Economics Case Studies, Economic Crisis Case Studies

Code :ECC0059

Year : 2018

Industry :Cement/Construction

Region : India

Teaching Note:Available

Structured Assignment : Not Available

Abstract:

The case describes the cartelization of cement companies in India. The Competition Commission of India (CCI) in January, 2017 levied a penalty of nearly Rs. 2.06 billion on seven cement companies on charges of cartelization. The penalty levied was 0.3% of last three fiscal years’ average turnover at the seven companies: Shree Cement Ltd, UltraTech Cement Ltd, Jaiprakash Associates Ltd, J.K. Cement Ltd, Ambuja Cements Ltd, ACC Ltd and J.K. Lakshmi Cement Ltd. The firms were found indulging in bid rigging in cement procurement tender by the Haryana government for supplying cement to state departments, boards and corporations. The CCI noted in its 120-page order that the anti-competitive activities of the companies had led to the cancellation of the tender and forced the Haryana government to start the process afresh. This had caused delay in timely supply for the execution of public infrastructure projects and overrunning of costs.

The aims of India’s Competition Act of 2002 were to prohibit the anticompetitive agreements, the abuse of a dominant market position such as restriction of the production of goods, denying market access to competitors and to protect the ability of new firms to enter the market. At the same time to have the chance of the benefits of disruptive innovation and market economy to consumers the Competition Appellate Tribunal ensure the players to enjoy their innovation so that there is incentive to develop and transform.

With this background, the case aims to discuss identification of cartels, effect of collusions on the concentration of market share, calculation of concentration ratio using Hirschman Herfindahl Index and the effects of market concentration of the cement industry. The case also allows for discussion on the antitrust action of Competition Commission of India (CCI) and the reaction of Competition Appellate Tribunal (CAT).

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