India - CCI Grants Relief Of Lesser Penalty In A Bilateral Ancillary Cartel Case.
Legal News & Analysis - Asia Pacific - India - Competition & Antitrust
13 February, 2019
On January 15, 2019, CCI had imposed penalty on Godrej and Boyce Manufacturing Company Limited (‘Godrej’) and four of its officials for colluding to fix prices of zinc-carbon dry cell batteries in India in violation of Section 3 of the CA02. 
In a leniency application made by Panasonic Corporation, Japan (‘Panasonic Japan’), it disclosed the existence of bilateral ancillary cartel between Panasonic Energy India Co. Limited (‘Panasonic India’) and Godrej for the institutional sales of dry cell batteries in India from 2012 till 2014 in order to fix prices and maintain price parity.
The director general noted that the evidence gathered demonstrated that Panasonic India and Godrej were engaged in anti-competitive behavior by way of a clause in the product supply agreement (‘PSA’) which imposed a mutual obligation on both parties not to take any step that would be detrimental to the market interests of the other party.
Further, Panasonic Japan admitted that its subsidiary Panasonic India was engaged in an arrangement to exchange commercially sensitive information with Godrej for price coordination in consonance with prices determined by the primary cartel which lasted till the date when Godrej stopped taking supplies of dry cell batteries from Panasonic India.
In this regard, Panasonic Japan submitted that Panasonic India and Godrej used to monitor the market operating price ( ‘MOP’) of each other and the other manufacturers in order to point out each other’s deviations from the agreed price. Email communications between Panasonic India and Godrej in regard to the MOP monitoring were provided by Panasonic Japan along with its leniency application which led to the director general’s finding that Panasonic India and Godrej exchanged commercially sensitive pricing strategies in order to maintain price parity.
CCI concluded that the email communications provided by Panasonic Japan showed that the MOP of Godrej’s products were decided jointly by Panasonic India and Godrej in order to maintain price parity, ultimately leading to a very high level of increase in prices of dry cell batteries, causing losses to consumers. In reaching its conclusion, CCI specifically noted certain emails where both Panasonic India and Godrej expressed their disappointment towards each other’s low prices and directed each other to increase their MOP. Interestingly, CCI rejected Godrej’s argument that it was in a buyer-supplier relationship with Panasonic India due to (i) a clause of the PSA that specified that both parties would operate as two independent principals in commercial transactions and (ii) the fact that the distribution arm of Panasonic India was horizontally related to Godrej from a demand-side perspective.
After considering the aggravating and mitigating factors in the case, CCI imposed on Panasonic India a penalty of 1.5 times its profits for each year of the duration of the cartel amounting to approx. INR 31 crores (approx. US $4.36 million). However, given that Panasonic India and its officials had provided genuine, full, continuous and expeditious cooperation during the course of the investigation which helped CCI in establishing the contravention of Section 3 of the CA02, CCI granted Panasonic India and its officials a 100% reduction of the penalty. With regard to Godrej, CCI noted that Godrej (being a was a relatively small player) was in a position to get dictated by Panasonic India, and had complained to Directorate General of Anti-Dumping and Allied Duties about the possibility of cartel. It therefore imposed a penalty of 4% of turnover for each year of the duration of the cartel on Godrej amounting to approx. INR 85 lakhs (approx. US $120,000). Finally, CCI imposed a penalty of 10% of the average income of the officials of Godrej for the three preceding financial years under Section 48 of the CA02.
 Suo Moto Case Number 02 of 2017.
For further information, please contact:
Zia Mody, Partner, AZB & Partners