CCI - ICF Chennai Specifying Eligibility Criteria For Procurement Through Tenders Cannot Be Considered As Anti-Competitive

Background Facts

Informant mentioned that ICF Chennai (OP-1) published a tender date 06.02.2023 for the procurement of 1811 nos. of Lower Spring Beam with vertical brackets for 453 coach sets.

The eligibility criteria (EC) for the tender required vendors to be on the Unified Vendor Approval Module (UVAM) list, have supplied 20% or 35% of the tendered quantity in the past three years, and have supplied a minimum of 200 units in the last three years.

The Informant noted that there were only five approved sources in the UVAM for the relevant item, but only two were active. This limited effective competition to just two vendors, which the Informant argued was against Railway Board guidelines that require a minimum of five active vendors.

The EC ignored past bulk suppliers' performance and Railway Board guidelines for vendor approval, thus excluding regular suppliers despite a sudden increase in tendered quantity.

The Informant alleged that Super Steels (OP-2) and Alvind Industries (OP-3) have consistently been the lowest and second-lowest bidders, respectively, for the past 6-7 years, showing a pattern of cartel behavior.

The Informant claimed that OP-2 could not have remained the lowest bidder without collusion with OP-3, who accepted OP-2's rates without attempting to become the lowest bidder. This alleged cartel was ignored by OP-1 in the current and previous tenders.

Feeling aggrieved, the Informant filed a complaint before the Commission, alleging that OP-1 abused its dominant position by imposing restrictive eligibility criteria for the tender and supporting cartel formation by OP-2 and OP-3, in violation of Section 4(2)(a)(i) of the Competition Act.

Observation by Commission

The Commission referred to the table of previous year's tenders provided by the informant and observed that, aside from the bid quotations made by OP-2 and OP-3 in two tenders with minor price differences, there is no other evidence supporting the informant's allegations of cartelisation between them.

The Commission held that mere price parallelism is not sufficient to conclude cartelisation without evidence of any additional factors supporting the parallel pricing.

The Commission further cited its order in the case of Delhi Jal Board vs. Grasim Industries Ltd. & Ors. (Case No. 03 of 2013), stating that parallel pricing is not per se violative of the Act. There must be additional evidence, or "plus factors," to conclude that prices have been set through coordinated action or a meeting of minds.

The Commission observed that there were no indications of collusion or a meeting of minds between OP-2 and OP-3, nor among the Opposite Parties. As a result, the Commission found no evidence of cartelization or violations of Section 3 of the Act by OP-2, OP-3, or OP-1.

Regarding the allegations against OP-1 under Section 4 of the Competition Act, the Commission noted that the claim about having only two active vendors, contrary to Railway Board guidelines requiring a minimum of five, was incorrect. The data showed that Nanda Engineering Works, another active vendor, regularly participated in Railway tenders, and EC Blade and Tools Pvt. Ltd. also bid in previous tenders.

The Commission observed that OP-1, being a consumer or procurer of the item, has the right to specify its own requirements, conditions, and eligibility criteria (EC). These requirements and conditions themselves are not necessarily anti-competitive. Therefore, the Commission directed to close the matter against opposite parties.

Case – XYZ Versus The PCMM, Integral Coach Factory & others

Citation - Case No. 18 of 2023

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