D.E.S's Shri. Navalmal Firodia Law College, Pune.

CLASS MOOT COURT PRESENTATION

BEFORE THE HON'BLE SUPREME COURT OF INDIA

CIVIL APPEAL NO. 3546 OF 2014

IN THE MATTER OF

RAJASTHAN CYLINDERS AND CONTAINERS LIMITED

APPELLANT(S)

V.

Union of India (UOI) and Ors.

RESPONDENT(S)

MEMORIAL ON BEHALF OF APPELLANT

Name: RUPESH ANKUSH RAUT

Class: 3rd Year LL.B

Div: B

Roll. No.: 118

~Memorial on behalf of the Appellant

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 Table of Contents i

TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................I

INDEX OF ABBREVIATION ..............................................................................................II

TABLE OF AUTHORITIES ................................................................................................III

STATEMENT OF JURISDICTION .....................................................................................IV

STATEMENT OF FACTS ….................................................................................................V

ISSUES RAISED ................…...............................................................................................VI

SUMMARY OF ARGUMENTS ...........................................................................................VII

ARGUMENTS ADVANCED ..............................................................................................VIII

PRAYER CLAUSE ................................................................................................................IX

~Memorial on behalf of the Appellant

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Index of Abbreviations ii

INDEX OF ABBREVIATIONS

COMPAT Competition Appellate Tribunal

IOCL Indian Oil Corporation Limited

OMC Oil Marketing Companies

DG Director General

CCI Competition Commission of India

OECD Organization for Economic Co-operation and

Development
UOI Union Of India

~Memorial on behalf of the Appellant

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Table of Authorities iii

TABLE OF AUTHORITIES

Statues:

 Constitution of India

 The Competition Act 2002

Dictionaries:

 Black’s Law Dictionary Ninth Edition

 Oxford Advanced Learner’s Dictionary

Webliography:
1) www.manupatra.com
2) www.scconline.com
3) www.google.co

~Memorial on behalf of the Appellant

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 Cases:

Sr.no. Case name Citation Page no.

1. Excel Crop Care Limited v. (2017) 8 SCC 47 16
Competition Commission of India &
Anr.
2. Union of India v. Hindustan 1994 AIR 988 17
Development Corporation
3. Punjab Land Development & 1990 SCC (3) 682 18
Reclamation Corporation Ltd. vs.
Presiding Officer, Laboure Court
4. CCI v. Artists & Technicians of Civil Appeal No. 20
W.B. Film & Television 6691 of 2014

~Memorial on behalf of the Appellant

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Statement of Jurisdiction iv

STATEMENT OF JURISDICTION

The petitioners have approached the Hon’ble Supreme Court of India to hear and
adjudicate over the instant matter under Section 53T of The Competition Act 2002.

Section 53T of The Competition Act 2002 provides for the appeal against any decision
or order of the Appellate Tribunal to Supreme Court. The Appellants aggrieved by the
orders dated 20th December, 2013 passed by the Competition Appellate Tribunal has
filed the present appeal before this honorable court u/s 53T of the act.

1. Sec 53T - The Central Government or any State Government or the Commission or any
statutory authority or any local authority or any enterprise or any person aggrieved by any
decision or order of the Appellate Tribunal may file an appeal to the Supreme Court within
sixty days from the date of communication of the decision or order of the Appellate Tribunal
to them: Provided that the Supreme Court may, if it is satisfied that the applicant was
prevented by sufficient cause from filing the appeal within the said period, allow it to be
filed after the expiry of the said period of sixty days.

~Memorial on behalf of the Appellant

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Statement of Facts v

STATEMENT OF FACTS

1) The appellants were suppliers of LPG cylinders to Indian Oil Corporation

Limited (IOCL) and other Oil Marketing Companies [OMCs] namely, IOCL,
HPCL and BPCL.

2) LPG Cylinder Manufacturers had formed an Association in the name of Indian

LPG Cylinders Manufacturers Association.

3) The Indian Oil Corporation Ltd. had floated the tender for the supply of 105 Lakh
14.2 kg capacity LPG Cylinders with SC valves in the year 2010-11.

4) The date for submitting the bids in the case of the concerned tender was 3.3.2010.

5) The two days prior to the date for submitting the bids, two meetings were held
on 1st and 2nd March, 2010 in Hotel Sahara Star in Mumbai.

6) The Competition Commission of India initiated Suo motu proceedings against

suppliers of LPG cylinders on receiving information regarding occurrence of
unfair practices (bid-rigging) in tender floated by Indian Oil Corporation Ltd. for
the supply of 105 Lakh 14.2 kg capacity LPG Cylinders with SC valves in the
year 2010-11.

7) A Director General was appointed by CCI to investigate the same.

~Memorial on behalf of the Appellant

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 8) The Director General (Investigation) (DG) discerned a pattern wherein parties
submitted their bids in various states at the same level to prove price parallelism.

9) Based on DG’s report the CCI ruled the existence of element of collusive
bidding/ bid-rigging on the following factors-
(i) market conditions; (ii) small number of suppliers; (iii) few new entrants; (iv)
active trade association; (v) repetitive bidding; (vi) identical products; (vii) few
or no substitutes; (viii) no significant technological changes; (ix) meeting of
bidders in Mumbai a few days prior to submission of the bids; (x) appointing
common agents; and (xi) identical bids despite varying cost.

10) The CCI imposed penalties against 45 companies for entering into the
arrangement of bid-rigging. The companies filed appeal before the Competition
Appellate Tribunal.

11) COMPAT upheld the decision of CCI that the suppliers of LPG Cylinders to
IOCL had indulged in cartelization, thus influencing and rigging the prices,
which amounts to violation of provisions of the Competition Act, 2002 namely-
Section 3(3)(a)1 and Section 3(3)(d)2.

12) Aggrieved by the orders dated 20th December, 2013 passed by the Competition
Appellate Tribunal the appeal has been filed by the appellants before this
honorable court.

1. Section 3(3)(a) - Agreement directly or indirectly determining purchase or sale prices shall
be presumed to have an appreciable adverse effect on competition and hence prohibited.

2. Section 3(3)(d) - Arrangement directly or indirectly resulting into bid rigging or collusive
bidding shall be presumed to have an appreciable adverse effect on competition and hence
prohibited.
~Memorial on behalf of the Appellant

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Issues Raised vi

ISSUES RAISED

1. Whether there was any collusive agreement between the participating

bidders which directly or indirectly resulted in bid rigging of the
tender floated by IOCL in March 2010 for procurement of 14.2 kg.
LPG cylinders?

2. Whether the nature of market and the prevailing conditions therein

have led to price parallelism?

3. Whether the Appellants have acted in contravention of Section 3(3)(d)

read with Section 3(1) of the Act?

~Memorial on behalf of the Appellant

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Summary of Arguments vii

SUMMARY OF ARGUMENTS

1. Whether there was any collusive agreement between the participating

bidders which directly or indirectly resulted in bid rigging of the tender

floated by IOCL in March 2010 for procurement of 14.2 kg. LPG cylinders?

As per the allegations, 45 persons had entered into an agreement of cartelization

which should not be established only with the said meeting which was not
attended by all and in fact very few members.
The control of the Government, insofar as supply of 14.2 kg gas cylinders is
concerned, would also show tight control over the pricing. In such a statutorily
tight control price fixing mechanism there could not be bid rigging.

2. Whether the nature of market and the prevailing conditions therein have led
to price parallelism?

It was an oligopolistic market wherein there was a likelihood of each player

being aware of actions of the other and in such a situation price parallelism would
be a common phenomenon.
In a monopolistic market where there are few buyers, the price is set by the
buyers, and the conditions are such that sellers can predict demand, there is a
repetitive bidding process and the products are identical and specialized, the
likelihood of price parallelism is natural.

~Memorial on behalf of the Appellant

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3. Whether the Appellants have acted in contravention of Section 3(3)(d) read
with Section 3(1) of the Act?

The counsel contents that the Competition Act prohibits anti-competitive practices,
which would imply that there has to be a competition in the market, in the first place.
As a corollary, if there is no such competition, Section 3(1)1 of the Act does not get
triggered.
In order to attract the presumption contained in Section 3(3)2 about the appreciable
adverse effect on competition, in the first instance, there has to be a finding that
there has been an agreement of the kind set out in Section 3(3)(a) to (d).

~Memorial on behalf of the Appellant

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Arguments Advanced viii

ARGUMENTS ADVANCED

1. Whether there was any collusive agreement between the participating

bidders which directly or indirectly resulted in bid rigging of the tender
floated by IOCL in March 2010 for procurement of 14.2 kg. LPG
cylinders?

 The counsel contents that there is no collusive agreement or bid-rigging in the

present case. The counsel put forth their case on the following propositions.

 The COMPAT upheld the inference collusion based on the factum of the
meetings of the Association.

 The factum of meetings of an association by itself in any case cannot lead to a

conclusion of collusion. The COMPAT went to the extent of holding that it is
irrelevant whether a particular party was a member of the Association or not and
the existence of Association is by itself sufficient. This approach was attacked
as contrary to the fundamental right to form an association under Article
19(1)(c)(g)1 of the Constitution of India.

 The counsel submits that the Rajasthan Cylinders and Containers Limited is
concerned, no representatives of appellant attended the said meeting. Further,
many other members did not attend the meeting.

1. Art 19(1)(c) - to form associations or unions

Art 19(1)(g) - to practice any profession, or to carry on any occupation, trade or business.

~Memorial on behalf of the Appellant

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  Some of the appellants stated that they did not attend the meeting and those who
attended the meeting maintained that nothing was discussed about the tender.

 As per the allegations, 45 persons had entered into an agreement of cartelization

which should not be established only with the said meeting which was not
attended by all and in fact very few members.

 It was expressly stated by at least two persons who attended the meeting that
price was not discussed.

 Nobody came with the explanation as to what transpired in the meeting or gave
any proof that prices were discussed. Minutes of the meeting were also not
produced.

 The counsel contents that the factors such as market conditions, small number of
suppliers, few new entrants, active trade association, etc. which lead the
authorities to coming to the conclusion that the appellants had colluded and
formed a cartel which led to bid rigging are to be analyzed keeping in mind the
ground realities that were prevailing.

 In the present case there are only three buyers. Among them, IOCL is the biggest
buyer with 48% market share. Because of limited number of buyers and for some
reason if they do not purchase, the manufacturer would be nowhere. That may
deter the persons to enter the field.

 The IOCL undertakes the exercise of having its internal estimates about the cost
of these cylinders. All the bidders supply the goods at the same rate which is
fixed by the IOCL.

~Memorial on behalf of the Appellant

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  There were 50 parties already in the fray and 12 new entrants were admitted.
Number of 12, in such a scenario, cannot be treated as less.

 Therefore, the conclusion of CCI that the appellants ensured that there should
not be entry of new entrant may not be correct.

 LPG (Regulation of Supply and Distribution) Order, 2000 published vide

Notification dated 26th April, 2000 as per which only Government oil companies
can supply LPG to domestic consumer of 14.2 kg LPG cylinders with dimensions
as specified therein.

 The LPG supply in 14.2 kg gas cylinders is an essential commodity; the

distribution of such cylinders takes place only through Government oil
companies; the price to the consumer is controlled by the Government; and
parallel marketeers, supplier and distributor of LPG cylinders may do so only for
cylinders and specifications other than 14.2 kg cylinders.

 This control of the Government, insofar as supply of 14.2 kg gas cylinders is

concerned, would also show tight control over the pricing. In such a statutorily
tight control price fixing mechanism there could not be bid rigging.

 Price control was entirely in the hands of IOCL and in a situation like this,
question of entering into any agreement with the motive of bid rigging or
collusive bidding did not arise.

 Since there are not many manufacturers and supplies are needed by the three
buyers on regular basis, IOCL ensures that all those manufacturers whose bids
are technically viable, are given some order for the supply of specific cylinder.
For this purpose, it has framed its broad policy as well. This also shows that
control remains with IOCL.

~Memorial on behalf of the Appellant

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  Thus, the all the participants in the bidding process were awarded contracts in
some State or the other, which was aimed at ensuring a bigger pool of
manufacturers so that the supply of this essential product is always maintained
for the benefit of the general public.

2. Whether the nature of market and the prevailing conditions therein have
led to price parallelism?

 The counsel contents that the inherent nature of the market of cylinder
manufacturers itself precludes the possibility of competition.

 It was an oligopolistic market wherein there was a likelihood of each player

being aware of actions of the other and in such a situation price parallelism would
be a common phenomenon.

 The counsel submits that the “Glossary of Industrial Organization Economics

and Competition Law” published by the Organization for Economic Co-
operation and Development (OECD), as per which monopsony consists of a
market with a single buyer. When there are only a few buyers, the market is
described as an oligopsony.

 Whenever there is a situation of oligopsony, parallel pricing would not lead to

the conclusion that there was a concerted practice there has to be other credible
and corroborative evidence. In Richard Whish & David Bailey in Oxford’s
Competition Law discussed the “Theory of Oligopolistic Interdependence” as
under: “In an oligopoly a reduction in price would swiftly attract the customers
of the other two or three rivals, the effect upon whom would be so devastating

~Memorial on behalf of the Appellant

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 that they would have to react by matching the cut. Similarly, an oligopolist could
not increase its price unilaterally, because it would be deserted by its customers
if it did so. Thus, the theory runs that in an oligopolistic market rival are
interdependent: they are acutely aware of each other’s presence and are bound
to match one another’s marketing strategy.

 Price parallelism is inevitable where the buyer has a high degree of control and
determines price, quantity, and even the identities of the awardees at its
discretion.

 The counsel humbly submits that in Excel Crop Care Limited v. Competition
Commission of India & Anr. (2017) 8 SCC 47 this hon’ble court observed that-
“Since dominant position is enjoyed by the buyer, it leads to parallel pricing and
this conscious parallelism takes place leading to quoting the same price by the
suppliers. The explanation, thus, given for quoting identical price was the
economic forces and not because of any agreement or arrangement between the
parties. It was submitted that merely because same price was quoted by the
appellants in respect of the 2009 FCI tender, one could not jump to the
conclusion that there was some “agreement” as well between these parties, in
the absence of any other evidence corroborating the said factum of quoting
identical price”.

 Further the counsel submits that the prevailing conditions such as limited buyers
and influence of buyers in the fixation of prices in fact rule out the possibility of
much price variations and all the manufacturers are virtually forced to submit
their bid with a price that is quite close to each other. Therefore, it became
necessary to sustain themselves in the market. Hence, the factor that these
suppliers are from different region having different cost of manufacture would
lose its significance.

~Memorial on behalf of the Appellant

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  The counsel contents that it is a situation where prime condition is to quote the
price at which a particular manufacturer can bag an order even when its
manufacturing cost is more than the manufacturing cost of others. The main
purpose for such a manufacturing would be to remain in the fray and not to lose
out. Therefore, it would be ready to accept lesser margin. This would answer
why there were near identical bids or price parallelism despite varying cost.

 In Union of India v. Hindustan Development Corporation 1994 AIR 988, it

was held that mere identical pricing cannot lead to the conclusion of
cartelization.
Because of mere quoting identical tender offers by the said three manufacturers
for which there is some basis, the conclusion that the said manufacturers had
formed a cartel does not appear to be correct.

3. Whether the Appellants have acted in contravention of Section 3(3)(d)

read with Section 3(1) of the Act?

 The counsel contents that the Competition Act prohibits anti-competitive

practices, which would imply that there has to be a competition in the market, in
the first place. As a corollary, if there is no such competition, Section 3(1)1 of
the Act does not get triggered.

1. Section 3(1) - No enterprise or association of enterprises or person or association of

persons shall enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely to cause an
appreciable adverse effect on competition within India.

~Memorial on behalf of the Appellant

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  Even assuming that there is a collusive agreement or bid-rigging in the present
case, there is no appreciable adverse effect on competition.

 The counsel humbly submits that since, the allegation against the appellants was
that the agreement resulted in bid rigging and case is covered under Section
3(3)(d) of the Act, it was necessary that there is a positive finding to the aforesaid
effect, namely, that there was agreement which had resulted in bid rigging.

 In order to attract the presumption contained in Section 3(3)1 about the

appreciable adverse effect on competition, in the first instance, there has to be a
finding that there has been an agreement of the kind set out in Section 3(3)(a) to
(d).

 In Punjab Land Development & Reclamation Corporation Ltd. vs.

Presiding Officer, Laboure Court 1990 SCC (3) 682 -
The definition has used the word ‘means’. When a statute says that a word or
phrase shall “mean”— not merely that it shall “include” — certain things or
acts, “the definition is a hard-and-fast definition, and no other meaning can be
assigned to the expression than is put down in definition” A definition is an
explicit statement of the full connotation of a term.

 Thus, for it to be a case of bid rigging, the agreement must be such which is
defined in the Explanation to Section 3(3)(d) creating the effect of:
o Eliminating or reducing competition for bids or
o Adversely affecting the process for bidding or
o Manipulating the process for bidding.

1. Section 3(3) - Any agreement which limits or controls supply, markets, technical
development, production, or provision of services will be deemed to have an appreciable
adverse effect on competition.

~Memorial on behalf of the Appellant

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  The counsel contents that there is no positive evidence of this nature at all and
the CCI as well as COMPAT has proceeded on inferences as regards bid rigging
and, therefore, such orders cannot be sustained.

 The complete absence of a finding of bid rigging, in the present IOCL tender, as
a matter of fact there cannot be any bid rigging as defined in Section 3(3).

 To take the first ingredient, i.e., eliminating or reducing competition for bids, the
report of D.G. itself finds that out of the 60 bidding parties 37 entities were not
belonging to any single group and are independently controlled. Hence, straight
away there is no case of ‘eliminating or reducing competition for bids’ which is
one of the possible ingredients of bid rigging as there were 37 entities who were
free of mind to participate and bid of their own accord in the absence of any
control by any cartel.

 As regards the second and third requirement of bid rigging, i.e., adversely
effecting or manipulating the bidding process, the submission of bids by the
appellant (even if identical) can have no effect of ‘adversely effecting or
manipulating the bidding process’ this being on account of the very nature of the
present tender process. Although, bids are invited from bidders, IOCL has a
fixed/base procurement price of Rs. 1106.61 per cylinder. IOCL then works out
an estimated rate per State based on certain factors.

 There was no positive finding of cartelization and the conclusion was merely
presumptive, even if it is accepted that there was such an agreement of bid
rigging or collusive bidding, there was no presumption of ‘appreciable adverse
effect on competition’.

~Memorial on behalf of the Appellant

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  In CCI v. Artists & Technicians of W.B. Film & Television (Civil Appeal
No. 6691 of 2014):
In the first instance, it is to be found out that there existed an “agreement” which
was entered into by enterprise or association of enterprises or person or
association of persons. Thereafter, it needs to be determined as to whether such
an agreement is anti-competitive agreement within the meaning of the Act. Once
it is found to be so, other provisions relating to the treatment that needs to be
given thereto get attracted.

 The counsel submits that the CCI, rather arriving at a finding with focus on the
aforesaid factors, proceeded to analyze factors which attach to the general market
conditions of the industry to ‘infer’ the ‘possibility’ of bid rigging and then
concluded that the ‘facilitating factors’ which may be ‘considered conducive for
cartelization’ are present.

 The D.G. found that ‘in all the probability, prices were fixed there at the meeting
in Bombay in collusion with each other. Such an inference and assumption based
on ‘higher chances’, ‘probability’, ‘tendencies or ‘likelihood’ by the CCI does
not meet the requirement of the definition contained in Explanation to Section
3(3) and certainly does not constitute a finding of ‘bid rigging’ as defined therein.

~Memorial on behalf of the Appellant

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Prayer Clause ix

PRAYER CLAUSE

Wherefore in the light of the issues raised, arguments advanced, reasons given and

authorities cited, this Hon’ble Court may be pleased to:

 Allow the present appeal.

 Set aside the order passed by the COMPAT.

 Impose the cost of litigation on the Respondent.

 Pass such other order or direction as it deems fit in the facts of the present case

and in the interest of justice.

All of which is most humbly and respectfully submitted.

COUNSEL FOR THE APPEALLANT

~Memorial on behalf of the Appellant

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