On June 5, 2020, CCI concluded that five domestic and industrial bearings manufacturers, namely, Schaeffler India Limited (‘Schaeffler’), ABC Bearings Limited (now amalgamated with Timken India Limited) (‘Timken’), National Engineering Industries Limited (‘NEI’), SKF India Limited (‘SKF’), and Tata Steel Limited, Bearing division (‘Tata Bearing’) (collectively referred to as ‘Opposite Parties’) were part of a cartel which was active for a period of 2009 to 2014^[1]. The investigation was initiated by CCI based on a leniency application filed by Schaeffler dated June 26, 2017, (‘LA’) under Section 46 of the Competition Act, read with Regulation 5 of CCI (Lesser Penalty) Regulations, 2009.

CCI noted from the LA that when steel prices (a primary raw material for manufacturing bearings) started increasing from 2009, there was coordinated action among the five companies to pass on such increase to the automotive and industrial original equipment manufacturers (‘OEM Customers’) and in the distribution segment of the market across India. As practice, if there was an increase in the manufacturing cost of bearings, including due to increase in the steel prices, the OEM Customers accommodated certain price increase from time to time. However, they generally did so only when all the suppliers demanded for such an increase. Hence, under the cartel arrangement, the Opposite Parties agreed on the percentage increase in steel price that each of them would represent to the OEM Customers, to seek a price increase from them. To achieve this, they would simultaneously send out price increase letters to the OEM Customers and distributors in the aftermarket, specifying the percentage increase in steel prices and a request to increase the existing supply prices.

Based on its observations, CCI directed the Director General (‘DG’) to investigate the matter. During the DG’s investigation period, NEI also submitted a leniency application. Based on documentary evidence (such as e-mails), the DG in its report (‘DG Report’) noted that the representatives of four Opposite Parties namely NEI, Schaeffler, SKF and Tata Bearing attended two meetings in Delhi. Here, the Opposite Parties discussed and fixed the pricing strategies to be adopted for seeking price increase from the industrial and automotive OEM Customers and in the aftermarket. However, the DG Report also concluded that the Opposite Parties did not collude in the aftermarket segment for bearings distribution. Similarly, the DG also could not find any evidence of cartelisation against Timken.

The DG also noted that there was no indication of any actual concerted price increase except in a few cases such as with respect to Bajaj Auto Limited and Maruti Suzuki India Limited in July 2010, and March to July 2011, respectively. Further, the price revision data also did not indicate that the prices of bearings sold by the four entities to the OEMs moved in tandem with each other. However, given that the four remaining Opposite Parties controlled approximately 3/4th of the market and were sharing confidential business information with an objective to achieve higher than competitive prices of bearings sold by them to the OEM Customers, the DG opined that there was a likely appreciable adverse effect on competition (‘AAEC’) caused in the market.

CCI, based on the DG’s findings in the DG Report, and the submissions of the Opposite Parties, concluded that a ‘cartel’ in terms of Section 3(3) of Competition Act existed between NEI, Schaeffler, SKF and Tata Bearing. With respect to the Opposite Parties’ argument that regardless of the exchange of confidential information between them no AAEC was caused as a result, the Opposite Parties relied on: (i) the price analysis in the DG Report; (ii) statements of OEM Customers exonerating them of cartelisation; and (iii) the substantial countervailing buying power which existed with the OEM Customers.

CCI rejected the contentions raised by the Opposite Parties and observed that the Competition Act prohibits both kinds of the agreements, i.e., those that cause AAEC and those that are likely to cause AAEC. CCI also clarified that once an agreement in terms of Section 3(3) of the Competition Act was established between the Opposite Parties, the fact that it would result in AAEC in the concerned markets was to be presumed. This presumption of AAEC could be rebutted. However, none of the Opposite Parties were able to demonstrate the existence of any of the rebuttable factors listed under clauses (a) to (c) of Section 19(3) of the Competition Act. It also noted that the fact that the Opposite Parties did not implement the collusive decision was not sufficient to rebut the statutory presumption of AAEC under the Competition Act.

Based on the above, CCI directed the Opposite Parties (excluding Timken since there were no findings against it) to cease the cartel and desist from colluding on the prices in the future. However, given the specific circumstances of the case (discussed above) CCI did not impose a penalty on the Opposite Parties.

[1] In Re: Cartelization in Industrial and Automotive Bearings, Suo Motu Case No. 05 of 2017, order delivered on 5 June 2020.