On February 3, 2022, the CCI imposed a penalty of INR 1.24 crores
(approx. US$ 151,728) on certain entities for bid-rigging in supply of signages for branches/offices/ATMs of State Bank of India (‘SBI’). ^[1]

In June 2018, the CCI received a complaint alleging bid-rigging in a tender floated by SBI Infra Management Solutions Private Limited (‘SBIIMS’) for supply and installation of new signages/replacement of existing signages for branches/offices/ATMs of SBI located at metro centres of its circles across India (‘Tender’). Based on the facts on record, the CCI arrived at prima facie finding that certain bidders for the Tender were co-ordinating and fixing the prices of their services as well as allocating the market amongst themselves, with the object of distorting fair bidding process. As such, the CCI directed the Director General (‘DG’) to investigate.

The opposite parties initially identified were Diamond Display Solutions Pvt. Ltd. (‘OP-1’), Autostriping India Pvt. Ltd. (subsequently renamed to AGX Retail Solutions Pvt. Ltd.) (‘OP-2’), Opal Signs Pvt. Ltd. (‘OP-3’), Avery Dennison Private Limited (‘OP-4’), and Amreesh Neon Pvt. Ltd. (‘OP-5’). However, during its investigation, the DG also added Macromedia Digital Imaging Pvt. Ltd. (‘OP-6’) and Hith Impex Pvt. Ltd. (‘OP-7’) to the matter.

During the pendency of the investigation, OP-4 applied for leniency under Section 46 of the Act read with the CCI (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’).

Based on the documentary evidence, depositions of key personnel of the OPs, call data records (‘CDRs’) of the key personnel of the OPs, the DG concluded that the OPs had indulged in anticompetitive conducts of bid-rigging and geographical allocation of the circles for which the Tender was issued. The DG also identified certain individuals of the OPs that would be liable in terms of the provisions of Section 48 of the Act.

Submission of OPs: OP-1, OP-2 and OP-3 admitted to the findings of the DG regarding coordination of bidding date and figures. OP-4, as a leniency applicant, provided vital disclosures and contended they (along with the individuals of OP-4) benefit from 100% reduction in penalty under the Lesser Penalty Regulations. OP-5, OP-6 and OP-7 denied the existence of an arrangement. All OPs (except OP-4) rejected the conclusion of guilt on the part of their representatives under Section 48 of the Act.

Findings and decision of CCI: The CCI reviewed several email exchanges between the OPs as well as depositions of employees of the responding bid participant OPs and found that the final bid price matched the figures discussed between the OPs for most geographical circles. For six geographical circles, the bidding sequence as well as the bid figures matched exactly. Although the lowest bid for some circles did differ slightly from what was planned between the OPs, the CCI noted that the bidding sequence and bid price need not match since the mere exchange of commercially sensitive information (‘CSI’) is disallowed under Section 3(3) read with Section 3(1) of Act, which not only proscribes the agreements which cause Appreciable Adverse Effects on Competition (‘AAEC’) but also forbids the agreements which are likely to cause AAEC. Further, in their depositions, most of the OPs admitted to having partaken in anticompetitive discussions with their competitors.

Some of the OPs argued that the excel worksheet containing the discussed bid figures, etc. prepared and circulated by a representative of OP-6, was merely a “tutorial” to explain the tendering process. The CCI rejected this argument, noting that the excel sheet was (unlike a tutorial) exhaustive and included data for all the geographical circles. The document was also revised basis additional inputs from another OP. Through the exchange of such information, the OPs had in engaged in bid-rigging and geographical allocation of market.

Other evidence considered by the CCI were CDRs of the OPs, which indicated that the OPs were in constant touch prior to, during, and post the bidding process, and the timing of the bid submissions closely matched the calls made among the OPs.

OP-6 also submitted that it did not participate in the Tender and therefore, it should not be held liable. The CCI however noted that participation is not a sine qua non for a finding of bid-rigging under the Act. Therefore, despite the fact that OP-6 did not participate in the tender, it cannot escape liability. The CCI also rejected the argument that the representative of OP-6 who led the preparation of the excel sheet, was acting independently of OP-6 as it did not gain any financial benefit, noting that that financial gain from collusion is also not a prerequisite to find a violation.

The OPs also argued that their conduct did not result in any harm as SBIIMS did not suffer any loss. The CCI rejected this argument and held that “any manipulation in the competitive price discovery process, in this case e-reverse auction system, would affect the final price to be paid by the tendering authority”.

The CCI found the OPs to have engaged in market allocation and bid rigging, prohibited under Sections 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. The parties were not able to prove any mitigating factors.

Regarding the liability of individuals under Section 48, the CCI noted that since their respective companies have been found to be in contravention of the provisions of the Act and none of them have been able to prove that such conduct was without their knowledge, they were liable.

Regarding the lesser penalty assessment, it was held that only OP-4 approached the CCI with a lesser penalty application but that too after the commencement of the of the DG investigation. They would therefore benefit from only a 90% reduction in penalty.

Relying on Supreme Court’s decision in Excel Crop Care Limited v. Competition Commission of India and Another^[2] (‘Excel Corp’), the OPs argued that relevant turnover should be based on the Tender value, or the type of signage involved and not all types of advertising/marketing materials they supply. The CCI rejected this argument and noted that Excel Corp does not in any way suggest that relevant turnover should be limited to the turnover earned from the specific customer or tender, and that such a plea would frustrate the underlying policy objective of deterring the cartelists.

In imposing penalty, the CCI noted that most of the OPs were micro, small and medium enterprises (‘MSMEs’). Further, some of them have even acknowledged their conduct during the inquiry. Accordingly, the Commission took a considerate view while levying monetary penalties upon MSMEs during the ongoing COVID-19 pandemic. The CCI also examined the
financial statements submitted by the parties and took a lenient view and decides to impose the penalty of 1% of the average of their relevant turnover for the three financial years i.e., 2015-16 to 2017-18. With regard to the individuals found liable in terms of Section 48 of the Act, the CCI imposed a penalty of 1% of the average of their incomes, for the three financial years i.e., 2015-16 to 2017-18.

[1] Suo Motu Case No. 02 of 2020.

[2] (2017) 8 SCC 47.