In a ‘body blow’ to the industry, which is fighting a demand slide, the Competition Commission of India (CCI) has slapped a hefty penalty of over Rs.6,300 crore on 11 cement producers, who were found violating the provisions of the Competition Act, 2002. The Act deals with anti-competitive agreements, including cartels.

The Commission has imposed a penalty on them “at 0.5 times of their profits for the years 2009-10 and 2010-11.’’

The 11 firms have also been directed to deposit the penalty amount within 90 days. And, they have been told to forthwith ‘cease and desist’ from indulging in any anti-competition activity.

The 11 cement firms are: ACC, Ambuja Cements, Ultratech Cements, Grasim Cements (now merged with Ultratech). J.K. Cements, The India Cements, Madras Cements, Century Cements, Binani Cements, Lafarge India and Jaypee Cements.

The Commission’s order on slapping penalty on these companies followed investigations into a complaint filed by the Builders’ Association of India. “While imposing the penalty, the Commission has considered the parallel and co-ordinated behaviour of cement companies on price, despatch and supplies in the market,’’ says a release from Ministry of Corporate Affairs. The Commission, the release further said, found the cement companies not utilising the available capacity. Effectively, it was argued, the cement companies had managed to “reduce supplies and raise prices in terms of higher demand.’’ It went on to argue that these companies forged an `anti-competitive agreement’, which was not only detrimental to the cause of consumers but also to the economy as a whole.

While levying penalty on these firms, the Commission imposed a penalty on the Cement Manufacturers’ Association (CMA) as well.

The CMA, too, has been asked to “disengage and disassociate itself from collecting wholesale and retail prices through the member-companies, and also from circulating the details on production and dispatches of cement companies to its members.’’

ICL to contest order

A release from India Cements said, “there was no basis to arrive at conclusions that our company has indulged in cartelisation, and anti-competitive practices.’’ Expressing its disappointment over the Commission’s order, the company lamented that “without any proof we have been found guilty.’’ The company asserted that it would be taking legal recourse to contest the order. ``To direct a collective body of corporate entities to desist from pursuing its lawful objectives is retrograde,’’ the release went on to argue.

Denying any involvement on price cartel, Ultratech Cement, too, said it would challenge the order before tribunal while others such as ACC and Ambuja Cements are mulling to make a similar move.

The maximum fine was imposed on Jaiprakash Associates at Rs.1,323.6 crore followed by Aditya Birla Group’s Ultratech Cements (Rs.1,175.49 crore), Ambuja Cements (Rs.1,163.91 crore) and ACC (Rs.1,147.59 crore). The CCI has fined Lafarge India Rs.480.01 crore, JK Cement (Rs.128.54 crore), India Cements (Rs.187.48 crore), Madras Cements (Rs.258.63 crore), Century Textiles (Rs.274.02 crore) and Binani Cements (Rs.167.32 crore).

Shares mixed

The huge fine imposed by the Commission has had its impact on the shares of these companies. Cement stocks, on Thursday, closed on a mixed note, with ACC and Ambuja Cements losing up to 2 per cent. Ultratech Cements, however, rose by as much as 2 per cent.

Cement makers mum

PTI reports from New Delhi:

The CMA, on Thursday, said it would go through the order of CCI imposing hefty penalty of over Rs.6,000 crore on 11 cement firms and then decide about future course of action. However, the Builders’ Association of India (BAI), on whose complaint CCI began the investigation, were elated and said the decision was a long-pending one. Senior advocate O. P. Dua represented BAI in the case against the cement makers at the CCI.

“We will study the nature and the rationale of the order and then only we can decide on the future course of action,” CMA Secretary-General N. A. Viswanathan said. When contacted, Aditya Birla Group firm Ultratech said it was yet to receive the order, and almost an echoing voice could be heard from others indicted by the CCI for “controlling supplies and determining prices through an anti-competitive agreement“. Sources in the law firm Amarchand Mangaldas, which represented ACC and Ambuja Cements, said it was reviewing the order and, in all likelihood, would appeal to the Competition Appellate Tribunal.

The apex realtors’ body Confederation of Real Estate Developers’ Association of India (Credai) hailed the CCI order and said, “the judgement justifies their apprehensions that cement and steel companies are engaged into cartelisation.”

“We welcome this decision by the CCI. We have been saying that the steel and cement companies are forming cartels and artificially hiking the prices. This has affected ultimately the consumers. The CCI has given the right judgement. This will discourage the cement makers from forming a cartel in future,” Credai President Lalit Kumar Jain said.