IRAC method as a tool for legal analysis of a case stands for Issue, Rule,
Application / Analysis, Conclusion. It is one way to structure legal analysis.
An effective tool where it is organized around each of these
elements for each and every issue and sub-issue (s) identified as a
This method is used to analysis the present case:
All India Tyre Dealers’ Federation v/s Tyre Manufacturers
Citation No: 2013 COMP LR 92 (CCI) - Application No: MRTP Case - RTPE No. 20 of 2008
- Decided On: 30 October 2012
CCI Team: H.C Gupta (Member), Geeta Gouri (Member), M. L. Tayal (Member),
S.N.Dhingra (Member) , Ashok Chawla (Chairperson) The President.
1. The present information was originally filed by the All India Tyre Dealers’
Federation (AITDF) against the tyre manufacturers before the Ministry of
Corporate Affairs and the same was forwarded by the Ministry to the MRTP
Commission (MRTPC). Consequently, due to the repeal of the MRTP Act, the matter
was transferred to the Competition Commission of India (Commission) under
section 66 (6) of the Competition Act, 2002 (‘the Act’).
2. In the said information dated 28.12.2007, AITDF alleged that the tyre
manufacturers were indulging in anti-competitive activities. In the information,
statements of Ministers of Finance and Corporate Affairs were quoted to indicate
that the Ministers were also aware about the behavior of the tyre
3. It was alleged that the domestic tyre industry was the best example of
indulgence in the anti-competitive activities and resorting to trade
mal-practices. The tyre trade has been reeling under this exploitative behavior
of these handfuls of domestic tyre majors. The domestic tyre industry, operating
at 95%-100% capacity, on the back of almost 25% annual growth in the commercial
vehicle population in last four-five years, has been working in union and
usurping the excise duty reduction contrary to the interest of tyre users.
4. The AITDF alleged that since independence, the behavior of domestic tyre
majors has been anti-competitive, anti-consumer and they have been indulging in
various pricing and trade malpractices, which had a direct bearing on the
revenue of the state exchequer.
5. The tyre majors are having a history of restrictive trade practices and even
35 years back the MRTP Commission had passed its first ‘cease and desist’ order
against the cartelization by domestic tyre industry in October 1974. Hence, the
domestic tyre industry has the ‘distinction’ of being indulgent in restrictive
trade practices in the market and as a consequence creating a rift among the
dealers and also creating a ‘creamy layer’ within the tyre trade and generally
exploiting the tyre user by price rigging and strangulation of production and
6. AITDF also alleged that the truck and bus operators are not the only victim
of their machination, but also the vehicle manufacturers like Tata Motors have
been exploited in the recent past by the domestic tyre majors.
7. The AITDF submitted that they have been continuously feeding the concerned
Central Ministries about the anti-trade, anti-consumer and restrictive trade
practices of domestic tyre majors. The AITDF also approached the Competition
Commission of India regarding the anti-competitive behavior of domestic tyre
majors with a vide letter dated 09.06.2007.
8. Following the receipt of the information, the erstwhile MRTP Commission
ordered an investigation into the matter. From the record, it appears that as
the DG (I&R) could not complete the investigation when the MRTP Act, 1969 was
repealed, the matter was transferred to the Commission.
9. The Commission considered the matter in its meeting and on carefully reading
the material on record and after giving thoughtful consideration to all the
facts and circumstances of the case, passed an order dated 22.06.2010 under
section 26(1) of the Act directing the Director General (‘DG’) to conduct an
investigation into the matter and submit a report. The order of the Commission
specifically mentioned the five major domestic tyre manufacturing companies viz.
Apollo Tyres Limited, MRF Ltd., Ceat Tyre Ltd., Birla Tyre Ltd. and JK Tyre
10. In pursuance of the direction of the Commission, the DG conducted the
investigation. During the course of the investigation, the DG issued notices to
the following tyre manufacturers to seek information and to collect data:
(i) J K Tyre & Industries Ltd. (J K Tyre)
(ii) Apollo Tyres Ltd. (Apollo)
(iii) Birla Tyres (Unit of Kesoram Industries Ltd.)
(iv) Ceat Tyre Ltd. (CEAT) (v) MRF Tyres Ltd. (MRF)
(vi) Dunlop India Limited (Dunlop)
(vii) Goodyear India Ltd. (Goodyear)
(viii) Bridgestone India Private Limited (Bridgestone) (ix) Michelin India Tyres
Pvt. Ltd. (Michelin)
11. Besides, the information was also collected from Original Equipment
Manufacturers (OEMs), AITDF and Automotive Tyre Manufacturers’ Association (ATMA).
12. All the above said Tyre Manufacturing Companies, OEMs, AITDF, and ATMA gave
a reply by providing their relevant data and everyone denied that there was no
price fixing and they were not carrying out any illegal activity which is in
contravention of Competition Act, 2002.
13. The DG carried out a detailed analysis of various economic factors like
pricing, capacity utilization, cost of sales, sales margin, cost of production
and market share and as well as the conduct of ATMA during the reference period
of 2005 – 2010. Based on the analysis, the DG came to a conclusion that there
existed a cartel amongst Tyre manufacturers and ATMA and that they were acting
in concert to distort the domestic tyre market which was in direct violation of
the provisions of the Competition Act.
Summary of findings of the DG:
(i) The tyre companies have not passed on the benefit of reduction
in excise duty to the consumers
(ii) Price parallelism existed amongst the tyre companies.
(iii) The tyre companies have not reduced the Net Dealer Price
(weighted price) in proportion to the actual production.
(iv) The tyre companies have not utilized their full capacity which
resulted in limiting the supply.
(v) The companies have been able to earn positive margins in most of
the period under investigation.
(vi) The tyre companies have been inflating some miscellaneous expenses
into the cost of production to reduce the net profit margins. Similarly, the
analysis also explains that the change in the price of natural rubber had no
impact on the cost of production and therefore, it does not explain the possible
reason for the increase in the price of tyres.
(vii) The tyre companies are operating on high margins and the same is
not passed on to the consumers.
(viii) The five domestic tyre companies occupy about 95% of the market
share of the total production. This high concentration made OEMs and the
replacement market highly dependent on these companies.
14. Based on the above findings, the DG concluded that the major domestic tyre
companies acted in concert and ATMA provided the platform to the members for
exchange and sharing of information relating to price, export, import, OEMs etc.
Thus, the DG concluded that ATMA and its five major domestic tyre manufacturing
companies (Apollo, MRF, JK Tyre, Birla and CEAT) have acted in concert in
contravention of the provisions of section 3(3)(a) and 3(3)(b) of the Act.
15. In reply to the contentions of the informant and the DG’s report, the Tyre
Manufacturers and ATMA stated that the investigation by the DG lacked
jurisdiction as the information which formed the basis of the above
investigation was filed at the time when enabling provisions of the Competition
Act were not in force.
16. Additionally, it was also contended by the Tyre Manufacturers and ATMA that
the investigation in the above matter arose from a letter by the informant dated
December 28, 2007, however, the DG has stretched the reference period to the
year 2005 – 2010, which included the period before the date of the letter.
17. It was further contended by the Tyre Manufacturers and ATMA that the DG had
adopted a theoretical approach and that the report was entirely based on
circumstantial evidence and facts.
18. One of the Tyre Manufacturers also contended that the DH had adopted wrong
economic principles of price parallelism and had not relied on any facts and
figured submitted by the Tyre Manufacturers.
19. In addition to countering the contentions of the informant and the findings
of the DG report, the Tyre Manufacturers also provided reasons for the price
parallelism that exists in the Tyre industry. They also specified that the
natural rubber prices are highly volatile and there are price fluctuations on a
daily basis and this was the primary reason for the increase in tyre prices over
the reference period.
In view of the contentions raised by the parties and the findings recorded by
the DG, the following issues arise for determination:
(i) Whether the Commission has the jurisdiction to proceed with the
matter under the provisions of the Competition Act, 2002?
(ii) Whether the tyre manufacturers have contravened the provisions
of section 3 of the Act?
(iii) Whether Agreement can be inferred from circumstantial evidence?
S. 2 – Definitions
(b) “agreement” includes any arrangement or understanding or action in concert,—
(i) whether or not, such arrangement, understanding or action is formal or in
(ii) whether or not such arrangement, understanding or action is intended to be
enforceable by legal proceedings;
S.3 – Anti Competitive Agreements
(1) No enterprise or association of enterprises or person or association of
persons shall enter into any agreement in respect of production, supply,
distribution, storage, acquisition or control of goods or provision of services,
which causes or is likely to cause an appreciable adverse effect on competition
(2) Any agreement entered into in contravention of the provisions contained in
subsection (1) shall be void.
(3) Any agreement entered into between enterprises or associations of
enterprises or persons or associations of persons or between any person and
enterprise or the 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) shares the market or source of production or provision of services by way of
allocation of the geographical area of the market, or type of goods or services,
or number of customers in the market or any other similar way;
(d) directly or indirectly results in bid rigging or collusive bidding shall be
presumed to have an appreciable adverse effect on competition: Provided that
nothing contained in this sub-section shall apply to any agreement entered into
by way of joint ventures if such agreement increases efficiency in production,
supply, distribution, storage, acquisition or control of goods or provision of
Explanation.—For the purposes of this subsection, “bid rigging” means any
agreement, between enterprises or persons referred to in sub-section (3) engaged
in identical or similar production or trading of goods or provision of services,
which has the effect of eliminating or reducing competition for bids or
adversely affecting or manipulating the process for bidding.
(4) Any agreement amongst enterprises or persons at different stages or levels
of the production chain in different markets, in respect of production, supply,
distribution, storage, sale or price of, or trade in goods or provision of
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement
causes or is likely to cause an appreciable adverse effect on competition in
Explanation: For the purposes of this subsection-
(a) tie-in arrangement
includes any agreement requiring a purchaser of
goods, as a condition of such purchase, to purchase some other goods;
(b) exclusive supply agreement
includes any agreement restricting in any
manner the purchaser in the course of his trade from acquiring or otherwise
dealing in any goods other than those of the seller or any other person;
(c) exclusive distribution agreement
includes any agreement to limit,
restrict or withhold the output or supply of any goods or allocate any area or
market for the disposal or sale of the goods;
(d) refusal to deal
includes any agreement which restricts, or is likely
to restrict, by any method the persons or classes of persons to whom goods are
sold or from whom goods are bought;
(e) resale price maintenance
includes any agreement to sell goods on
condition that the prices to be charged on the resale by the purchaser shall be
the prices stipulated by the seller unless it is clearly stated that prices
lower than those prices may be charged.
S. 26 – Procedure for inquiry under section 19
(1) On receipt of a reference from the Central Government or a State Government
or statutory authority or on its own knowledge or information received under
section 19, if the Commission is of an opinion that there exists a prima facie
case, it shall direct the Director General to cause an investigation to be made
into the matter.
Provided that if the subject matter of information received is, in the opinion
of the Commission, substantially the same as or has been covered by any previous
information received, then the new information may be clubbed with the previous
S. 66 – Repeal and savings
(6) All investigations or proceedings, other than those relating to unfair trade
practices, pending before the Director General of Investigation and Registration
on or before the commencement of this Act shall, on such commencement, stand
transferred to the Competition Commission of India, and the Competition
Commission of India may conduct or order for the conduct of such investigation
or proceedings in the manner as it deems fit.
(3) All cases pertaining to monopolistic trade practices or restrictive trade
practices pending (including such cases, in which any unfair trade practice has
also been alleged), before the Monopolies and Restrictive Trade Practices
commission shall, on the commencement of the competition Amendment Act, 2009
stand transferred to the Appellate Tribunal and shall be adjudicated by the
Appellate Tribunal in accordance with the provisions of the repealed Act as if
that Act had not been repealed.
For the removal of doubts, it is hereby declared that all cases
referred to in this sub-section, sub-section(4)and sub-section (5)shall be
deemed to include all applications made for the losses or damages under section
12(B)of the Monopolies and Restrictive Trade Practices Act,1969 (54of1969) as it
stood before its repeal.
As mentioned in the facts, The opposite parties have contended that present case
arose before the MRTP Commission from the complaint of the AITDF dated
28.12.2007 referring to the alleged anti-competitive practices of the tyre
manufacturing companies, the DG had no jurisdiction to extend the period of
investigation beyond the year 2007 and his report is liable to be rejected on
this ground only. It is also contended that the Act has no retrospective
operation and as such, the Commission does not have the jurisdiction to look
into the present matter. It is true that the present inquiry was instituted with
reference to the allegations made in the year 2007. However, the DG has examined
the conduct of the Opposite Parties from the year 2005-06 to 2009-10 and has
found that alleged anticompetitive conduct of the parties which started prior to
coming into force the relevant provisions of the Competition Act continued even
after the date when these provisions were notified i.e., May 20, 2009.
No doubt the period of contravention of the provisions of the Competition Act,
2002 has to be reckoned only from the date of its enforcement but this does not
imply that either the DG or the Commission cannot examine the conduct of parties
post notification where the information/complaint was filed before the MRTP
Commission. The Commission, while passing an order under section 26(1) of the
Act, did not specify any period for the reason that at that stage, it would not
be desirable to curtail the period of examination by the DG. As the proceedings
before the Commission are inquisitorial in nature, it would not be appropriate
to restrain the DG from fully examining the allegations of cartelization in the
tyre industry. As such, it is difficult to agree with the submissions made by
the opposite parties that the proceedings are vitiated on any of the grounds so
urged. Given this fact, the plea of the opposite parties that the DG had no
authority to examine their conduct for a period subsequent to the alleged period
of contravention has no force and is liable to be rejected. The Commission is of
opinion that the preliminary objections taken by the opposite parties regarding
jurisdiction of the DG and/or the Commission are contrary to the scheme of the
Act and the legal position on this aspect is quite clear.
In this regard, it is also noted that Hon’ble High Court of Delhi in,
Interglobe Aviation Ltd. v. Competition Commission of India
W.P. (C) 6805/
2010 has held on a similar issue that where the investigation by the DGIR, MRTPC
remained incomplete and the matter did not crystallize into a ‘case’ before the
MRTPC, it was not incumbent on the DGIR, MRTPC to transfer the case to the
Competition Appellate Tribunal and not to the Commission.
This view was reiterated by the Hon’ble High Court of Delhi in, Gujarat
Guardian Ltd. v. Competition Commission of India
W.P. (C) 7766 / 2010. The
Delhi High Court rejected the arguments raised by the petitioner and held that
This Court finds that since the investigation was incomplete the matter was
rightly transferred to the CCI. On further consideration of the material on
record the CCI formed a prima facie opinion to proceed under Section 26(1) of
the CA. This was not contrary to Section 66(6) of the Competition Act, 2002. It
is possible in the course of an investigation that the DG, CCI forms a prima
facie opinion to proceed under the provisions of the CA, 2002 itself. There is
no illegality per se in such action of the DG, CCI.
Furthermore, the Commission has not been conferred with any power to adjudicate
any matter invoking the provisions of repealed MRTP, Act. This premise becomes
clear when the provisions of section 66(6) are contrasted with the provisions of
section 66(3) of the Act. Whereas the Competition Appellate Tribunal has been
specifically conferred power to adjudicate cases pertaining to monopolistic and
restrictive trade practices pending before the MRTP Commission in accordance
with the provisions of repealed MRTP Act under section 66(3) of the Act, no such
power has been given to the Commission under section 66(6) of the Act.
In the backdrop of the provisions of the Act as analyzed above, the Commission
finds that there is no illegality in entertaining and examining the present case
under the Competition Act, 2002 in which the investigation was pending before
the DGIR, MRTPC before the MRTP Act was repealed. In this connection, a
reference may be made to the decision of the Hon’ble High Court of Bombay in,
Kingfisher Airlines Ltd. v. Competition Commission of India W.P. No. 1785/200,
where it was held that though the Act is not retrospective, it would cover all
agreements covered by the Act though entered into prior to the commencement of
the Act but sought to be acted upon now i.e. if the effect of the agreement
continues even after 20.5.2009. Thus, even in cases where the alleged
anti-competitive conduct was started before coming into force of sections 3 and
4, the Commission has the jurisdiction to look into such conduct if it continues
even after the enforcement of relevant provisions of the Act.
In the present case, practices of the parties alleged to be anti-competitive
have been found by the DG to be still continuing and there is nothing on record
to contradict the same. Accordingly, the Commission is of the considered view
that in the light of legal position as discussed above, there is absolutely no
illegality in the proceedings in the present case and the arguments and the
contentions of the parties on this aspect have no force. As has been seen above,
the Commission does not have the power to adjudicate any matter invoking the
provisions of the repealed MRTP Act, therefore, in the present matter the
relevant period for the purposes of determining the contravention of the parties
under inquiry will commence only from the date of enforcement of section 3 of
In view of the aforesaid and after dealing with the jurisdictional issues, the
Commission proceeds to deal with the substantive issue arising for determination
in the present case.
The commission examined this aspect as trade association can as observed in
other cases, be an active facilitator for cartel behavior. Tyre manufacturing
firms have an association under the name Automotive Tyre Manufacturers’
Association (ATMA) as the representative body of the automotive tyre industry in
India. All five large tyre companies representing over 90% of the production of
tyres in the country are its members. ATMA was set up in 1975 and is registered
under the Companies Act. The evidence gathered by the DG has shown that they
frequently meet at the platform of ATMA to discuss and perhaps even share
sensitive business information. The Association also regularly publishes data on
production and export of various categories of tyres. Besides, the Association
prepares status notes on various subjects which are of relevance to tyre
industry, such as, Tyre Retreading Industry, Regional Trade Agreements & Rules
of Origin, Anti-Dumping, etc.
These facts are corroborated from the information available on the website of
ATMA. The information available there also proclaims that with the guidance of
the Managing Committee the ATMA functions through various committees set up,
consisting of different disciplines, such as Marketing, Export, Purchase (Raw
Material), Taxation, Technical, etc. Thus, it is noticed that the firms have an
active trade association engaged in the above activities. Thus, it is seen that
there are some factors which may be conducive to cartelization but they may be
diluted due to other factors as has been pointed out in the above discussion.
The fact that market concentration is very high with entry barriers and the
product is homogenous, support cartel formation, but high bargaining powers of
OEMs due to the volumes, options to replacement consumer to retread, increasing
radialization, imports effectively being cheaper even in the brief period of
anti-dumping duty goes against sustaining a cartel structure. A conclusive
finding, however, can only be made after considering other evidence including
circumstantial pieces of evidence.
A lot has been made by the opposite parties of the fact that the DG has failed
to gather any direct evidence to support his findings. Reliance is also placed
upon a decision of the Commission in the case of Neeraj Malhotra v. Deutsche
, Case No. 05 of 2009 to contend that to establish a finding of
infringement under section 3(1) read with 3(3) of the Act, the agreement must be
established unequivocally. In view of the provisions of the Act, as highlighted
below, in this respect, the Commission observes that the plea is misconceived.
The term agreement
itself is defined in section 2 (b) of the Act. For
felicity of reference, the same is quoted below:
Section 2(b). "agreement" includes any arrangement or understanding or action in
(i) whether or not, such arrangement, understanding or action is
formal or in writing; or
(ii) whether or not such an arrangement, understanding or action is
intended to be enforceable by legal proceedings;
It may be noticed that the definition of the term ‘agreement’ as given in the
Act includes any arrangement or understanding or action in concert whether or
not formal or in writing or is intended to be enforceable by legal proceedings.
Clearly, the definition which is inclusive and not exhaustive is a wide one. The
agreement does not necessarily have to be in the form of a formal document
executed by the parties. Thus, there is no need for an explicit agreement for
the existence of an ‘agreement’ within the meaning of the Act.
The same can be inferred from the intention or conduct of the parties. In the
cases of conspiracy or existence of any anti-competitive agreement, proof of
formal agreement may not be available and the same may be established by
circumstantial evidence alone. The concurrence of parties or the consensus
amongst them can, therefore, be gathered from their common motive and concerted
The Commission observes that the existence of a written agreement is not
necessary to establish a common understanding, common design, common motive,
common intent or the commonality of approach among the parties to an
anti-competitive agreement. These aspects may be established from the activities
carried on by them, from the objects sought to be achieved and evidence gathered
from the anterior and subsequent relevant circumstances. Circumstantial evidence
concerning the market and the conduct of market participants may also establish
an anti-competitive agreement and suggest concerted action. Parallel behavior in
price or sales is indicative of coordinated behavior among participants in a
No doubt the parties to such an agreement may offer their own sets of
explanations behind the existence of circumstantial evidence. However, it also
remains a fact that parties to an anti-competitive agreement will not come out
in open and reveal their identity to be punished by the competition agencies.
This is also the reason that the legislature in its wisdom has made the
definition of agreement
inclusive and wide enough and not restricted it
only to documented and written agreement among the parties.
Thus, the Commission is not impeded from using circumstantial evidence for
making inquiries into the act, conduct, and behavior of market participants. The
competition agencies in other jurisdictions have also taken cognizance of
circumstantial evidence while inquiring and establishing contravention in cases
involving anti-competitive agreements. While noting that the legal
system/framework, market structure, firm/consumer behavior etc. differs from
jurisdiction to jurisdiction, the Commission finds that the basic competition
principles are by and large applicable across jurisdictions.
It is no doubt true that as held by the Commission in Neeraj Malhotra case
(supra), an agreement must be established unequivocally. That, however, is not
to suggest that an agreement can be established only through direct evidence. As
discussed above, circumstantial evidence is of no less value than direct
evidence as the law makes no distinction between the two. The Commission is not
oblivious of the fact that the anticompetitive conspiracies are often hatched in
secrecy. The firms engaged in anti-competitive activities are not likely to
leave any trace evidencing the same. Therefore, in the absence of any direct
evidence of agreement among the conspirators, circumstantial evidence is
required to be looked into. If direct evidence is not present, but
circumstantial evidence does indicate harm to the competition at a market place,
the Commission will certainly take cognizance of the same. The Commission also
observes that among a set of circumstantial evidence, evidence of communication
among the participants to an anti-competitive agreement may give an important
clue for establishing any contravention. Communication evidences might prove
that contravening parties met and communicated with each other to determine
their future or present behavior.
On the issue of price parallelism specifically, the CCI was of the opinion that
in certain instances, price parallelism may be dictated solely by economic
reasons and that t is not a violation of the Competition Act if it does not the
result from concerted action. The CCI weighed various parameters and held that
the presence of other factors such as the bargaining power of the OEMs, who
constitute a majority of the customer base and the options to replacement
consumer to retread diluted the factors suggesting collusive actions. It also
held that the levy of anti-dumping duty on the imported tyres suggested that
cheaper options were available.
In view of the above and taking into consideration the act and conduct of the
tyre companies/ ATMA, it is safe to conclude that on a superficial basis the
industry displays some characteristics of a cartel there has been no substantive
evidence of the existence of a cartel. As a tradable the industry has always
been open to competitive threats from imports. The Commission holds that the
available evidence does not give enough proof that tyre companies/ ATMA acting
together have limited and controlled the production and price of tyres in the
market in India.
The Competition Commission Of India (CCI) concluded that there was not enough
substantial evidence to corroborate the DG’s report or to support a finding that
the Tyre Manufacturers had engaged in cartelization. On the contention of the
Tyre Manufacturers that there needs to be an explicit agreement to
establish cartelization, the CCI held that certain industries provide a
structural basis that is conducive for cartelization and that that tyre industry
in India, being highly oligopolistic and concentrated in nature, having entry
barriers and a homogenous product is conducive for cartelization but there are
other factors that dilute the above structure and create conditions which do not
sustain the maintenance of a cartel.
The Commission was of the opinion that price parallelism per se may not violate
the provisions of the Act and that in certain cases price parallelism could have
been dictated solely by economic reasons and that it was not a violation of the
Competition Act if it does not result from the alleged concerted action. The
Commission also weighed various parameters and held that the presence of other
mitigating factors such as the bargaining power of the Original Equipment
Manufacturers known as the OEMs, who constitute a majority of the customer base,
and the options to replacement consumer to retreat diluted the factors
suggesting collusive actions. It also held that the levy of anti-dumping duty on
the imported tyres suggested that cheaper options were available and hence the
existence of cartel cannot be established.