The competition commission of India has imposed penalties on five tyre manufacturers. The reason for the penalty is that these companies had engaged in cartelisation. The five companies which face the penalty are Apollo Tyres, MRF Ltd, Ceat Ltd, JK Tyre and Birla Tyre.
The CCI stated in a statement that through their platform of association, Automotive Tyre Manufacturers Association (ATMA), the tyre manufacturers exchanged price-sensitive data among them through which they took the collective decisions on setting the prices of tyres. The companies and the ATMA were found guilty of contravention during 2011-2012 by the provision in Section 3 of the Companies Act. This act prohibits anti-competitive agreements.
The CCI also said that ATMA collected the company-wise and segment-wise data, monthly and cumulative. This data was collected on production, domestic sales and tyres exports on a real-time basis. CCI also imposed a penalty of Rs. 8.4 lakhs on ATMA. CCI has restrained ATMA from collecting retail and wholesale prices from the member tyre manufacturers. The CCI found out that the companies and the association created an environment of cartelisation by acting uniformly to increase the prices of tyres in replacement markets and they also controlled and limited the supply and production in the market.
In the case hearing, it was said that during 2005, natural rubber prices increased from Rs. 78/kg to Rs. 114/kg, tyre prices were raised across segments by 12%-15%. But when the prices of the rubber went down to 82/kg, the prices of tyres were only decreased by 3%-4%. The same thing happened during 2008. In 2011-2012, natural rubber prices inflated to Rs. 240/kg, tyre prices were increased by 18%-25% but as the prices of natural rubber dropped to Rs. 145/kg in 2013-14, prices of tyres remained the same. The benefits of reduced prices were not passed on to the customers as the industry was maintaining a self-styled ‘price control’. The companies were also imposing tariff and non-tariff barriers through their association with ATMA to strengthen their control on the domestic market.
The CCI order was passed in Aug 2018. The tyre manufacturers decided to exercise their legal options in courts and hence the order was kept in a sealed cover. Supreme Court dismissed their appeal on 28th Jan 2022.
Originally Published On: https://blog.investyadnya.in/cci-imposes-penalty-on-five-tyre-manufacturers/