CCI vide its order dated 20.01.2022 discovered 4 delivery
strains , Nippon Yusen Kabushiki Kaisha (‘NYK
Line’/’OP-1’), Kawasaki Kisen Kaisha Ltd.
(‘KLine’/’OP-2’), Mitsui O.S.Ok. Strains Ltd.
(‘MOL’/’OP-3’) and Nissan Motor Automobile Provider Firm
(‘NMCC’/’OP-4’), responsible of cartelization within the
provision of maritime motorcar transport providers to
car Unique Gear Producers (‘OEMs’) for
varied  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, primarily based on an
software 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 software that NYK Line,
Ok-Line, MOL and NMCC (hereinafter the ‘OPs’) colluded in
respect of offering maritime motorcar transport providers to
car OEMs viz. for sure particular abroad commerce routes.
Fee famous that the OPs have been exchanging commercially
delicate info to co-ordinate, inter alia, the
value to be quoted for provision of maritime motorcar
transport providers on Pure Automobile Provider (‘PCC’) vessels to
car OEMs. Primarily based 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.

Throughout 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 software 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 software dated 29.07.2016 on the
floor that two competing firms have filed a joint software.
Thereafter, MOL, adopted by NMCC, filed separate purposes
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 so forth. Within the bid-rigging
    course of, MOL was additionally complicit.
  2. NYK Line and Ok-Line, inter alia, coordinated the crusing
    schedule to manage the frequency of shipments monthly, in
    response to the requests made by.
  3. Conferences came about between NYK Line and NMCC on this regard,
    whereby NMCC requested NYK Line to submit a bid at a value increased
    than NMCC’s indicated charges. Additional, for a particular commerce
    route (redacted) , NMCC requested NYK Line to supply a provisional
    freight fee.
  4. The Fee famous that the OPs have been exchanging commercially
    delicate info to co-ordinate, inter alia, the value to be
    quoted within the matter of provision of maritime motorcar
    transport providers on Pure Automobile 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 trade contains of
a number of sectors and sorts of vessels, together with bulk carriers,
tankers, and automobile carriers. Along with delivery automobiles,
automobile carriers additionally ship excessive and heavy cargo (cargo greater and
heavier than a automobile and requiring particular preparations) and
small, ancillary, non-moveable cargo, and so forth. A RoRo ship is a particular
sort of ocean vessel that enables automobiles to be pushed and parked on
its decks for lengthy voyages. These ships, also referred to as Automobile
Carriers, have particular ramps to allow easy accessibility, excessive sides to
shield the cargo throughout transport, and quite a few decks to permit
storage of a giant quantity and number of automobiles. With the aforesaid
trade 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 providers to and that NYK Line
    and Ok-Line additionally agreed to observe ‘Respect Rule’ with MOL.
    Additional, freight charges have been additionally mentioned between these three
    Ops.
  2. NYK and Ok-Line colluded by having conferences and exchanging calls
    for 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 at the very least 2012, using varied modus operandi
    and thereby forming respective cartels which had the impact of
    limiting competitors in India.
  4. Your entire set of proof that are within the type of memos,
    e-mails, Affidavits, and depositions, established that every one the 4
    OPs have 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 function 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, constantly 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 must 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
    customary beneath Regulation 3(1) of the Lesser Penalty Laws
    learn with Part 46 of the Act and must be granted most
    discount in penalty.
  • The ‘Respect Rule’ was on the coronary heart of the cartel
    actions that came about between the automotive provider delivery
    firms and can be a key focus of MOL’s lesser penalty
    software and extra submissions.
  • MOL’s response also needs to entitle NMCC, its subsidiary, to
    all advantages that MOL might 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

Alternate of Info: The
Fee, was of the view that even assuming that the dialogue
between the OPs with respect to freight served as a reference, it
is past comprehension as to what was the necessity to talk about 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 value discovery course of by
colluding with one another, any effort by the procurer to additional
negotiate the value isn’t prone to obtain the identical aggressive
freight charges that may have been found beneath aggressive
situations. The communication between the OPs are indicative of the
reality, that as an alternative of independently competing to supply providers
to, determined to supply joint providers in relation to the tender for
maritime motorcar 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 in the event that they
have in any other case colluded. The essence of the availability is to make sure
aggressive choices. This can be attained by floating a proper
tender or by partaking 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 result of the mentioned rule would clearly be that
Ok-Line didn’t present providers. Ok-Line has not asserted that it
was not approached by in search of maritime transport providers for its
automobiles manufactured in India. Accordingly, the mentioned assertion by
Ok-Line was of no consequence. As elaborated earlier, there may be
enough proof on document (through emails, WhatsApp messages) to
point out that different PCC(s) approached KLine to both respect the
incumbent standing or quote a better value.

AAEC:

CCI additional held that Alternate of knowledge and discussions in
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 clients.

CCI additional held that the analysis of obtainable proof
signifies that there was an settlement between NYK Line, Ok-Line, MOL
and NMCC with the target of enforcement of “Respect
Rule”, which suggests avoiding competitors with one another and
defending the enterprise of incumbent Pure Automobile Provider (PCC) vessels
with the respective OEM. The PCCs would respect the enterprise of the
incumbent provider 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 fee. The OPs engaged in such practices with the goal of
limiting competitors and sustaining the established order, i.e.,
guaranteeing that the automotive carriers would hold their respective
companies for sure clients and/or sure routes. The mentioned
conduct on the a part of the OPs could be categorised 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 primarily based 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 way of change of commercially
delicate info to co-ordinate, inter alia, the
value quoted within the matter of provision of maritime motorcar
transport providers 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 annually 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
identical fee 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 strategy the
Fee. As such, it was held eligible for as much as 100% discount
within the penalty quantity imposed upon it. The leniency software
filed by NYK Line disclosed the collusive actions with its
rivals together with paperwork of proof in assist. With full
disclosure of knowledge, in relation to change of commercially
delicate info, freight prices, limiting provide
subsequently led to the CCI to order an investigation within the
matter. CCI additionally granted one hundred pc immunity to NYK Line and its
people for disclosing the existence of cartel within the maritime
motorcar market. Subsequently, MOL and NMCC filed lesser
penalty purposes with detailed submissions as to why they
must be traded collectively and never as separate entities. Each have been
granted the second and third precedence standing maker respectively.
MOL and its people have 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, have been granted up
to 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 providers. Although all of the 4 delivery strains had conceded
that they have been coordinating with one another and have 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,
significantly , relating to cost fixation regardless that such makes an attempt
will not be profitable or the procurer might deliver down such charges by
its personal due diligence .

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

Particular Questions referring to this text must be addressed
on to the writer.

Article by MM Sharma, Head Competitors Legislation &
Coverage Follow, Vaish Associates, Advocates, New Delhi,
India

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