Competition Commission of India
In Re: Anti-Competitive Conduct In The ... vs Banwari Paper Mills Limited on 17 November, 2021
COMPETITION COMMISSION OF INDIA
Suo Motu Case No. 05 of 2016
In Re: Anti-competitive conduct in the paper manufacturing industry
Against:
Banwari Paper Mills Limited Opposite Party No. 1
Bindals Papers Mills Limited Opposite Party No. 2
Fibremarx Papers Private Limited Opposite Party No. 3
Indian Agro & Recycled Paper Mills Association Opposite Party No. 4
K.R. Pulp & Papers Limited Opposite Party No. 5
Khanna Paper Mills Limited Opposite Party No. 6
Katyayini Paper Mills Private Limited Opposite Party No. 7
Kuantum Papers Limited Opposite Party No. 8
Madhya Bharat Papers Limited Opposite Party No. 9
Naini Paper Limited Opposite Party No. 10
Rama Paper Mills Limited Opposite Party No. 11
Ruchira Papers Limited Opposite Party No. 12
Sangal Papers Limited Opposite Party No. 13
Satia Industries Limited Opposite Party No. 14
Shree Bhawani Paper Mills Limited Opposite Party No. 15
Shree Shyam Pulp & Board Mills Limited Opposite Party No. 16
Shreyans Industries Limited Opposite Party No. 17
Supreme Paper Mills Limited Opposite Party No. 18
The Sirpur Paper Mills Limited Opposite Party No. 19
Tirupathi Balaji Fibres Limited Opposite Party No. 20
Trident Limited Opposite Party No. 21
Suo Motu Case No. 05 of 2016 1
CORAM
Ashok Kumar Gupta
Chairperson
Sangeeta Verma
Member
Bhagwant Singh Bishnoi
Member
Present:
For OP-1 and its individuals Mr. KKR Das, Advocate
For OP-2 and its individuals Mr. Nakul Mohta and Ms. Vatsala Pandey, Advocates
For OP-3 and its individuals Mr. KKR Das, Advocate
For OP-4 and its individuals Mr. Manav Vohra, Advocate
For OP-5 and its individuals Mr. Pawan Upadhyay, Ms. Tanzeela Mubashsharah,
Advocates alongwith Mr. Jitendra Prakash Gupta,
Vice President (Commercial)
For OP-6 and its individuals Mr. Ramji Srinivasan, Senior Advocate with Mr.
Shivkrit Rai, Mr. Atul Dua and Ms. Gayatri Verma,
Advocates
For OP-7 and its individuals Mr. Abir Roy and Mr. Vivek Pandey, Advocates
For OP-8 and its individuals Mr. Gaurav Mitra and Mr. Salil Seth, Advocates
alongwith Mr. Sanjay Khosla, VP (Marketing)
Suo Motu Case No. 05 of 2016 2
For OP-9 and its individuals Mr. Shwetank Ginodia and Mr. Satyaki Mukherjee,
Advocates
For OP-10 and its individuals Mr. Ranjan Sardana, Advocate alongwith Mr. Pawan
Agarwal, Managing Director
For OP-12 and its individuals Ms. Sadapurna Mukherjee, Advocate alongwith Mr.
Umesh Chander Garg, Managing Director and Mr.
Vipin Gupta, Executive Director
For OP-14 and its individuals Mr. Samar Bansal, Ms. Harsheen Madan, Mr. Vaibhav
Choukse and Ms. Nripi Jolly, Advocates alongwith
Mr. Manav Sarin, VP (Sales)
For OP-17 and its individuals Mr. Rajshekhar Rao, Sr. Advocate with Ms. Sonal
Sarda, Ms. Ela Bali and Ms. Aditi Khanna, Advocates
alongwith Mr. Anil Kumar, CEO
For OP-18 and its individuals Mr. Puneet Kumar Verma, Advocate
For OP-20 and its individuals Mr. KK Sharma, Advocate alongwith Mr. Naveen
Agarwal, Director
For OP-21 and its individuals Mr. Karan Singh Chandhiok, Mr. Vikram Sobti and
Ms Lagna Panda, Advocates alongwith Mr. Deepak
Nanda, Managing Director
Suo Motu Case No. 05 of 2016 3
Order Under Section 27 of the Competition Act, 2002
1. The present case was initiated suo motu by the Commission, pursuant to a Note
dated 28.04.2016 received from the Office of the Director General (DG),
wherein it was stated that, during the ongoing investigations in Case No. 30 of
2014 and Case No. 85 of 2015, certain material was gathered by way of e-mail
dumps which indicated that paper manufacturers might have indulged in price
manipulation through concerted action. Taking cognizance of the aforesaid
Note, the Commission, vide its order dated 31.05.2016 decided to register the
instant case as Suo Motu Case No. 05 of 2016 against twenty (20) paper
manufacturers and an association which provided its platform for such activities,
as identified by the DG.
2. Having perused the material furnished by the DG, the Commission noted that
the twenty (20) paper manufacturers used the platform of the association (Indian
Agro & Recycled Paper Mills Association/OP-4 Association/IARPMA, which
claims to be the apex representative body of non-wood based paper segment,
having 114 paper mills as its members) to discuss and agree upon increase in
prices of non-wood based paper. The platform of the association was further
used to monitor implementation of price increase by attendees/participants.
Accordingly, the Commission prima facie opined that there appeared to be a
case of contravention of the provisions of Section 3(1) of the Competition Act,
2002 ('the Act') read with Section 3(3)(a) thereof, and vide an order dated
06.12.2016, directed the DG to cause an investigation to be made into the matter
and submit a report. These 20 paper manufacturers and the association were
accordingly arrayed as Opposite Parties, as reflected in the cause title of the
matter.
3. Pursuant to the directions issued by the Commission, the DG conducted an
investigation and submitted the investigation report to the Commission. During
the pendency of investigation before the DG, OP-21 approached the
Suo Motu Case No. 05 of 2016 4
Commission by filing an application under the provisions of Section 46 of the
Act read with the Competition Commission of India (Lesser Penalty)
Regulations, 2009 ('LPR').
4. The Commission considered the investigation report in its ordinary meeting held
on 04.03.2020, and vide an order of even date, directed to forward electronic
copies of the non-confidential version of the investigation report to the Opposite
Parties (along with their identified individuals), who were found to have
contravened the provisions of the Act by the DG for filing their respective
objections/suggestions thereto, if any.
5. After receipt of objections/suggestions to the DG report, along with financial
details from the aforementioned OPs, the Commission fixed the matter for final
hearing during 10th-12th August 2021. After conclusion of arguments, the
Commission decided to pass an appropriate order in due course.
Investigation by the DG:
6. The DG investigated 21 original OPs, out of which, the DG recorded findings of
contravention of the provisions of Section 3(1) of the Act read with Section
3(3)(a) thereof against ten (10) OPs, viz. OP-2, OP-5, OP-6, OP-7, OP-8, OP-9,
OP-10, OP-12, OP-17 and OP-21. As regards other OPs, the DG did not record
any specific finding of contravention of the provisions of the Act. The DG,
however, found that the platform of OP-4 Association was used by paper
manufacturers to discuss and decide on prices to be increased in a concerted
manner. The evidence collected by the DG shall be analysed in the succeeding
paras of this order and it is unnecessary to reproduce the same at this stage. The
period of cartel was noted by the DG to be from September 2012 till March
2013.
Objections/suggestions of the OPs
Suo Motu Case No. 05 of 2016 5
7. In their written objections/suggestions to the DG report and oral submissions,
the OPs, along with their respective individuals, made detailed submissions, and
the same are noted in the succeeding paras. It may be pointed out here that, as
the DG has recorded finding of contravention against ten (10) OPs besides
highlighting the role of OP-4 Association in providing its platform to paper
manufacturers for discussing and deciding price increase in concerted manner,
as detailed in the preceding para, the conduct of these eleven (11) OPs alone
would be considered, and accordingly, objections/suggestions of these OPs
alone are noted and considered in this order.
Bindal Papers Mills Limited (OP-2) and its individuals
8. OP-2, in its submissions, stated that the DG has delineated the relevant product
market as writing and printing paper made out of agricultural waste and recycled
waste paper, and relevant geographic market as Northern India, even though
delineation of relevant market is not mandatory. Further, OP-2 objected to the
relevant product market and relevant geographic market delineated by the DG as
such delineation was stated to be not in line with market reality in the paper
industry. It submitted that the DG did not analyse the facts of the case and
evidence in the correct perspective. The writing or printing paper manufactured
by employing agro residue or waste paper as raw material is substitutable with
paper manufactured using wood as a raw material.
9. It was further averred that the OPs are manufacturing different varieties and
grades of papers, and the DG did not examine the consumer preferences of
whether their end use is interchangeable. In this regard, the fact that there are
various grades of paper within the category of non-wood based papers shows
that it is not a homogenous/common product manufactured by all the OPs, and
hence, the market is not prone to cartelisation.
Suo Motu Case No. 05 of 2016 6
10. In addition, OP-2 submitted that the DG has only arrived at the conclusion of
substitutability on the basis of the statements of few dealers, which have not
even been permitted to be cross-examined.
11. Most of the OPs are situated in the northern region of India. However, non-
wood based paper producers are spread across India. It would be incorrect to
suggest that only parties situated in northern India hold considerable influence
over the supply of agro-based paper products in northern India. There is no
regulatory trade barrier, local specification requirement, consumer preference,
transportation cost, etc., and 800 agro-based and recycled fibre-based paper
mills can potentially sell and compete in northern India.
12. According to OP-2, the DG concluded that only 10 mills have indulged in
cartelisation, including OP-2, without appreciating the fact that a cartel cannot
sustain if majority players are not a part of it, since, in that case, the majority
players would undercut the others' prices.
13. The DG relied on internal emails exchanged between the officers of the
Seshasayee Paper and Boards Limited (SPBL) in relation to OPs. However, this
cannot be regarded as reliable evidence against the OPs as SPBL was a direct
competitor of OP-2 and could have ulterior motives behind writing the emails
that hold no evidentiary value in the current legal structure. The emails can also
not be relied upon on the grounds that it has no evidentiary value for want of a
certificate under Section 65B of the Evidence Act from the competent person.
14. OP-2 has stated that the DG erred in observing that all the competing
agro/recycled fibre-based paper manufactures implemented an increase in
prices; on a careful perusal of said emails, it is evident that not all OPs increased
the prices, and a large chunk of the stock of the OPs was sold to the government
at tender rate or to dealers at older rates.
Suo Motu Case No. 05 of 2016 7
15. Due to a sudden slump during the last quarter of 2012 to the first quarter of
2013, OP-2 was constrained to increase the prices of paper due to market forces
in order to maintain cash flow and profitability. Even if it is considered that OPs
had discussed prices in the aforementioned meetings, in practice, the prices of
paper were fixed by OPs independently as per market forces.
16. OP-2 contended that the DG did not grant the opportunity of cross-examination
to OP-2 and other parties to examine the testimony of those who have deposed
before the DG in relation to the said emails. The said persons are interested
parties, and therefore, their statements could not be relied upon in the absence of
cross-examination.
17. In addition to its contentions, OP-2 has submitted that the DG denied cross-
examination by, inter alia, stating that it relied on documentary evidence and not
oral testimonies of witnesses to conclude against it.
18. OP-2 further stated that the price increase was not in accordance with the
alleged discussions in the meetings, yet, the DG arrived at a conclusion that the
price trend followed by OP-2 is as per deliberations in the meeting. It has also
been stated that the price increase was only made for Ace Maplitho and Copier
Paper only, which was attributed to the increasing cost of raw material.
19. There was no price parallelism. Even the dealers examined by the DG have
denied any knowledge of cartel in the paper industry and admitted that the prices
of paper are seasonal.
20. Further, as per OP-2, the DG failed to demonstrate any evidence of the existence
of agreement to price fixing/parallelism, and instead, has built the case on purely
circumstantial evidence and suppositions. Further, whilst the Appreciable
Adverse Effect on Competition (AAEC) caused by a horizontal agreement to fix
Suo Motu Case No. 05 of 2016 8
prices, etc., may be presumed by the Commission, there must exist proof of an
agreement in order for this presumption to arise.
21. OP-2 further submitted that the OPs (including OP-2) did not follow a uniform
price trend after the meeting. Though the price circular/price list is published by
OP-2, the actual sale with dealers is at a negotiated price. Moreover, as a matter
of practice, OP-2 offers trade discounts and cash to dealers. Therefore, the actual
sale price is much lower than the published price. In the present matter, although
the price increase took place through various circulars, discounts were
simultaneously offered, such as Trade Discount, Additional Discount and Cash
Discount.
22. In addition, OP-2 has submitted that the DG failed to appreciate that the effect
of increase in price is not directly passed to the final consumer.
23. The price trend of OP-2 and the other OPs was not in accordance with alleged
deliberation in the alleged meetings. However, as per the DG, in the meetings, a
consensus was reached between OPs to increase prices by 6000 PMT during the
period September 2012 to March 2013.
24. OP-2 further stated that the paper industry is seasonal, and typically, prices
increase from September to March due to high demand and because of increase
in the costs of raw material. Further, during September 2012 to February 2013,
the paper industry witnessed issues such as escalation in the price of diesel,
increase in the cost of raw material, banning of import of second hand
machinery, etc., owing to which, the paper mills were forced to increase their
selling price to maintain profitability.
25. It was submitted by OP-2 that the alleged cartel was for a short duration - from
September 2012 to March 2013.
Suo Motu Case No. 05 of 2016 9
26. With respect to the role of its office bearers found to have contravened
provisions of Sections 48 (1) and 48(2) of the Act by the DG, it has been stated
that all decisions in official capacity in respect of increase and decrease in price
were taken by keeping in mind, various factors affecting the market.
27. On the basis of above, OP-2 has prayed the Commission to not impose penalty
on OP-2 as its business has been badly affected and its paper mill was
temporarily closed down because of the lockdown. Further, any penalty is likely
to drive OP-2 out of business as it operates on a very thin margin and it is not a
habitual offender. In case the Commission decides to levy a penalty, only the
relevant turnover generated by the sale of the products to dealers should be
considered, as the contravention has no connection with the sales made by OP-2
to institution/exports.
Indian Agro & Recycled Paper Mills Association (OP-4) and its individuals
28. OP-4 submitted that it only organised meetings, i.e., arranging venue, seating
arrangements, sending out meeting details and venue details, etc. Such meetings
were called to discuss the issues being faced by agro-based paper mills, such as
pollution, government policies, etc., and the price of the paper was never on the
agenda. It, however, admitted that discussion in respect of price was raised in
one of the meetings, but such an attempt was vehemently detested. There was no
active discussion of price during the meeting hours and the answering
Association cannot be held responsible for what the other members do before or
after a meeting. It was also pointed out that the answering Association does not
have any authority over manufacturers, buyers and distributors of paper. The
determination of MRP is vested with the manufacturing company and not with
the Association.
29. In addition, OP-4 has contended that OP-4 and its Secretary General do not fall
under the definition of 'enterprise' as defined under Section 2(h) of the Act. The
DG failed to provide any evidence to suggest that OP-4 benefitted from such
Suo Motu Case No. 05 of 2016 10
activities, which is sine qua non to the allegations made. The DG report does not
establish anywhere that there was a meeting of minds between OP-4 Association
and other OPs or that the OPs were acting in concert.
K.R. Pulp & Papers Limited (OP-5) and its individuals
30. OP-5 submitted that it is mainly present in North India. The paper market
throughout India is free, and everyone can purchase from the place/person of
their choice. Further, the dealers are not exclusively bound to sell the product of
OP-5 and are free to sell the product of any mill at any rate.
31. Further, it was submitted that OP-5 is dealing in agro-based writing and printing
paper and its market share in the year 2011-12 and 2012-13 was 0.71%. The
cumulative share of all OPs would hardly be 2 - 3% of the market share, which
has ~ 800 paper manufactures.
32. OP-5 further submitted that the import of paper plays a pivotal role in
determining the possible impact of alleged price manipulation. The DG, while
projecting the growth, had taken the figures of 2014-15 instead of comparing it
with the relevant period.
33. It was also contended that the DG did not take into account that there is no
geographical market for a paper industry, particularly when all the varieties of
papers are available across India and in the circumstances when a large part of
paper is being imported. The DG report also does not mention the impact and
role of other paper manufactures who have been selling paper in North India
region.
34. OP-5 further does not agree with the findings of the DG that the three varieties
of paper are substitutable. The DG also did not examine the consumer
preference of whether the end use is interchangeable; since cream wove is not
Suo Motu Case No. 05 of 2016 11
substitutable with maplitho as it is inferior in quality, consumers may not adjust
to such a change in quality.
35. Further, as per OP-5, the price increase of paper manufactures who had attended
meetings was not in conformity with the prices decided in these meetings. The
price increase of OP-5 was never in tandem with the alleged emails; on the
contrary, there was a decrease of Rs. 3000/-.
36. Even though OP-5 was an attendee at the meetings of the OP-4 Association, it
was not a participant in the alleged cartel and/or a party to the alleged agreement
to increase prices, if any.
37. In his deposition, Shri Vijay Kumar Aggarwal, Ex-Vice President Marketing of
OP-5, who had attended a few meetings of OP-4 Association on behalf of OP-5,
also stated that the agenda of the meeting was never to discuss prices. He stated
that some manufacturers chose this platform to discuss prices; however, at no
point has it been admitted or accepted that OP-5 was involved in such
discussions or that OP-5 participated in any agreement on price increase.
38. As per OP-5, the factum of attending meetings of an association such as OP-4
Association by itself cannot lead to the conclusion of collusion or participation
in a cartel. It must be shown that there was a meeting of minds by entering into
an agreement with respect to determining sale prices in a manner that is likely to
have appreciable adverse effect on competition.
39. It was further submitted that the paper industry is fragmented, market shares are
unstable and there is ease of entry. Thus, the pulp and paper industry have all the
characteristics of a pure/perfect competitive market. It was also contended that
the DG report states that only 10 manufacturers have indulged in cartelisation,
which includes OP-5, without appreciating that a cartel cannot sustain if
majority players are not part of it, since in that case, the majority players would
Suo Motu Case No. 05 of 2016 12
undercut others' prices. Further, the contents of the emails relied upon by the
DG could not be proved as the person could not remember exactly the
discussion that took place at the meeting. Moreover, it was not proved whether
the decision allegedly taken in the meeting was complied with or not.
40. As per OP-5, the DG also did not take into account that the hikes in price of
paper were due to unfavourable market conditions, which is evident from the
email dated 20.09.2012. Further, from the email dated 19.11.2012, it is evident
that OP-5 did not increase the price as per the decision in the meeting. Further,
no discussion with respect to OP-5 took place in the meeting as per email dated
19.12.2012. OP-5 did not participate in the meeting held on 19.01.2013.
However, the DG has concluded that OP-5 raised prices after the 19.01.2013
meeting with competitors.
41. The DG did not carry out any study on the type of market, number of paper
manufactures present in North India, the quantum of import of paper, supply of
paper by other manufactures in India to consumers in North India, the price
differences between the opposite parties and other manufactures in North India
and import price and price of manufactures situated elsewhere but supplying
paper in North India.
42. No proof of price parallelism in the present proceedings was identified by the
DG in its report before declaring that OP-5 participated in cartel for
manipulating prices. The DG report did not consider how the meeting and the
alleged decision taken at the meeting had impacted competition in the market.
The prices of all the paper manufacturers remained the same or similar, which
was due to an increase in the Wholesale Price Index (WPI). The emails relied
upon by the DG are not admissible until a certificate under Section 65(B) of
Indian Evidence Act, 1872 has been provided therewith. There was no
appreciable adverse effect on competition in the market, which is an essential
condition enshrined in Section 3 of the Act.
Suo Motu Case No. 05 of 2016 13
43. The DG in its report also ignored a vital question with regard to the profits
earned by OP-5 after the alleged cartelisation and increase in sale price. OP-5, at
different intervals during the relevant period was also out of operation, and no
manufacturing took place during such periods. Further, prices of the
manufactures differ from each other, ranging from Rs. 43 per kg to Rs. 46 per
kg. Increase in price by OP-5 had no nexus with the alleged price determination
in the so-called meetings held on 19.09.2012, 19.11.2012, 19.12.2012 and
19.01.2013, as these price increases happened on account of the demand and
supply ratio.
44. Lastly, it was pointed out that OP-5 has also disassociated itself from any such
meetings since January 2013, adhering to the very purpose of the enactment.
The answering paper mill has been adversely affected due to COVID-19 since
March 2020, and OP-5 has not been able to normalise it until now. Therefore,
OP-5 does not have any substantial source of revenue at present and would be
severely prejudiced by the imposition of any monetary penalty.
Khanna Paper Mills (OP-6) and its individuals
45. As per OP-6, none of the OPs was the recipient of the four emails written by
Shri S. Ramesh of SPBL to his senior, i.e., Shri P. K. Vasist, nor have they
admitted the said e-mails or their contents. The said e-mails are nothing more
than mere hearsay and hold no credible value in the eyes of the law.
46. The DG has misquoted the internal email between Shri Dhimant Singh and his
superior, wherein they discussed market operating prices (MOP) and the price
information available in the public domain. The DG has misportrayed and
misquoted the statement to conclude that the same indicated that Shri Dhimant
Singh will write and ask other competing paper mills to look at the price
revisions in the last three months. Further, the price discussions in these emails
Suo Motu Case No. 05 of 2016 14
shows that the discussion was regarding historical prices and had nothing to do
with fixing future prices.
47. The said emails are also inadmissible on account of being non-compliant with
the Indian Evidence Act, 1872, as no certificate in terms of the provisions of
Section 65(B) thereof has been submitted.
48. Further, OP-6 was also denied the right of cross examination of Shri S. Ramesh
or Shri Vasist by the DG. The reason for this is that representative(s) of OPs
duly accepted the documentary evidence with which they were confronted in
their statement recorded under oath.
49. It is settled law that price discussion per se does not result in AAEC unless the
same is implemented. The DG report fails to show such implementation. The
DG has given a broad finding that writing and printing paper of all categories is
substitutable despite their differing end use, characteristics, absolute prices and
market of these categories. The DG has not considered the manufacturing
process, costing, raw material used, thickness, brightness, absolute prices,
surface smoothness and different quality of product produced by each OP and
end usage/consumer of each such product.
50. Comparing entities that either only manufacture writing and printing paper or
manufacture the same in majority to OP-6, despite the fact that the broad
category of relevant product, i.e., writing and printing papers, constitutes the
lowest portion of OP-6's product offering, is unfair, wrong and in no manner
reveals any anti-competitive behaviour on the part of OP-6.
51. The premise of substitutability being the dealer's statements and the cross-
examination of such statements being denied despite a request for the same is
violative of the principle of natural justice. The DG has not even delineated the
geographic boundary of North India and has not taken into account the fact that
Suo Motu Case No. 05 of 2016 15
OP-6 (among other OPs) supplies writing and printing papers to other parts of
India as well, including, but not limited to, Gujarat, Delhi, Meerut, Agra, Indore,
Ludhiana, Mumbai, Surat, Kanpur and Kolkata.
52. Price increase, even if discussed or decided, was never implemented by OP-6.
53. Given the negligible market share of OPs, there can be no presumption of
AAEC in view of the negligible market shares.
54. OP-6 relies highly on the import of raw material, since as much as 60% of the
requirement of raw material of OP-6 is met by imported raw material; thus,
fluctuation of currency exchange rate has the greatest effect on the prices of OP-
6's products.
55. Instead of any profits, OP-6 suffered a loss in the year 2012-13 whereas, in the
previous financial year, there was a profit.
56. The oral statement of Mr. P. G. Mukundan, Secretary General of OP-4
Association, the person who convened the alleged meetings, has not been taken
into account in the impugned report. Mr. Mukundan has stated that the meetings
were convened for the discussion of technical and immediate issues.
57. From the investigation report, it is evident that no contravention has been
committed by OP-6, and the DG has not pointed out even a single instance of
consent or connivance or involvement of Shri Dhimant Singh, Shri Rahul
Khanna or any other personnel of OP-6.
58. Price increase by OP-6 was attributable to increase in cost and demand surge,
and the same was based on MOP.
Suo Motu Case No. 05 of 2016 16
59. The DG has failed in discharging the burden of proof on it to show/allege any
contravention of the provisions of Section 48(1) of the Act by Shri Rahul
Khanna. Further, no contravention has been committed by OP-6, and Shri Rahul
Khanna was not even aware of the alleged meetings and there was no occasion
for Shri Rahul Khanna to exercise due diligence to prevent the commission of
such contravention.
60. Shri Rahul Khanna never attended the meetings mentioned in the emails of Shri
S. Ramesh of SPBL nor was he apprised of what transpired in the said meetings.
61. Not a single email has been referred to or relied upon in the DG report which
would show the involvement of Shri Dhimant Singh or Shri Rahul Khanna in
the meetings of OP-4 Association.
62. It was also pointed out that Shri Dhimant Singh was not served any notice
notifying that action was being contemplated against him under Section 48(2) of
the Act and was denied the opportunity to adduce evidence to the contrary.
63. Lastly, it was prayed that penalty, if levied, may be limited to the sale of the
purported relevant product (copier paper) in the relevant geographic area (North
India) for the alleged cartel period (September 2012 to March 2013). It was
submitted that penal provisions be strictly construed, and reiterated that penalty
be restricted to the profit and/or turnover accruing from the offending act, lest
the same become inequitable for multi-product companies such as OP-6. The
doctrine of proportionality states that punishment, if any, must be proportionate
to the offence ought to be applied. It was also prayed to consider mitigation of
penalty in view of the prevailing circumstances and the loss of business of the
non-wood based paper mills, and OP-6 in particular.
Katyayini Paper Mills Private Limited (OP-7) and its individuals
Suo Motu Case No. 05 of 2016 17
64. In its response, the answering Opposite Party averred that in the meeting
convened by OP-4 Association on 19.12.2012, which was attended by Shri
Sanjay Khemka of Katyayini, no discussion of the alleged price rise of Rs.
3000-5000 MT took place between the attending parties. Based on the email
evidence on record, the discussion of this alleged price rise only took place in
the September 2012 meeting, which was not attended by OP-7, and OP-7's price
rise cannot be arbitrarily attributed to the cartel.
65. The price discussions in the meeting dated 19.12.2012 attended by OP-7 did not
pertain to the grade of paper manufactured by OP-7, and only the prices of B-
grade paper were discussed in the aforesaid meetings.
66. The observations of the DG that all grades of writing and printing paper are the
same are erroneous.
67. No anti-competitive agreement can be inferred since the DG is only basing his
findings on mere coincidence with respect to the month in which OP-7 attended
a meeting convened by OP-4 Association, and the corresponding price rise.
68. Further, it was pointed out that the DG had noted that Shri T. S. Goraya of
Banwari Paper Mills Ltd. had attended two meetings of OP-4 Association during
the relevant period. However, the price rise effected by them was not found to
be "entirely supportive" of the assertion that they were an active member of the
cartel, and hence, they were merely held responsible for not informing the
Commission of the cartel.
69. The DG did not consider that the alleged price rise by OP-7 may have been a
direct fallout of the high cost of production or the surge in demand for writing
and printing papers instead of the decisions of the cartel, and did not even
depose Shri Gautam or Shri Rajesh Agarwal of the answering Opposite Party in
order to find out the reasoning for such increased prices.
Suo Motu Case No. 05 of 2016 18
70. The DG, while delineating the relevant product market, has grouped writing and
printing paper made of recycled waste paper or agricultural waste together,
irrespective of the quality and grade of paper. However, different grades of
paper are not direct substitutes of each other vis-à-vis end use, price and quality.
71. Further, the factors enumerated under Section 19(3) of the Act have not been
met in order to establish an AAEC in the relevant market, and the presumption
against the answering Opposite Party is wholly rebuttable.
72. Given its position as a minor player in the relevant market and the fact that OP-7
participated in one meeting where the relevant price rise was not even discussed,
it is clear that OP-7's alleged conduct has not, in any way, contributed to an
AAEC in the relevant market.
73. The DG has arrived at conclusions regarding Katyayini's involvement in the
cartel with respect to a grade of paper that Katyayini manufactured and sold in
negligible quantities. Without prejudice, Katyayini's alleged involvement could
not possibly have caused an appreciable adverse effect on competition.
74. With respect to OP-7, the DG has only deposed Shri Amit Dewan, the erstwhile
General Manager (Exports) of OP-7, instead of deposing the Managing Director
Shri Agarwal or the Accounts Manager, Shri Kapil Gautam, who were aware of
OP-7's local pricing. It was highlighted that Mr. Dewan was a new joinee at OP-
7 and who was associated with a division of OP-7 entirely unrelated to the
domestic market and which falls outside the purview of the relevant market in
the present case. Thus, the provision of Section 48 which lifts the corporate veil
and fastens vicarious liability to senior officials of violating companies, cannot
be invoked vis-à-vis Shri Dewan. Shri Dewan is neither a director nor a
secretary of OP-7. Further, he is not a "manager" within the meaning of the
word ascribed to it under Section 48(2) of the Act.
Suo Motu Case No. 05 of 2016 19
75. It was alleged that, by denying Shri Agarwal, Shri Gautam, and Shri Khemka
the right to be heard and duly deposed, the DG has violated the principles of
natural justice and violated the rights of OP-7 and its officials.
76. It is submitted that unless a contravention of the provisions of the Act is found
against the company, its officials cannot be held liable in terms of Section 48 of
the Act.
77. Since there is no anti-competitive agreement between OP-7 and the other OPs,
the office-bearers of OP-7 cannot be held liable either under Sections 48(1) of
the Act or Section 48(2) thereof.
78. In relation to Mr. Amit Dewan, it has been submitted that after receiving the DG
Report in the subject matter, OP-7 tried to contact Shri Dewan for the
proceedings before the Commission but he was not contactable. OP-7 has no
further association with Shri Amit Dewan or any further information about him.
79. The emails dated 20.09.2012 and 19.12.2012, which have been relied upon by
the DG, appear to have been placed on record without an accompanying
certificate under Section 65B of the Indian Evidence Act, 1872, and as such, are
inadmissible.
80. Lastly, without prejudice to the above submissions, the answering Opposite
Party submitted that assuming but not conceding that OP-7 and its officials are
guilty of contravening the Act, no monetary penalty should be imposed upon
them. OP-7 is a very small player in the relevant market, and its alleged
participation in a cartel which spanned several months was very short-lived. OP-
7 allegedly only increased its price on one occasion in December 2012 and did
not increase it in any other month.
Kuantum Papers Limited (OP-8) and its individuals
Suo Motu Case No. 05 of 2016 20
81. At the outset, OP-8 contended that the DG built up its entire report on four
emails which were allegedly addressed by an employee of SPBL to his superior
giving his version of the alleged discussions that took place in the meetings
between the members of OP-4 Association, without there being any actual
minutes of the meetings. When the answering Opposite Party was not present in
the meeting held on 19.09.2012, it is not understood as to how it could have
increased the prices as per the discussion that took place on 19.09.2012. Even
though the employee of OP-8 was present in the other three meetings, there is
nothing in the other three emails to show that OP-8 consented to any change in
price. Rather, it is recorded in the other three emails that the mills have not
uniformly increased their prices. Further, Shri S. Ramesh belongs to SPBL and
is not even a competitor of OP-8, as they deal in wood-based paper, unlike OP-
8.
82. The price increase was done by OP-8 after considering multiple commercial and
economic factors, irrespective of the occurrence of the meetings. It is
incomprehensible as to how mere 20 paper mills can sustain a cartel, especially
when there are admittedly more than 750 paper mills in the market.
83. It was pointed out that the increase in prices of various products of different
manufacturers during October 2012 to March 2013 has been compared and
compiled by the DG. As such, such exercise is inherently defective since it does
not account for the fact that the quality of product of each manufacturer is not
necessarily comparable. It is an admitted position that there always existed
variations in price charged by OP-8 in comparison to the price being charged by
the other OPs.
84. The DG has failed to take into account different kinds of paper manufactured by
the OP-8, the input cost/cost of manufacturing the particular kind of paper,
prices of the product compared and the prices of product after an increase in
prices.
Suo Motu Case No. 05 of 2016 21
85. There exists no reason whatsoever for OP-8 to enter into some arrangement with
its competitors to increase the prices, as the profit of OP-8 fell in the year in
which the allegation of formation of cartel has been levelled.
86. It is a matter of record that OP-8 and some of the opposite parties increased their
prices independent of the alleged discussion at the relevant meetings, as their
increase in prices is either below Rs. 3000-4000 PMT or above Rs. 5000 PMT,
which does not fall in line with the range of Rs. 3000-4000 as per the alleged
discussion in one of the meetings.
87. The DG has failed to consider that there is no evidence of exchange of
price/confidential information between OP-8 and other OPs. There is no direct
or indirect evidence that OP-8 has indulged in such exchange of confidential
information.
88. The absence of entry barriers and the presence of a large number of players in
the market preclude the possibility of a small group of manufacturers forming a
cartel.
89. The decision to increase the price is based on various factors, including but not
limited to, increase in the input cost, market condition, stock position and
various other factors. OP-8 increases its prices in the normal course of its
business between November to April every year, i.e., even in the years prior to
the period of investigation and post the period of investigation, since it is a peak
season for the paper industry.
90. The price movement does not show any synchronisation between the OPs, thus
demolishing the allegations of cartelisation and violation of the provisions of
Section 3 of the Act in the present case.
Suo Motu Case No. 05 of 2016 22
91. For a cartel to sustain, majority players need to have cartelised to ensure that no
one undercuts others' prices; however, since a substantial number of remaining
players in the market were not found to be part of the alleged cartel by the DG,
price increases by a few paper mills would be inconsequential, as the remaining
players would reduce their prices, which would result in a shift of demand to
these players, thereby defeating the purpose of a cartel.
92. For a cartel to survive, there must be mechanisms in place for: (a) arriving at a
mutually agreeable strategy to ensure successful functioning of the cartel and (b)
monitoring behaviour to identify the deviation. However, the same do not exist
in the present case.
93. The main reason behind the formation of any cartel is to attain supra-normal
profits by each cartel member, and the same can only be achieved if all cartel
participants increase their prices in tandem to make the end price similar/same
so that a customer will not switch to a cheaper product after the price increase.
94. Lastly, it was submitted that the demand for paper has decreased and continues
to remain subdued due the outbreak of COVID-19 (as court proceedings and
classes in schools and colleges, amongst various other things, are being held
virtually, which has drastically impacted the demand for paper). The entire
paper industry, including OP-8, is continuously struggling for survival;
therefore, any penalty will further add to the misery of OP-8.
Madhya Bharat Papers Limited (OP-9) and its individuals
95. At the outset, OP-9 submitted that it was denied an opportunity to test the
credibility and reliability of the testimony given by Shri S. Ramesh of SPBL.
The evidence gleaned from a cross-examination of Shri S. Ramesh may well
provide further material that would need to be considered by the Commission,
and in fairness, an opportunity should be provided to OPs to cross-examine Shri
S. Ramesh.
Suo Motu Case No. 05 of 2016 23
96. There are a substantial number of players in the market, each competing for a
larger share of the overall market. The market is also characterised by low entry
barriers. In addition, the industry faces competition from exports. Customers in
this market have considerable negotiating power, since they include government
authorities, large publishing houses, etc., who buy paper in large quantities and
can, therefore, obtain substantial discounts from manufacturers. Therefore, due
to the market structure, the non-wood paper market is not susceptible to
cartelisation.
97. The DG report clearly overlooks the basic premise of a cartel, which is that a
cartel requires the participation of a majority of players so that others are not
able to undercut the cartel. The alleged price increase by just the 10 players
identified by the DG could not have influenced the market price.
98. The market share of MBPL by capacity is only around 0.001% of the paper
market and, as such, is negligible. The annual turnover of the answering
Opposite Party is less than one-fifth of the average turnover of the parties that
have been alleged to be members of the cartel. As such, OP-9 has little or no
market power, and its ability to influence the price in the market is negligible.
99. OP-9 did not increase its prices in the months of September, October, November
2012 and in the month of January 2013 despite the alleged cartel purportedly
having agreed to do so. These facts show that although OP-9 was an attendee at
the meetings mentioned above, it was not a participant in the alleged cartel
and/or the alleged agreement to increase prices, if any.
100. The DG report identifies two price increases implemented by OP-9 during the
relevant period, viz., an increase of Rs. 1000 PMT in the month of December
2012 and an increase of Rs. 3000 PMT in the month of February 2013. In this
regard, it was submitted that neither of these price increases were made in
Suo Motu Case No. 05 of 2016 24
tandem with any other participant in the meetings or in accordance with the
increases mooted in the said meetings.
101. Reading the emails dated 20.09.2012, 19.11.2012, 19.12.2012, and 19.01.2013
as a whole, it is evident that there is no meeting of minds vis-à-vis OP-9 and the
other participants. OP-9 was a silent spectator at the meetings, and no role can
be attributed to it in the alleged cartel.
102. In the months leading up to February 2013, there had been a steep rise in input
costs, and this issue had also been discussed at the OP-4 Association meeting
held on 19.09.2012. OP-9 had only increased its prices once in the past 11
months, by Rs. 1000 PMT on 15.12.2012. Therefore, an increase in prices was a
prudent business decision dictated by economic realities.
103. The graphs set out in the DG report indicate there is a substantial difference
between the average price increase and the highest and lowest price increase.
Accordingly, if there had been an agreement among parties as alleged, all firms
would have increased their prices at a proportionally similar rate and there
would not have been such a high divergence between the average price increase
and the highest price increase.
104. A comparison with the same months of the previous year or the same months of
the following year may not necessarily indicate the proper scenario since it is
not a certainty that prices will always be increased in the same months of every
year.
105. A number of other OPs have stated that it were the big paper manufacturing
companies that actively participated in discussions and decided on implementing
the prices. Again, this would naturally exclude any participation by OP-9 given
its negligible market share.
Suo Motu Case No. 05 of 2016 25
106. Mere mirroring prices of competitors or mere identical pricing/price parallelism
cannot lead to the conclusion of cartelisation. It was therefore submitted that
price parallelism does not by itself indicate that OP-9 may be acting in concert
or that such parallelism is the result of an agreement between it and other
players.
107. The pricing analysis in the DG report does not take into account various factors
such as: (a) quality and grade of paper; (b) base or starting price of the parties
prior to the relevant period; (c) factors unique to the parties, which may affect
pricing (for example, local strikes or other issues); and (d) the different cost of
production of the parties.
108. The law does not impose a positive obligation on OP-9 to inform the
Commission if it comes to know of a potential cartel.
109. The DG report has exonerated certain OPs whose facts resemble those of the
answering Opposite Party and who are similarly placed. Despite the striking
similarities in the facts and circumstances of these OPs and OP-9, while these
other OPs have been rightly exonerated, OP-9 has been held to be in
contravention.
110. The liability of Shri Jaydeep Chitlangia can only arise if OP-9 is held liable. In
this regard, it was submitted that each of the arguments made on behalf of OP-9
are being adopted and reiterated on behalf of Shri Jaydeep Chitlangia as well.
111. Regarding penalty, if any, to be imposed on OP-9, it was submitted that OP-9 is
by far the smallest manufacturer found to have participated in the cartel, and its
turnover is less than one-fifth of the average turnover of the other parties who
have been found liable.
Suo Motu Case No. 05 of 2016 26
112. The non-wood paper industry is going through a very difficult phase at the
moment as business has been severely affected due to the prevailing pandemic.
Therefore, the imposition of any penalty would severely affect the financial
position of OP-9. OP-9's mill has been shut since July 2019 and it has not been
able to open the same till now. Therefore, OP-9 does not have any substantial
source of revenue at present and would be severely prejudiced by the imposition
of any penalty.
113. The market share of OP-9 is negligible (about 0.001% only), and its actions
would have little or no impact on the market. OP-9 also urged the Commission
to consider the limited duration of participation in the cartel, if any, and the
period being minimal, is unlikely to have an AAEC.
114. Lastly, OP-9 submitted that it has made full disclosure and also fully cooperated
with the investigation. It has never been in violation of the Act in the past.
Naini Paper Limited (OP-10) and its individuals
115. OP-10 in its response submitted that products of OP-10 and the wood pulp-
based manufacturers are substitutable as the prices of their products impact the
demand for each other's product. Thus, they all form part of the same relevant
product market. Further, the relevant geographic market should be "Territory of
India".
116. The market leaders and big paper manufacturers facing cartel investigation in
the existing cases are imposing/enforcing the cartel and ensuring its compliance
by OPs. That bigger players of market created such compelling circumstances so
that small players were left with no other option but to abide by their dictates to
act as a cartel.
117. The DG report does not prove that Shri Pawan Agarwal of OP-10 attended the
meeting dated 19.09.2012. The DG has relied on the email of a third person
Suo Motu Case No. 05 of 2016 27
which was not sent to Shri Pawan Agarwal or any other person/officer of OP-10.
It is the AAEC which can be presumed and not the existence of the agreement.
The onus of proving the existence of anti-competitive agreement is on the DG,
and once proved, AAEC can be presumed.
118. The increase in price is in tune with the increase in cost of production. The
prices of OP-10's products were increased because of increase in price by other
manufacturers. This decision was based on market intelligence/trend.
119. The DG has ignored factors like cost of production, market trend, price
parallelism, etc., while arriving at its conclusions. The DG has erred in relying
on the price list of OP-10's product, completely ignoring the discounts being
offered by it to its dealers, as it is not the actual price at which the product is
sold.
120. OP-10 is a very small player in the industry, having a miniscule turnover during
2012-13 compared to the big players of the relevant market and overall market.
Its market share is only 1.65% when seen in the non-wood paper manufacturers
market and 0.65% when taken in the overall market of paper manufacturers.
121. It was further pointed out that Shri Pawan Agarwal did not attend any meetings
of OP-4 Association and he had no role whatsoever in the alleged cartel.
122. Due to poor demand of paper, the scale of operations is badly dented, and OP-10
is able to run its plant at 40-50% of its installed capacity, and therefore, unable
to recover even fixed costs. OP-10 has not passed on the full burden of increased
cost to its consumers by way of discounts provided. It has absorbed a portion of
the increased cost.
123. Lastly, it was prayed that if any penalty were to be imposed by the Commission,
the same may be imposed only on the relevant turnover for the relevant period,
Suo Motu Case No. 05 of 2016 28
i.e., September 2012 to January 2013. It was also submitted that the answering
Opposite Party has fully cooperated with the DG during the investigation and
with the Commission during inquiry. Imposing any monetary penalty would put
a question mark on the very survival and going concern status of OP-10.
Ruchira Papers Limited (OP-12) and its individuals
124. As per OP-12, the DG itself noted that no one represented it in the meetings held
on 19.09.2012, 19.11.2012 and 19.01.2013. However, the DG unilaterally
assumed that Shri R. K. Maheshwari, who attended the meeting held on
19.12.2012, was an authorised representative (who was not authorised) of OP-
12, despite not having any evidence on record to establish the same.
125. The increase in cost of raw material in 2013 was the reason for increase in price
of writing and printing paper. In 2014-15, since raw material prices had
stabilised, there was no need to increase prices in 2014-15.
126. From data pertaining to the production of OP-12 achieved during 2010-11 to
2013-14, it can be observed that, during this period, the production levels
remained at par or at increasing trend, which is evidence that OP-12 never
controlled production at any level during these years.
127. The similarity in the dates of price announcements may be regarded as a direct
result of the high degree of market transparency, which does not have to be
described as artificial.
128. Further, Shri Umesh Chandra Garg of OP-12, in his statement, submitted that he
did not authorise anyone and did not attend any meeting, which has not been
challenged or even commented upon by the DG.
129. The DG ought to have factored in that certain industries provide a structural
basis that is conducive for cartelisation and that the paper industry in India,
Suo Motu Case No. 05 of 2016 29
being highly oligopolistic and concentrated in nature, having entry barriers and a
homogenous product, is conducive for cartelisation, but there are other factors
that dilute the above structure and create conditions which do not sustain the
maintenance of a cartel.
130. The DG has failed to carry out a detailed analysis of various economic factors
like pricing, capacity utilisation, cost of sales, sales margin, cost of production
and market share during the relevant period.
Shreyans Industries Limited (OP-17) and its individuals
131. OP-17 in its response to the DG report has submitted that it always acted
independently and on market intelligence and trends in determining its
commercial affairs and does not engage with its competitors in violation of the
provisions of the Act.
132. By not affording the right to cross-examine, the DG proceedings are in gross
violation of the principles of natural justice.
133. The credibility of Shri S. Ramesh is also doubtful as he admitted in his
deposition that paper manufacturers are unorganised and make changes in their
prices as per their market suitability regardless of the behaviour of the
competitors.
134. The DG denied the opportunity of cross-examination to OP-17 notwithstanding
that the credibility of Shri S Ramesh is doubtful.
135. The DG has also failed to consider that there is no direct evidence of exchange
of price/confidential information between the product manufacturers. The DG
has ignored this aspect in its entirety while arriving at the conclusion of alleged
cartelisation.
Suo Motu Case No. 05 of 2016 30
136. In relation to price parallelism analysis, the DG report fails to set out the
parameters and justifications for comparing the products manufactured by
various OPs. Further, the analysis done by the DG does not explain whether the
compared products belonged to the same price bracket. The DG has erred in
arriving at the conclusion of price parallelism without justifying the: (a) variety
of the paper, (b) base grammage of the paper, (c) initial prices of the products
compared and (d) the prices of the product after increase in prices.
137. The DG report further suffers from grave infirmities as it fails to specify what
grade and quality of paper it used as a basis for conducting its analysis for price
parallelism.
138. It was further submitted that the DG has failed to explain whether the prices of
paper of OPs were similar to begin with. If the prices of the products
manufactured by various OPs were dissimilar, then the conclusion of parallel
increase by a certain amount is inaccurate. It was submitted that if the sale prices
of OPs did not match at the outset, then the prices subsequent to a simultaneous
similar increase would not match either. With different OPs selling the product
at different prices, the purpose of a cartel would be defeated.
139. The DG cherry-picked only 21 product manufacturers/OPs from almost 800
players that operate in the non-wood based paper market to conclude that they
indulged in alleged cartelisation. Additionally, out of the 21 OPs, the DG has
concluded that only 10 have actively indulged in alleged cartelisation. In doing
so, the DG failed to note that, for a cartel to sustain, majority players need to
have cartelised to ensure that no one undercuts others' prices. Such an arbitrary
exclusion has no tenable basis in law.
140. OP-17 submits that the non-wood based paper market is not prone to
cartelisation as the market is not oligopolistic as there are nearly 800 non-wood
Suo Motu Case No. 05 of 2016 31
based paper mills in India, with approximately 40 players that sell in North
India.
141. It is commonly understood that for a cartel or concerted practice to survive,
there must be mechanisms in place for: (a) coordinating the cartel agreement and
ensure successful functioning of the cartel, (b) monitoring the behaviour and
conduct of the members of the cartel and (c) punishing members of the cartel
who do not fall in line with the decisions of the cartel. The DG has failed to
produce any evidence that even remotely suggests that any of the above-
mentioned elements is present in the Indian non-wood based paper market,
which comprises nearly 800 non-wood based paper mills.
142. The DG also failed to note that the November e-mail clearly records that none of
the OPs (except Khanna and Trident) implemented the price increase pursuant to
the 19.09.2012 meeting. This categorically establishes that even though OPs
attended the relevant meetings, the decisions to increase prices were
independent thereof.
143. It was further submitted that the answering OP attended three of the relevant
meetings, as these meetings are usually conducted to discuss industry issues
such as increase in cost of the raw materials, change in government policy, etc.
144. OP-17 has increased its prices between September to March every year between
2009-10 to 2017-18. Thus, it is a price trend that OP-17 follows every year.
Between October and February 2012-13, OP-17 increased its prices because of
increase in costs of manufacturing the product from the previous year.
145. SIL Office Bearers can only be found guilty under Section 48 of the
Competition Act if SIL is held guilty of violating Section 3(3) of the
Competition Act. As explained herein above, SIL has not contravened any
provision of the Competition Act, therefore it is humbly submitted that the SIL
Office Bearers cannot be held liable under Section 48 of the Competition Act.
Suo Motu Case No. 05 of 2016 32
146. On penalty, OP-17 submitted that due to COVID-19, OP-17's business has been
adversely affected; it is a relatively small company with only 2% market share;
this is the very first competition law violation on the part of OP-17; and it has
made full disclosures and cooperated in entirety with the investigations of the
DG. Further, given that office bearers of OP-17 did not send/receive any of the
relevant emails or exchange any information and there being no evidence to
show that they violated the Act, the office bearers cannot be held liable for the
same.
Trident Ltd. (OP-21) and its individuals
147. OP-21 agreed with the conclusion of the DG report that certain paper
manufacturers engaged in anti-competitive conduct by participating in meetings
where commercially sensitive information was discussed. It was pointed out that
different types of paper within the writing and printing paper segment are
viewed as substitutable by customers. Non-wood based paper manufacturers
have to price writing and printing paper significantly lower to ensure that
customers do not switch to better quality A-grade paper.
148. As pointed out previously, OP-21 has filed a leniency application and has
cooperated during investigation.
Analysis
149. The Commission has perused the material available on record, including the
investigation report and evidences in support thereof as submitted by the DG,
the submissions made by the Opposite Parties and has also heard in detail the
arguments put forth by the parties during oral hearings.
150. The question which falls for consideration in the present matter is whether the
paper mills (including their association) engaged in the manufacture of non-
Suo Motu Case No. 05 of 2016 33
wood based writing and printing paper have cartelised and thereby, contravened
the provisions of Section 3(1) of the Act read with Section 3(3)(a) thereof.
151. Before examining the aforesaid issue, it would be appropriate to note that OP-21
has filed their Leniency Petition and has admitted to its conduct and has
supported the findings made by the DG in the investigation report. During the
investigation, OP-21 cooperated fully with the DG and made vital disclosures.
152. In the aforesaid backdrop, the Commission proceeds to examine whether there
was an "agreement" between the OPs to cartelise, as found by the DG.
153. Before examining this issue, it is apposite to note that the definition of
'agreement' as given in Section 2(b) of the Act requires, inter alia, any
arrangement or understanding or action in concert, whether or not formal or in
writing or intended to be enforceable by legal proceedings. The definition, being
inclusive and not exhaustive, is a wide one. An understanding may be tacit, and
the definition under Section 2(b) of the Act covers even those situations where
parties act on the basis of a nod or a wink. The Commission notes that the Act
envisages civil liability. Thus, the standard of proof required to prove an
understanding or an agreement would be on the basis of 'preponderance of
probabilities' and not 'beyond reasonable doubt'. There is rarely any direct
evidence of action in concert, and in such situations, the Commission has to
determine whether those involved in such dealings had some form of
understanding and were acting in cooperation with each other. In light of the
definition of the term 'agreement', the Commission has to assess the evidence
on the basis of benchmark of preponderance of probabilities.
154. Further, in terms of the provisions contained in Section 3(1) of the Act, no
enterprise or association of enterprises or person or association of persons can
enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely
Suo Motu Case No. 05 of 2016 34
to cause an appreciable adverse effect on competition within India. Section 3(2)
of the Act declares that any agreement entered into in contravention of the
provisions contained in sub-section (1) shall be void. Further, by virtue of the
presumption contained in sub-section (3), any agreement entered into between
enterprises or associations of enterprises or persons or associations of persons or
between any person and enterprise or practice carried on, or decision taken by,
any association of enterprises or association of persons, including cartels,
engaged in identical or similar trade of goods or provision of services, which (a)
directly or indirectly determines purchase or sale prices; (b) limits or controls
production, supply, markets, technical development, investment or provision of
services; (c) shares the market or source of production or provision of services
by way of allocation of geographical area of market, or type of goods or
services, or number of customers in the market or any other similar way; or (d)
directly or indirectly results in bid rigging or collusive bidding, shall be
presumed to have an appreciable adverse effect on competition.
155. In case of agreements as listed in Section 3(3)(a) to (d) of the Act, once it is
established that such an agreement exists, it will be presumed that the agreement
has an appreciable adverse effect on competition; the onus to rebut the
presumption would lie upon the parties.
156. In this statutory framework, the Commission proceeds to examine the evidence
collected by the DG to assess whether there was an 'agreement' between the
OPs of the nature which is prohibited in terms of the provisions contained in
Section 3(1) of the Act read with Section 3(3) thereof.
157. In this regard, it would be useful to refer the evidences collected by the DG
during investigation. For felicity of reference, the analysis, in respect of each of
the OPs that have been found to have contravened the provisions of the Act by
the DG, shall be done separately and in seriatim, after outlining the background
and the broader nature of evidence including the genesis of civil conspiracy.
Suo Motu Case No. 05 of 2016 35
158. In this regard, the Commission proceeds to analyse the electronic evidence and
statements of the representatives and key persons of OPs to ascertain whether
there was any 'agreement' between them of the nature prohibited by the Act.
159. The DG, during the course of investigation of two other cases, came across four
e-mails dated 19.09.2012, 19.11.2012, 19.12.2012 and 19.01.2013 originating
from the e-mail box of Shri P. K. Vasist, Vice President (Marketing) of SPBL,
containing details of meetings that took place amongst 20 paper mills of North
India under the aegis of OP-4 Association, engaged in the manufacture of paper
by using agricultural waste or waste paper as their raw material. At this stage, it
would be apposite to reproduce the said e-mails for ready reference:
Suo Motu Case No. 05 of 2016 36
160. On perusal of the aforesaid e-mail, it appears that representative(s) of various
paper mills were discussing price increase. They also seem to draw a roadmap to
achieve Rs. 5/- per kg increase by 15.01.2013. Further, it seems that members
expressed that Rs. 5/- per kg may sound like a very steep increase, but if they
work on the said target, they can achieve Rs. 3/- to Rs. 4/- kg. To start with, all
agreed to increase their price by Rs. 1/- per kg immediately, and the increase
must be spontaneous.
Suo Motu Case No. 05 of 2016 37
Suo Motu Case No. 05 of 2016 38
161. From the above, it appears that in the meeting held on 19.11.2012 whose
discussions have been abstracted in the aforesaid e-mail, it was, inter alia,
resolved to increase price by Rs. 1/- per kg. w.e.f. 01.12.2012. The email also
appears to suggest monitoring of the decisions in terms of implementation taken
in the previous meeting.
Suo Motu Case No. 05 of 2016 39
162. The aforesaid e-mail, inter alia, indicates that, as per paper mills, dealers at
large do not accept price increases announced immediately, but later, succumb
Suo Motu Case No. 05 of 2016 40
after all mills raise their respective prices; the meeting held on 19.12.2012 ended
on a positive note that a further price increase of Rs. 1/- can be worked out from
January 2013.
163. On examination of another email dated 19.01.2013, extracted below, it is noted
that the meeting commenced with the expression of satisfaction as the price was
increased by Rs. 4/- per kg. from October 2012 and was absorbed in the market.
The participants in the meeting held on 19.12.2012 expressed their satisfaction
over the improved market conditions.
Suo Motu Case No. 05 of 2016 41
164. From the gist of the aforesaid four e-mails, as extracted and adumbrated supra,
it appears that the paper manufacturers met on four occasions in Delhi. Further,
from the e-mails, it is seen that the chief purpose of the said meetings was to
discuss prices and draw a roadmap for future increase, besides monitoring the
level of implementation of the decisions taken in the previous meetings. From
the decisions taken in the meetings as abstracted in the said e-mails, it appears
that OP-4 Association/IARPMA provided its platform to the participants of the
meetings to facilitate price related discussions.
165. In view of the aforesaid backdrop, the Commission proceeds to examine the
statements of the representative(s) of OPs recorded by the DG in respect of
whom specific findings of contravention was returned, after confronting them
with the aforesaid e-mails.
Bindal Paper Mills Ltd. (OP-2)
166. The DG recorded the statements of Shri Ashok Vyas, Vice President
(Marketing) and Shri Neeraj Goel, ex-Director, of OP-2, on 30.10.2018, after
confronting them with the aforesaid e-mails. In this context, the relevant extracts
of the statement of Shri Ashok Vyas are excerpted below:
Suo Motu Case No. 05 of 2016 42
"Yes, I have attended a few such meetings".
"Yes, I was authorised to attend meetings on behalf of the company.
As regards pricing decisions I used to be a part of the discussion but
the final call with regard to price changes is taken by the Directors
namely Mr. Neeraj Goyal and Mr. Ankur Bindal."
"Though, the agenda of the meetings was not price discussion
however, informally prices used to be discussed in many such
meetings."
"The call on whether to increase prices as discussed in these meetings
rested with the aforesaid two Directors."
"On-going through the email dated 19.12.12 of Shri S. Ramesh of
SPBL shown to me I recollect that the details given in the email may
be true".
"As regard implementation of the price decision taken in this meeting
the price circular issued by us correlates with what transpired in the
meeting".
167. Further, it would be appropriate to reproduce the relevant extracts from the
deposition of Shri Neeraj Goel, and the same is accordingly noted below:
"I also admit that because of such a grave scenario the
representatives of competing firms also used to discuss prices and on
many occasions try to arrive at a price which is mutually agreeable to
each other keeping in mind the high cost of production that was
threatening the very survival of the industry".
Suo Motu Case No. 05 of 2016 43
"Apart from other discussions on a few occasions the members also
discussed prices and decided mutually to implement these decisions so
that the losses on account of high cost of production can be reduced".
"Sir, I have seen the email and I confirm that I attended this meeting
on 19.09.2012. Ongoing through the email I am able to recollect that
the details given in the aforesaid email are factual".
"Some of the persons that I remember who used to attend these
meetings were Shri Rathore and Shri Anil Kumar from M/s Shreyans
Industries Ltd. and Shri Pramod Agarwal of M / s Rama Papers,
Bijnore, Shri Gopal / Shri Vijay Agarwal of M / s K.R. Pulp, Shri
Pawan Agarwal of M/s Naini Paper, Shri Rahul Khanna and Shri
Dhimant Singh of M / s Khanna Papers are a few names who attended
these meetings where prices were discussed and decided among other
pressing issues facing the paper industry."
168. On careful examination of the statements of the representatives of OP-2, it is
evident that both the representatives admitted to have attended the meetings
organised by OP-4 Association, wherein the prices were discussed by paper
manufacturers. They have also corroborated the contents of the e-mail as to what
transpired in the meetings convened by OP-4 Association.
Indian Agro & Recycled Paper Mills Association (OP-4/ IARPMA)
169. The DG recorded the statement of Shri P. G. Mukundan, Secretary General of
OP-4, on 25.10.2018. Relevant extracts of the same are reproduced below:
"Yes, among other issues prices also used to be discussed by the
representatives of paper mills and I am not aware of whether these
discussions on prices were implemented by the paper mills".
Suo Motu Case No. 05 of 2016 44
"Sir, I am aware that discussing prices is in violation of the
provisions of the Competition Act, 2002 but my role was limited to
accede to the requests of the members of our association and it was
their choice whether to discuss prices or not...
"As I have mentioned in response to my earlier question that though
prices were discussed in this meeting, the meeting was convened by
me to discuss some of the burning issues before the Executive
Committee connected with the pollution control in the paper mills. I
can say that this meeting was primarily organised by IARPMA to
discuss raw material issues with the Executive Committee members.
However, the members after the discussion also chose to discuss
prices of paper."
"As such many associate members who used to attend these meetings
were actively involved but to name a few Shri Ashok Vyas and Shri
Neeraj Goyal of M/s Bindal Papers, Shri Dhimant Singh of M/s
Khanna Papers, Shri Anil Kumar and Shri Rathore of M/s Sheyans
Papers and Shri Srikant of M/s Trident Ltd. and Shri S. Ramesh of
SPBL, Shri Rahul Khanna of M/s Khanna Papers, Shri Maheshwari of
M/s Ruchira Papers, Shri Vijay Agarwal of M/s K.R. Pulp and Papers
are some of the names that I remember who were instrumental and
active in requesting for such meetings where the attendees (competing
paper manufacturers) used to discuss price of paper."
170. From the aforesaid deposition of Shri P G Mukundan of OP-4, it is evident that
the same further corroborates the contents of e-mail, noted supra, that paper
manufacturers used to meet and discuss prices using the platform of IARPMA
(OP-4 Association).
Suo Motu Case No. 05 of 2016 45
K.R Pulp & Papers Ltd. (OP-5)
171. The statement of Shri Vijay Kumar Agarwal, ex-Vice President (Marketing) of
OP-5, was recorded by the DG on 03.12.2018. The relevant excerpts of his
statement are noted below:
"Yes, I had attended a few meetings of IARPMA as a representative of
my company."
"Though, price discussion was not the main agenda but discussions
on prices used to take place as many paper manufacturers chose this
platform to also discuss prices informally".
"Sir, I confirm that I had attended this meeting though I do not
remember exactly the discussions that took place in this meeting. We
were too small a player to give any suggestion with regard to price
and it is the bigger paper manufacturers like Naini Paper, Trident
Ltd., Shreyans Paper, Bindal, Sheshasayee (SPBL) who used to be
involved in price discussions".
"As I said though I had attended this meeting our participation was
only to listen to what the bigger paper manufacturers used to say and
report it to our management. It was the management's call to take the
decision whether or not to implement the decision collectively taken
on increasing the price by paper manufacturers participating in this
meeting. This is the reason that you would see that we had increase
the price of paper by Rs.2000/- PMT instead of Rs.1000/PMT as
decided in the said meeting".
172. The above-mentioned deposition of Shri Vijay Agarwal corroborates the
contents of e-mails which have been quoted previously considering his
admission of being part of the meetings where prices of non-wood based writing
Suo Motu Case No. 05 of 2016 46
and printing paper used to be discussed by paper manufacturers using the
platform of OP-4 Association.
Khanna Paper Mills Ltd. (OP-6)
173. The DG recorded the statement of Mr. Dhimant Singh, Marketing Head of OP-
6, on 28.11.2018 during the investigation. The relevant section of the statement
is excerpted below:
"Yes, the email is indicative of discussions of MOPs (Market
Operating Prices) having taken place in particular IARPMA meet."
174. Additionally, the DG recorded the statement of Shri Rahul Khanna, Managing
Director of OP-6, on 29.11.2018. The relevant extract of the statement of Shri
Rahul Khanna is reproduced below:
"Yes, I am aware that the aforesaid two employees of my company
used to attend these meetings. This was necessitated as Secretary
General, Shri P.G. Mukundan used to repeatedly call me or any
member of my marketing team to attend these meetings and just to
have a representation our employees used to attend these meetings".
"All I can say is that though the price increase seems to be matching
as per the email shown to me but the same was due to cost pressure
and demand surge. Further, since our market is based on market
operating price the price undergoes some changes like even decrease
in price from time to time. Thus, the actual price increase may not be
the same as is reflected in the price increase circular issued by us".
175. From the above, it is evident that not only representative(s) of OP-6 attended the
meetings which took place using the platform of OP-4 Association, but even the
representatives accepted the suggestion that price increases effected by OP-6
were in accord with the contents of e-mails, even though a feeble attempt was
made to ratiocinate the same citing "cost pressure" and "demand surge".
Suo Motu Case No. 05 of 2016 47
Further, it is observed that there are multiple references to OP-6 in the relevant
email(s).
Katyayani Paper Mills Pvt. Ltd. (OP-7)
176. The DG recorded the statement of Shri Amit Dewan, General Manager
(Exports) of OP-7, on 16.01.2019 for the purposes of investigation. The relevant
extract of statement of Shri Amit Dewan of M/s Katyayini Paper Mills Pvt. Ltd.
is quoted below:
"I have attended one or two meetings five-six years back at Hotel
Jaypee Sidharth, New Delhi."
"Though there were other discussions but prices of paper were also
being discussed informally by the paper manufacturers during this
meeting"
"I do not remember the names of the persons who had represented
their paper mills but representatives of M/s Trident Ltd., M/s Khanna
Paper Mills, M/s Shreyans Industries Ltd. M/s Bindal Paper Mills Ltd.
etc. were present in the meeting."
177. The statement of Shri Amit Dewan confirms the attendance of the representative
of OP-7 in the meetings where prices were also discussed.
178. The submission of OP-7 that the alleged discussion of the price rise of Rs.
3000-5000 per MT only took place in a meeting dated 19.09.2012 in which OP-
7 was not present cannot be accepted in light of discussions regarding price
increase implementation according to targets fixed in earlier meetings having
taken place in subsequent meetings attended by representatives of OP-7.
Suo Motu Case No. 05 of 2016 48
Kuantum Papers Ltd. (OP-8)
179. The relevant extract of the statement of Shri Somesh Jawa, ex-President
(Marketing) of OP-8, dated 14.06.2018 is as under:
"Yes, I attended this meeting."
"I have seen the email and the details given in the aforesaid email. I
confirm that I had attended this meeting but at this point I am not able
to recollect what exactly transpired in that meeting."
"Sh. P. G. Mukandan, Secretary General of IARPMA telephonically
used to organise and inform about these meetings."
180. The relevant extract of the statement of Shri Pavan Khaitan, Managing Director
of OP-8, dated 30.11.2018 is also relevant in the context, and the same is
extracted below:
"Yes, I might have attended one or two such meetings but my
marketing executives like Shri Somesh Jawa and Shri Krishan Kant
used to attend such meetings."
"However, the prices of paper also used to be discussed on the
sidelines during such meetings. This fact was apprised to me by my
marketing personnel who attended these meetings."
"The prices appear to have been increased as per the details given in
the email but we increase our prices taking into consideration various
factors like stock position, order book and the market trend. The
increase could be of a similar quantum as the period of September to
March is a high demand period for the writing and printing industry."
Suo Motu Case No. 05 of 2016 49
"The price increase could have been due to various factors effecting
the market and any similarity in price increase could be coincidental
as the market during that period is generally buoyant."
181. The contention of the answering OP that there are no actual minutes of meetings
is inconsequential in view of its own representatives confirming their attendance
in the meetings and accepting the fact of price discussions during such meetings.
Further, the submission of the answering OP that the price increase was done
after considering multiple commercial and economic factors irrespective of the
occurrence of the meeting, is also misconceived. It is axiomatic to assume that
meeting with competitors and discussing prices influences and takes away the
independent decision making of the market participants involved in such
meetings.
Madhya Bharat Papers Ltd. (OP-9)
182. The relevant extract of the statement of Shri Jaydeep Chitlangia, Managing
Director of OP-9, dated 21.12.2018 is noted below:
"I have seen the email and I recollect that I had attended this
meeting."
"I have attended many meetings but the agenda of the meetings was
never to discuss prices but other issues like pollution, taxation, import
policies, etc. were the main agenda for convening such meetings.
However, some paper manufacturers also on their own used this
platform to discuss prices of paper as well."
"I have seen the emails and agree that Shri Manoj Ranjan
represented our company in these meetings. However, price increases
though were discussed in these meetings but the final call to whether
or not to increase the prices depended on many other factors like
stock position, order book position, etc."
Suo Motu Case No. 05 of 2016 50
"There have been four meetings during this period and in every
meeting there was a discussion to increase price by Rs.1000/- PMT
immediately. We did not increase the price in any of these months i.e.
October, November, 2012 and January and March, 2013"
183. From the above, it can be seen that representatives of OP-9 have attended the
meetings held between September 2012 to January 2013 under the aegis of OP-4
Association, where prices were discussed.
Naini Paper Ltd. (OP-10)
184. The statement of Shri Pawan Agarwal, Managing Director of OP-10, dated
07.06.2018 and 28.02.2019 is as under:
"Yes, I have received informal invites from the Secretary General,
IARPMA, Shri Mukundan over phone asking me to attend lunch on
meetings at Delhi."
"I have seen the email as well as the price details submitted by us. We
have increased the price by Rs.2000/- per MT on 22.01.2013 and by
Rs.1000/- on 15.02.2013 but this increase also is on account of the
market trend prevalent in the writing and paper industry. Though the
increase appears strikingly similar to the decision taken in the
meeting dated 19.01.2013 by competing paper manufacturers but as I
mentioned earlier that by increasing the price simultaneously these
paper manufacturers have forced us to increase our price also as the
demand for paper remained robust during this period."
"I was in touch with Mr. Ankur Bindal and Shri Neeraj Goyal of M/ s
Bindal Papers, Mr. Anil Kumar of M/s Shreyans Industries Ltd., Mr.
Rahul Khanna of M/s Khanna Papers and Mr. Shreegopal Agarwal of
M/s K.R. Pulp & Papers Ltd. Other than these people I have not been
in touch with any other representative of competing paper
Suo Motu Case No. 05 of 2016 51
manufacturers. These talks over telephone was with regard to
technical matters relating to manufacturing of paper or availability of
raw materials".
185. When confronted with the e-mails, the representative of OP-10 not only
admitted to have been in touch with other paper mills but also admitted that the
price increase of OP-10 was in line with the decisions taken at the meetings
and recorded in the e-mail. However, the representative tried to explain the
increase citing "market trend" in the industry.
Ruchira Papers Ltd. (OP-12)
186. The DG recorded the statement of Shri Umesh Garg, Managing Director of OP-
12, dated 12.12.2018, and noted that the name of one Shri R. K. Maheshwari,
who attended on behalf of OP-12 in the meetings convened by OP-4
Association, appeared in the email of Shri S. Ramesh of SPBL. However, Shri
Umesh Garg denied having any employee by the said name and stated that he
had not authorised any person by this name to attend meetings on behalf of the
company.
187. In this regard, firstly, it is seen that OP-12 increased the prices on two occasions
during the cartel period. Further, the Commission notes that the contention of
OP-12 taken in its submission to the effect that the price increase was on
account of increase in price of raw materials also does not appear to be borne
out from the details of cost and prices submitted by OP-12 itself, as detailed
infra. It is noted that the cost of production of writing and printing paper fell in
the year 2012-13 to Rs. 37,979.37 (MT) from Rs. 40,738.06 (MT) in 2010-11.
In relation to the price, it is better to present the same in a tabular format for the
different comparable grades of paper manufactured by OP-12 from year 2010 to
2013:
Suo Motu Case No. 05 of 2016 52
Effective from 12th February 2013:
Grade GSM (grams per square Basic Price (in INR) per
meter) kg in sheets
Ruchira Classic 54-57 51.5
Ruchira Classic 58-63 50.0
Ruchira Classic 64-69 49.5
Ruchira Classic 70 & above 49.0
Ruchira Super White 54-57 53.0
Ruchira Super White 58-63 51.5
Ruchira Super White 64-69 51.0
Ruchira Super White 70 & above 50.5
Effective from 1st January 2013:
Grade GSM Basic Price (in INR) per
kg in sheets
Ruchira Classic 54-57 48.5
Ruchira Classic 58-63 47.0
Ruchira Classic 64-69 46.5
Ruchira Classic 70 & above 46.0
Ruchira Super White 54-57 50.0
Ruchira Super White 58-63 48.5
Ruchira Super White 64-69 48.0
Ruchira Super White 70 & above 47.5
Effective from 30th March 2012:
Grade GSM Basic Price (in INR) per
kg in sheets
Ruchira Classic 54-57 45.5
Suo Motu Case No. 05 of 2016 53
Ruchira Classic 58-64 44.0
Ruchira Classic 65 & above 43.5
Ruchira Super White 54-57 47.0
Ruchira Super White 58-64 45.5
Ruchira Super White 65 & above 45.0
Effective from 05th March 2011:
Grade GSM Basic Price (in INR) per
kg in sheets
Ruchira Classic 54 & 57 43.75
Ruchira Classic 58-64 43.0
Ruchira Classic 65 & above 42.5
Ruchira Super White 54 & 57 45.75
Ruchira Super White 58-64 45.0
Ruchira Super White 65 & above 44.50
Effective from 04th March 2010:
Grade GSM Basic Price (in INR) per
kg in sheets
Ruchira Classic 54 & 57 39.75
Ruchira Classic 58-68 39.0
Ruchira Classic 70 & above 38.5
188. It is observed from the prices of two grades of paper (Ruchira Classic and
Ruchira Super White) that, from the price circular dated 04.03.2010 till price
circular dated 12.02.2013, in Ruchira Classic, there had been an increase of 28-
30 per cent and in Ruchira Super White, there had been increase of 14-16 per
cent.
189. The parallel behaviour of OP-12 by making an overall increase of Rs. 6000/-
PMT between September 2012 to March 2013, coupled with an increase in
Suo Motu Case No. 05 of 2016 54
prices despite fall in cost of production is strongly indicative of OP-12 being
part of concerted conduct resorted to by non-wood based paper manufacturers,
who increased prices after discussions in a coordinated manner.
Shreyans Industries Ltd. (OP-17)
190. The relevant extract of statement of Shri J. S. Rathour, Vice President
(Marketing) of OP-17, dated 26.11.2018 is as under:
"As we are members of IARPMA I have attended a few meetings
where competing paper manufacturers participated."
"The meetings were convened by Shri Mukundan, Secretary General
of IARPMA who used to inform about the date of venue of the meeting
to me or to my Executive Director over telephone."
"Though the price of paper was never the main agenda of such
meetings but the same used to be discussed among competing
manufacturers during the course of such meetings informally."
"Yes, I attended this meeting."
"Though the price increase announced by us matches with the
minutes of the meeting given by Shri S. Ramesh of SPBL but the same
could be co-incidental."
"I used to take the decisions to increase the price and I kept my senior
officers Shri Anil Kumar and Shri Rajnish Oswal informed about the
price increase affected by me."
"Though the price increase announced by us matches with the
minutes of the meeting given by Shri S. Ramesh of SPBL but the same
could be coincidental."
Suo Motu Case No. 05 of 2016 55
191. The relevant extract of statement of Shri Anil Kumar, Executive Director &
CEO of M/s Shreyans Industries Ltd., dated 27.11.2018 is as under:
"As far as I remember I did attend this meeting."
192. The Commission has perused the statements of Shri J. S. Rathour and Shri Anil
Kumar. It is clear from their admission that not only did they attend the
meetings as detailed in the email of Shri S. Ramesh of SPBL but also that the
prices were discussed in these meetings. Further, regarding the price increase
during the period September 2012, to March 2013, which matched the decisions
taken in the meetings with regard to price, the answering OP could not offer any
cogent reasons for the same, except stating that it was coincidental.
Trident Ltd.(OP-21)
193. The relevant extract of the statement of Shri M.P. Srikanth President (Sales) of
OP-21, dated 03.10.2018 and 04.10.2018 is as under:
"Yes, I have attended a few such meetings"
"There was no specific agenda for the meetings but yes, prices were
discussed in these meetings with an intent to offset the overall losses
being incurred."
"Yes, competing mills used to meet, discuss and decide on prices to be
increased simultaneously."
"I have gone through the email shown to me and I am clearly able to
recollect that this is the same meeting that I had attended at Hotel
Jaypee Sidhartha on 19.09.2012. As mentioned by me in my reply
even in this email there is mention of increasing the prices by
Rs.5000/- PMT by January, 2013. On reading the contents I confirm
that most of Shri S. Ramesh's account of what transpired in the
meeting appears factual and correct."
Suo Motu Case No. 05 of 2016 56
"I have gone through the email shown to me and I am clearly able to
recollect that this is the same meeting that I had attended on
19.11.2012. As mentioned in my reply to question No.9 of statement
dated 03.10.2018 the prices increase decided of Rs.1000/- PMT also
finds a mention in the email shown to me. On reading the contents I
confirm that most of Shri S. Ramesh's account of what transpired in
the meeting appears factual and correct."
194. The relevant extract of the statement of Shri Anil Singh, Manager of OP-21,
dated 05.10.2018 is noted below:
"Yes, I have attended four such meetings as representative of Trident
Ltd. These meetings were under the aegis of IARPMA or IPMA and
many of our competitors i.e. manufacturers of writing and printing
paper attended these meetings."
"I have gone through the email shown to me and I am able to
recollect that this was the meeting that I had attended Shri Naveet
Jindal my Marketing Head. This meeting was held at hotel Jaypee
Sidhartha, New Delhi and after going through the email I can say that
most of the details given by Shri S. Ramesh of what transpired in that
meeting are factually correct."
195. The relevant extract of statement of Shri Naveet Jindal, Marketing Head (Paper
Division) of OP-21, dated 04.10.2018 is as under:
"Yes, I have attended a few such meetings."
"There was no specific agenda for the meetings but yes, prices were
discussed in these meeting"
Suo Motu Case No. 05 of 2016 57
"Yes, it is true that competing paper mills used to meet, discuss and
arrive at a consensus on prices of paper to be increased and the
quantum of discount to be offered."
"Yes, Shri P.G. Mukundan was aware of what transpired in these
meetings as he was one of the participants in many of these meetings
that I had attended in which prices were discussed."
"Yes, on a few occasions we did implement the price increase decided
in such meetings unaware of the consequences of this Act."
"Being a Marketing Head of the Paper Division the final call on any
price increase for paper products manufactured by Trident Ltd., was
taken by me."
"I have gone through the emails shown to me and I am clearly able to
recollect a few of the observations made in the email and confirm that
this was the meeting that I had attended along with my junior
colleague Shri Anil Singh on 19.12.2012."
196. The statements of Shri M. P. Srikanth, Shri Anil Singh and Shri Naveet Jindal
indicate OP-21 as one of the members of the cartel of paper manufacturers who
met and discussed prices in the meetings convened on the platform of OP-4
Association. The statements of the above two persons, i.e., Shri M. P. Srikanth
and Shri Naveet Jindal, elaborately detail cartelisation of paper manufacturers
producing writing and printing paper either by using agricultural waste or used
waste paper as raw material.
197. Having perused the DG report and the submissions made by OPs, in particular
the e-mails of S. Ramesh of SPBL, and the statements given by the
representatives of OPs as detailed hereinabove, the Commission concludes that
various meetings were organised and attended by the representatives of OPs
Suo Motu Case No. 05 of 2016 58
under the aegis of the platform of OP-4 Association, where prices were
discussed. From the e-mails, it is evident that the meetings were convened to
discuss prices and draw a roadmap for future increase by paper manufacturers
on the platform provided by OP-4 Association, besides monitoring the level of
implementation of the decisions taken in the previous meetings.
198. The Commission notes that mere attendance in meetings where commercially
sensitive information like prices, is discussed, influences and takes away the
independent decision making ability of participant competitors and resultantly,
they can no longer independently decide the price related policies in the market.
Accordingly, it is unnecessary and inconsequential to deal with the submissions
relating to the price parallelism when direct evidences are present in the form of
corroborative statements of representatives of paper mills regarding attendance
in the meeting(s) and discussion on prices.
199. At this stage, the Commission deems it appropriate to deal with some ancillary
pleas advanced by OPs in their submissions. It was argued by some of the OPs
that the DG has delineated the relevant product market as writing and printing
paper made out of agricultural waste and recycled waste paper and relevant
geographic market as northern India, even though delineation of relevant market
is not mandatory. Further, OPs objected to the relevant product market and
relevant geographic market delineated by the DG, as such delineation was stated
to be not in line with market reality in the paper industry. It was further
submitted that the writing or printing paper manufactured by employing agro
residue or waste paper as raw material is substitutable with paper manufactured
using wood as a raw material.
200. Having examined the plea, the Commission is of the opinion that the contention
is thoroughly misplaced. While examining anti-competitive conducts under
Section 3 of the Act, the question of delineation of product and demarcation of
the market is beyond the statutory scheme. It is unnecessary to point out that
concept of 'relevant market' has no manner of application in the proceedings
Suo Motu Case No. 05 of 2016 59
relatable to Section 3 of the Act, which prohibits anti-competitive agreements.
The said concept in express term is applicable in respect of abusive conduct by
dominant undertakings and also during assessment of merger filings. In the
present case, it is on record that OPs are engaged in similar trade of
manufacturing paper and, as such, any agreement entered into by such market
participants who are operating at the same level in the market, in determining
prices, is squarely covered under the presumptive rule of Section 3(3)(a) of the
Act and unless rebutted, falls foul of the statutory prohibition as engrafted in
Section 3(1) of the Act.
201. Similarly, the plea of some of the OPs that there was no AAEC on account of
the impugned conduct is also misdirected. In this regard, suffice it to observe
that from a bare reading of the provisions of Section 3(1) of the Act, it is evident
that these provisions not only proscribe the agreements which cause AAEC but
the same also forbid the agreements which are likely to cause AAEC. Hence, the
plea that there is no contravention of the provisions of the Act in the present
matter, because allegedly no AAEC has been caused as a result of the alleged
cartel between the parties, is misdirected and untenable in the face of clear
legislative intent, whereby even the conduct which can potentially cause AAEC
is prohibited. Furthermore, once an agreement of the types specified under
Section 3(3) of the Act is established, the same is presumed to have an AAEC
within India. Therefore, it follows that once an 'agreement' of the types as
specified in Section 3(3) of the Act is shown to be established, the same falls
within the presumptive rule of AAEC as provided thereunder. The parties,
however, can rebut such statutory presumption in light of the factors provided
under Section 19(3) of the Act.
202. In the present case, the OPs have failed to show how their impugned conduct
resulted in any accrual of benefits to consumers; improvements in production or
distribution of goods or provision of services; or promotion of technical,
scientific and economic development by means of production or distribution of
Suo Motu Case No. 05 of 2016 60
goods or provision of services in terms of Section 19(3) of the Act. On a holistic
evaluation of the replies filed by the parties in light of the factors enumerated in
Section 19(3) of the Act, the Commission is satisfied that the parties have not
been able to dislodge the statutory presumption by adducing cogent evidence, as
required.
203. In view of the above, taking into account all the aforesaid evidences collected by
the DG, the Commission concludes that OPs had indulged in cartelisation in
fixing prices of writing and printing paper as detailed in this order, by
participating in the meetings convened under the umbrella of the platform
provided by their trade association and discussing prices and the roadmap for
coordinated increase, besides monitoring the decisions taken in such meetings.
Such conduct of competitors is sufficient to persuade the Commission to hold
that OPs have contravened the provisions of Section 3(1) of the Act read with
Section 3(3)(a) of the Act. The Commission, therefore, finds these OPs to be in
contravention of the provisions of Section 3(1) of the Act read with Section
3(3)(a) of the Act, accordingly.
204. At this stage, it is apposite to consider the contention raised by some of the
parties that the decisions taken in the meetings convened by their trade
associations were not implemented uniformly by all the participants. For the
foregoing reasons given in the context of dealing with the plea of AAEC, it is
sufficient to note that the legislature has proscribed anti-competitive agreements
which not only cause but which are also likely to cause appreciable adverse
effect on competition. When competitors are meeting and discussing prices, it is
beyond any doubt that such conduct, at the minimum, is likely to cause
appreciable adverse effect on competition. In this statutory backdrop, where
even conduct which is likely to cause appreciable adverse effect on competition
is proscribed, it would require a very high degree of rebuttal by the parties to
dislodge the statutory presumption. Save and except taking the plea, the OPs
have completely failed to discharge this burden.
Suo Motu Case No. 05 of 2016 61
205. An argument was also taken by some of the parties that there are number of
players in the market and the DG or the Commission could not have cherry-
picked only some of the parties for the purposes of the investigation or inquiry,
respectively. In this regard, the Commission is of the opinion that in a statutory
framework raising presumption of appreciable adverse effect on competition in
respect of specified conduct, even a few players who are found to have indulged
in the proscribed conduct can be captured, and it is not the requirement of law
that, for a cartel to be established, it is necessary to implicate and implead each
and every player operating in the industry. It is another matter that the parties
may rebut the statutory presumption by adducing cogent evidence.
206. Some grievance was also made by a few OPs that the opportunity of cross-
examination was not accorded. In this regard, it is sufficient to point out that the
case essentially rests on e-mails and the contents thereof, which were duly
confronted to the representatives of the OPs themselves, who not only broadly
corroborated the same but even acknowledged the meetings convened on the
platform readily made available by the trade association. The representatives
also deposed as to the nature of discussions having taken place in such meetings.
In view of this, the plea seeking cross-examination is misconceived and
infructuous as the Commission has only relied upon the depositions of the
representatives of the parties themselves while examining their conduct.
207. Even otherwise, under Regulation 41 of the General Regulations, the
Commission or the DG has the discretion to take evidence either by way of
affidavit or by directing the parties to lead oral evidence in the matter. However,
if the Commission or the DG, as the case may be, directs evidence by a party to
be led by way of oral submissions, the Commission or the DG, as the case may
be, if considered necessary or expedient, may grant an opportunity to the other
party or parties, as the case may be, to cross-examine the person giving the
evidence. Hence, even when the evidence is led by oral submissions, the
Commission or the DG retains the discretion to consider the request for the grant
Suo Motu Case No. 05 of 2016 62
of opportunity to the other party or parties to cross-examine the person giving
the evidence, if the same is considered necessary or expedient.
208. Be that as it may, for the reasons already mentioned, nothing survives in such
requests as the Commission has not used the oral testimony of any person other
than those of representative(s) / former representative(s) of the concerned
companies.
209. Lastly, some of the parties also raised the plea of lack of certificates in terms of
Section 65(B) of the Indian Evidence Act, 1872 to support the electronic
evidence. In this regard, it is appropriate to point out that, in the absence of
denial of meetings by OPs when confronted with those e-mails and the nature of
discussions therein as reflected in the e-mails, the plea is sans merit and is
accordingly rejected. In any event, the present order is based on the testimonies
and depositions of the OPs themselves who have corroborated the contents of e-
mails, as discussed in this order.
210. Once contravention by OPs is established, the Commission proceeds to analyse
the conduct of the Opposite Parties' directors, officers and employees who
would be liable for such anti-competitive acts of the Opposite Parties, in terms
of Section 48 of the Act.
211. In view of the instances cited by the DG in the investigation report regarding the
identified individuals and evidences against them, the Commission agrees with
the DG in terms of liability to be fixed under Section 48. Accordingly, the
Commission holds the individuals of OPs, as identified and against whom
findings of contravention was recorded by the DG, liable in terms of the
provisions of Section 48(1) and 48(2) of the Act. None of the identified
individuals have been able to prove that the contravention committed by their
respective companies was without their knowledge or that they had exercised all
due diligence to prevent the commission of such contravention. The individuals
Suo Motu Case No. 05 of 2016 63
have not been able to rebut or deny before the Commission the roles played by
them in cartelisation for which the DG has gathered cogent and sufficient
evidences, which are primarily based on the testimonies of representatives of the
concerned parties. Therefore, the Commission also finds the identified
individuals of OPs liable in terms of the provisions of Section 48(1) as well as
Section 48(2) of the Act.
212. Before parting with this order, the Commission notes that, though the DG did
not record any specific finding of contravention against OP-1, OP-3, OP-14, OP-
18 and OP-20, being cognizant of meetings and discussions, they should have
reported the matter to the Commission. In this regard, the Commission warns
these OPs to be careful in attending meetings of trade associations where
activities prohibited under the Act take place. If they find themselves in such
meetings, it would be obligatory for them to recuse themselves from such
meetings and, as responsible corporate citizens, immediately bring such
meetings and discussions to the attention of the Commission without any delay.
ORDER
213. In view of the above, the Commission holds OPs (OP-2, OP-5, OP-6, OP-7, OP-
8, OP-9, OP-10, OP-12, OP-17 and OP-21) to have contravened the provisions of Section 3(1) read with 3(3)(a) of the Act, as detailed in this order.
214. The Commission, in terms of Section 27(a) of the Act, directs above OPs and their respective officials who have been held liable in terms of the provisions of Section 48 of the Act to cease and desist in the future from indulging in practices which have been found in the present order to be in contravention of the provisions of Section 3 of the Act, as detailed in the earlier part of the present order.
Suo Motu Case No. 05 of 2016 64215. On the issue of imposing monetary penalties upon the OPs and their respective officials, the Commission is of the view that, for the reasons recorded below, the ends of justice would be met if a symbolic penalty as against the maximum penalty permissible under the statute, is imposed upon the OPs only.
216. In this regard, the Commission is conscious of the fact that during pandemic, as contended by OPs, most of the businesses moved to the virtual mode, reducing the need for paper and thereby affecting the paper business significantly. In such a situation, any significant penalty on these firms may render them economically unviable. Thus, considering the matter holistically, the Commission decides to impose a monetary penalty of only Rs. 5 Lakh upon each of the OPs (OP-2, OP- 5, OP-6, OP-7, OP-8, OP-9, OP-10, OP-12, OP-17 and OP-21) who have been found to have contravened the provisions of the Act, as detailed in this order.
217. As regards OP-21, it is observed that it has filed lesser penalty application and has also fully cooperated during investigation before the DG. The Commission decides to grant 100% reduction in the penalty amount imposed upon OP-21.
218. A penalty of Rs. 2.50 Lakh is imposed upon OP-4 Association for actively providing its platform for anti-competitive activities of the players, besides convening, coordinating and organizing the meetings. Further, the Commission is of the considered opinion that the objectives of the Act would be met if the parties including their respective individuals in the present matter are ordered to cease such cartel behaviour and are further directed to desist from indulging in similar behaviour in the future, as directed earlier. The OPs and their respective individuals are, however, cautioned to ensure that their future conduct is strictly in accord with the provisions of the Act, failing which, any such future behaviour would be viewed seriously as constituting recidivism, with attendant consequences.
219. It is made clear that nothing contained in this order shall be deemed confidential, as the same have been used in the terms of provisions of Section 57 of the Act.
Suo Motu Case No. 05 of 2016 65220. The Commission directs each of the OPs (OP-2, OP-5, OP-6, OP-7, OP-8, OP-9, OP-10, OP-12, and OP-17) and OP-4 Association to deposit the penalty amount within 60 days of receipt of this order.
221. The Secretary is directed to communicate with the concerned parties accordingly.
Sd/-
(Ashok Kumar Gupta) Chairperson Sd/-
(Sangeeta Verma) Member Sd/-
(Bhagwant Singh Bishnoi) Member Date: 17/11/2021 Place: New Delhi Suo Motu Case No. 05 of 2016 66