CCI Ruling on ICF Chennai Tender Eligibility Criteria and Cartel Allegations

July 24, 2024

The Competition Commission of India (CCI) bench, including Ms. Ravneet Kaur (Chairperson), Mr. Anil Agrawal (Member), Ms. Sweta Kakkad (Member), and Mr. Deepak Anurag (Member), ruled that the PCMM – Integral Coach Factory (ICF), Chennai, is within its rights as a procurer to define eligibility criteria and tender requirements. The commission concluded that such specifications do not constitute anti-competitive behavior.

Context

The informant stated that ICF Chennai (OP-1) issued a tender dated 06.02.2023 for the acquisition of 1811 units of Lower Spring Beam with vertical brackets for 453 coach sets.

The eligibility criteria (EC) specified for the tender mandated that vendors must be listed on the Unified Vendor Approval Module (UVAM), have supplied either 20% or 35% of the tendered quantity in the last three years, and have delivered a minimum of 200 units during the same period.

The Informant observed that among the UVAM-approved sources for the specific item, only five were listed, but only two were currently operational. This narrow selection restricted effective competition to just two vendors, which the Informant contended contradicted Railway Board guidelines mandating a minimum of five active vendors.

Furthermore, the eligibility criteria (EC) overlooked the historical performance of previous bulk suppliers and deviated from the Railway Board’s guidelines on vendor approval. This exclusion occurred despite a notable surge in the quantity tendered.

The Informant accused Super Steels (OP-2) and Alvind Industries (OP-3) of consistently being the lowest and second-lowest bidders, respectively, for the past 6-7 years, indicating a pattern suggestive of cartel behavior.

According to the Informant, OP-2 could not have consistently maintained the lowest bid position without collusion with OP-3, who allegedly accepted OP-2’s rates without attempting to undercut them. This alleged cartel activity was allegedly overlooked by OP-1 in both current and prior tender processes.

The Informant, feeling aggrieved, lodged a complaint with the Commission, alleging that OP-1 had misused its dominant position by imposing restrictive eligibility criteria for the tender and facilitating cartel behavior between OP-2 and OP-3, in contravention of Section 4(2)(a)(i) of the Competition Act.

Commission’s Assessment

The Commission reviewed the historical tender data provided by the Informant and noted that, apart from minor price discrepancies in bid quotations between OP-2 and OP-3 in two tenders, there was insufficient evidence to substantiate allegations of cartelization.

The Commission emphasized that mere price parallelism, without additional corroborative factors, does not indicate cartel behavior.

Referring to its precedent in the case of Delhi Jal Board vs. Grasim Industries Ltd. & Ors. (Case No. 03 of 2013), the Commission reiterated that parallel pricing alone does not violate the Competition Act. Evidence of coordinated actions or a meeting of minds, known as “plus factors,” is necessary to establish such violations.

The Commission found no indications of collusion or concerted actions between OP-2 and OP-3, or among the parties involved. Therefore, it concluded that there was no evidence of cartelization or breaches of Section 3 of the Act by OP-2, OP-3, or OP-1.

Addressing the allegations against OP-1 under Section 4 of the Competition Act, the Commission clarified that the claim regarding only two active vendors, contrary to Railway Board guidelines requiring a minimum of five, was inaccurate. The data indicated that Nanda Engineering Works, an active vendor, regularly participated in Railway tenders, and EC Blade and Tools Pvt. Ltd. also submitted bids in previous tenders.

The Commission recognized OP-1’s authority as a consumer or procurer to define its own specifications, conditions, and eligibility criteria (EC) for procurement. These requirements, by themselves, do not necessarily imply anti-competitive behavior. Consequently, the Commission directed the closure of the case against the concerned parties.

Posted and reproduced in Public Interest by

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