Why the Cochin Port Trust is a Compelling thought for Section 3(3) of the Competition Act
On 1st August 2017, Competition Commission of India (CCI) held Container Trailer Owners Coordination Committee (CTOCC) in violation of section 3(3) of the Competition Act (the “Act”). The said conduct pertained to price fixation in coastal operations, but felt short of invoking monetary penalty from the CCI.
Primary allegation in the case pertained to CTOCC and others opposite parties establishing 'Turn System', which enable them to fix fair rates of service delivery. This, as per the informant, Cochin Port Trust, was in violation of section 3(1) and 3(3) of the Act, as it prevented the non-members or outsider container trailer companies to operate in the port.
This case while dealing with the alleged contravention of the said sub-sections, opens a Pandora Box where a trade association is expected to create a level field for its members on one hand, but also invoke anti-competitive conduct if the same is created through price determination. In this particular case even though CCI could not find any evidence in support of non-members being denied access to the market, because of shift of ‘burden of proof’ explicitly mentioned in section 3(3), OPs’ conduct was found to be anti-competitive. The propositions put forth by CTOCC were found to be insufficient to disapprove the presumption of Appreciable Adverse Effect on Competition (AAEC) post price fixing.
The peculiarity of the case lies in the fact that the opposite parties (OPs) did not deny the existence of such agreement but rather only disputed that the turn system is anti-competitive in nature. However in line with wordings of section 3(3), i.e. “…shall be presumed..”, they were not able to give sufficient reasons to convince CCI otherwise. The facts can be summed up as follows:
Now prices are bound to be higher because it prevents the entities to indulge into aggressive competitive practices where they keep lowering the fare rates, thereby allowing more container trailer companies to enter the market. Various strikes by the trade unions in the recent past even resulted in Kerala Government coming up with a decision of fixing the fare rate for the Container Trailer Association. In fact this was one of the explanations given by OPs where they argued that the said decision started affecting their business adversely, as many container trailer companies were offering services at a lower fare than the decided rates.
The underlying purpose of having a trade association gets defeated if they are not allowed to come up with a mechanism addressing common issues of its members. Had they not enforced some level of consistency in fare rates, it would have been detrimental to small players’ interests, where large players would have captured the market by levying low prices in short term. This would eventually have had resulted in AAEC.
One of the objectives which is stated by the CCI in their Mission 2020 vision document is “..establish(ing) a robust competitive environment through proactive engagement with all stakeholders including consumers, industries, governments and international jurisdictions..”. If the industries are to survive, they have to make profit and for that lowering of prices would have opposite effect. Thus, there is a gap in the competition mechanism where practices like turn systems are not being referred as a tool to address arbitrariness in lowering of prices.
CCI could have also looked into the benefit of maintaining fixed base price for the container trailer operator, decided in consultation with trade unions, government and other stakeholders. Kerala High Court passed a similar order where port authority was directed to address the issue related to turn system.
Overall reading of the order would suggest that while price-fixing is likely to invoke suspicion of CCI, the practice in itself cannot be said to be anti-competitive. A more holistic approach, where the events before and after such price-fixing have an equal bearing on the case along with specifics of the industry. Even though there is presumption of guilt in the said sub-section, it should not be allowed to over-shadow overall facts of the case. In this particular case, CCI was able to walk a middle path by calling the conduct of OPOCC anti-competitive, but also deciding not to invoke monetary penalty on the same hand. If not fair, the order reads reasonable.