Five Tyre Firms Operated as Cartel, Finds CCI Probe

Between 2011 and 2014, they indirectly determined the price of tyres in the market, says report

 The investigation wing of the Competition Commission of India (CCI) has found Apollo Tyres, MRF, CEAT, JK Tyres and Birla Tyres guilty of cartelisation.

The ministry of corporate affairs had filed a complaint against these companies.

UNDER THE SCANNER Top executives who have been asked to furnish their income details, including income tax returns:

Neeraj Kanwar, vice-president and managing director, Apollo Tyres K M Mammen, chairman and managing director, MRF Ltd Anant Goenka, managing director, CEAT Ltd Raghupati Singhania, chairman and managing director, J K Tyres and Industries Ltd Basant Kumar Birla, chairman, Birla Tyres Ltd

"These five companies under the aegis of the Association of Tyres Manufacturers Association (ATMA) have from 2011-12 to 2013-14 indirectly determined the price of tyres in the market," said the report of the director-general's office of the CCI's investigation wing. The preliminary report has not been made public but was examined by Business Standard.

The CCI has asked the companies and ATMA to submit objections on this preliminary report by March 16. Company executives have been asked to furnish income details, including income tax returns, for the past three financial years. A final decision will be taken by CCI after an oral hearing on March 23.

"Despite a significant decline in input costs, particularly in 2012-13 and 2013-14, prices were kept higher, which could not have been possible without an agreement among these companies. The presence of conducive conditions in the market facilitated a cartel among the companies," said the report.

Apart from Apollo Tyres, no company responded to emailed queries from Business Standard. "This is just a preliminary investigation report, which has been submitted by the DG, CCI to the Competition Commission of India. We are yet to submit our response/objections, post which, there would be proper hearing, and then a final determination by the CCI," said a spokesperson of Apollo Tyres.

The investigation found the five companies controlling 83 per cent of the tyre market. "Despite slack tyre demand in in 2012-13 and 2013-14, the companies were able to significantly enhance operating margins, a strong indication of coordinated action," the report said.

The ministry of corporate affairs had referred the matter to the CCI in December 2013, after hearing arguments of the All-India Tyre Dealers' Federation.

"The increase and decrease by similar magnitude during 2011-12 to 2013-14 indicated tyre prices moved in tandem," said the report.

DID TYRE COMPANIES TAKE CUSTOMERS FOR A RIDE?

Feb 2007: All India Tyres Dealers Federation (AITDF) tells Ministry of Corporate Affairs (MCA) that domestic tyre majors are involved in cartelisation May 2009: The case shifted from the erstwhile Monopolies and Restrictive Trade Practices Commission to Competition Commission of India June 2010: Finding the allegations to be prima facie true, CCI orders investigation October 30, 2012: Enough evidence not found April 2013: Competition Appellate Tribunal (Compat) dismisses AITDF appeal against the CCI’s October stand November 2013: AITDF gives a fresh representation to MCA; submits average prices of seven tyre sizes for five years, between 2010 and 2014 December 2013: MCA refers the matter to CCI June 2014: Finding the allegations to be prima facie true again, CCI orders thorough probe December 2015: DG office says tyre companies guilty of cartelisation under the aegis of Automotive Tyre Manufacturers Association between 2011 and 2014 February 2016: CCI asks tyre companies and complainant to submit their objections by March 16

"Email communications of May 2011 between MRF and Apollo through director-general, ATMA, with regard to the pricing strategy, clearly revealed active collusion," the report added.

Frequent meetings of various ad hoc groups consisting of representatives of only five tyre companies without any record of proceedings suggested ATMA, which comprises of 10 member companies, was exploited by a few controlling minds, the report said.

"Our legal counsels are studying the document sent by the CCI. Accordingly a reply will be submitted," ATMA said.

 

Reference - http://www.business-standard.com/article/economy-policy/five-tyre-firms-operated-as-cartel-finds-cci-probe-116030500042_1.html