Competition Commission of India
M/S V E Commercial Vehicles Ltd vs Bangalore Metropolitan Transport ... on 19 July, 2011
BEFORE THE COi\/'lPETlTlON COMM§SS--iON GF lNDlA [Case No 26/2011] DECiSlOf\l DATED: 19th JULY, 2011 M/s. V E Commerciai Vehicles Limited informant Vs. Bangalore Metropolitan Transport Corporation Opposite Party Order under Section 26(2) of the Competition Act: 2002
The instant information relates to the alleged abuse of dominant position by the Bangalore Metropolitan Transport Corporation {hereinafter referred to as "Bl\/lTJ") in purchase of bus chassis' l\/l/s. V E Commercial Vehicles Limited (hereinafter referred to as "the informant") has filed the present information under section 19(a) of the Competition Act, 2002 "lZTe:.,Commission on 30.05.2011 alleging toil of gangalore, the BMTC is abusing its dominant position in purchase of bus chassis from the informant.
3. The brief of the facts, as stated in the information, are as under:
3.1.The informant is a public limited company incorporated under the provisions of Ilffac) lndian Companies Act, 1956 and is engaged in manufacturing and sell] of motor \ vehicle products and engines including heavy commercial vehicles in india. The Opposite Party, Bl\/lTC, is a body under the administrative control of the Karnataka State Road Transport Corporation (hereinafter referred to as "l<SRTC") and is engaged in the provision of passenger bus transportation services in the metropolitan territory of Bangalore.
3.2. in response to the tender notification No. l<ST/ COME/SK/T--7l dated 01.07.2006 of KSRTC (for procurement of 2500 BS ll and BS lll/Euro lll passenger bus chassis with some technical specification for its 4 zones such as; KSRTC (800 chassis), North Western Karnataka Road Transport Corporation » NWKRTC (1050 chassis), North East Karnataka Road Transport Corporation - NEKRTC (200 chassis) and Bl\/lTC (400 chassis)], the informant along with Ashok Leyland and Tata l\./lotors submitted pre-
qualification (technical) applications to KSRTC for supply of 400 SS lll/Euro lll passenger bus chassis for BMTC use.
3.3.Subsequently, on 16.08.2006 the KSRTC issued a letter in the name of the informant 'along with /~\shol< Leyland and Tata Motors asking them for some additional technical specifications for BS lll/Euro lll bus chassis. Further, through its letter dated 05.09.2006, KSRTC asked for some more technical specifications for bus chassis over and above the speciflcationsfi_,rn__gntioned in the tender notification dated 01.07.2006 as well as in the lett Accordingly, the last date for submission of technical 'Zed tléV>l,.0:8;.09.20O6. L») 3.4. After being qualified in the preoualification technical bid, the informant and other qualified bidders submitted their commercial bid to KSRTC. Having emerged as the most Competitive bidder, a purchase order for 400 bus chassis was issued in favour of the informant by the BMTC on 14/10/2006 with technical specifications and price consideration of Rs. 6, 35,657/~ per bus chassisf'The purchase order issued to the informant contained all the terms and conditions and other compliances which were to be adhered to by the informant in the production and supply of BS lll/Euro lll bus chassis.
3.5./Accordingly, the informant started manufacturing of BS lll bus chassis in consonance to all the technical specifications asked by KSRTC/BMTC in the tender notification as well as in the subsequent letters. But, upon inspection of the chassis BMTC asked the informant to change the design of the chassis beyond the technical specifications given in the tender notification as well as in the subsequent letters. The change in specifications demanded by Blx/lTC was communicated to the informant on 23.11.2006.
3.6. The informant has alleged that Bl\/lTC enjoys monopoly power in the provision of .
0 E passenger bus transportation services in the erritory of Bangalore and is t dominant purchaser of bus chassis in the territory of Bangalore. Being the dominant '2' BMTC*abuses its dominant position by frequently changing the technical imposing other unfair conditions on the informant in purchase °W"'l8 Cfmducts of Bl\/lTC are abusive in nature and er The provisions of section 4 of the Act.
Dd" "TE the design and layout and other t.'.im:l.,t_6'f'ilffl€ even though the chassis layout, etc. as mentioned in the tender notification as well as in the purchase order.
The Bl\/lTC did not acknowledge the receipt of the bus chassis supplied to it with the intention not only to avoid making prompt payment but at the same, time to avail the prompt payment discount also from the~informant as per the contractual terms agreed upon by the informant and BMTC.
iii. The BMTC is maliciously withholding a balance amount of Rs. 8.64 crore of the informant towards the sale price of the chassis.
The BMTC has retained 5% of the total cost of the chassis supplied by the informant as opportunity cost which is to be refunded after satisfactory function of the chassis supplied by it. This act of BMTC amounts to the abuse of dominant position because imposition of this cost was neither a part of the tender notification nor a part of the purchase order. This is an illegal financial imposition which is in contrary to the terms of contract entered into between the Bl\/lTC and the informant.
The Bl\/lTC has also retained a sum of Rs. 19 lakh which was to be paid to the informant towards the cost of the tyres of the supplied chassis within three months of submission of the Automotive Research Association of lndia (ARAl) certificate confirming the road worthiness of the vehicles.
4 The matter was considered by the Commission in its meeting held on 19/07/2011. The Commission has carefully gone through the facts and averments advanced in the information and carefully scrutinized the entire material available on record. S. It is noted that the activities being It '"f"bfy.._the informant and BMTC is covered in the definition of 'enterpris'1e"i' :s.e.ctiRor_i_'2El._h) of the Act. G3 The issue before the Commission tor consideration in this matter is that whether the gMTC is engaged in any anti--cornpetitive activities which are in violation of The crux of the allegations made by the informant in the matter is that, being the dominant procurer or' bus chassis in Bangalore, the BMTC is abusing its dominant position by arbitrarily changing the technical specifications of the chassis which is contrary to the terms and conditions specified in the tender notification as well as in the purchase order issued by Bl\/iTC, levying an opportunity cost at the rate of 5% of the total cost of the chassis supplied and withholding a balance amount or' Rs. 8.64 Crore of the informant towards the sale price of the chassis. it is observed that relevant market in this case would be the "marl<et for procurement of BS lll/ Euro lll bus chassis in lndia". On close examination of the matter it is revealed that there is no evidence available on record or in public domain which could show that BMTC is a dominant buyer of BS ill passenger bus chassis in lndia as procurement of bus chassis in large quantity are made by various state road transport corporation throughout lndia trom time to time. Further, the purchase of bus chassis in bulk order is done by many state road transport corporations under the lawaharlal Nehru National Urban Renewal Mission (lnNURlVi), a central government initiative for development of urban intrastructure. it is also observed that in the tender notification KSRTC has asked for procurement of 2500 bus chassis tor its four zones and the number or' chassis required for BMTC is substantially less than the number of chassis required for other three zones. Besides, there are number of private passe,nger'jb'ustransport service providers in lndia who are also purchasing bus chassi,sfin.__.l'ar£ge_q'u_antityi . I M" ear '" be a domihaht ' asis of above ahaiysis, the BMTC ooes hot app W 10 Thus, 0" the D"
. , .'. ~. -- been abie to . . - ;~ 7 want has aiso hot rt . ' ihdia. Further, the m'Or"' or bus chassis in procurer . sari E v V "
t vidertce on record to show that BMTC is in a dominant t"JOsitioh ih bring am' 500' . .. ' '-he BMTC I F ' ' ihoia. Theietore, since t ., . w v 3 in bus. chassis in octi.emeht Oi B UWE maihet OT pr - il§~"'Ol"] of . - ' ' ievaht markeili the 0.b~>*' ' "
* . - ~ t oositioh ii'\ the re ~ . '\ d to be in a domihah , cannot 09 50' e . . - ~-' So prima tacie, ii J. ~ t does not GHSE. I I\/'; /'4 . lieeed by the imoiman I dO|iiiriaHpC 35 a D abuse oi' _ . . 5 «On A of the Act in the mattet'
4.J-- » ' . ' iatiohot provisions oi Sew "'haL theie iS ho \/iO L app€al'SL . .L ' tacie case is made out tor _ , . , » ' thg VIEW that no prima t .. r h theretoiei *5 OT , r . +' v' vestieatioh into this .. 4-' » ~ " nerai tor conducting in D . Ipreflce to the Diiector be makmg a ret-t .
L . ' iatihg to this matter . ~ * d the pioceedihgs re . + h 26 (1) Of the Act an matter under sectio . , _ _L. i V __\ J,' 2 are Ckjsed fOf'{'fl\f\'I]'t_h UHQE: SCCUOU 5 I H _ , .., .,.r V '--L~ ' r'ormaht accordihgix./. , , '. 1- 1 i3tOiiiiO Ti ttieifl.
12.>ecretat\/ .s oiiec e i /"T [Vie'r§)O/b/C: to Z"5
/V]CYY)_l9e/2/(R) dz M 5f/[9//Mm Wjfijngh Mania//C7") cm W , Office Manager Competition Commission of India T - '1 3 Government of India
--.-~--ȴ~"' New Delhi