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September 08, 2008


Cement companies escape CCI noose

BS reported that the cement companies that were found guilty of cartelization by the Monopolies and Restrictive Trade Practices Commission would have had to pay a hefty fine had the Competition Commission of India been functional.

Under the Competition Act 2007, which is yet to be notified, there is a provision that the companies guilty of cartelization will have to pay a fine up to 10% of their turnover or three times the net profit. If the penalty of 10% of the turnover is imposed on 41 out of 44 guilty companies, including Larsen & Toubro, Shree Cement, JK Cement, the amount comes up to a whopping INR 3,600 crore. And if the penalty of 3 times the profits is ordered by CCI, then ACC and Ambuja Cement alone will have to pay fine of over INR 7,000 crore.

Monopolies and Restrictive Trade Practices Commission found companies involved in restrictive trade practices and acting in concert in fixing the retail prices of their produce under section 33 (1) (d) of the MRTP Act. It has asked the companies to file a compliance report within eight weeks.

Mr Naveen Goel corporate law expert said that “Under this section, MRTPC can only direct the companies that the practice should be discontinued or not repeated, other than this the commission is powerless to do anything against the companies forming a cartel.”

Mr Vinod Dhall acting chairman and member of CCI, while reacting to the MRTPC order, said that “Had the CCI been functional, each company would have had to pay 10% of the average turnover for the last three financial years, or a penalty equivalent to 3 times of the profits made by the cartel. Under the Competition Act, 2007, there is also a provision to impose penalty of 10% of the average of the turnover of the cartel for the last 3 financial years.”

Mr Prem Chand Gupta union minister of corporate affairs said that “The CCI will be operational by the middle of 2008.”

But till the central government clears the proposal of CCI for staff requirement and notifies the Act, the commission will not be functional. The commission has asked for a staff of 480 professionals, including lawyers, financial analyst and economists.