1. Shri Govind Aggarwal & Ors. v. M/s ICICI Bank Ltd. & Ors.
(2011)
I. Introduction
This case primarily revolves around allegations of differential interest rates and prepayment
penalties charged by ICICI Bank and other financial institutions, impacting home loan
borrowers. The case was brought before the Competition Commission of India (CCI) by several
informants, including Shri Govind Aggarwal. The informants alleged that these banks engaged in
anti-competitive practices by imposing higher interest rates on existing customers and levying
hefty penalties on customers seeking to switch banks by prepaying their loans.
II. Background
The informants, including Shri Govind Aggarwal, had taken floating-rate home loans from ICICI
Bank. However, over time, the interest rates offered to new customers were significantly lower
than those charged to existing customers, despite market conditions favoring a reduction in
interest rates. Furthermore, when existing borrowers, such as Shri Govind Aggarwal, sought to
switch to other banks offering lower rates, they were required to pay prepayment penalties,
ranging from 2% to 4% of the outstanding loan amount.
● Govind Aggarwal’s Loan: Shri Govind Aggarwal took a floating-rate loan of ₹7 lakhs
from ICICI Bank in March 2003. By October 2008, the floating interest rate on his loan
had increased to 14%, while new customers were being offered loans at rates as low as
12%.
● Disparity: Shri Aggarwal argued that this disparity in interest rates between new and
existing borrowers defeated the very purpose of floating-rate loans, which were supposed
to adjust based on market conditions.
● Prepayment Penalty: Shri Aggarwal wanted to switch to another bank that was offering
loans at a lower rate but was discouraged by ICICI Bank's imposition of a prepayment
penalty, further restricting his financial mobility.
III. Key Issues Raised
Discriminatory Interest Rates: The informants contended that ICICI Bank and other
banks were discriminating between new and existing customers by charging higher
interest rates to the latter. The banks justified this by stating that new customers were
being offered loans at the market rate at the time, while existing customers had agreed to
a rate when they first signed their loan agreements.
Prepayment Penalty: The case also focused on the prepayment penalties levied by the
banks. These penalties were viewed as anti-competitive, as they acted as a barrier for
customers wishing to switch to another bank offering better terms. By imposing these
penalties, the banks were restricting competition in the market for home loans.
Market Power and Competition: The informants argued that by charging these
penalties and differential rates, the banks were abusing their market power. Since most
customers were tied to their banks due to the high switching costs, it restricted healthy
competition in the home loan market, allowing banks to operate without the pressure to
innovate or reduce interest rates.
IV. Findings of the Director General (DG)
● Differential Interest Rates: The DG found that banks continued to charge differential
interest rates to new and old customers even after the market conditions had improved.
This practice violated the principles of fairness and transparency.
● Prepayment Penalty: The DG also observed that the prepayment penalties levied by
ICICI Bank and other financial institutions acted as a barrier to competition, as they
discouraged customers from switching to banks offering lower rates.
● Abuse of Dominance: The DG concluded that the banks' practices, particularly the
differential rates and prepayment penalties, constituted an abuse of dominance in the
home loan market, thereby violating Section 3(3)(b) and Section 4 of the Competition
Act, 2002.
V. Key Legal Provisions Involved
● Section 3(3)(b) of the Competition Act, 2002: Prohibits anti-competitive agreements,
which directly or indirectly result in limiting or controlling the provision of services,
leading to an appreciable adverse effect on competition.
● Section 4 of the Competition Act, 2002: Prohibits abuse of dominance, where an
enterprise takes advantage of its dominant position in a market to impose unfair or
discriminatory conditions on consumers.
VI. CCI’s Decision
The CCI took cognizance of the findings and observed that ICICI Bank and other financial
institutions had indeed engaged in anti-competitive practices. The imposition of differential
interest rates and prepayment penalties was deemed to have an appreciable adverse effect on
competition, and the practice was found to be in violation of both Section 3(3)(b) and Section 4
of the Competition Act, 2002.
● Directive to Banks: The CCI ordered that banks should cease the practice of charging
differential interest rates. It was directed that the interest rate offered to new customers
should also be available to existing customers, especially in a falling interest rate
scenario.
● Prepayment Penalty: The CCI also mandated that banks should stop charging
prepayment penalties, as it hindered the free movement of customers between financial
institutions, thus stifling competition.
VII. Analysis
The case of Shri Govind Aggarwal exemplifies how large financial institutions can exploit
market conditions to the detriment of consumers. By maintaining higher interest rates for
existing borrowers and levying prepayment penalties, ICICI Bank and others were able to create
significant switching costs, thus locking customers into unfavorable financial arrangements.
● Impact on Consumers: The differential interest rates deprived existing borrowers of the
benefits of a floating-rate loan, which is supposed to adjust with market conditions. The
prepayment penalties further compounded the issue by making it financially unfeasible
for customers to seek better loan terms elsewhere.
● Impact on Competition: The lack of mobility for consumers due to high switching costs
allowed banks to operate with less competitive pressure. By curbing customers’ ability to
switch, the banks effectively reduced market competition, leading to higher interest
rates and less innovation in the home loan industry.
VIII. Conclusion
The CCI’s ruling in this case was a significant step toward ensuring fair competition in the
Indian banking sector, particularly in the home loan market. By curbing the practice of
prepayment penalties and ensuring that differential interest rates are not charged unfairly, the
ruling aimed to enhance consumer mobility and market competitiveness.
This case highlights the importance of regulatory oversight in curbing anti-competitive
practices and protecting consumer interests in a rapidly growing economy like India.
2. Builders Association of India v. Cement Manufacturers'
Association (2016)
I. Introduction
This case focuses on allegations of cartelization in the Indian cement industry, brought forward
by the Builders Association of India (BAI) against the Cement Manufacturers' Association
(CMA) and multiple major cement manufacturers. The informant alleged that these
manufacturers were engaging in anti-competitive practices, including price fixing, limiting
production, and creating artificial supply shortages. The Competition Commission of India (CCI)
was asked to investigate these practices, which were believed to have an adverse impact on the
construction industry.
II. Background
The Builders Association of India filed a case under Section 19(1)(a) of the Competition Act,
2002, alleging that the cement manufacturers, under the aegis of the Cement Manufacturers'
Association (CMA), engaged in price fixing and restrictive trade practices. The complaint further
claimed that the manufacturers collectively controlled the production and supply of cement,
limiting production even though there was sufficient capacity, which in turn artificially inflated
the price of cement.
The specific anti-competitive practices alleged included:
● Price fixing: The manufacturers were accused of setting uniform prices across regions,
despite different costs of production.
● Production control: Despite increased production capacities, manufacturers were accused
of deliberately underutilizing their plants to create artificial scarcity.
● Territorial market allocation: The informant alleged that the manufacturers had divided
the Indian market into five zones to control supply and maintain high prices.
III. Key Issues Raised
1. Price Fixing: The Builders Association claimed that cement manufacturers were involved
in collusive price fixing, increasing prices in a coordinated manner across the country.
They argued that the manufacturers maintained price parallelism, where the prices moved
uniformly across regions without direct correlation to actual demand and production
costs.
2. Capacity Utilization: The informant contended that despite the significant growth in
installed production capacity, the manufacturers deliberately kept capacity utilization low
to limit supply and create artificial scarcity in the market.
3. Abuse of Dominance: It was also alleged that the leading cement manufacturers, who
collectively held over 75% market share, abused their dominant position by engaging in
these anti-competitive practices, causing harm to the construction industry and consumers
at large.
IV. Findings of the Director General (DG)
The CCI directed its Director General (DG) to investigate the matter. The DG's investigation
report supported the allegations made by the Builders Association of India. Key findings from
the DG’s report included:
● Price Parallelism: The investigation revealed that the prices of cement across different
manufacturers showed strong correlation, indicating price parallelism. The data showed
that the cement prices increased uniformly across different regions, often at the same time
and by similar amounts, despite regional differences in production costs.
● Low Capacity Utilization: The DG found that despite substantial increases in installed
production capacity between 2006 and 2010, capacity utilization had declined, dropping
to 73% in 2011. This low utilization was viewed as a deliberate attempt by the
manufacturers to reduce supply and increase prices.
● Concerted Action: The investigation concluded that the Cement Manufacturers'
Association (CMA) facilitated meetings among manufacturers to coordinate production
levels and prices. The DG identified High Power Committee (HPC) meetings as venues
where major manufacturers, including ACC and UltraTech, allegedly discussed and
coordinated price increases.
V. Key Legal Provisions Involved
● Section 3(3)(a) of the Competition Act, 2002: Prohibits agreements among enterprises
that directly or indirectly determine purchase or sale prices, leading to an appreciable
adverse effect on competition.
● Section 3(3)(b) of the Competition Act, 2002: Prohibits agreements that limit or control
production, supply, markets, technical development, investment, or provision of services.
VI. CCI’s Decision
The Competition Commission of India (CCI) found the Cement Manufacturers' Association and
the involved manufacturers guilty of anti-competitive practices, including cartelization. The CCI
held that:
● Price Fixing: The manufacturers had indulged in price parallelism by coordinating price
increases across regions without any justifiable link to costs or market conditions.
● Control of Supply: The manufacturers had intentionally underutilized their production
capacities, despite growing demand, to control the supply and manipulate the prices of
cement.
● Role of CMA: The Cement Manufacturers' Association (CMA) was found to have
provided a platform for the manufacturers to engage in collusive practices, by facilitating
meetings and providing production and price data to its members.
● Imposition of Penalty: The CCI imposed a significant monetary penalty on the CMA and
the cement manufacturers. They were also directed to cease and desist from indulging in
any anti-competitive practices related to price fixing, production control, or market
allocation.
VII. Analysis
The Builders Association of India v. Cement Manufacturers' Association case provides a
comprehensive example of cartelization in the Indian cement industry. The case reveals how
oligopolistic industries can exploit their market position to manipulate prices and restrict supply,
harming both the downstream industries (such as construction) and consumers.
● Impact on Consumers: The artificial inflation of cement prices due to collusion directly
impacted the construction industry, leading to higher project costs and delays. This
ultimately had a ripple effect on housing prices and infrastructure development in India.
● Role of Regulatory Bodies: The case highlights the importance of regulatory oversight in
ensuring competitive practices in key industries. By holding the manufacturers
accountable and imposing penalties, the CCI sought to curb anti-competitive behavior
and restore fairness in the market.
VIII. Conclusion
The ruling in Builders Association of India v. Cement Manufacturers' Association (2016) serves
as a critical reminder of the consequences of cartelization and anti-competitive practices. By
penalizing the collusion between cement manufacturers, the CCI reinforced its commitment to
ensuring a competitive market environment that promotes fair trade practices and protects the
interests of consumers and businesses alike.
3. Indian Laminate Manufacturers Association Vs. Sachin
Chemicals & Others (2020)
I. Introduction
This case revolves around allegations of cartelization by major importers of phenol in India. The
Indian Laminate Manufacturers Association (ILMA) alleged that a cartel among importers of
phenol artificially increased the price of this critical raw material, which is predominantly used
in the laminate and plywood industries. ILMA claimed that the artificial price hike caused
significant financial distress for small and medium-sized laminate manufacturers, who could not
pass the cost increase to end customers due to fixed margins.
II. Background
The ILMA filed the case under Section 19(1)(a) of the Competition Act, 2002, alleging that 19
phenol importers colluded to manipulate prices and limit the supply of phenol in the Indian
market. ILMA claimed that phenol prices doubled from ₹60 per kg to ₹115 per kg between
January 2016 and March 2016. This period saw a price surge despite the lack of major demand
or significant increases in international prices, leading to suspicions of cartelization.
● Key Material (Phenol): Phenol is a major component used in the production of
decorative laminates. It is used to produce phenolic resin, which is critical for
manufacturing products like Sunmica. The industry is highly dependent on phenol
imports, as local production cannot meet domestic demand.
● Cartel Allegations: ILMA accused the OPs of artificially inflating phenol prices by
creating a fake shortage and restricting supply. The importers were also alleged to have
taken advantage of rumors spread during a seminar organized by ILMA in February
2016, where it was forecasted that phenol prices would rise, further fueling panic buying.
III. Key Issues Raised
1. Artificial Price Increase: ILMA alleged that the OPs formed a cartel to artificially raise
the price of phenol from ₹60 to ₹115 per kg within just a few days (between January and
March 2016).
2. Rumor-Based Market Manipulation: It was claimed that the OPs spread rumors of
phenol shortages to justify the steep price increases, although there was sufficient stock at
Kandla Port and elsewhere.
3. Abuse of Dominant Position: The informant argued that a few large importers
controlled the majority of the phenol supply in India, enabling them to manipulate prices
and restrict access for smaller manufacturers.
IV. Findings and Analysis
The DG's report pointed to strong evidence of price parallelism and synchronized price
increases among the top phenol importers. However, direct evidence of a formal cartel
agreement, such as emails or other communication showing explicit coordination, was lacking.
The investigation also revealed that the rumors about phenol shortages, allegedly spread during
a seminar organized by ILMA, had further fueled panic buying.
● Economic Indicators: The DG’s analysis of market trends showed that phenol prices
surged by 90% in early 2016, while international prices remained relatively stable. This
pointed to artificial inflation by the importers. However, the Commission found it
difficult to conclude cartelization in the absence of direct evidence of communication
among the OPs.
V. Key Legal Provisions Involved
● Section 3(3)(a) of the Competition Act, 2002: Prohibits agreements among enterprises
that directly or indirectly determine purchase or sale prices, leading to an appreciable
adverse effect on competition.
● Section 4 of the Competition Act, 2002: Deals with the abuse of dominant market
position.
VI. CCI’s Decision
The Competition Commission of India (CCI), after reviewing the DG’s report, found that
while price parallelism existed, it was insufficient to conclude that a cartel had been formed.
The Commission ruled that:
● No clear evidence of collusion or formal communication between the OPs was found.
● The price increase could be attributed to market dynamics, speculation, and external
factors such as rumors about anti-dumping duties on imported phenol, which led to a
demand surge.
As a result, the CCI dismissed the case, concluding that the allegations of cartelization could not
be substantiated with strong evidence.
VII. Conclusion
The case of Indian Laminate Manufacturers Association Vs. Sachin Chemicals & Others
(2020) illustrates the complexities of proving cartel behavior in the absence of direct evidence of
collusion. Despite suspicious market behavior, such as price parallelism and unusual profit
spikes during the alleged period, the CCI could not conclusively prove the existence of a cartel.
The case highlights the need for concrete evidence, such as communication records or explicit
agreements, to establish anti-competitive practices under the Competition Act.
