmrnissicrn pn the basis pf'data and discussicm ahclye . crltiseryes that there has been inverse relatipn between the prices and the capacity utilizatien. The Cemmissian helds that ceerdinated act . ef the cement cempanies including the Clpppsite Parties te limit and central their prcrductipn, dispatch and capacity is reflected pn rising price pf cement cryer the last few yea rs. Price Leadership

6.9.1B As has been discussed in para 4.2.7 ef this erder, the market af cement is breadly diyided inte fiye regiens. The Cammissien netes l frem the findings ef DG that the share ef each cpmpany yaries in these regicins. Heweyer, in each regien tap cempanies enjey pesitien ef market leadership. Lafarge, ACC, ACL are market leaders in the Eastern regicrn, centrcllling majerity ef the market share. lA·'hiie in the lllclrthern regien, ACC, ACL, Ultratech, Shree are the majpr players centrcllling mere than half ef the market share, ACC, laypee and Ultratech are the market leaders in the Central Regicrn. Further, ACL, Ultratech, India, laypee are the market leaders in Western regien and Llltratech, ACC, India Cement and lyladras Cement are the leaders in the seuthern regian.

6.9.19 Since the nu _ ____ Ifref [T["l_?]6lI§_\ cement manufacturing cpmpanies is net many rlegirilns, it laecpmes easier tp ceerdinate their strategi rise tigiiia/fituatien ef cellusiye price

leadership in the market. Price leaders give price signals through advanced media reporting about impending price rise which is , followed bv all cement manufacturers in the market The statements recorded by DG establish existence of price leadership in the cement market;

Statement of Shri Rahul Kumar, Director St Chief Financial Dfficer, Jaiprakash Associates Ltd. recorded by DG " Q.31: Please exproin as to whether the changes in prices af your campan y are arsa dependent upon the prices of competitor cement companies?

Ans.: The finar pricing decisions of rAr. are taken independeotry however, the prices af the perceived market readers are keptin mind. Q.32: Wha are the perceived market ieaders in the states where your company is operating? is your company arsa a market reader in any the aperationar markets?

Ans.: rn different states the perceived market rea ders are drQh'erent bat, ACC, Ambaja, Lrrtratech Ei Lafarge are the perceived market reade rs in most of the stotes in which we operate. We do not perceive aurserves ta be a market reader in any afaur aperationar marr<ets." Statement of Shri AN. Dharmakrishnan, Executive Director - Finance, Madras Cements Ltd.

"r.1.2E: Wha are the perceived market ieaders in the states where your company is operating? rs your campony arsa a market reader in any the aperationar markets?

Ans: Tamil Nadu - rndia JCeri·Terit,' Lirtrotech Si rvradras Cement are perceived market ieaders. _ .____ n,

iterara -- india Cement, _adras`rZem_entiE; Acc are perceived morket rea ders. r` .- - ai `r

.15w li-_ { I `-

-..= t . _ r

as ·¥¢$`»~·"

Andhra Pradesh _ - There is na perceived market ieader kamataka - Uitratech &ACC " `

West Bengai -- Ambuja Cement, Uitratech :5 Laf0rge" 5hri K. Ravi, Managing Directar, NCL In dustries Ltd., Hyderabad "C£.§: Wha are the big cement campanies in yaur area wha can decide the market trend?

Ans: The big campanies in di)'f,Ferent markets decide the trend af prices, thaugh they may vary fram time ta time and fram market ta market. _

Q10: Are yaur prices dependant an the prices af big cement _ campanies?

Ans: Yes, ta a certain extent, aur prices depend upan the prices af the big cement aampanies. Wefaiiaw the market trend ta ensure the avaiiabiiity afaur brand in the market, even if we may seii at a iass." Statement af Dr. 5. Anand Reddy, taint Managing Directar in Mjs Sagar Cernents Ltd. recarded by DG an 25m March, 2D11. "CJ.B: what are the reasans far such a freguent price change by yaur campany?

Ans: We have been faiiawing the market ieaders and we faiiavv the price accarding ta the market canditians. Q.9: Yau have stated that yau faiiaw the prices af market ieaders. Da yau mean say that the prices af cement are decided by ieading cement manufacturers? Wha cNi_such market ieaders? Ans: Every district an every-ma;ar'tawn, there are brands which - Z- F as -`.. '

are papuiar. Sa we faiia " the prices af:-papuiar brands We cannat i- A- .

`*-' in ll

-·" {

235

name ane ar twa market ieaders, as such, in every area, there are different market ieaders. " '

' 5.9.2U The Carnmissian abserves that in caurse af praceedings 'aefare DG it has been admitted that the big campanies set the price trend which is faliawed by smaiier players. Statement at Shri P.R. Raju, Directar, Anjani Partiand Cement, Hyderabad

*'£1.8: What are the reasans far such a freauent price change by yaur campany?

Ans: The change in price is because af change in the pattern af cansumptian ar the arders. Cement is said thraugh deaiers except far ` the buik praject buyers. We are the smaii manufacturer and aur quantum af saie in the market is insignificant. Therenare very big campanies ii`ke Uttratech, india Cement, Eiria Graup, Ambuja and ACC with wham we have ta campete. Sa far as the prices are cancerned, these big campanies came in dijj'erent categaries. There is anather price range far middie ievei campanies and aurs came in the third categary. Thus we have ta keep prices beiaw-the prices af tap and middie ievei campanies.

(1.9: Are yaur prices dependant an the prices af big cement campanies?

Ans.· We faiiaw the big campanies far the purpase af market trend aniy. The prices are nat dependent, but they are campetitive" Shri S.Fi..Ei. Ramesh Chandra, Managing Directar, Bheema Cement, Hyderabad {___ ._ -.

" C18: What are the re sans far such'_;a._f_reauent price change by yaur campany? _ A-_

Ans: We an iy faiiaw t fharket trehdsr. _-F ki `F - ' xr--,J:'

¤-i·· - s- J

tas

Cl.9: Are vaur prices dependant an the prices af big cement campanies?

Ans: Yes, because market trends are decided bv them." 6.5.21 Jaiprakash Assaciates in their aral submissians have alsa befare the Cammissian stated that thev fallbw the prices af Ultratech. Acc and ACL. lt was alse submitted that if it daes nat fnllaw the prices bf leaders it will nat survive in the market. JK Cements Limited in their submissibns befbre the Cammissian has _ alsa stated that it is a fallawer and nat leader implving that price leadership exists in the market.

5.5.22 Fram the statements and submissians as abave, the Cammissibn pbserves that the agreements and cancerted actian as l regards price amang the cement campanies are led bv the tap cement cbmpanies [alsa the Uppbsite Parties in the case] whe are the market leaders in their respective regians. The statements recarded during the caurse af investigatian as abave indicate that the price is changed bv cement manufacturers an the basis af price pf market leaders. The big plavers halding the maximum share plavs a rele af leaders in facilitating cancerted actian amang the cement manufacturers.

High Prafit Margins __ . .- __ R

6.*3.23 The tjammissibn dbgecires-_Qthat-\;the infbrmant in his infarmatian and DG in his af inviestiggatipn have submitted that bv restricting and cantralli tfxjgefliarket and bv charging 23 li J-.·'r-·r -_

higher than cempetitive prices, the cement cpmpanies including the Uppesite Parties have earned huge prefit ever the vears. Accerding te DG, the actien ef cement manufacturers suggests maximizatien ef prefit bv eliminating cempetitien en prices. The Uppesite Parties in their replies have rebutted the findings ef DG bv stating that their prefit margins have net been abnermal and are falling ever the vears. It has alse been stated that DG has incerrectlv censidered cest ef sales te measure prefit margins. Further, in ether secters, cemmedities the margins are much mere than the cement industrv. , A cencern has alse been raised that the mandate ef the Cemmissien l is net te ieek inte whether cerrect prices ef a cemmeditv are being charged as Ieng as prices are geverned bv the market ferces. 6.9.24 The {Zemmissien has carefullv censideredthe infermatien, findings ef DG and the cententien ef the Uppesite Parties en the issue. The tiemmissien ebserves that the pretitabiiitv ef businesses and cammaaitiss traded in the market mav varv depending upen efficiencv and manner ef utilizatien ef facters ef preductien apart frem cest and demand pull facters. The dutv cast upen the Cemmissien as per previsiens ef the Act is net te leek inte and determine the measure and degree ef prefitabilitv ef a secter er a cemme·::|itv er a firm, if it is the eutceme ef interplav ef nermal market ferces ef price, supplv demannd. Hevvever, in case cempetitive ferces are impeded cennslfrainned in anv manner threugh agreements, practice :'=Zl;iecis_ie.ns,; dbullse ef deminant pesitien ef a deminant piaver a l;ia_rttf¥c tive cembinatiens, 23E

then it is the dutv et the Cdmmissibn tb take suitable actidns and suggest measures TD prbmdte cdmpetitibn and unshackle cnmpetitive fdrces in favbur bf ecbndmic develbpment df the ebuntrv.

6.9.25 The Cbmmissibn bbserves that prdtit margin bt ali the Dppesite Parties bn all para meters has been quite high. it is nbt that thev are running intd iesses. In fact sdme df the big cdmnanies have nested a high Return dn Ca pitai Empidved [HUGE} in earlier vears as high as 25% and has returned a higher earnings IEJEFDFE Depreciatidn, interest, Tax and Amdrtisatidn [EBEHTA} in 2DlD-11 as cdmpared tb the previdus vear 2339-ID as mav be seen frdm the data given beldvv;

Earnings Befdre Depreciatibri, Interest, Tax and Amdrtizatiun Cumpanv Name 2·D|Il3-2DD'§ 1335-2013 2313-2311 A C n; Ltd. 2544.33 1322.33 1521.4:11

Ambu a Lament; Ltd. 197*1.33 1351.33 159433 JZ·;pI`EI.*IEI.S'f°|· A'$SD·C;3tE'$

Ultratech Cement 1313.00 2394.33 2323.03 I Return dn Cepitai Empldved

cdm anv Mama 233S»2e3e 233*3-1313 2010-1311 asses 19

Amb uja Ce me nts Ltd. 17 El 11

rridia cams.-as-. Ltd. w 1a.s2 aes

Iaiprakash Assuciates a__ __

lfavpee Grdupl 3.53 -·'TQ ··,3T31·._ 3.93 Madras cement: Ltd. 1?.54f ' -1s._s3;\-X a.e·¤ ixeementtta. 1a. ,5.- - ` · 1-T. ., 1*.25 Bsnanicemeattttd. tees.; ._-_ · mas

uitretath cement Q ii, es if ta

-i-C IT L -L

{xi

' .2. i.. e.*"Z»"

6.9.26 The Cemmissien ebserves that high eretit margin ef the cerniiianies is indicative ef the tact that these cemeanies are earning high erefits. During the year 2U1U-11, the eperating rlrefit et ACC, ACL and Ultratech has alse gene up as cempared te the previeus vear. 'RU·C.E ef these eempanies is alse prettv high and heve rs areuncl 2iJ% ever the last three vears. The ether cemeanies are alse shevving a geecl ereiit. Cemeanies like Binani and Madras Cements alse have returned high RUCE. The Cernmissien ebserves that in cases ef seme Dpeesite Parties the prefitabiiitv has alse reduced. Hevvever, thev are alse having reasenablv higher RDCE. ' 6.9.27 The Cernrnissien netes frern the analysis cenclucted bv the DG ter PPC fer the vears ZDDTQDUB and EDUS that the Dpeesite Parties have earned huge margin ever the cest ef sales. ACC Limited -

Name ef Year Eest ef Sales Margin _ Margin Margin as 56 ef Sales . cempanv sales in Reaiisatie in Rs per bag ef Reaiisatien Rs. n in R.s. cement

ran rei

scc ==><>< ==><><

ACC 2DUB xxx xxx xxx

B21 2¤¤r as as

Ambuja cements limited -2DDS

Margin Margin asiiste Sales

· per bag realisa tien

Sales ef

` Cestef Realisatie cement

Year Sales Rs nRs Margin Rs iin Rs]

KKK XIX {Mui XJDR R11

_ zees »- .

Ga] zeer . max" mer

araauia zees I - _ ._'~

HEHE if __J1tK1i;}__ l- mix xm:

gnsr zeee . _

°·7g:ix · .su»<x;Q' xxx

Bhatinda '·:' if I

I - -»·· Fr

'Rabfitraw will l·'.KZ•l i¢1•:1< xxx 100i as 2009

Sanlcrail 2009

H M 1Ki

Farraklca 2009 ______

I mix ree: au xxx

Reerkee _

_ M HH M

sisragg 1

Ambuja Cements limited · 200Ei

111 are 111

Margin Margin as $6 te

per bagef Sales

Castel SBLES eementljin realisation

Unit Year Sales Reaiisatlen Margin Ra

Am|::u`a 2003

rm-; xxx Mx xxx mmf.

Gai Amb uia 2[JUE

Daria hat 200S

K M KK M

alias as HHHH1

mm xxx xxx a mn

Rabriyawas 200E

:•t1•0•L Milli :•i3Li¤i stirtir'. INI

Sankraii zeta

Farraklta 200B

imc H mix xxx mum

Rearlnee 2003

za HKKH1

Bhatpara 20051

- rmt xxx mul suiibi X11

Avg

ambuia Cements limited -- Z00?

Unit tear Cestet {Bae; -"r·irla_rgin Margin Margin as 'liite Sales. ij §_ReaIisati¤· per brag ef Sales rr ' - "}{,_ -. cement Realisatiun

¥-`..' ia se _-._ {in Rs]

rw? E sa

G¤i¤=¤¤¤i¤ 2¤¤=* @HE1@l§

2*2-;-* I ' I .(~-J

;lM----. "

naaaghar mu? ve

Bharmaa ¤¤¤¢* @ va

Faviave aw? &

Sankrail EDU? zum xm: xm

Panama a¤¤r @@ av `

Rama awa 5i ><><»·

Aaeraaa m av W; me M

Uitra tech [Grasirn} Average fer EDGE

Cue-1: nf Sales Margin as at ef saies

unit Year sales reaiisatilln Margin reaiisatinn Snuth

UX IDLX

Panipat EGGS

KKK W

Rajshree

@11 W 1

@@1 W Ki

drrr i aa

Ravvaniraipu r] '

1111 W W

Ultra tech {Gramm} Average fer EDGE

Cust nf Saies Margin asaanfaaies

Unit Year sales reaiisatiun realisatinn

Sciuth 2{JDB

W W K W

Snuth unit-ii 2DUB

W W K W

Aditva EDDS

Raishree EDGE

W {Ki

Bhatincla EDGE

T11 W

xxx /_ .=¤·:><"· an xxx

Rawaniraipur} 2uuE rk _ W"

, :I•C¥•¤•'· ` -Q,. `)t:•t}•l

1 $ 1

` . ci} ar.; ,,2* H,

EX-L_·F~ -.f.

is ;'.p__{lj.;_/

Ultra tech {Grasirni Average for 2i]D}'

Cost of Margin as 'iiiot sales

Unit Year sales Sales realisation Margin realization South 20D?

XIX XXX

EDD? K

zuur

xxx xxl FX1

Bl"·¤'¤l*'*d¤ mc'?

_ _ Flawan 2i]lZl·?

` j

india Ceme nts- EDGE.

Margin per Margin as 'i·l.to

gag gf sales. realisation

cement

Cost of Sales

Unit rear Sales realisation Mar in lin rs} Dalavoi D9

Mallrapur D9

i""i* H M KH€

'ulishupuram D9

vema entha D9

2"°" ' N T11

nagar D9

rhrrrrr M INT1

EDGE- xxx xxx xxx xxx

Sanicaridurg D9 H

ZODB- xxx xxx xxx

Chilamltur EIB

mills- xxx xxx xxx xxx

aaa oa

India Cements--2UUS

Margin Margin as%to

' per bag $3195

__ ____ Of realisation

'- Tx saoent

units Year °`5ales raaiiaati n "·Margin [in rs} xxx-. ` .· xxx xxx

Dalavoi zoo?-oa 2 ` _ " ` "

YJ g '>._ J ··- ' .

'?"`Qa=1s· · ¤;r Y

RL .-,__ -1;- -.15:-i .. { .

Malkapur 2DlJ?·£i3

hupu Quuy K1HH r

xxx xxx xxx xxx xxx

i'[·j=.ma_gentha 2D·G`J'--DB x ` _ __

Maki? xxx xxx xxx xxx xxx ' E

i_;i§ar________ 5 EUG`!-DB

xxx xxx I

$¤¤'·*¤'id·"'K 2':l'?l?'UB ¤

xxx xx?. K.'•il•l

2¤¤? 1 K

X12 HHH

111

India Elements-20D?

Margin Margin as%

parbag resales

uf reaiisatinn

Cust ef Sales cement

Year sales realisation Margin iin Rs}

rxxxxxx xxx-¤¤ xxx xxx

I x¤·x··¤x xxx xxx xxx I1

xtshupuram 2ClD5·¤? M M xxx iltlil M

remagentha zcnnxxcn

_ Shankar HIDE-D? w xxx xxx H xxx

nagar

Sankaridurg 2DD6·D'.·' W xxx xxx xxx xxx ` R11 KX!

MG 24305-ui

laxpee caments

Units Year Cust ¤f Sales Margin as%t¤ sales ' SBIEE [Ea HB3 ti'Dl°|

Fteaiisatiun

Bela a xxx _____ __ __ xxx

plant 2DDS-D9 fl- - ·' `~ _i___

Rewa xxx xxxl {-."f_ s I xxx

plant EDDB-UB - - gi ~ - ", _

W * xxx xxx

Chunar 2DGa-09 €* = _? " i

- xxx ` j ,- {_ 'xx xxx

xxx -- I

{hx-I;,:;! -E-';_;r-._r

Units rear Cast at Salas realisatiun margin Margin aa as tu sales sales realisatiun

l BEI3 al KKK HEI KKK XXII'.

x·a='¢ ' 2*-i*E-f;{€i$;...i-.- ..

Rawa i xx.: ' xxx xxx xxx |,

F*"'='"' I 2"..*"'=2'.'.-!.--- .

'Ellendln xxx xxx

; unit 2D·lZJ?--tJE

Binani camanta

YEAR Cust Elf Sales Margin as $5 af

UNIT Sales Reaiizatlun Salas raalizatiun

- zulug-D9 UX PCICI'. l HK :•i]¤L:•'.

Eli nanl ram a

Naem ka 2¤DE_¤g xxx xxx xxx

thana

HEX IKE

2~¤? xx H 1

xxx xxx

M 111

Latarga Camants

l Yaar Cust uf sales Salas Margin Margin as *5-% of salas realization l€i=*ll$-¤*l'¤'ll

Unit

Sunatlih ZDD3

" I

XXI

Arsrneta EDD3

I.--N __ T a .

. {JW,. _` . C?. I

Year Cast uf s ies ._._ Salas H `milfgtn Margin as 95 ut sales Unit `raalix tiun *- _ raalisatinn

xxxxxxx 1@ xxx s

·}·` ¥-_ __ __ i" r-:._`rr

xxx

X sw?

Arsrneta zum i

J°]°i"`m _ is F

zen?

6.9.2B The Cemmissien frem the details ef cest and sales realizaticins as abbve ebserves that margins earned bv the Uppcrsite Parties named in the infcrrmatibn have been quite impressive. The Oppcrsite · Parties have been able te maintain a gbed prefit margin in spite bf capacitv additiens ever the vears which repudiates their stand that thev have been earning even belew re-investment levels and that thev are incurring Iesses.

EEE

5.1D Whether the Dppesite Parties have centravened the prcrvisiens ' ef sectien 3 [3} ef the Cmnpetitien Act, Zutiz? E·.1D.1 Cin the basis df feregeing, the Cemmissibn helds that the eccrnemic evidences put tcrgether with the fact that the cement cempanies including the Oppbsite Parties regularlv meet at the - platfcirm ef CMA and CMA cellects beth retail and whelesale prices and circuiate details ef capacitv utilizatien, preductidn and dispatch ameng all its members establish ceerdinated act en the part df the cement ccrmpanies te restrict pypidiictidnnln and supplies in the market in ccrntraventien ef pruvisicr scrnfiseictien 5;iQ3]{b} ef the Act. Further, the prices efall the cement c includingthe Dpp-esite Parties ssa `*--¥i;l'fj,-..fi$-?`· `I

mpve tpgether which in existence pf pther factprs as abcve net pnlv suggest mere price parallelism but establish that the Dpppsite Parties are in agreernent and acting in cpncert tp fix prices bf cement in ccntraventipn pf prpvisipns dfsectipn 3[3}{a]· pf the Act. E».1D.2 The Ccmmissipn pbserves thatnin the present case, price parallelism ampng the cement manufacturers suppprted and cprrcbprated bv factprs such as limiting and cpntrplling supplv bv n underutilizing capacitv, maintaining similar and parallel behavicur in prpducticn and dispatch pf cements with a view tp maintain high prices in the market as discussed in the preceding paras establish that the cement cpmpanies and Dppcsite Parties named in the instant matter have acted in cpncert under an agreement. 5.1U.B The Cemmissipn aisc dbserves that the cempanies have scught tp argue that in the absence pf direct evidence, np anti- ccmpetitive agreement can be inferred. Hdwever, the fact that the cement cpmpanies including Upppsite Parties meet frequentlv at the platfprm pf CI'v'|A give them an ample pppcwtunitv tc discuss prcducticn and prices. CMA cpllects retail prices and whplesale prices thrpugh the cpmpeting cpmpanies pn weeklv and mpnthlv basis which further prdvide them dppprtunitv tp discuss and - ezrchange infcrmatipn dn prices. The preductien and dispatch details uf each cempanv are?euiated~.t·:_g ell the members bv Ervin. The asseciatien is aisp en ·benci2hll`arking exercise in respect ef its members. Therefpr erfidenitninlihat the ccmpeting cement

companies exchange information and get to know each other's production, dispatch and prices.

E=.].U.4 The Commission further observes that the fact that such institutionalised interactions facilitate exchange of sensitive information is demonstrated bv the parallel behaviour of prices, _ production and dispatch among the competing cement companies as brought out in the preceding paras of this order. Under this arrangement, the CMA collects prices through a network of cement companies and the companies get an opportunitv to know about the prices of each other. The C.iv'L»¤·. not oinlv collects prices but also circulates and disseminates information on capacities and production of competing cement companies. The companies who have resigned a from the membership still attend the meetings of [NUR Thus, all the cement companies even if thev are not the members of Civig are the l part of the whole arrangement. Even if there could be difference in the cost structure of cement companies, the parallel behavior in - movement of prices reflects some arrangement and understanding among them. -

5.10.5 As has been discussed in this order, the companies who are the leaders in different zo§rlgs.are__f`o||owed bv the other companies. The cement compan" ___. iaisdkeep supplies under control through lesser than optimal of capacities and raise prices when the demand inthe marlte .g_§%; up. 1 ._ii /

-1 - - ,_. ,»*

E·.1o.E The wav the production and supplies together with prices _ move in the market establish coordinated behaviour, action in concert and agreement on the part ofthe cement companies. 6.10} As per the provisions of section 3[3i of the Act, if due to an agreement within the meaning of section 2lb} of the Act, the parties operating at the same level of production or supplv chain are found indulged in the acts of limiting the production and supplies and directlv or indirectlv determining the price of cement in the market, ' adverse effect on competition is presumed. In the backdrop ofthe rebuttals bv the Opposite Parties that competition has not been impacted, however, the Commission has also considered the factors mentioned in 19l3i caretullv in light of all the material facts on record.

5.1D.E The Commission finds that the coordinated act on the part of the cement companies has neither caused anv improvement in production or distribution of goods or provision of services nor any promotion of technical, scientific and economic development bv means of production or distribution of goods or provision of services. Dn the contrarv, the capa/ci,Ptf,{itilisatio.n has gone down in EDGE}-1D and 2El1[i-11 over the `vearss ._.. hwus, there is no elticiencv defence brought in bv pposite,l¤*aittieis as mentioned in section 19i3]le] and [fl of the I L" ·. lf,}

6.1D.Q Further, it cannpt be said that there is anv accrual pf benefit te the cpnsumers since the prices pf cement have gene up cpnsiderablv in recent vears. ln additipn, artificial shprtages are alsp created in farm pf reduced capacitv utilizatipn and therebv reduced supplv pf cement in the market te the detriment pf the cpnsumers as has been discussed in the preceding paras cnf this prder. E.1D.1D The Cpmmissicin finds that while there was np accrual c•f_ benefit tcl the censumers, the Cippusite Parties have earned huge prpfit margins bv acting tpgether pn prices, prpductipn and supplies. i Cpnsiderablv high prpfit margin in the backdrep pf parallel behavipr in mpvement pf prices, dispatch, and prcnductipn ef pement and reduced capacitv utiliaatien pver the vears indicate that the Cement cpmpanies have acted in their pwn self interest tp maximize the prpfit depriving bpth the cpnsumers and ecpnpmv frpm the pcnssibie benefits put pf eptimal capacitv utilizatien and reduced prices, 6.10.11 The Cemmissien hplds that in view cnf analvsis pf factprs mentipned in sectipn 19{cl], 19ie] and 19if] pf the Act, it is established that th/er'"ce_menit `cprnpanies have cpntravened the prpvisipns cnf secti aimi read with sectipn 3[ii] pf the Act bv fixing the and limitiingriand cpntrplling the prcnductipn gnd supplies in the is-:' if

. 2sp

E·.1o.12 The Commission also observes that as per the provisions of section 2 {ci of the Act, eartels have been defined ag under; (ci "cartei" includes on association o I producers, sellers,. distributors, traders or service providers who, by ogreement omongst themselves ` limit, controi or ottempt to control the production, distribution, sale or price o jj or, trode in goods or provision of services; I 6.1il.13 The act and conduct of the cement companies establish that thev are a cartel. The Commission holds that the cement companies acting together have limited, controlled and also attempted to control the production and price ofcement in the market in India and the allegations of the informant on these issues are substantiated. The Commission while holding so also notes as has been brought out bv the informant that cement companies have been penalized in other jurisdictions also for their anti--competitive acts and Clv1A and _ some of Opposite Parties in coordination have also been found to be engaged in restrictive trade practices in the past bv the erstwhile lviFlTP commission in case No. RTPE 21 of 2ilo1 and RTPE No. 99 of 1Ei1·¥.lil. Holcim which has a majoritv stake in ACC and ACL and Lafarge have been penalized in European union.

Partig to agreement

5.11 The Commission notes that the Opposite Parties have in their arguments along with other__po_ints also contended that the report of UG does net Spetifv th·{riieme5 contravening parties and also the period of allege ttftel`. ln_thisf'::rgegard, the Commission observes that the Opposite P rtés roentionend the case are the prominent

players in the market in respective regions and are the key players in the whole arrangement. The other cement companies have followed _ them. Moreover, the present inquiry is limited to the Opposite Parties named in the information.

Er.12_The act of the Opposite Parties in limiting and controlling supplies in the market and determining prices through an anti- competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy since cement is a crucial input in construction and infrastructure industry vital for economic deveiorlrrtetlt of the country. Therefore, in the instant matter the Opposite Parties named in the information together vvith Elvis. vvho ' has been found providing platform for exchange of sensitive information on production and price of the competing parties are held guilty of contravention of the provisions of section Biaiiai and _ 3{3}[h} read with section ${1] ofthe Act. _ Pgriog of gontravention

6.13 As regards period of contravention, for the purposes of this order, the Commission tinds that the Opposite Parties have institutionalized the system of sharing the prices, capacities and production among each other using the platform of Clvie in order to limit and control the production and supplies and determine the prices of cement in the market. Since the DG has examined the conduct of the parties Eljvtllved-in the cartel only upto lvlarch 2+1111, this order captures t from.thie date of enforcement of the relevant provisions o Act- i.e...2o.o5.éOo9 to 31133. 2011. `#t1%$%tsi>

6.14 The Commission, however, observes that decision as regards the involvement at the parties in anti-competitive agreement and the period of contravention in the instant case is limited to this case only and is independent of any other information which may be tiled subsequently and also independent of decision in case no. 52 of 2ddE pending before the Commission.

T. Eirder under Section 2T of the Act

T.1 The Commission has found the Opposite Parties in contravention of section Bl?.] ia} and 3{3iib',l read with section 3{1] of the Act. ' ` Determination otPenatty

T,2 The Commission oosenres that since the cement companies in the present case have been found to be in cartel, determination of amount of penalty is to be done in terms of proviso to section 2Tr"f_b] of the Act, which reads as under;

" 22. virhere after inouiry the Commission finds thot any agreement referred to in section 3 or action of on enterprise in o dominant position, is in contravention of section 3 or section 4, os the cose may be, it may pass oil or any ofthe following orders, nomeiy:--- n fa} ......

fb} impose such penalty, as it may deem fit which shall be not more than ten per cent of thexdgerage the turnover for the last three preceding financial y each-'-ofsuch person or enterprises which are parties to s shéggreemepts ·'-: o rlphuses _~\ sr · . , - .·'

· "

ass

Prayided that in case any agreement referred ta in sectian 3 has been entered inta by a cartet the Cammissian may impase apan each praducer. setter, dis tributar, trader ar service prayider inctuded in that cartet, a aenatty at up ta three times at its prafit [far each year afthe aantinaance afsuch agreement ar ten per cent tif H5 tt.tm0t.·'E*t' far each yetitr D}; the COHUTHUOHCE at 5UL't'i agreement; whicheyer is higher. "

2.3 The calculatian at penalty limit based an turnayer in terms at sectian 22tb] is as under;

Grass turnaver far EDDB- lmtiaf Grass 1·D% af Tata} [ln 10 [ln Rs. crate] taking Tummter Tumaver Turriaverais Rs.crare] Irma acpaunt period at as fas2£l1El~11 tzatatilated eantrauentian Past leuiated [in Rs. in p¤lu·mn4 Natlflcatian Le. in aalumn Crate] [in Rs.crare] 2·b.·¤5.2DD5 an pra-rei: 1[in

hasis [In Rsuate] Rsxrare}

set: Ltd. 241E.'.l.'t' 241.51 1as2a.ss l¤4?'·B-E'- 'l?¤9-44 Ambuja 21sa.sa 2Ls.as esse.33 95553 1'€+?'¤-55 Cements

Ltd.

ainani 12*3ts.1£i 123111 1·32ts.53 132.89 325.533 Cement

Ltd.

eentury 4213.45 421.34 515t3.t3D 515.88 *332.22 Textiles

limited

india 3551.28 355.12 3t3t1S.a2 3t3B.B¤ 243.52 Cements

Ltd.

i It 1605.44 1t2¤54 213t3.21 213112 323.56 Cement

Ltd. . · .

Lafarge 234.53 `" _B2B.t32 152.%

lndia'P·•tt. `

Ltd. 1 '·

Madras 2523.55 = -- 252.35 = 2ts35.12 29.3.51 54a.t3a Cernents ` - _}

Ltd. . . _

254-- F '''``

Llltratech 5555.,41 559.34 148551.5 145535 1155.15 Cernont

Ltd.

Jeiprakash 151o?.'I5 1515.Tr 13551.51 1553.13 1393.55 Associates

' &r3s¤* 1

- 1.4 Tne calculation of penalty limit based on net profit in terms of section 1?{b] is as under;

Net Profit 1555-15 5 Times of Net Net 1 Times of Totol taking lmao acoount Profit as Profit Nat Profit as [in lis. rrlocl of rralmlatcdin 1015- calculated in cror] contravosttiszm Post ooiumn 1 [ln 11[ln Hs. column 4 [ln Notification i.¤. Rs. crore] crore] Rs. orora] 15.55.1¤ll·5 on pro-

raiz louis •]in_ Rs.

crore]

scctta, zsnsxs - tazsas W sassy

555.51 '

- Arnbuja 1064-19 1.2536* 5T5n.s5 5555.45 Ltd.

saasm sorts 111.sa mass

llomont

Ltd. -

Century 153.43 515.15 155.55 71835 1544.55 . TE'.•t'l.]le5

Limited

_ India 5.5535 515.55 53.15 154.55 1114.55 Cemonts

Ltd. .

1 it tsd.45 553.38 51.51 137.55

Cement

Ltd.

Laforge 1559.33 413.4D 25·¤U.GB

Ltd. -

T T

Madras 355.17 51331 215.9}* 532.51 1551.71 Eements

Ltd.

Llltratech 545.74 2Bi|B.`Z2 14[Hi.15 4212.55 7551.51 Ltd, -~. ' _-

Jaipralrash 1415.43 T@5BE15 { ., -1'1'5?.?3 7541.53 Associates if- EQ _ _: `- '_ `

LiI!'I'IltEd " N-,'_ ` `- lj -~ .

Q;) ;- _: I . .~: I- III}

. `°*?- ··' .-. '.»·"

J-rr-·`_3t[ I°'[§I!·°- I .-· J

'·--________..»»··"

155

'F.5 It would he seen from the above that the amount of three times of net profit calculated as above is higher than 1D% of the turnover. l 5ince as per the provisions of Proviso to Section 2?[b] the penalty has to be determined on the basis of net profit or turnover whichever is higher, in this case the net profit has been taken into account by the Commission. Therefore, considering the totalitv of the facts and circumstances ofthe instant case, the Commission decides to impose l a penaltv of ti.5 times of net profit for 2D{'.l9--1D[from 2o.o5.2iiD9} and ` 2o1o-11 in case of each cement manufacturer named as opposite Parties in this case. Accordinglv, the penalty amount is determined as undeq

Name net Pmm zoos- as Timeoof nat emiit o.s Times Totailjn 1D taking into Het Profitais 2o1·D-11 of Net i°ts.c;-pre] account period of calculated {in Rs. Prolit as contraverition in column I orare]. ealoulaped Post Iilotzihcation [it RS.€|'·EI"'B'} incolumn i.e. 2o.o5.2·EI19 on 4 lil"

pro-rata basis [in Rs.cro·re}

Fts.cr¤re'j

.··Hi.tu. ` neun 1,a2s.2e sszje 11111.59

seeez

Amhuja rooms J· 55131 1155.51

Cements Ltd.

Eiinani Cement 2441.13 112.DT

Ltd.

cerrurv Terdjlcs sous 119.S¤

Limited

mars camems soess teams asso W 1a':.¤e

ttc, . ' ' - t

ritcemem ua. tsiurs , -..- __g¤ }E2.51 3131 12¤.5¤ `* ;`: l '·

tarsr-ge mais sss.s1 ·¤uzrJ.4o W ¤an.n1

l>vt.ttd. __ _

,·_i

Madras EICI5.2? 11.¤,9?

Cements Ltd.

uitrereeh an-at-·-·1 413.2:-* 1¤.e·t1Z-s 1*112.1.2 11?5.Ar5 l Cement Ltd. '

,4...,.

Jsiprskesii 1ct-*s.4s Hs.?1 11a?.Z·'e seams 1323.au Assecietes I

Limited

ins regards CMA since it has prdvided i:§ferrn ID thgsgent c¤mpa nies and facilitated cartelizatien, fer the purpeses df this case, the Cpmmissien decides te impdse a penaltv df 1D% df its tDtEli receipts fur twu vears in terms ef sectinn Bib} as under; Grass Gresawrnduer Germs Average Perraltvat turnover fur fer IGDB-1D turmrrarfcvr Tumcnrer rateefluif IDUB-D9 [In Rs. mere] 1EI1¤-1.1 fer three en average { in Rs. Un Rs. Cmre} years l turnuver in Cmre R$.·¤·cn'e

Cement EL2? D.?3

itilanufactures

Assucfatidn

T.? While impdsing penafty, since Grasim is new merged with uitratech, prdfit ef dnfv ultratech ¤"ments hu been cdnsidered. In case ef Centurv and Jaiprakash Asseciates Limited, their tetai prdfit has been ccnnsidered in accerdance with the prdvisidns df the sectien Z? ef the Act.

13 Since the enfdrpemenr previsidns ef the Act have came inte effect frem 2fJ.D5.2f.ifJ9, for the calculatidn df penaltv an cement cdmpanies in the present case, the peridd frem 1.4,2Di}9 te l 19.D5.2UD9 has net been cbnsiderediahd smeunt ef penaltv has been .-..- if .. °\

calc uiated accerclingiv 'r`t»he ''=_ p eridd 2i?i_f1QT 1D. 19 The Cernmissien Is·§¤_decides>tdLis_s¤.rL feildwing directidns; _,-J ·- I Ni;-iff

i*sr--~#·'

ilThe Opposite Parties should 'cease and desist* from indulging in any actiyity relating to agreement. understanding or arrangement on prices, production and supply of cement in the market. *

iil CMA should disengage and disassociate itself from collecting wholesale and retail prices through the member cement companies and also from circulating the details on production _ and dispatches of cement companies to its members. - B. The Commission decides accordingly. The directions in para 7*.9 aboye must be complied within Eli} days of receipt of this order. The amount of penalty determined in case of different entities must also be deposited within a period of Bil days from the date of receipt of this order.

9. Secretary is directed to communicate this order as per regulations U to all the parties.

-sc|· . --sd·- -sd-

l-l C Gupta Geete Gouri R. Prasad

[member] {Member] [member}

--sc|· -si:|- -sd·

Anurag Goel M. L. Tswal .lustice{Retd.]5.N.Dhingre _ [Member] [Member] [Member}

-5d-

Ashok Chawla g,»»;·r"" 1~·--cxx

i¤i·¤ir¤sr¤¤¤l '-." u

5 eg. _. ;j "_

iii oerrisea Za <`Q;iré=i5$r_ fi

rciuu