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Mere commonality of ownership of participating firms, is not sufficient to record any conclusion about bid rigging in the absence of any material indicating collusion among such bidders: Competition Commission of India

Unless there is material on record to justify the claims of price fixing by collusion, mere commonality of ownership does not indicate violation of the provisions of Section 3(3)(d) of the Competition Act. This was held by the CCI in the matter of In Re: Alleged Cartelization in Road Construction work in the State of Uttar Pradesh, [ Suo Motu Case No. 03 of 2018] before Hon’ble Chairperson Mr. Ashok Kumar Gupta, Hon’ble Members; Ms. Sangeeta Verma and Mr. Bhagwant Singh Bishnoi.

On the basis of a report from the Comptroller and Auditor General, the Commission acted on its own initiative upon becoming aware of the possibility of bid rigging by contractors engaged in road construction in the State of Uttar Pradesh. The Public Works Department (PWD) is in charge of the state’s road, building, bridge construction and maintenance. The CAG analysed 802 contract bonds undertaken by PWD in selected districts and found significant discrepancies from the criteria for technical evaluation of bids. The CAG noted a lack of competition in the tendering process, stating that 110 contract bonds were awarded on the basis of a single bid out of a total of 802 test-checked contract bonds implemented between 2011 and 2016. There was no re-tendering in any of these cases. As a result, only a small percentage of tenders received competitive bids.

Based on the above, the Commission on 26th June 2018, held that there was a contravention of Sections 3(3)(a) and 3(3)(d) read with Section 3(1) of the Act. Additionally, it also asked the Director General (DG) to conduct an investigation and submit its report. The DG observed the following, that the PWD replied to the findings of the CAG report saying that, proper tender promotion and publicity had been made, that no bid rigging arrangements had been made with bidders, and that the tendering process was unbiased. There were no restrictions on bidders participating in the bidding process if they were registered with the Department as autonomous units, even if two or more bidding enterprises shared partners or ownership. It was also pointed out that there was no clause in the tender conditions for rejecting a tender if only one bid was received.

The DG ascertained that identical bids in a tender and then during negotiation may indicate collusion between two bidders.  However, no proof to support or substantiate such suspicion was found.  When two bidders submit identical bids, the work is divided between them. This guaranteed that the quality of work was accomplished at a lower cost than was authorised, that the Department had not suffered any loss or litigation, and that the work was in accordance with previous practises.

The Commission with regards to the aforementioned and referring In Re: Ved Prakash Tripathi v. Director General Armed Forces Medical Services and Ors [ C.No. 10 of 2020] and In Re: Reprographics India v. Hitachi Systems Micro Clinic Pvt. Ltd. & Ors. [C.No. 41 of 2018] held that, “mere commonality of ownership of participating firms, in itself, is not sufficient to record any conclusion about bid rigging in the absence of any material indicating collusion amongst such bidders while participating in tenders. The Commission has consistently held that mere common ownership is not sufficient to record any findings of contravention of the provisions of Section 3 of the Act………that in the absence of any rule regarding a single bid, it would have been difficult for the Department to cancel a tender merely because there is only one responsive bid, much less to draw any inference of anti-competitive conduct in the absence of any material on record in this regard………the investigation has not brought out any material which warrants further inquiry into the matter. The material brought forth by the DG are not sufficient to record any finding of contravention of the provisions of Section 3(1) of the Act read with Section 3(3) thereof.”

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Judgement Reviewed by Vagisha Sagar

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