CCI vide its order dated 20.01.2022 discovered 4 delivery traces , Nippon Yusen Kabushiki Kaisha (‘NYK Line’/‘OP-1’), Kawasaki Kisen Kaisha Ltd. (‘KLine’/‘OP-2’), Mitsui O.S.Ok. Traces Ltd. (‘MOL’/‘OP-3’) and Nissan Motor Automotive Provider Firm (‘NMCC’/‘OP-4’), responsible of cartelization within the provision of maritime motorized vehicle transport companies to car Unique Gear Producers (‘OEMs’) for numerous abroad commerce routes. Within the public model of the order, the names of the OEMs have been redacted. 

BACKGROUNG

The CCI initiated suo motu case, based mostly on an utility dated 01.10.2014 filed beneath the provisions of Part 46 of the Competitors Act, 2002 (the ‘Act’) learn with Regulation 5(1) of the Competitors Fee of India (Lesser Penalty) Laws, 2009 (‘Lesser Penalty Laws’), by NYK Line. It was talked about within the utility that NYK Line, Ok-Line, MOL and NMCC (hereinafter the ‘OPs’) colluded in respect of offering maritime motorized vehicle transport companies to car OEMs viz. for sure particular abroad commerce routes. Fee famous that the OPs had been exchanging commercially delicate info to co-ordinate, inter alia, the worth to be quoted for provision of maritime motorized vehicle transport companies on Pure Automotive Provider (‘PCC’) vessels to car OEMs. Based mostly on the identical, the Fee, forming an opinion {that a} prima facie case of contravention of the provisions of Part 3(3)(a) and Part 3(3)(d) learn with Part 3(1) of the Act is made out, handed an order dated 20.11.2014 beneath Part 26(1) of the Act directing the Director Common (‘DG’) to trigger an investigation to be made into the matter and submit a report. In the course of the pendency of investigation earlier than the DG, MOL and NMCC additionally approached the Fee on 29.07.2016 as lesser penalty candidates, by submitting a joint utility beneath the provisions of Part 46 of the Act learn with Regulation 5(1) of the Lesser Penalty Laws. The Fee, nevertheless, vide order dated 03.08.2016, rejected the mentioned utility dated 29.07.2016 on the bottom that two competing firms have filed a joint utility. Thereafter, MOL, adopted by NMCC, filed separate functions earlier than the Fee on 04.08.2016, beneath Part 46 of the Act learn with Regulation 5(1) of the Lesser Penalty Laws.

ALLEGATIONS

  1. NYK Line and Ok-Line exchanged info with respect to quoted freight charges/positions/schedules, and many others. Within the bid-rigging course of, MOL was additionally complicit.
  2. NYK Line and Ok-Line, inter alia, coordinated the crusing schedule to regulate the frequency of shipments monthly, in response to the requests made by.
  3. Conferences befell between NYK Line and NMCC on this regard, whereby NMCC requested NYK Line to submit a bid at a worth larger than NMCC’s indicated charges. Additional, for a particular commerce route (redacted) , NMCC requested NYK Line to offer a provisional freight charge.
  4. The Fee famous that the OPs had been exchanging commercially delicate info to co-ordinate, inter alia, the worth to be quoted within the matter of provision of maritime motorized vehicle transport companies on Pure Automotive Provider (‘PCC’) vessels to car OEMs. 

The Fee, discovered {that a} prima facie case of contravention of the provisions of Part 3(3)(a) and Part 3(3)(d) learn with Part 3(1) of the Act is made out and directed an in depth investigation by the Director Common (DG) . 

DG INVESTIGATION 

The DG famous that the ocean delivery business contains of a number of sectors and kinds of vessels, together with bulk carriers, tankers, and car carriers. Along with delivery autos, car carriers additionally ship excessive and heavy cargo (cargo larger and heavier than a car and requiring particular preparations) and small, ancillary, non-moveable cargo, and many others. A RoRo ship is a particular kind of ocean vessel that enables automobiles to be pushed and parked on its decks for lengthy voyages. These ships, also referred to as Automotive Carriers, have particular ramps to allow easy accessibility, excessive sides to guard the cargo throughout transport, and quite a few decks to permit storage of a big quantity and number of automobiles. With the aforesaid business overview, the DG returned to the next findings:

  1. Line, Ok-Line and MOL colluded with one another. The modus operandi for this collusion was discovered to be centered on preliminary negotiations between these three OPs. It was discovered that NYK Line and Ok-Line agreed to supply joint companies to and that NYK Line and Ok-Line additionally agreed to observe ‘Respect Rule’ with MOL. Additional, freight charges had been additionally mentioned between these three Ops. 
  2. NYK and Ok-Line colluded by having conferences and exchanging requires the route of from 2008 to 2012. There was additionally shut matching of freight costs for the contracts. 
  3. The DG discovered that the 4 OPs had agreements/preparations/tacit understanding with one another from 2008 onwards until not less than 2012, using numerous modus operandi and thereby forming respective cartels which had the impact of limiting competitors in India. 
  4. The complete set of proof that are within the type of memos, e-mails, Affidavits, and depositions, established that every one the 4 OPs had been in common interplay with one another and formulated methods with respect to contract, which is in contravention of the provisions of Part 3(3)(a), 3(3)(c) and three(3)(d) learn with Part 3(1) of the Act. 
  5. Varied officers of the OPs beneath Part 48(1) and/or Part 48(2) of the Act, who had been a part of the cartelization amongst the OPs. The position of those people was duly famous. 

REPLY OF OP’S 

  • NYK Line supplied full, true and very important disclosures, info, paperwork and proof and co-operated genuinely, totally, repeatedly and expeditiously all through the investigation and never hid any info. 
  • NYK Line, prayed that within the occasion the Fee deems it applicable to levy a penalty on NYK Line, it needs to be granted 100% discount in penalty by way of Part 46 of the Act learn with Regulation 4 of the Lesser Penalty Laws. 
  • MOL has extensively defined the cartel and has made immense worth addition. MOL has additionally submitted a number of proof which has not been relied upon by the DG within the DG Report. MOL has met the usual beneath Regulation 3(1) of the Lesser Penalty Laws learn with Part 46 of the Act and needs to be granted most discount in penalty. 
  • The ‘Respect Rule’ was on the coronary heart of the cartel actions that befell between the automotive service delivery firms and can also be a key focus of MOL’s lesser penalty utility and extra submissions. 
  • MOL’s response also needs to entitle NMCC, its subsidiary, to all advantages that MOL could get by way of immunity or discount in fines in consonance with MOL’s precedence standing. 
  • NMCC made immense worth addition by means of its submissions and extensively assisted the DG in arriving at its conclusions.

CCI FINDINGS 

Change of Data: The Fee, was of the view that even assuming that the dialogue between the OPs with respect to freight served as a reference, it’s past comprehension as to what was the necessity to focus on even reference ranges between rivals. Such discussions may have been between the procurer i.e., and the involved OP and never between the OPs themselves. Additional, it was additionally of no consequence that subsequently negotiated charges had introduced down the freight charges for the route, even under the supposed Guideline Charges. As soon as the OPs have distorted the worth discovery course of by colluding with one another, any effort by the procurer to additional negotiate the worth will not be prone to obtain the identical aggressive freight charges that might have been found beneath aggressive situations. The communication between the OPs are indicative of the very fact, that as a substitute of independently competing to offer companies to, determined to supply joint companies in relation to the tender for maritime motorized vehicle transport for its commerce route from to in. By advantage of this association, they secured enterprise. Mere absence of a proper tender wouldn’t grant immunity to the negotiating suppliers from the provisions of Part 3(3)(d) of the Act if they’ve in any other case colluded. The essence of the supply is to make sure aggressive choices. This can be attained by floating a proper tender or by participating in negotiations with potential suppliers. 

Respect Rule: The Fee famous that the very foundation of the cartel allegations within the matter pertains to enforcement of ‘Respect Rule’ by the PCCs in favour of the incumbent participant (which in case of , was NMCC). Due to this fact, the end result of the mentioned rule would clearly be that Ok-Line didn’t present companies. Ok-Line has not asserted that it was not approached by in search of maritime transport companies for its autos manufactured in India. Accordingly, the mentioned assertion by Ok-Line was of no consequence. As elaborated earlier, there may be adequate proof on file (through emails, WhatsApp messages) to point that different PCC(s) approached KLine to both respect the incumbent standing or quote the next worth.

AAEC: CCI additional held that Change of data and discussions within the current matter weren’t restricted to operational points. The PCCs actively exchanged/mentioned, inter alia, price-related info in addition to requested one another to implement the ‘Respect Rule’. By no stretch of creativeness can dialogue on such points be assumed to be restricted to operational points. The Notification No. S.O. 354(E) dated 05.02.2015 issued by the Ministry of Company Affairs whereas exempting Vessel Sharing Preparations (VSAs) between Liner Delivery Business from the provisions of the Act, doesn’t exempt them from provisions of Part 3 of the Act and has itself carved out an exclusion for agreements leading to concerted practices involving fixing of costs, limitation of capability or gross sales and allocation of markets or prospects. 

CCI additional held that the analysis of accessible proof signifies that there was an settlement between NYK Line, Ok-Line, MOL and NMCC with the target of enforcement of “Respect Rule”, which means avoiding competitors with one another and defending the enterprise of incumbent Pure Automotive Provider (PCC) vessels with the respective OEM. The PCCs would respect the enterprise of the incumbent service by both offering a quote above the incumbent’s charges or refraining from quoting. To realize the mentioned goal, the OPs resorted to multi-lateral in addition to bilateral contacts/ conferences/ e-mails with one another to share commercially delicate info which, inter alia, contains freight charge. The OPs engaged in such practices with the goal of proscribing competitors and sustaining the established order, i.e., guaranteeing that the automotive carriers would hold their respective companies for sure prospects and/or sure routes. The mentioned conduct on the a part of the OPs may be categorized as an settlement which is presumed to have AAEC inside India beneath the provisions of Part 3(3) of the Act. It’s famous that NYK Line, MOL and NMCC haven’t objected to such AAEC. 

CCI based mostly on the above concluded that NYK-LINE, Ok-LINE, MOL, NMCC together with their workplace bearers (‘Reverse Events’ or OP) are responsible of cartelization by means of trade of commercially delicate info to co-ordinate, inter alia, the worth quoted within the matter of provision of maritime motorized vehicle transport companies on PCC vessels to car OEMs beneath Part 3 of the Act.

PENALTY

The Fee determined to impose penalty @ 5% of the related turnover for every year of continuance of cartel on all of the OPs:

  1. OP – 1 NYK LINE INR 38,10,52,508 
  2. OP-2 Ok-LINE INR 24,23,22,075 
  3. OP – 3 MOL INR 20,25,94,486 
  4. OP-4 NMCC INR 40,99,20,191

The Fee additionally imposed a penalty on the people, on the similar charge of 5% of the common of their incomes, for the final three monetary years previous the date when the settlement between Reverse Events ceased to exist.

LESSER PENALTY 

NYK Line was the primary lesser penalty applicant to method the Fee. As such, it was held eligible for as much as 100% discount within the penalty quantity imposed upon it. The leniency utility filed by NYK Line disclosed the collusive actions with its rivals together with paperwork of proof in assist. With full disclosure of data, in relation to trade of commercially delicate info, freight expenses, proscribing provide subsequently led to the CCI to order an investigation within the matter. CCI additionally granted 100% immunity to NYK Line and its people for disclosing the existence of cartel within the maritime motorized vehicle market. Subsequently, MOL and NMCC filed lesser penalty functions with detailed submissions as to why they need to be traded collectively and never as separate entities. Each had been granted the second and third precedence standing maker respectively. MOL and its people had been granted as much as 50% discount from penalty, being the second leniency applicant, was fined INR 10,12,97,243 and lastly, NMCC and its people, had been granted as much as 30% discount from penalty, being the third leniency applicant, and was fined INR 28,69,44,134. 

COMMENT: This can be a typical case of rivals exchanging delicate info to coordinate within the charges for offering companies. Although all of the 4 delivery traces had conceded that they had been coordinating with one another and had been thus cartel but their meek protection of the coordination that subsequently negotiated charges had introduced down the freight charges for the route, even under the supposed Guideline Charges not resulting in precise improve in sea fares was rightly rejected by the Fee. The Act proscribes even makes an attempt of coordination amongst rivals, notably , relating to cost fixation though such makes an attempt is probably not profitable or the procurer could carry down such charges by its personal due diligence.

This text first appeared on the Antitrust & Competitors Legislation Weblog on 23 February 2022