Compat tells cement firms to cough up 10% of CCI penalty

The CCI had charged the cos of forming a cartel to drive up prices.

Written by ENS Economic Bureau | New Delhi | Published: May 18, 2013 3:22 am

The CCI had charged the cos of forming a cartel to drive up prices.

The Competition Appellate Tribunal (Compat) has asked cement companies to pay Rs 630 crore as penalty to the Competition Commission of India (CCI) on the charges of forming a cartel in the sector to drive up prices.

In an interim order,a Compat bench headed by Justice VS Sirpurkar asked 11 cement producers,including Lafarge India,India Cements,JP Associates,Binani Cement,Ambuja Cements,Madras Cements,and JK Cement,along with their lobby group Cement Manufacturer’s Association to pay 10 per cent of the total penalty of Rs 6,307 crore,within a month.

The markets,however,welcomed the order with stocks of the cement companies rising by 3 per cent. Jagannadham Thunuguntla,head of equity research at SMC Capital said the bullish markets had discounted the news especially as the substance of the order was already in public domain.

The tribunal also said that if the companies failed to deposit the amount within 30 days,their petition would be dismissed. This means the companies have to pay up the 10 per cent now to retain their chance to appeal the case in the higher courts. The matter would now come up for final hearing in August. The cement producers had filed petitions challenging the hefty penalty imposed on them by the competition watchdog. The case against them was filed by Builders Association of India (BAI),which is the representative body of builders and contractors.

The association described the Compat order “as a major victory against alleged cartelisation by the cement industry”. The cement companies had been told by CCI that they had established a cartel. “The commission holds that the cement companies acting together have limited,controlled and also attempted to control the production and price in the market in India”,its order noted. The commission had found “cement manufacturers in violation of the provisions of the Competition Act,2002,which deals with anti-competitive agreements,including cartels.”

Following the complaint against the cement companies,the director general (investigation) of the Competition Commission had found the cement companies were in violation of Section 4 of the Competition Act.

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