Builders Association Of India vs Cement Manufacturers’ … on 31 August, 2016 – Case Summary

In the case of Builders Association of India vs Cement Manufacturers on 31 August 2016, the Competition Commission of India (CCI) was presented with a significant dispute involving allegations of anti-competitive practices within the cement industry. The case was brought forth by the Builders Association of India (BAI), who accused the Cement Manufacturers’ Association (CMA) and 11 cement manufacturing companies of violating Sections 3 and 4 of the Competition Act, 2002. The CCI, in its order dated 20.06.2012, found the accused parties guilty of contravening the provisions of Section 3(3)(a) and 3(3)(b) read with Section 3(1) of the Act.

Facts of the Case

The BAI, an association of builders and entities involved in construction, alleged that the cement manufacturers, under the umbrella of the CMA, were indulging in monopolistic and restrictive trade practices. They were accused of controlling the price of cement by limiting and restricting production and supply, despite having the capacity to produce more. The BAI also alleged that these manufacturers were involved in ‘collusive price fixing’, dividing India into five zones to control supply and fix high prices of cement, forming a cartel in contravention of the provisions of Section 3 of the Act.

The BAI further alleged that these manufacturers, who collectively held more than 57.23% of the market share in India, were abusing their dominant position to arbitrarily increase the price of cement. This was seen as a violation of Section 4 of the Act.

Issues Raised

The BAI raised several issues in their complaint. They claimed that the cement manufacturers were producing less than their installed capacity to create artificial scarcity and raise prices. They also accused the manufacturers of restricting the supply of cement to builders and consumers, causing artificial increases in the price of cement. The BAI argued that these actions had an adverse effect on competition in the real estate sector and affected the interests of consumers at large.

The BAI also pointed out that despite various concessions and stimulus packages announced by the Government in the wake of the financial crisis of 2008, the cement industry, instead of reducing the price of cement, increased it. They argued that this was a clear indication of the industry’s anti-competitive behavior.

Court’s Observations

The CCI observed that the cement manufacturers had indeed increased their prices uniformly and simultaneously at the same time, despite having different costs of production and transportation. This was seen as a clear indication of concerted action.

The CCI also noted that despite a slowdown in the construction and real estate sectors, the cement industry had earned an Operating Profit Margin (OPM) of 26% on a turnover of Rs. 45,717 crore in 2008, the highest OPM amongst 16 major industries, save for mining. This was seen as further evidence of the industry’s anti-competitive behavior.

The CCI concluded that the cement manufacturers, through their concerted actions, had indeed indulged in anti-competitive practices in contravention of the provisions of the Competition Act, 2002. They were ordered to cease and desist from any activity relating to agreement, understanding, or arrangement on prices, production, or supply of cement in the market. The CMA was also ordered to disengage and disassociate itself from collecting wholesale and retail prices through its member cement companies and from circulating details on production and dispatches of cement companies to its members.

This case serves as a significant precedent in the enforcement of competition law in India, highlighting the role of the CCI in curbing anti-competitive practices and ensuring fair competition in the market.