TMI Blog2022 (7) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act, the most difficult task is to establish the existence of the agreement/arrangement/understanding amongst the parties, because such agreements are often perpetrated in secrecy. In the present case, however, the existence of the agreement, i.e. the fixation of price, is not under challenge. The DG has found enough evidence that the prices were increased and certain restrictions were imposed collectively by OP-1 to OP-10 through association meetings from 2014 till 2018. OP-1, the only OP that filed response to the Investigation Report, has admitted to these meetings. Rather, it has sought to justify its participation in such meetings by citing the prevailing circumstances at the time when such meetings took place and the mutual nature of such meetings where, admittedly, the members of the Informant also participated. Further, many such meetings were organised at the premises of the Chennai Port Trust and with its knowledge. Circulars were issued by these OPs after the said meetings, which have been received and responded to by the Informant. Thus, the Commission finds no purpose being fulfilled by reiterating the minutes of the meetings and the discussions that took ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aner charges, inflation, etc. between 2010 and 2018, and on the other hand, it has brought forward the plight and financial distress of its members. OP-1 has stated that the transportation business is the only means of survival for the members of various associations which have been made OPs in the present matter, thereby making such members solely dependent upon the income derived from the transport business for their livelihood, for payment to their drivers/cleaners, repayment of loans from financial institutions, upkeep of the trailers etc. Further, CFSs were entering the transportation business, and thus, sidelining members of TOAs - While the Commission may tend to have a sympathetic inclination towards certain difficulties, which has been expressed by OP-1 that its members face and is cognizant of the facilitative role of trade associations in furthering the collective interests of its members to alleviate the hardships, if any, the Commission cannot be oblivious to such Association providing its aegis to facilitate coordinated conduct which are otherwise falling foul of the provisions of the Act. Further, as regards the third justification offered by OP-1, i.e. the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions of the Act. The Commission is of the considered view that a cease-and-desist order under Section 27 of the Act would sub-serve the ends of justice in the matter. - Case No. 04 of 2018 - - - Dated:- 20-7-2022 - Ashok Kumar Gupta (Chairperson), Sangeeta Verma (Member) and Mr. Bhagwant Singh Bishnoi Member For National Association of Container Freight Stations (Informant): Mr. T Sundar Ramanathan, Authorised Representative, Mr. Vivek Pandey Legal Counsel, Mr. Adarsh Ramanujan Legal Counsel, Mr. Navneet Dogra Legal Counsel For Trailer Owners Association (OP-1): Mr. P. K. Sabapathi, Advocate For OP-2 to OP-12: None ORDER Order under Section 27 of the Competition Act, 2002 Information The Information in the present case has been filed by the National Association of Container Freight Stations, Chennai Chapter (hereinafter, the Informant / NACFS ) under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, the Act ) against M/s Trailer Owners Association (hereinafter, Opposite Party No. 1 / OP-1 ), M/s Trailer Organisers Association (hereinafter, the Opposite Party No. 2 / OP-2 ), M/s Port Contractors Welfare Associa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he OPs. Thus, the members of the Informant, as per the Information, are dependent upon the members of the OPs for continuous movement of goods, since the CFS are stated to have the space to accommodate 3 days storage, at most. Brief facts of the case 4. The Informant has alleged that the decisions taken by the OPs in various meetings during 2010 to 2018 are anti-competitive. The first meeting which the Informant has alleged to be anti-competitive is dated 07.07.2010, wherein it was decided that none of the members of the Informant could ply more than 20 trailers of their own for movement of containers, and such ceiling should include their sister concerns as well. This meeting was attended by the members of the Informant, the Chennai Port Trust and six transport owners associations (TOAs). 5. The second meeting which the Informant has alleged to be anti-competitive was held on 09.08.2014, wherein it was decided that, w.e.f. 01.09.2014, the individual rate for trailer services will be increased across the board, i.e., by ₹900/- for 20 feet containers and by ₹ 1400/- for 40 feet containers. The rates were to be further revised on 31.03.2016 and it was decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017, a letter was issued by some of the OPs, namely, OP-1 to OP-8, OP-10, and Tamil Nadu Taraus Containers Transport Owners Association to NACFS stating that tariffs for EXIM transport of containers agreed in 2014 were to be maintained. Also, CFS operators and members of the OPs were not entitled to commercially negotiate to reduce the rate from what was decided in 2014. The payment was to be made by a CFS operator to member of the OPs within 15 days, and if any negotiation was found to be continued by NACFS, the OPs would allegedly engage in non-cooperation in any export/ import delivery transport service with that specific member of the Informant. 12. NACFS responded to the aforesaid letter on 19.04.2017, stating that the tariff was not agreed upon in any meeting and the same is subject to mutual agreement between an individual trailer owner and a CFS operator. Additionally, any issue related to billing or delay was to be sorted out between an individual trailer owner and a CFS operator and should be mutually negotiated. On 07.02.2018, another letter was issued by the OPs to NACFS, wherein it was stated that a meeting was held by the OPs on 05.02.2018 and it was found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their members have engaged in collusive anti-competitive conduct by going on a strike since 16.09.2019, as a means to pressurise the Informant and their members to accept the unilateral and anti-competitive terms, despite the ongoing investigation by the DG. However, vide order dated 01.10.2019, the Commission rejected the said application, observing that the Informant had failed to demonstrate a case stronger than a mere prima facie opinion for investigation, irreparable loss, and balance of convenience in their favour, as envisaged in the Hon ble Supreme Court s decision in CCI vs. SAIL (2010 CompLR 0061 SC). Observations and Findings of the DG 17. After seeking extensions, the DG submitted the Investigation Reports to the Commission on 22.02.2021 and 09.04.2021, in confidential and non-confidential versions, respectively. 18. The DG noted that the Chennai Port is the 2nd largest port in terms of cargo handled in India. The port serves the geographical regions of Tamil Nadu, Pondicherry, South Andhra Pradesh and parts of Karnataka and has now emerged as hub on the east coast of India. A CFS is an extended arm of the port where containers are stuffed, de-stuffed and agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue was of commercial interest to the port and involved smooth functioning of port services. 21. The minutes of the said impugned meeting dated 09.08.2014 are stated as under: A joint meeting was held on 9th August, 2014 at Chennai Port Trust administrative building premises facilitated by Chennai Port Trust Authorities and chaired by Chairman Shri Atulya Misra, M. The discussion concluded with the following relating to transportation of containers from/ to the Port of Chennai. 1. For carriage transportation of (import/export) containers between ChPT and CFS increased by INR900/ 20' INR 1400/40' from the existing rate. 2. Effective date of implementation of revised rates will be 1 Sept 2014. 3. Next revision will be due on 31 Mar 2016 through mutual discussion and agreement of stakeholders of CTCC. 4. Existing procedure for carriage of Container(s) will continue to follow. 5. No stoppage on movement of containers by any stakeholders and the transport Operating Associations during the ensuing period and all concerns to be addressed through joint meeting of all stakeholders of CTCC. .. 22. From the reply o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09.08.2014 wherein rates were fixed it does not negate the allegation that the OPs have unilaterally fixed the prices. Even the presence of other stakeholders does not dilute the allegation of the Informant. Rather, it appears from the record that the stakeholders, by participating in the meeting, wanted to ensure seamless movement of the containers. 25. The DG also highlighted that, though the Chairman of the Chennai Port Trust attended the meeting dated 09.08.2014, his presence appeared to be forceful at the behest of threat of strikes by the OPs. Therefore, his presence may have been to safeguard the seamless movement of work without any disruption at the Chennai Port. OPs, as per the DG, may have pressed for the presence of a government official to have an impression of binding effect on members of the Informant. Thus, the DG opined that the decision taken in the meeting held on 09.08.2014, to increase the tariffs, does not seem to be a free decision taken by market forces independently in a competitive market. 26. The DG also noted that two more meetings were held on 19.04.2018 and 11.05.2018 amongst the stakeholders of the Chennai Port. The meeting was organised by Che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 07.07.2010. The said meeting took place at the Southern India Chamber of Commerce premises at Chennai and was attended by members of the Informant and OPs, Chennai Custom House Agents Association (CCHAA) (now known as Chennai Customs Brokers Association, CCBA), Chennai Ennore Port Steamer Agents Association (CHENSAA), South India Chamber of Commerce and Industry (SICCI) and Chennai Container Terminal Pvt. Ltd. (CCTL). In the said meeting, it was categorically decided that the CFS Operators can ply their vehicles to the maximum of 20 and that any requirement over and above the 20 vehicles used by them should be given only to members of any of the six TOAs. 30. The DG observed that the restriction of not plying more than 20 trailers, as decided in the meeting held on 07.07.2010, is an anti-competitive condition as it amounts to controlling the provisions of transport services at Chennai Port. The DG also highlighted that it was decided that the existing fleet should continue till the next review meeting and it would be reviewed in next review meeting only. This, as per the DG, showed that OPs were controlling the market of provision of transport services by the members of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 19.03.2018 onwards. Further, the DG found that the vehicle movement of the trailers outside the port was stopped on 19.03.2018 by the OPs. Meanwhile, on 19.03.2018 itself, a meeting was convened with the stakeholders to resolve the issues between NACFS and TOAs. Subsequently, based on the discussions/negotiations, the strike was called off on the same day, i.e. 19.03.2018. The said negotiations pertained to increase in the tariffs, payment of dues by CFS within 30 days from the date of receipt of the bill and number of trailers that each CFS can ply. As per the minutes of the said meeting, there was a deep discussion on the 20 Trailers fixation as imposed by the TOA to be plied by each individual member of the NACFS. The NACFS suggested to increase 30 trailers per CFS. It was agreed that the co-ordination committee shall decide upon this issue. Meantime, the NACFS should ply only 20 Trailers as per the 2010 agreement. 34. Based on the above discussion and minutes of meetings, the DG concluded that the conduct of OP-1 to OP-10 in imposing restrictive condition of not plying more than 20 trailers is in contravention of Section 3(3)(b) of the Act as it amounts to limiting and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d averments, the Commission decided to forward a copy of the non-confidential version of the Investigation Report to OP-11 and OP-12 to invite their objections/suggestions thereof. Further, in view of the request being made by OP-1, the Commission decided to grant 8 weeks time to the parties for filing their respective objections/suggestions to the Investigation Report. The Commission further decided to hear the parties on the Investigation Report on 18.11.2021. 39. None of the OPs filed their objections/suggestions to the Investigation Report within the prescribed timeline. The Informant filed its suggestions/objections to the Investigation Report on 15.11.2021, craving leave to file additional response, in case any objections/suggestions are filed by any of the OPs. Vide email dated 15.11.2021, adjournment request was made by OP-1 seeking extension of time by 6 weeks for filing its objections/suggestions to the Investigation Report, stating that it could not convene the meeting of its members due to the government restrictions on large gatherings given the prevailing COVID-19 pandemic. The Commission allowed additional time and fixed the hearing on 02.02.2022. 40. Thereaft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, on 17.05.2022, the Informant filed its reply to the suggestions/objections dated 28.04.2022 filed by OP-1 to the Investigation Report. 44. The crux of the responses/submissions/objections made by NACFS and OP-1, including the oral submissions of NACFS, are summarised below. Replies/Submissions of the Parties Trailer Owners Association/OP-1 45. OP-1 stated that all the conclusions/findings/observations of the DG against OP-1 are purely on conjectures, assumptions and presumptions, and not supported by any concrete material. None of the practices of OP-1 and its members fall within the categories of Section 3(3) or Section 3(1) of the Act. It has been stated that the members of NACFS play a dual role of CFSs and transporters. Around 16 CFSs operating in Chennai own more than 417 trailers by themselves. Transportation work is allotted to these CFS transporters on a priority basis, and the leftover work, if any, is given to the members of OP-1 and the members of any other trailer owners association. Members of OP-1 operate only transportation business and no other business, and thereby, are solely dependent upon the income derived from the transport business for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciations had also expressed their anguish regarding the conduct of the members of NACFS engaging fresh/new transporters by side-lining existing transporters, whenever they requested payment of the transportation charges for the works already undertaken/carried out. The trailer owners associations had requested NACFS to organise a joint meeting between NACFS and all the trailer owners association to resolve various issues. In response to the said joint letter, NACFS sent a reply dated 19.04.2017 and contended that all issues would have to be sorted out among the individual members. The very wordings of the said reply, which was sent after a delay of more than three years, shows that the same was an afterthought to wriggle out of their commitment made before the Chairman of Chennai Port Trust in 2014. 49. OP-1 contended that it had also submitted a comparative chart of increase in the prices of diesel, insurance, tyres, spare parts, driver/cleaner charges, etc. between 2009 and 2018 before the DG, to justify the increase in price, which has not been considered. 50. OP-1 also averred that the members of NACFS, who also own trailers, charge anywhere upto Rs. 11000/- for 20 feet t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had the members of OP-1 ever resorted to any strike nor blocked any entrance to the port or prevented anyone from operating their respective trades at any point of time. NACFS has not produced any evidence to substantiate these allegations. 54. OP-1 also stated that the observation of the DG that the members of OP-1 have 2336 trailers, all 40 feet, owned by 810 members of OP-1, is baseless and without any substance. The members of OP-1 own about 1200 trailers alone, with both 20 feet and 40 feet trailers. 55. Based on the aforesaid averment, OP-1 has prayed for dismissal/closure of the present matter. NACFS/Informant 56. The Informant submitted its response to the Investigation Report on 15.11.2021 and agreed with the conclusion of the DG regarding contravention of the provisions of the Act by OP-1 to OP-10. The Informant also reiterated the evidence against these OPs captured in the Investigation Report, which are not detailed herein. 57. The Informant, however, objected to the conclusion of the DG exonerating OP-11 and OP-12 and alleged that the call for strikes and lockouts given by the associations shows the involvement of OP-11 and OP-12. The Informant furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. 59. The Informant also stated that the factum of using strikes and lock-outs to make the members of the Informant agree to their illegal demands is evidenced by the documents and evidence on record. On 09.08.2014, the members of the Informant were made to agree to an across- the- board increase in prices, and because the prices were fixed across the board, the OPs agreed in the minutes of the meeting dated 09.08.2014 that there shall be no stoppage of movement of containers. Therefore, the stoppage of movement was always used as a threat to make the members of the Informant agree to the increase in prices without taking into consideration any parameters. The Informant has also highlighted instances of strikes undertaken by the OPs. 60. The Informant also relied upon the evidence contained in the Investigation Report to state that a majority of the members of the Informant agreed to the increased rates fixed by the OPs after the 09.08.2014 meeting. Further, it is also stated that the evidence on record brings out that only 3 out of the 28 CFS operators have more than 20 trailers, which shows that the members of the Informant were forced to accept the restrictive condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely, the OPs illegally leverage this position and take illegal advantage of this situation, resorting to various anti-competitive practices such as collective boycott and strikes and complete lockout/blockage of gates preventing all movements of goods in and out of the port and force and coerce the Informant and its members to agree to their illegal demands of increased prices, etc. 65. Based on the aforesaid averments, the Informant has prayed that the findings of the DG be affirmed, whereby OPs have been found to be indulging in contravention of the provisions of Section 3(3)(a) as well as Section 3(3)(b) of the Act. The Informant has also prayed for an imposition of penalty on the OPs and a direction for cease and desist from indulging in anti-competitive conduct. Observations and Findings of the Commission 66. The Commission has examined the material available on record, including the Information, Investigation Report, submissions made by the Informant, including the oral submissions, and the response filed by OP-1. Despite several opportunities having been granted to OP-2 to OP-12, none of these OPs have filed any submissions/response to the Investigation Report, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as enshrined under the Act, are reproduced below: Section 3(3) 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- (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) xx (d) xx shall be presumed to have an appreciable adverse effect on competition. xx 71. Both the allegations raised in the present matter fall under the category of decision taken by, any association of enterprises or association of persons, which are presumed to be having an appreciable adverse effect on competition (AAEC). Generally, in cases concerning horizontal arrangement/collusive conduct falling under Section 3(3) of the Act, the most difficult task is to establish the existence of the agreement/arrangement/understanding amongst the parties, because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een considered by the DG. Though such increase has not been stated as a justification of collusive conduct, OP-1 has claimed that this provides some perspective on the reasonability of price increase. Secondly, OP-1 has brought forward their plight and financial considerations such as inordinate delay on the part of CFS in clearing the dues to use transportation services of the members of the TOAs; CFSs entering the transportation business, and thus, sidelining members of the TOAs, whose only means of survival was through these transportation services, etc. Thirdly, OP-1 has stated that the decisions taken at the impugned meetings were mutual decisions which had an active involvement of the members of the Informant and the Chennai Port Trust, and thus, the same cannot be held as unilateral price increases on the part of the OPs. The Commission will deal with each of these in the ensuing paras. 73. The Commission observes that, through the first and second justification cited above, OP-1 has tried to demonstrate the role of associations as an instrument to further the economic and social well-being of its otherwise small members having unequal bargaining power. On one hand, OP-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legitimacy of actions taken by them under the Act. The relevant para therefrom is excerpted below: 7. Undoubtedly, there has been a collective action by OP 1 and its members but primarily the trade associations are for building consensus among the members on policy/other issues affecting the industry and to promote these policy interests with the government and with other public/private players. Such activities may not necessarily lead to competition law violation. To perceive otherwise will render the trade association bodies as completely redundant, being opposed to competition law. The trade association provide a forum for entities working in the same industry to meet and to discuss common issues. They carry out many valuable and lawful functions which provide a public benefit e.g. setting common technical standards for products or interfaces; setting the standards for admission to membership of a profession; arranging education and training for those wishing to join the industry; paying for and encouraging research into new techniques or developing a common response to changing government policy. Therefore, membership and participation in the collective activities of a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r achieving improvements in the production or distribution of goods or provision of services or promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services. Tested on these parameters, the justification offered by OP-1 does not in any manner rebut the presumption of AAEC but has been an attempt possibly to provide succor to its members and nothing more. The participation of Informant or Chennai Port Trust cannot alter the characterisation of an otherwise collusive conduct/practice. Neither can it dilute the responsibility of the associations involved in such collusive decision making. In a competitive market, the prices of goods or services should ideally be determined by a free interaction between demand and supply forces. Any collective collusive action can manipulate the market outcomes under which the independent decisions between each buyer and seller could have been reached. Seen in this light, the collective action by TOAs has manipulated the market forces and narrowed the scope of competition. 80. In this regard, the Commission also notes the submissions made by the Informant that the OPs were using ..... X X X X Extracts X X X X X X X X Extracts X X X X
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