Competition Commission of India
M/S. Pankaj Gas Cylinders Ltd vs Indian Oil Corporation Ltd. Main Order, ... on 22 June, 2011
'M/s. Pankaj Gas Cylinders Ltd.
CO'M'PiETiI'TilON ~?COiM'Ml:SSlON OF lNDlA 'Case 'No. 10 of 201.0 Dadt-e: 21064' 1011 informant I lndian Oil C:or.po'r;atio'n Limited Opposite 'Party \_._.------»--.----..----
Tsne :pre.seni 'ien'fo'rm'a*t'io'n has been filed under section '1'.9("1'§ (a) of "then :.Co"mipe.'tit'io'n Act, 2.00.2 ('the Aect") by "l\'/l/"s ~P-.a'nka_'j ~G'a~s Cylinders Ltd. ('the i'ni'o'rmantl_) on I25...O.2.2iO1LO tagainsft lndian Oil C-o'r,po'r-.at'ion 1Li'mited ("the :O.p:p'osite 7Pta'rt,y') Ialleging, in'te'r ..aIia, faibudse »:o'f :domi"n:an'c ;po.si'tion in 'the :p'r.oc;ur-e'm'en.'( 0.1' '1-4.2 Kg Liquid Petroleum Gas (LPG) sc_yl ind ers .
12. The "facts as stated .u'nd-e'r.:
2.1 As stated in the information, the informant, viz., 'M/s Pankai Gas Cylinders Ltd., a :public limited company, is engaged in the business of manufa'ctur'i'n'g of LPG Gas Cylinders, SC Valves and Domeistic Pressure Regulators which are used by the LPG distribution and retailing companies, viz., lndian 'Oil "Co'r.p'or.ati'on .l_'td. (lOC)c, Hindustan Petroleum Co'r.p'o'r.;aticon Ltd. (HPCL) and Bharat P-etroleum Cor.pora.tio'n 'Ltd. (*B'P.C.L) (to be r-e'le'rr-ed to -as 'the LPG Gas Companies' collectively).
2.2 The Otpposite 1P;a'rty., 'l'nd'ian iO'il C:or.p'or.ation Ltd., a Putblic Llimited Company 'i'n'co'r;poratred under the '?Compa'nie.s (Act, 1956, is -e'ng'a,ge'd in the 'bus"ines:s of *re'fi'n.i'ng of petroleum, :p'etro'che'm'ic'als as well as ~'di:str'ib.u'tio'n, rmarketing of oil, g as and other :pe'tro'leutm :p:rodu'cts..
233 it is :alleged in the i'n'fo'r.m'at'ion that even 'tho.u_.gh the end .UiSB'l'S of the :produ:cts 'manu'f:actured :by :the 'i'nfo'rm:ant are general public at large and the 'c.om'me'roci'a'l users :but the ti'nto'rmtant and ot'he'r ?m~a'nuT»aCt.u'r-ers of the vemcpty zc;yli'n:de'r~.s 'have 'no idir-ect .access "to the end u's--'e'r:s. .l;t is stat-e'd that "the only way :by which the sold is through competitive ibid.din;g by the 'LPG Gas \ . : w r ' " ' z ._-- :2 , ' 2 [2 .-4
-Companies. It is further alleged that the "e'nti'r-e 'volume oi' products manufactured is subject to the demand and subsequent procurement by the LPG Gas Companies 'through bid process.
As per averm-ents the 'Opposite Party invited Tender :No. C LTPG --- O/l\/l/'PT-D3/O9-'10 tor the supply of -approximately 105 lakhs of 14.2 Kg LPG Cylinders with SC Valves for its various bottling .plants.
it is stated that 'as per the tender documents, only those manufacturers having valid approval of Chief Controller of Explosives (CCOE) and license "from 'Bureau of lndian Standards (BIS) tor 'm'~an.u'factu're of 'l-4.52 i-Kg 'LPG =Cylin'de*rs as per lS--'3'1.96 (Pia.rt-ll) gas on the due diat-e of the tender can 'bid 'for the tender. The in'form'a'nt is '-stated to have "met the el'i_g'i:b'ility rcriteria. it is turther stated that in the itechnical bid (part of the te'nde'r documients, tstpeciral terms and 'co'nditio'n.s which 'need to be scoirnfplied :by the "b'idd'e'r ras .co'nditio'n :pre.cede'nt 'ifor ipa'rtici;p'at'i'o'n in the ':bidding :p:r.oce;ss have been me'n'tioned.. Zl:n ;prar.t'i;cu.la'r., .att-ention "has been drawn to clau-se :6 of the .A'nn:e=x.u'r:e-'lil to the '.tech"n'ical ;bid and the same reads as tollowsi:
'.'--Any ten.de*rer, who is on_;th.e,."Ho1iié3ay,ujcist./BlackListed by IOCL/B'PC.L/HPCL sas gjdug Jda'te'i'Qfi;:1;épder .will :be disqualified from ~this§terif.d.eiri'i;\.l?xi i 2.5 The informant has also stated that the 'above clause of 2.6 Holiday Listing has been further clarified in Clause 'l8 of Annexure--l to the Technical Bid which specifies the grounds for Holiday Listing.
it is alleged b_y the informant that in all previous bids held by the Opposite Party, the 'present clause 6 was not there in the tender docu'ment.s and the same has been incorporated for the 'first time in the "present bid document. it has also been stated that no such clause ever appeared in an_y dot the bid called by any of the L-PG Gas Companies.
2.7 "It has also been alleged that the aQyp;po:s'ite "P--art_y invited 2.8 another Tender 'No. L'PG-O/'M/PT--'04/O19-'1D on '15..O2.'200'1 tor sugprply of --do'me;sti.c ;p:r--es's.ure ;regulato'r.s and in this bid also :a ;similar rclause has been ;in.corp.or~.ated in the 'bid documernts.
..It has been 'further stated that the us.u:a'l :practice is to .re:strain a bidder from :biddi'n;g for 2a t-e'n.de'r tloat~.ed by ;a LPG company., where 'the :co'm:pa'n'y :h'a'-s holiday ilisteid :or black listed the ':b'idd:er.. it 'has been also :stated that this restriction .is not atextended-t';6jrg:a'pgpiica;ble to :bidders who are blac-k listed or mtpany bother than the one which 'has eiinvit5e;d <~3'r_;[-' 2.9 '2."|.O
2.'TlTl It has been "stated that the said clause is restraining the informant and other similarly situated bidders 'from taking .part in the competitive bidding process of the Opposite Par.ty due to the fact that the in'fo'rm.ant has been holiday listed and black listed by the other "LPG Gas Co'm.p'any, viz., -BPCL.
It has been further alleged that the informant was holiday listed by QBPCL vide its letter dated 'l7.08..2009 for a period of one year from the date of this letter for 'non- _acceptance of the Letter of Intent. It has also been stated that though BPCL had put the iinf.orman't on 'holiday on list "i77;O8;2.009, 'still it was buying .c_yli'nde'r.s and 'SC 'Valves from the informant till '.November., "2009 and the informant was =su:p;pl_y'in_g 'these 'items to the 's.a:tis'fa.ctio'n of the BTPCL 'at :a much lower "rate compared to other '-su'pjp'l iers.
lt has 'been alleged that the natur-e of iholiday li.sti'n;g :has rnoothing to do with the te;c'h'n'i:cal »e'ffic'i'en'cy and the viability of the :prod.u.ct~s of the 'in'fo'rm.a'nt.. flt 'has been :stated that the finttoorrnant was .:put 'under the 'hi-olid-ay list tor no'n--a:cce.ptanc:e 2.011' the letter cot fintent and the said restraint was only tor a ;pe'rliod..~bsot i7ioih7e'~§yhe.a*r and specific to the contract ronly. ilt ?h'a's that the 'informant is 'still asu:p;pl_ying tr.egulator.s 2 »./ . .> V: 3:,' 2.12 2.13 upto '50,0'0O .units 'per month and SC valves to the Opposite Party 'as per satisfaction.
its requirement and to its 'Based on the above averments, it has been stated that the inclusion of the said clause would frustrate the objective of competitive .bidding to get the product at a competitive 'price.
The informant has also -alleged that the Opposite Party is having ap_p'roximat»e|y 47% of the market share in the distribution and retailing of gas and acco'rdingly., it has been submitted that it enjoys do'mina'n'tjposifion. 'Further, it has been alleged that the O:prp:otsite 7Party by the 7S.ai.d clause of ho"l'iday 'listing has created "a -re.strain't on 'those players who in the .ordi'n'ary course of .b.us'ine's--.s are not denied trom p.a'rti.c'i:p:ating in the bid and the -same amounts to itm_po:s'ing :.un'fai'r .condition in ipcurchtase/.-sale of goods in contravrention of section 4 (2) (a) :('i) of the Act. It has been 'further alleged that the zaction ot the Opposite P.a'r.t_y in 'inc'l.udin_g B'P'C.L -"and fl-.lP.lCL into the holiday listing clause has resulted into :deni:al sot 'mar-ket taccess to the "informant =si.tu'ated 'persons in 'contr~av-ent'i.on of .:§ieict°iog'n 'ot the «Act.
2.1.4. Based on the above, the informant has prayed to the Commission seeking, inter alia, thetoilowing reliefs:
a) To pass an order directing the Opposite Party to modify Clause 6, Annexure ll of Tender No. LPG-
O/M/PT-O3/09-1.0 due on 03.03.20i10A'and Clause 12 in Annexure ll of Tender No. LPG-O/IV!/PT-04/09-'10 due on '17.03.2010 respectively, .by removing the reference of .BPCL and HPCL in the respective clauses.
b) To restrain the Opposite Party from proceeding with the above two bids with the presence of above two clauses in different Tenders.
c) To restrain the Opposite -Party from including the said clauses in future .bi.d d.ocumen:ts.
13.. The 'Commission, on ..c'ons'i;der--a'ti'o'n of th-e facts and 'c'i'rc.um:sta'nc-es of the case, 'found that t=he'r-.e «'e.x'i»sts ..a prima .taci.e case for ~maki'n_g a 'r-e'fe'r.en'cte to the ?.Dir-.e.cto'r ?.Gen'er.a'l (D8) to :c.ond.ucit zan Einvesti_gatio'n "into the "matter rand acco'rdi'n,gIy., the
-C:om'mitss'i.o'n passed an order under :section 26 a(ti_') -ot the Act on T30.-"O.3.'2'0?lLO di'r».ecti'n;g the D6 to -conduct 'i=nves".ti_.gratio'n into the 'matter ;and izsubrm it his 'repo'r.t..
«4. ?P..ursura'nt~to the 'order ;pa-s:s~ed :by the ~Com;nj:ifs~sion, the DG tconducted the 'invest'i_g:atiron's and the inve'st'i;gati'on tsuzbmiitt-ed his :r--.ep'or.t :o*h to the
-Commi-ss'i:o*n. h 'i l .5. "Fii'nd'i'n'qs o'f DG f'R-e=po'rt 45.1 In order to analyze the issues/allegations raised b_y the informant, the DG, at the outset, proceeded to define the 'r'e|evant market in the pre.se'nt case.
5.2 'The DG, after taking into conside'ration the reievant provisions of the Act, defined the relevant 'market as 14.2 Kg LPG Cylinders as per the technical specifications _prescribed in the tender documents of the Opposite Party for the supply of such cylinders all over India.
-5.3 Further, the DG, after "detailed examination of the factors enumerated in section '119 (4) of the Act, has come to the "conclusion that the Opposite 'iP{a'rty is in .-a ;position of domina'n.ce. The DG :has also 'reported that -since IOC is havinig «ta 'mar-ket :share of :around 50%, it can exercise its mar-ket ;power :by ta~k'i'n_g .dec'isio'ns indepe'nde'nt|y and -operate .inde'pe'nd.e-n't|:y of relevant .:market of ;pro'c.u'r-.eme'nt of '1-4:2 -K;g LPG :.c_y|i-nders .and can also zaffect consumers in its tavou-r.. ' 'competitive forces :pr~ev.a'il.ing in the €5t.~4 The 136 has also 'noted that the impugned :ac.tio'n on the :p'a'r.t of the 'IOC may have :a :potenti;a| gaidvertse effect on the com'petiti-on ~;s'i'n.ce the intormanit and 's'i'miia'r'iy placed .bidd'e'r~s have been de;p'riiv-ed, and in tutur-e also may :b:e de'p'r'ived, 'ot the :o:p:portunit_y to :participate in the gprroceses.
The DIS :.a'|s'o found the rconditions as :restr.a'i'nt on trade so far as the 'bidding ability and comvpet-ehce ot the informant are concerned.
5.5 Resultantly, the DG has concluded that the impugned tender condition under clause 6 of Annexur-e-.2, is restrictiveacs it imposed unfair and discriminatory condition in procurement of 14.2 Kg LPG cylinders and hence found that the IOC has contravened provisions of section -4 (2) (a) (i) of the Act. The DG also found the impugned tender conditions as denying access to the market of supply of 14.12 Kg LPG cylinders in violation of section .4 (.2) (c ) of the Act.
6.. The Commission considered the report of DG in its 'meeting held on 18.1 0.12010 and decided to send the 'copies of 'i'nvesti_gation report to the ip:art'ies to 'file their r.eplies/"ofbjections. 'Thze :C'om'missio=n also tdireccted the 'in'f:ormla'n't as well as the Opposite Party to .appear for oral "h.ea'r'i'ng, it they so :desire, either :personally or th r.o ugh :th:e'i"r sa.uth"oriz~e:cl :representatives.
7. The 'Op.po'sit«.e ;Pa'r.ty 'filed its retplyl .o'.bject'io'n's to the DG 're;port on '1'1.'O'1.i2'0"l"l_. fShr.i .vA;'.N.¥H'a~k»sta"r, rSe'ni.or Advocate .appe'are'd tor O.p'p:osite iPa'rt_y and made o'r:a'l su'.b'm'iss'io*ns on 27.01 .'20'1'1 .
F8. ?Re.p'l-v 'by the #0 p:po.s*i'te ?Par;tv
18."! It has :been .s.u:bmitt-ed ;by the iO;p;p.o~s_item E-P;a'r.ty that it has "filed its detailed 'reply :a'lo'ngwit*h ithe the DG 1:luri'n g the course of inv-eistigation it§.§';'ir'ep'qcu-e.st~ed the Commission to treat its 'reply dated I27.05..2'O"l0 filed before the DG as apart and parcel of the present repl_y.
8.2 The Opposite Party also questioned the scope of inve".stigati.on'o'f the DG and submitted that the DG has extended the scope of investigation by dealing with the aspects of bid rigging and cartelization by the suppliers/manufacturer of cylinders which was beyond the purview of the investigation. It has been contented that the DG cannot investigate any new issue without the same having been brought to the notice of the Com'mission .and without the prima facie opinion having been formed by the Commission in this regard.
8-3 The O.p'po.sit-e Party 'further submitted that the analysis of the -allegations as co'nt'ained in the report is 'factually 'inco'rrect. It has been also submltt~ed that the allegations, even 'assuming to be 'correct, do not esta;b'l'is'h that the Opposite 'Party has "violated the .provisions of the Act. ?Further, it has been 'cont-endec'l :by the Opposite 'Party that it does not enjoy a .d.osm"i.na'nt :position in the =re'levant market. I 18 .4 The -O'ppos'ite Party *f.u'rthe'r submitted that the relevant :product 'market as tdefined in the Act would 'i'nc'lude all those :products which are 'r.e;ga'rded :as iinte'r.c'hangea'ble .o'r :s.u'bstituta'.b'le by the tconsumers, by 'reason of the ch'a'r.act-:eri.stics ot the :products, their gpric-es and i.ntende'd use. Th_e««;*r»el"é'v?arn;t\'iproduct in the present case would inclurdee the cylin:él:eg:r:srgli5t j:a:l'l'rl'A'dié?nensione and shapes and can not be :c:on"fined to ;cyl..i:r:§d1e'rs:a=s 10 contended by De "merely because the iinformant has :co"m*plai'ned of about "a restrictive clause in the tender for 'procurement of "I42 Kg LPG Cylinders.
8.5 'The Opposite Party has submitted that the impugned condition in the tender document is neither unfair nor discriminatory- It applies uniformly to all the bidders :and is not designed to prevent any enterprise or class of persons from participating in the "tender. Further, it has been contended that the Opposite Party .as .a business enterprise is -entitled to safeguard its interest as well as int--er--est of the consumers while dealing with any other enterprise. A condition which is made known well in advance and 'inserted in "public interest ca'nn.ot be termed as practice resulting in -denial of market access. it has been ass-erted by the O;p.pbsit=e -Party that it is -open 'for it to declare that it d.oes not w'i's'h to do .b.usine:ss with jpersons "who have been found unr--eli.able :b.u:s'i'ne;ss jpartners.
8.6 It has 'been "further ..c'ontended by the .O.pp:osite 'Party that the clause tr-elatiingg to iHoli'da_y "Listing is :purely in :p.ubl'ifc int--e'r.e:st and to 'prev-eint uns:c'ru'p.u'lo.u's rand' unre'li'abl:e 'ma'n.ufa;cturer.s/ su'p;plie'rs from ;:aib.u.sing the t»en:der tprooess. It has been t.u'rth«er argued that the 2a'nal_ys'i:s in the §i~nvesti_g:atio'n 'report of the ;p'rovi~sion.s of section "l9 (4) -OT the Act to 'determine the dominant :position of the Opposite ?Par.ty is bad as :it ais-sumes "dominant :position on the sole criteria of *mark«e't in -supply and *distr"i.but'i on of '.l_~'P.'G. Thee im/e.st'i;ga'ti'!;o'/'n; taken into account the tact that an enter,pr'is-e 'both a seller 11 of goods and merely be'c--ause an enter.prise has "a sizeeable market share in the sale of :a particular product will not per se make it a dominant player in other market especially the market of raw materials used in '-such goods.
8.7 l:t has been submitted by the Opposite'Party that the Holiday Listing clause is 'purely in ipublic interest and in consonance with sound and ethical business practices accepted throughout the world and cannot by any stretch of imagination amount to imposing directly or indirectly, unfair or discriminatory condition in purchase orsale of goods.
9.. The Commission has "carefully considered the information, the documents filed therewith, the 'inv.estigation report .of the 'DG, the 'reply of the Opposite Party to the 136 "report and the other relev_ant 'material available on record. '
10. issues From the analysis of the above, the following points arise 'for .determination in the present :matter:
(a) What is the 'relevant mark-et' in the :present case?
(:b) Does the Opposite 'Party hold the "dominant ;position in the 'relevant market'?
(c) Whether the Opposite 5P-warty 'dIqminant . - \, position in contravention ;o'f:se'ctio*n 11.' .;oT?Lthe;;Act'?
1211. Determination of issue "no. '1 11.1 The Commission has to determine the relevant market as defined in section 2(r) of the Act inthe light of the provisions contained in section 19 (5), viz., the relevant product market and the "relevant geographic market. The relevant product 'market .as defined in section 2 (t) of the Act has to 'be determined in the ll_ght of the 'factors contained in section 19 (7) of the Act. Similarly, the relevant geographic market as defined in section .2 (s) of the Act has to be determined "in the light of the factors contained in 'section 19 (6) of the Act.
11.2 For determin'i'ng the 'relevant "market in the instant case, it is also necessary to examine the various statutory aspects involved in the distribution and .supply of -LPG in lndia.
11..-3 Priior to the year 1993, the :private :-sector was 'not allowed 'to participate in the parallel 'marketing of LPG. iln order to increase the .ava'ilabilit_y of LPG and to foster competition, the ;private -sector was allowed to participate ?in the -scheme of 'parallel mariketing of LPG ;in April, 19.93 by tdecanalising ?im'ports --..ofl_iPG.
11.4 The Central iGovem'ment in «exercise of the powers .conferred upon it by section :3 of the Essential 1Com'm:oditie.s Act, 1955 issued the LPG .(Regulation of 'Supply and iDistributi'o'n) !Order., 20010 ('the LPG Order') on 26.04.230.00, it is :seen 'from the ..;pe»rusa_l,:'«ejf__the above order that cylinders, regulators and valves, tparallel marketers have to be .disti"nctiv.el_y -'diffe're'nt by the Z13 'public sector oil companies. This position becomes clear .by a combined reading of schedule II and schedule ill of the notification.
11.5 Clause «4 ('1) (e) and Clause '5 read with Schedule--ll of the _L_PG Order prescribe standard size and «specification of LPG Gas Cylinders applicable to distributors of a Government Oil Company. 'Similarly, Clause 4 (1) (e_) .and Clause :5 'read with Schedule-lll of the LPG Order provides that a parallel marketer under the parallel marketing -system shall deal with, inter alia, cylinder of any size, "shape, design and wei_ght other than those specified in Schedule-ll conforming to Indian Standard Specifications.
11.6 On the :basis of the above, it may be "noted that only PSU Oil C'omp.anies can supply 'L7PfG fin 'l-4.2 Kg cylinders as per given specifications in schedule ll -of the fnotificatio'n dated :26.04.'2000.
'.l'1..7 Lln «addition to the regulatory ~differ.e'nt'iatio'n as highlighted above the »specifications provided in the 'tender documents floated by 'lOC only those 'manufacturers of LPG cylinders were -eligible to bid who were having valid rapproval from 'Chief :Co'ntr.o'ller of Explosives (CCOE) :and Bureau of .Indian istandards (BIS) license for 'ma'nu'factur.e of '14.? Kg '.EP.G cylin'der as per 'IS -- T3fl'96 (rpartil).
Ti '.1 48 .l n the light of above 'factual and statutory :po's'itio*n undoubtedly the 'relevant product "market in the instant case would :be 121.12 "Kg LPG cylinders as specified in the tender "documents of **O;ppo_site Party.
'1 *1 .9 In the 'present case since the is made all over lndia and the LPG comp'ani§e._s »-empty .__1 11l cylinders on national level the relevant geogratphic "market shall 'be the entire lndia.
1'l.;'lO Therefore, the "relevant market in they present case is delineated .as 14.2 Kg LPG cylinders as per specifications prescribed in the tender documents of the Opposite Party. The DG has also defined the relevant market similarly.
"i"|.1'1 in the backdrop of foregoing position the contention of the Opposite Party that the relevant :product market should comprise of LPG cylinders of all weight category does not seem to h:ave any 'force and is liableto be rejected.
12. fDetermina't'io'n of ilssue no. 72 1.211 As per the vexplanation .(:a) to section '4 of the Act, dominant 'po;s'iti.on means a .position -of strength, «enjoyed :by an enterprise, in the relevant market, in lndia, wh'i.c'h enables iittto o.pera'te iindegpendently of' .competitive 'forces 'prevailing 'in the relevant market; or affect 'its rco'mpetitor.s or consumers or the relevant market in its tavour.
"122 Further, the Co'mm'iss'ion, "while Tinquilring 'whether :an :enter,pr'i.se ren_'j'oys a dominant tpositioon 'TOI' not under Act, is required to have due regard to an 'or in rsection 1 9 (4) ofthe Act. pf "1253 It 'is seen that the DG 'has, after -a detailed »an'a'l,ysi's of the 'factors mentioned in section '19 (4) of 'the Act, "reached the conclusion that |OC is in a position of dominance in the relevant market. The JDG has noted inithe report that IOC is 2a market leader having around 50% market share in the LPG market, and is also dominant player in the market of procurement of '1«4."2 Kg LPG cylinders. It has been 'noted by 'the DG that out of total market share of 14.2 -Kg LPG cylinders i.e. approximately 80-90 lac 'per annum' the IOC iprocures 50% of "them and rest is procured by -BPCL and HPCL. In 'terms of size and resources of enterprise, the IOC has 89 LPG 'bottling plants having wide network consisting of regional offices in metros, 1-6 JSt-ate offices and .39 Area offices. lt is one -of the largest commercial -enterprise in terms of sales and its other competitors EBPCL and i-HPCL are distant r.un'ne'r.s. lt .is thus 'clear that by .co'mmandin_g 50% 'market share in the ,relevant market and hav'in_g huge size :and resource, 'it 'is in ;a position to exercise 'its "market 'power and operate inde'pe'nde'ntl,y of co'mpetitive "forces :prevailing in the :relevant market of "p-r.ocurement of "-14.2 Kg 'LPG Cylinders and "can also zaffect 'the :relevant "market sand 'con-sumers in its favo ur.
"12.-4 The Opposite 'P:art_y "has assailed the findings :01' DG report on :domina'nce. 'It has :been ssubmitted that the DG has failed to establish the dominance of the Opposite Party when in the report of the DG itselfthe market share of ilOC is :pegged at less than»§_,g;°/o. It is further argued "that dominant 'position of 'enterprise :iétablis'he'd :by the DG with 5e'mp"irica| data ofithe -"mar-ket product market. ' i if 12:5 The contentions raised by the IO_pp.o'site Party "do not have any merit as the DG has not based his findings in respect of dominance solely on the market share enjoyed by the Opposite "Party and has come to the conclusion on a detailed analysis of the various tactors enumerated in section 19 (4) of the Act. As discussed above not only the market -share of Opposite -Party is -48..2% as against 25.8% of BPCL and 26% of HPCL but in terms of other parameters provided in ;section 1.9 (4) of the Act also, the lOC~is way ahead of its "competitors.
1.2.6 Thus, the Commission has no doubt that the Opposite Partyis in ;a dominant 'position in the 'relevant market .and issue no. .2 is decided :accordingly..
13.. iD.eter.m'i'na'tio'n =o"f flssue no. 3 1333 After defining the 'relevant market and determining the dominant :poSitio'n of the O.pposite Party in the said "relevant market, the 'C-commission has to consider whether the insertion of the impugned clause in the tender documents :by the 'O.ppo'site '~P;a'rty :amounts to an ::ab.u.se of "dominant position in terms of the tprovisions -:of section 2'4 of the Act.
113.2 The DG in his "report :has noted that the .--in:clusion of BPCL sand '-HPECL in the clause of Holiday 'Li-sting in the tender rdocument :by IOC is unfair :because it "restricts the supply in the r--e|ev.a'nt market. it 'has also :been observed by DG that Holiday 'Lifsytingfe§jis.:QEd\in'a'rily in the 'nature :of :a temporary 'restraint zonly 'ifor and the *r.estraint is ilimited to the extent aot :s.up:ply ;has 'L ' ,' ~ x \. M 17 " _, ~ :3; - »'. f . , /, 'holiday "listed any entity. This '-Holiday 'listing also usually 'pertains to thatparticular bid or the contract of supply. It does not affect the other contracts with the holiday 'listed company. However, the said clause puts a restriction which not only debars a company from '1 bidding which has beenholiday listed by the IOC but also by BPCL and HPCL as well.
13.3 The .DG, in the light of the above has found substance in the allegations that action on the part of the IOC may have a potential adverse effect on competition 'since the informant and similarly placed bidders have been and in future also may be deprived of the opportunity to participate in the competitive bidding process. The DG also found substance in the aallegation thatby virtue of the said clause, the IOC has put unconscionable 'restraint on trade in so far as the bidding ability and competence of the 'informant is =co'nce'rne:d. Trhus, the DG has concluded that the 'tender conditions, :par.t'icu'larly conditions under clause 6 of .Ann.exure--|l are Testrjictive since they have put unfair and *c'liscriminato'ry conditions in ;procurement of 142 Kg *L7P.G «Cy'linder.s in violation 'ofthe ipr.ovi.sions of section 4 (2) (a) of the Act. 'Further, the DG zalso sdrzawn the conclusion that the same also denied access to the -mar'-ket of supply of 14.2 ;L_3PG :'Cylinders in violation of section «4 (.2) (c) of the Act.
"l.3.1l The .O.pjpos'ite Party in its 'reply to the DG 'report denied any violation of the "provisions :of section 4 of the Act. in the reply, ;it has been stated that the Opposite Party is entitled totaAl§ey.;_lVeg'itimrate steps 'to :protect its ;commercial tnterest as well and the :same is sought to be achieved :by putting ~emba'r_go '18
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upon :a known defaulter. lt is 'further contended that, any event, such a 'temporary embargo "does not amount to abuse of any dominant position as it does not 'affect competition and on the contrary it sends a strong "message to .unreliable players.
1.3.5 it has also been contended that 'manufacturers of cylinders are ;a class of enterprises who 'manufacture cylinders "for 'packing and "transporting gas including LPG. The manufacturers are not confined 'to manufacture cylinders of 14.12 -Kg weight and thus market access is not denied to any manufacturer as the impugned condition does not preclude the 'manufacturer from -supplying cylinders of other dimensions to other .user.s/.buyers.
"I336 The "Opposite 'Party in its reply has "further -submitted 'that the
-impugned condition in the tender documents is :a condition which is 'neither unfair 'nor discriminatory. It 'applies uniformly "to all 'the :bidders and is not designed to :prevent any one or 'a class of persons 'from :p.articip'ati'ng in ttheitender. 'lt {is the term otthe trade which IOC 'has disclosed in its 'tender which is known to all the prospective ibidders. IOC, as :a business enterprise, is entitled "to :safeguard {its interest as well as the consumers" interest while dealing with any other business enterprise. A condition which is 'made known well in 'advance and inserted in public interest cannot be termed»'as'}Ta':prta_cti.ce 're'sulting in denial of 'market access. lt is :open to it does not wish to do ;business with ,perso'n's unreliable 19 business *partners. It is not necessary -that 'IOC has to burn 'its '1"ingers and it is only 'thereafter that it has the 'freedom to refuse to deal with such persons. The impugned condition makes it abundantly clearthat lOC does not wish to do business with undependable/unreliable persons which could have serious impact on its business of supply of LPG'to domestic consume-rs.
13.7 'The Opposite Party has "further stated in its reply that restraint on trade to subserve public interest can 'never be construed as an abuse. it has been 'further submitted that it is a common business 'practice that :a person with undesirable conduct is precluded 'fromiparticipatinvg in the "tender. The concept of black listing and 'holiday -listing is atime tested principle -and the same %is 'followed across jurisdictions and economies so long as the 'reasons for such tblacklisting/holiday listing are based on valid 'andjustitiable rreasons.
13.8 It "appears that the :impugned clause "does not 'contravene the "provisions of section 4 of the Act as "neither it can 'be held as an unfair 'nor discr?im'intatory condition -:in gpurchase of goods. "It seems to be -a 'reasonable business ;pr«ac'ti'ce 'followed by 'the Opposite Party to safeguard against the ;de'tault -by the suppliers "which "may jjeo;p'ar.dize the supjply of gas cylinders to the consumers. Besides, the said condition applies uniformly to all the bidders and therefore 'the same cannot be considered as .:dis:criminatory «.a;s,>cq..,A.:.lAih'(.iy/.t=:;l_l\.'_ 'F.ur.thermor-be, the impugned conditio'n in the tender be said to be
-denyin g rmarket access to any supp.liero§f it :cy.li'nder~.s has 20 ._ made :default in supply the 'procurer company is well 'within its 'rights not to deal with the defaulting supplier. The "necessary corollary of this is that any enterprise cannot allege wrongdoing because of being debarred from bidding when that enterprise is itself wrongdoer. lt is also observed that in the instant case the informa holiday list by the BPCL because of the n 'intent and the informant has 'not challenged the .:action of BPCL.
fine informant to supply cylinders of other dimensions to other u'sers/buyers. Therefore, the impugned clause in the tend nt had. been' put on on-acceptance of letter of Moreover, it is always open 'fo er documents of lOC cannot be said to constitute an abuse in terms of the 'provisions of -section 4 of the Act.
"l13.i9 In the light of above analysis of facts .and -evidence the conclusion drawn by the '.DG 'cannot be acce_pted and no contravention of section 4 has been found to have been established against the party.
"l'3.*l 0 issue 'no. :3 .is disposed :of accordingly.
*14. :Conc'lus'io'n 'in view of the above discus-sion, the Commission is .of the "considered view that the insertion of Fholiday listing :clau4sé"';in"
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floated by the Opposite Party is ;not an sabusef "gposition in 21 contravention of the provisions of section 4 of the Act and therefore the matter deserves to be closed.
15. In view of the above findings the matter relating to this informationo is disposed off accordingly and the proceedings are closed forthwith.
16. The Secretary is directed to inform the parties accordingly.
h 99/ '" gal V'" §c{' ,___ mm/z/W4 [Co] mama» LP) Menmlw-4(.£,~iq) ii.-:17 M L' ea»/x kw;
V ,,-sAL'}RAJ1§:_r>/./3'? sh (l3lpLAUT ' V ., iqffice Manager /CQmp&e,lit|'on Commission of India Government of India New Delhi 22