Excel Crop Care Ltd. v. Competition Commission of India, (2017) 8 SCC 47

The leading Supreme Court decision on bid rigging and, for six years, on the computation of penalties. Four manufacturers of aluminium phosphide tablets quoted identical rates in successive tenders of a public buyer and had boycotted an earlier tender. The Court upheld the finding of bid rigging, held that the Director General is not confined to the allegations in the information, held that conduct continuing after the Act came into force is within the Commission's jurisdiction, and held that a penalty on a multi-product enterprise must be computed on relevant turnover. The last of these holdings has since been affected by the amendment of 2023, and the note deals with that separately.

1. The Facts

The Food Corporation of India floated tenders for aluminium phosphide tablets, used for the fumigation of foodgrains. Four manufacturers submitted identical rates in successive tenders over several years, notwithstanding that their costs of production differed. In an earlier tender they had jointly declined to participate. The Commission found a contravention of Section 3(3)(d) read with Section 3(1) and imposed penalties computed at nine per cent of the average turnover of the preceding three years. The appellate tribunal reduced the base to the turnover of the product concerned, and appeals were carried to the Supreme Court.

2. The Holdings

1. Bid rigging established. Identical quotations by enterprises with different cost structures, taken with the earlier boycott and the surrounding circumstances, established an agreement within Section 3(3)(d). The identity of price between firms whose costs differed was the circumstance that could not be explained by independent conduct.
2. Scope of the investigation. The Director General is not confined to the four corners of the information. Where the investigation into the tender referred to in the information disclosed the same conduct in a later tender, the Commission could consider it, because the direction under Section 26(1) is to investigate the matter and not merely the specific allegations. To hold otherwise would require a fresh information for every instance of a continuing course of conduct.
3. Jurisdiction over continuing conduct. Conduct that began before Sections 3 and 4 were notified on 20 May 2009 but continued afterwards is within the Commission's jurisdiction in respect of the period after notification.
4. Relevant turnover. The word turnover in Section 27(b) must be read as relevant turnover, meaning the turnover of the product or service to which the contravention relates, and not the total turnover of a multi-product enterprise. The reasoning was proportionality: a penalty computed on products having nothing to do with the contravention would be excessive, would offend the principle that punishment must fit the offence, and could be arbitrary under Article 14.
5. The method of computing a penalty. Determine the relevant turnover; apply an appropriate percentage having regard to aggravating and mitigating circumstances; and then test the result for proportionality, including against the ability of the enterprise to survive it.

3. What the Amendment of 2023 Changed

The relevant turnover holding construed the word turnover as it then stood in Section 27(b). The Competition (Amendment) Act, 2023 substituted the definition in Section 2(y), so that turnover now means global turnover derived from all products and services by a person or an enterprise. The statutory ceiling is therefore computed on a much larger base than the decision contemplated.

4. The Case Read with Rajasthan Cylinders

Excel Crop Care and Rajasthan Cylinders and Containers Ltd. v. Union of India, (2020) 16 SCC 615 are the two poles of the Indian law on bid rigging, and they should always be read together. In Excel Crop Care identical bids established a cartel; in Rajasthan Cylinders they did not, because the structure of the market explained them, there being a single large public buyer with countervailing power, few suppliers, capacity allocated by the buyer and a reserve price known to the industry. The difference lies not in the bids but in the market. The question in every case is whether the pattern requires an agreement to explain it, or whether the conditions of the tender and of the market would produce it anyway.

5. Why the Case Is Cited

• Bid rigging. The leading Indian authority on proof of Section 3(3)(d) from identical bids and surrounding circumstances.
• Investigation. The authority for the proposition that the Director General investigates the matter and not merely the allegations.
• Penalty. The origin of the relevant turnover doctrine and of the proportionality principle that survives it.
• Temporal jurisdiction. Authority on conduct straddling the notification of Sections 3 and 4.

6. Related Topics and Provisions