THE ORDER
The Competition Commission of India has found cement manufacturers in violation of the provisions of the Competition Act, 2002 which deals with anticompetitive agreements including Cartels. The Commission has imposed penalty on 11 Cement Manufacturers named in the information @0.5x profit for the FY10 and FY11. The penalty amount so worked out amounts to over `6000 crore. The Commission has also imposed penalty on the Cement Manufacturers Association. The Cement Manufacturers upon whom the penalty has been imposed are ACC, Ambuja Cements Limited, Ultratech Cements, Grasim Cements now merged with Ultratech Cements, JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements.
CCI CAUTIONS CEMENT MAKERS
While imposing penalty, the Commission has considered the parallel and coordinated behaviour of cement companies on price, dispatch and supplies in the market. The Commission has found that the cement companies have not utilised the available capacity so as to reduce supplies and raise prices in times of higher demand. The Commission has also observed that the act of these Cement Companies 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 development of the country.
WHAT NEXT
Cement companies are likely to appeal against the CCI order in the Competition Appellate Tribunal and may obtain a stay order against the same. Courts have the power to rule against the Compat order. Financial strength of large cement makers may enable them to withstand the financial impact of this order but pricing power likely to get severely constrainted in the future.
The Competition Commission of India has found cement manufacturers in violation of the provisions of the Competition Act, 2002 which deals with anticompetitive agreements including Cartels. The Commission has imposed penalty on 11 Cement Manufacturers named in the information @0.5x profit for the FY10 and FY11. The penalty amount so worked out amounts to over `6000 crore. The Commission has also imposed penalty on the Cement Manufacturers Association. The Cement Manufacturers upon whom the penalty has been imposed are ACC, Ambuja Cements Limited, Ultratech Cements, Grasim Cements now merged with Ultratech Cements, JK Cements, India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements.
CCI CAUTIONS CEMENT MAKERS
While imposing penalty, the Commission has considered the parallel and coordinated behaviour of cement companies on price, dispatch and supplies in the market. The Commission has found that the cement companies have not utilised the available capacity so as to reduce supplies and raise prices in times of higher demand. The Commission has also observed that the act of these Cement Companies 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 development of the country.
WHAT NEXT
Cement companies are likely to appeal against the CCI order in the Competition Appellate Tribunal and may obtain a stay order against the same. Courts have the power to rule against the Compat order. Financial strength of large cement makers may enable them to withstand the financial impact of this order but pricing power likely to get severely constrainted in the future.
PENALTY ON CEMENT COMPANIES
Name Penalty (Rs. crore)
JP Associates `1323.6
ACC `1147.59
Ambuja `1163.9
Ultratech `1175.49
Lafarge India `480
Binani `167.32
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