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The Competition Commission of India closes the reference against M/s Gokul Agro Resources Limited and M/s Gokul Agri International Limited because common ownership alone does not prove bid-rigging or collusion. The Army Purchase Organisation alleged that both opposite parties are sister concerns that formed a cartel in an edible oil tender. The Commission finds that multiple independent entities participated in the tender and other bidders won several schedules. The Commission also notes that the opposite parties are independent listed companies without common directors. Therefore, the Commission closes the matter under Section 26(2) of the Competition Act, 2002.
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COMPETITION COMMISSION OF INDIA
Ref Case No. 03 of 2024
In Re:
| ADGST (SM) Army Purchase Organisation | Informant |
|---|---|
| And | |
| M/s Gokul Agro Resources Ltd. | Opposite Party No. 1 |
| M/s Gokul Agri International Ltd. | Opposite Party No. 2 |
CORAM
Ms. Ravneet Kaur Chairperson
Mr. Anil Agrawal Member
Ms. Sweta Kakkad Member
Mr. Deepak Anurag Member
Order under Section 26(2) of the Competition Act, 2002
The present matter was received as a Reference under section 19(1)(b) of the Competition Act, 2002 (‘Act’) from Army Purchase Organisation (‘APO’/ ‘Informant’) through ADGST (SM), APO alleging contravention of the provisions of Section 3 by M/s Gokul Agro Resources Ltd. (‘Opposite Party No. 1’/ ‘OP-1’) and M/s Gokul Agri International Ltd (‘Opposite Party No. 2’/ ‘OP-2’), collectively referred to as ‘OPs’.
As per the Reference, APO is responsible for the procurement of ration items (including tinned, packaged, dry ration and animal ration) for the Armed Forces.
The Informant has stated that:
“7.5.8. It is possible that sometimes a group of bidders quote the same rate against a tender. Such pool/cartel formation is against the basic principle of competitive bidding and defeats the very purpose of an open and comparative tendering system. Such and similar tactics to avoid/control true competition in a tender leading to “Appreciable Adverse Effect on Competition” (AAEC) have been declared as an offence under the Competition Act 2002, as amended by the Competition (Amendment) Act, 2007. Such practice should be severely discouraged with strong measures. In case of evidence of cartel formation, detailed cost analysis may be done by associative experts if necessary. Besides, suitable administrative actions can be resorted to, such as rejecting the offers, reporting the matter to the trade associations, the Competition Commission or NSIC, etc., and requesting them, inter-alia, to take suitable strong actions against such firms. New firms may also be encouraged to get themselves registered for the subject goods to break the monopolistic attitude of the firms forming a cartel. Changes in the mode of procurement (GTE instead of OTE) and packaging/slicing of the tendered quantity and items may also be tired. A warning clause may also be included in the bid documents to discourage the bidders from indulging in such practices.”
The Commission considered the matter in its ordinary meeting held on 18.12.2024 and decided to pass an appropriate order in due course.
The Commission has carefully perused the information in the Reference and material available on record.
The Commission notes that the Informant has alleged possibility of cartel formation in tender invited by the APO. Section 3(3)(d) of the Act deals with bid-rigging and reads as under:
“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—
…
(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.”
It is noted by the Commission that both OPs are enterprises and are engaged in identical trade of goods. In the present matter, the Commission, upon perusal of the Reference and documents annexed therein finds that 15 entities participated in the impugned tendering process and 11 of them were found technically qualified for participating in the subsequent stages of the tendering process.
On scrutiny of the summarized table of bids relating to tenders, as provided in the Reference, it is observed that OP-1 and OP-2 emerged L-1 on 4 occasions each out of a total of 15 occasions, and the percentage difference between their bids ranges between 0.42% and 10.46%. Further, from the data given for 15 occasions, it is noted that on 7 occasions the winner was a party other than OPs.
Further, it is pertinent to mention that one of the prayers in the Reference is to investigate the possibility of cartel formation and commonality of management between the OPs. Previously the Commission has dealt with similar allegations in Case No. 25 of 2021 (XYZ Vs. Continental Milkose India Limited). Relevant paragraphs from the Order of the Commission are reproduced as under:
“19…. Be that as it may, the Commission, in the facts and circumstances of the instant case, observes that merely having common Directors/Partners may not, ipso facto, give rise to anti-competitive concerns, in the absence of other material factors to indicate that such common relationship facilitated a few entities to come together and manipulate the bid process and reduce the strategic uncertainty required in such process. It may not be entirely uncommon, where a common Promoter/Director acts as a link between two entities, to facilitate anti-competitive behaviour. However, there is no presumption that it has to be that way at all times; instead, it will depend upon the attendant factual matrix. Thus, the Commission is of the view that merely having common business linkages between the bidders as projected by the Informant, in itself, cannot be the sole basis to suggest meeting of minds or assentio mentium between the bidders in the bidding process.
- The Commission has previously held that common ownership is not sufficient to record any findings of contravention of the provisions of Section 3 of the Act. In Re: Alleged cartelization in road construction work in the State of Uttar Pradesh (Suo Motu Case No. 03 of 2018), it was held that:
“Having examined the DG report and the material available on record, the Commission, at the outset, notes that as regards related parties submitting bids or parties having common ownership, the Commission is of the opinion 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. In this regard, reference may be made to a few of such previous orders passed by the Commission. In Re: Ved Prakash Tripathi v. Director General Armed Forces Medical Services & Ors. (Case No. 10 of 2020), the Commission held that: “…mere commonality of directors or ownership of participating firms, in itself, is not sufficient to record any prima facie conclusion about bid rigging in the absence of any material indicating collusion amongst such bidders while participating in the impugned tender…. Further, In Re: Reprographics India v. Hitachi Systems Micro Clinic Pvt. Ltd. & Ors. (Case No. 41 of 2018), the Commission held that: “...merely having common business linkages between the OPs as projected by the Informant, cannot be the basis to suggest collusion in the bidding process. Moreover, there is no material on record to suggest that the OPs were engaged in Bid Rotation etc. Therefore, the allegation of supportive bid does not find favour with the Commission....”. Resultantly, mere commonality of ownership does not imply contravention of the provisions of Section 3(3)(d) of the Act, unless there is material on record to substantiate the allegations of bid rigging by way of collusion.””
