Competition Commission of India finds that the companies had influenced prices of industrial and automotive bearings in the domestic market between 2009 to 2014.
07 Jun 2020 | 12437 Views | By Nilesh Wadhwa
The Competition Commission of India (CCI), the fair trade practice watchdog in the country, has found Schaeffler India, National Engineering Industries, SKF India, and Tata Steel’s bearing division (Tata Bearing), were involved in cartelisation in the domestic industrial and automotive bearings market. The probe was conducted for the alleged malpractice ...
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The Competition Commission of India (CCI), the fair trade practice watchdog in the country, has found Schaeffler India, National Engineering Industries, SKF India, and Tata Steel’s bearing division (Tata Bearing), were involved in cartelisation in the domestic industrial and automotive bearings market. The probe was conducted for the alleged malpractice by the companies from 2009 to 2014. The findings come nearly a year after CCI’s findings hinted at alleged price manipulation by the bearing manufacturers.
CCI undertook an investigation in 2017, when it received information that five companies may have artificially influenced the prices of bearings between 2009-2014, which led to higher raw material cost being passed on to the consumers. These companies controlled nearly 75 percent of the domestic bearings market between 2009-2011 — a time when steel prices, the key raw material in bearings, was fluctuating sharply.
In an order document accessed by Autocar Professional, the commission noted that “when the steel prices started increasing 2009 onwards, there was co-ordinated action amongst the five companies to pass on such increase to the automotive and industrial OEM customers and in the distribution segment of the market. Such cartelisation existed 2009 onwards till late 2014 and was confined only to the Indian market.”
CCI says such coordination operated across industry segments within India to seek uniform price increase from various OEMs. As a general practice, if there was an increase in the manufacturing cost of bearings, including due to increase in the steel prices, the OEMs accommodated certain increase in price from time to time. However, they generally did so only when all the suppliers demanded for such an increase. Hence, under the cartel arrangement, these five companies agreed on the percentage increase in steel price so that each of them would represent to the OEMs, to seek a price increase from them. The rationale behind such co-ordination was to simultaneously send out price increase letters to the OEMs and distributors in the aftermarket, specifying the percentage increase in steel prices and a request to increase the existing supply prices, as otherwise the likelihood of getting a price increase was believed to be less certain.
The CCI probe found that there was allegedly a consensus among the companies ”to seek a price increase of 12 percent and settle at six percent” with tractor and automotive manufacturers. For two-wheeler manufacturers there was a consensus to seek a “10 percent price increase and settle at four percent”.
In its order, CCI has found National Engineering Industries, Schaeffler India, SKF India and Tata Bearing responsible for these actions. In terms of penalty for the companies, the CCI order says: “It is observed that in light of the peculiar facts and circumstances of the present case as detailed in this order, ends of justice would be met if the parties cease such cartel behaviour and desist from indulging in it in future, as directed earlier. The parties are however, cautioned to ensure that their future conduct is strictly in accord with the provisions of the Act, failing which any such future behaviour would be vied seriously with attendant consequences.”