Brief Summary. (To read the full post click here)
There is a common and historical practice of bid rigging dominant in Government tenders. License Raj has been replaced by heavy competition between private and public sector companies. However, the procurer Government departments still have one sided terms in their contracts for the private bidders to combat. Making a Cartel to secure business seems like a safe bet. Competition policies aim to level the playing field by punishing/penalizing any dominant behavior. The atmosphere can be changed by the private sector questioning the one-sided terms and colluding positively to increase their bargaining power.
Cartel Studies
Companies engage in collective bargaining and rig bids in public procurement tender. A detailed explanation of which is mentioned in the document below.
Adopting collective bargaining through the platform of an Association is quite common for Firms/Enterprises to cartelize
CCI has been investigating such cases, like Sugar Mill Owners Association, Onion Traders, United Producers/Distributors Forum (UPDF) and Films Association (of distributors & theatre owners). While looking into sugar mill owners association for cartelization charges, the Commission took note of a news article titled “Cartelization by industry to push up sugar prices: Traders” published in The Economic Times alleging that certain sugar mill associations had indulged in anti-competitive practices by fixing the minimum ex-mill price of sugar through the platform of their association.
However, the Commission observed that sugar was highly regulated and controlled either through a mechanism of control over prices or control over supply and that the industry was not operating within the free market. The Commission also noted that market dynamics were not able to drive the industry because of excessive governmental control and regulations. At the same time, the Commission has also ruled that just because sugar is a regulated commodity, it would not fall outside the scope of the Competition Act.
Similarly, the onion traders were investigated on the basis of various media reports alleging hoarding, price manipulation, and possible cartelization. The case was closed as the DG, in his investigation, by not understanding the nuances of traditional markets and the mechanisms that beget anti-competition behavior failed to garner enough evidence of cartelization by proceeding on lines of cartel investigation as applied to the modern industry cartels.
In the cinema industry, In May 2011, CCI fined (nominally) 27 film producers/members of the United Producers/Distributors Forum (UPDF) controlling almost 100% of the market for production and distribution of Hindi pictures in multiplexes in India (relevant market) who were clearly acting in concert to fix prices and also limiting/controlling supply by refusing to release Hindi films for exhibition in multiplexes. UPDF and its members had collectively boycotted the multiplex cinema operators for own gains and did not contribute to any benefits for the market or consumers.
Later, in Feb 2012, Films Association (of distributors & theatre owners) were fined for collectively controlling the distribution and exhibition of Films by imposing unreasonable and compulsory conditions, like becoming a member and registration with the association without which the Producers were boycotted. The Association used the said anti-competitive conditions to ensure payments by producers. However, they have to amend and delete all such clauses to comply with this new legislation in force.