Sep 30, 2024NCLAT Upholds CCI’s Decision to Penalize Toyfort for Anti-competitive Practices and Bid Rigging
On July 2, 2024, the National Company Law Appellate Tribunal (‘NCLAT’) upheld the CCI’s Order holding Toyfort (‘Appellant’) liable for anti-competitive practices and bid rigging violating Section 3 of the Act. [1]
Proceedings before CCI
On August 7, 2018, the CCI received information alleging bid-rigging in soil testing tenders in Uttar Pradesh. The allegations centered around multiple companies, including Toyfort, which were accused of colluding to manipulate the bidding process. The DG report provided evidence, including fake invoices and non-compliance with eligibility criteria, which confirmed bid-rigging among the parties involved. Thus, the CCI found that these entities, including the Appellant, violated Sections 3(3)(c) and 3(3)(d) of the Act by engaging in cartelization and bid-rigging. The CCI imposed penalties on the parties involved, directing them to cease such anti-competitive practices and fined them 5% of their average turnover over the last three financial years.
Proceedings before NCLAT
The Appellant filed an appeal challenging the CCI’s Order, arguing that: (i) the DG investigation focused on familiar relations rather than concrete evidence of collusion; and (ii) its participation was a commercial misadventure and not a calculated attempt at bid-rigging.
The CCI, however, maintained that Appellant’s bids were cover bids, submitted to create an illusion of competition.
Findings of NCLAT
The NCLAT: (i) agreed with the CCI’s reasoning, noting that the familial and business relationships among the parties’ indicated collusion; (ii) found that Appellant’s actions aimed to support Austere Systems in winning the tenders through bid rigging; (iii) reduced the penalty from 5% to 3% of the average annual turnover for the last three years due to the Appellant’s supportive rather than leading role in the cartel; and (iv) used total turnover for penalty calculation, rather than relevant turnover, to prevent entities with no relevant turnover from avoiding penalties.
[1] Toyfort v. Competition Commission of India, Competition Appeal (AT) No. 34 of 2022 & IA Nos. 2607, 2608 of 2022.