CORPORATE PRESS RELEASES (INDIA) news desk, June 21,2012
(Reuters) – Eleven cement makers were slapped with $1.1 billion in fines on Thursday for price fixing, a record penalty from an increasingly assertive anti-trust regulator, the Competition Commission of India (CCI).
The CCI said the companies colluded to underuse their plant and create an artificial shortage of cement, the government said in a statement.
Analysts said the ruling, which was heavier than expected, reflected an increasingly tough approach by the three-year-old regulator and represented a coming of age for Asia’s third-largest economy, hit by a spate of high-profile corruption cases in recent years.
UltraTech Cement (ULTC.NS), part of the diversified Aditya Birla Group, Holcim-controlled ACC (ACC.NS) (HOLN.VX) and Ambuja Cement (ABUJ.NS), India Cements (ICMN.NS) and the Indian unit of France’s Lafarge SA (LAFP.PA) were among those fined the equivalent of 50 percent of their net profit for the fiscal years ending in March 2010 and March 2011.
“As economies get bigger there is a greater need for competition laws to regulate corporates that have grown with those economies from either abusing their dominance or cornering markets through cartels,” Samir Gandhi, partner at law firm AZB Partners, said ahead of the ruling.
Executives from the fined companies denied price fixing.
“We have not indulged in any cartelisation,” said O. P. Puranmalka, who heads UltraTech’s cement business, adding the company will challenge the order.
“We deny the charges of cartelisation, there is no question about it,” N. Srinivasan, managing director of India Cements told Reuters.
“I don’t think this order is based upon any proof that they have,” said Srinivasan.
The ruling, handed down after markets closed, comes five years after a similar order against 44 companies by the CCI’s predecessor.
Some industries in India such as telecoms see fierce price competition. Others, including fuel retailing and packaged foods, are governed by state-set prices.
“The CCI has demonstrated that it is willing to use its considerable fining powers, which has made companies take competition law compliance particularly seriously,” said Gandhi.
For the full ruling, click here
The watchdog could have imposed a maximum penalty of 10 percent of the average turnover of each company for the last three financial years.
“The act of these cement companies in limiting and controlling supplies in the market and determining prices through an anti-competitive agreement is not only detrimental to the cause of the consumers but also to the whole economy,” the CCI said in the statement.
The companies were ordered to pay the fine within 90 days.
“We are already ‘underperform’ on the sector and are building in a 15 percent [net present value] discount in our calculation factoring CCI verdict,” said Rakesh Arora, analyst at Macquarie Equities Research in Mumbai.
A spokesman for Ambuja Cement declined to comment on the ruling as it had not received a copy, while a spokesman for ACC could not be reached by Reuters.
The joint secretary of the Cement Manufacturers’ Association, an industry body also fined in the ruling, declined to comment.
The CCI could face a slew of appeals.
“There are a lot of legal options available, they will keep on fighting,” R. Prasad, a CCI member, told the ET Now television channel after the ruling. “It is for the betterment of the market that such orders are required,” he added.
Last year the watchdog slapped a 6.3 billion rupees penalty on DLF Ltd (DLF.NS), India’s biggest developer, for abusing its dominant position. The company is appealing the decision and the next hearing in the case is scheduled for June 27.