Indian Cement Cartel Uncovered by CCI, 'Lucky Number 7' Exposed Collusion

An exclusive investigation by Reuters has brought to light the intricate workings and eventual unraveling of an alleged cement cartel in India, with key findings outlined in a confidential report by the Competition Commission of India (CCI). The probe, spanning five years, uncovered a decade-long period of price collusion and bid-rigging primarily targeting the state-run Oil and Natural Gas Corporation (ONGC). The genesis of the investigation dates back to 2018 when ONGC, India's largest oil explorer, detected anomalies in bids for a cement order. Competing bids from various firms were strikingly identical, all quoting 7,000 rupees per tonne. When ONGC raised concerns about these consistent prices, an executive from India Cements provided a peculiar explanation: 'Seven was his 'lucky number'.' This seemingly innocuous detail, supported by the company's written submission to ONGC, which explicitly stated the 'financial bid was also supported by the numerology factor of 7,' became a crucial piece of evidence in the antitrust probe. The CCI's 90-page investigation report, reviewed by Reuters, meticulously detailed the cartel's operations. It identified Dalmia Cement (Bharat), a subsidiary of India's fourth-largest cement manufacturer Dalmia Bharat, and Shree Digvijay Cement as participants in the cartel for a significant 12-year period, from 2007 to 2018. India Cements was implicated for its involvement during the 2017-18 period. The report highlighted 'thinly concealed attempts at collusion' by these Indian companies. Evidence gathered during the exhaustive investigation included a range of concrete proof points such as communications, records of meetings, emails, and even admissions from the implicated parties. These substantiated claims of bid rigging, coordinated discussions on supply patterns, and deliberate efforts to exclude foreign bidders from tenders. For instance, the 2018 tender for 170,000 tonnes of cement saw all three companies — Dalmia Cement, Shree Digvijay, and India Cements — quoting either 7,000 rupees or 7,350 rupees per tonne with taxes for supplies across different states. ONGC's vigilance was critical in initiating the probe. Following the suspicious bids in 2018 and subsequent tenders showing similar pricing, ONGC issued a warning in late 2019, notifying India Cements that the identically priced bids indicated a potential violation of competition law. This warning, and the subsequent 'lucky number' defense, underscore the brazenness of the alleged collusion. The CCI's report suggests a deliberate and coordinated strategy by these firms to manipulate the market and stifle competition, particularly in public procurement tenders. The implications of this investigation are significant for India's corporate landscape and regulatory environment. It signals a heightened resolve from the Competition Commission of India to scrutinize domestic firms for antitrust breaches, following a period where the regulator had notably focused on high-profile investigations involving foreign giants. Gautam Shahi, a competition law partner at Indian law firm Dua Associates, noted that while tech cases have been a growing focus for CCI, there is also increased recognition within the government to address breaches involving state-run firms and public procurement. This incident is not an isolated one in the Indian cement sector. Past reports indicate that the CCI has previously investigated the industry for similar anti-competitive practices. In 2012, the CCI had imposed a substantial penalty of $1.1 billion on several cement companies for colluding to under-utilise their plants and create artificial cement shortages, though an appeal against that decision was still pending as of 2020. In December 2020, Reuters also reported on raids conducted by India's antitrust body at the offices of other major cement players, including UltraTech Cement and subsidiaries of LafargeHolcim (ACC and Ambuja Cements), and Shree Cement, as part of ongoing cartelisation complaints. The current investigation into Dalmia Cement, Shree Digvijay, and India Cements, detailed in the Reuters exclusive, reinforces the challenges faced by regulatory bodies in curbing cartelisation in vital industries. The detailed evidence from communication, meetings, emails, and admissions, as cited in the CCI report, suggests a sophisticated and long-standing conspiracy to fix prices and rig bids, ultimately harming consumers and public sector undertakings like ONGC. The outcome of this case could set a precedent for future antitrust enforcement in India and serve as a strong deterrent against anti-competitive practices. The report also highlights a broader trend of the CCI expanding its vigilance beyond foreign entities to actively monitor and penalize domestic companies engaged in cartel activities.

Frequently Asked Questions

Read Full Story on Quick Digest