Lakshmi Kumaran & Sridharan AttorneysAn ISO 9001 / 27001 certified law firm

No cartelization by asbestos cement sheet manufacturers

18 March, 2014

Competition Commission of India has on 11-2-2014 in Suo-Motu Case No. 1 of 2012, held that there is no evidence to suggest cartelization by asbestos cement sheet (ACS) manufacturers and the provisions of Section 3(3) read with Section 3(1) of the Competition Act, 2003 have not been contravened. Discussing the findings of the Director General (DG), the Commission held that there was no evidence of any specific pattern indicative of sharing of market amongst the top players in a concerted manner. Taking note of oligopolistic form of market structure for asbestos cement sheets and seasonal nature of demand for the product, the Commission was of the view that the ACS industry was amendable to price parallelism and that the quarterly movement of price was not due to concerted action among the industry players. Price sensitivity of the rural market which formed major segment of the market for said products was also considered by the Commission in this regard.

On the allegation of dissimilarity in the price movements between the raw materials and prices of ACS, relying on findings of DG, the Commission was of the view that cost and price figures were not indicative of any concerted action as during peak demand (demand being seasonal) price was high despite fall in cost, while during periods of low demand, manufacturers were not able to pass the high cost to the buyers. No concerted action in shutting down their plants (to curtail production and supply) was noticed by the Commission, as all the top players had shut-down their plants during part of the period under consideration due to different reasons, and the production usually showed downward trend during periods of low demand. It was noted that production of the product increased from 2008-09 to 2011-12, there was increase in production capacity by major players, capacity utilization was around 90% and DG had given a finding of valid economic operational reasons for steeper reduction in production at occasions. Further, analysis on profitability was found to be not relevant.

Communication between major manufacturers was found to be in respect of investment in raw material mine and minutes of meeting of the Asbestos Cement Products Manufacturers Association was also found to be not indicative of cartelization activities.
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