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Role of Economic Evidences in Prosecution of Cartels

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Role of Economic Evidences in Prosecution of Cartels ROLE OF ECONOMIC EVIDENCES IN PROSECUTION OF CARTELS Dissertation submitted in part fulfilment for the requirement of the Degree of LL.M. Submitted by Supervised by RINKI SINGH DR. GARIMA DADHICH NATIONAL LAW UNIVERSITY DELHI (INDIA) 2017 DECLARATION BY THE CANDIDATE I hereby declare that the dissertation entitled “Role of Economic Evidences in Prosecution of Cartels” is the outcome of my own work carried out under the supervision of Dr. Garima Dadhich, Assistant Professor, Corporate Governance and Public Policy, Indian Institute of Corporate Affairs, Ministry of Corporate Affairs, Govt. of India. I further declare that to the best of my knowledge the dissertation does not contain any part of work, which has not been submitted for the award of any degree either in this University or any other institutions without proper citation. I further declare that I followed the Research guidelines of the University. Place: New Delhi Rinki Singh Date: 35LLM, 2016 National Law University Delhi i CERTIFICATE OF SUPERVISOR This is to certify that the work reported in the LL.M dissertation entitled “ROLE OF ECONOMIC EVIDENCES IN PROSECUTION OF CARTELS,” submitted by Rinki Singh at National Law University, Delhi is a bona fide record of his/her original work carried out under my supervision. To the best of my knowledge and belief, the dissertation: (i) embodies the work of the candidate herself; (ii) has duly been completed; and (iii) is up to the standard for being referred to the Examiner. Place: New Delhi Dr. Garima Dadhich Date: Assistant Professor, Corporate Governance and Public Policy, Indian Institute of Corporate Affairs, Ministry of Corporate Affairs, Govt. of India ii ACKNOWLEDGEMENT I express my deepest sincere regards and gratitude to my respected supervisor, Dr. Graima Dadhich, for her steady help, direction on the subject and consolation for undertaking this exploration work on the topic “Role of economic evidences in Prosecution of Cartels”. She has dependably been a wellspring of inspiration for this attempt and have motivated me to undertake further research in this work. Her important proposals and exchanges have been exceptionally useful in the finishing this research work. This work would not have been attainable without her thorough directions. I, further, wish to offer my thanks to the whole NLU-D family particularly Prof. (Dr.) Ranbir Singh (Vice-Chancellor, National Law University, Delhi) and Prof. G.S. Bajpai (Registrar, National Law University, Delhi) for giving all the framework and infrastructure required for undertaking this research work. I would also like to show my gratitude to the Library staff of the National Law University, Delhi for their steady support. I extent special thanks to my parents, family and friends for their steady support and guidance in this attempt. Last, but not the least, I recognize and thank the researchers whose work is utilized for this work. Rinki Singh 35LL.M.2016 iii LIST OF ACRONYMS & ABBREVIATIONS AAEC Appreciable Adverse Effect on the Competition AITDF All India Tyre’s Dealers Federation ATMA All India Tyre Manufacturer Association BCDA Bengal Chemist and Druggist Association CCI Competition Commission of India CMA Cement Manufacturer’s Association CMA Cement Manufacturing Association DG Director General EU European Union MRTPC Monopolies and Restrictive Trade Practices Commission OECD Organization for Economic Co-operation & Development PAN Presence Across the Nation R&D Research and Development SCP Structure - Conduct - Performance TFEU Treaty on Functioning of European Union US United States WTO World Trade Organisation iv LIST OF CASES 1. Alkali Chemical Corporation Ltd 2002, CTJ 459 (MRTP) 2. All India Tyre’s Dealers Federation v. Tyre Manufacturer MRTP Case: RTPE No. 20 of 2008. 3. Aluminium Phosphate Manufacturers, Case no. 2 of 2011 4. American Tobacco Co. v. United States 328 U.S. 781 (1946). 5. Bell Atlantic Corp. v. Twombly 550 U.S. 544 (2007). 6. Builders Association of India v. Cement Manufacturers, Case No. 29 of 2010. 7. Exclusive Motors Private Limited v. Automobili Lamborghini , case 52 of 2012 8. Express Industry Council of India Ltd. V. Jet Airways and others, Case No. 30 of 2013 9. Hindustan lever Ltd. & Tata Oils mills co. Ltd, 994 CTJ 270 (SC) (MRTP) 10. ICI v. Commission, Case 48/69 ECJ, [1972] ECR 619 11. In re alleged cartelisation by steel producers, Case No.: RTPE No. 09 of 2008 (MRTP) 12. In Re Bengal Chemist and Druggist Association, Case No. 02 of 2012 and Ref. Case No. 01 of 2013. 13. Monsanto Co. v. Spray-Rite Service Corp 465 U.S. 752 (1984). 14. Neeraj Malhotra and Deutsche Bank and Ors. Case No. 5 of 2009. 15. RPTA v. Crompton India Ltd. and Rallis (India) Case vol III. 16. RRTA Vs W. H. Smith & Sons Ltd. [1969] 3 All ER 1065. 17. Sarabhai Chemicals case, (1979) 49 Comp Cases 145 (MRTP commission). , 18. Theatre Enterprises 346 U.S. at 541. 19. Wood Pulp Case OJ [1985] L 85/1, [1985] 3 CMLR 474 20. Zinc Producer Groups OJ [1984] L 220/27, [1985] 2 CMLR 108 LIST OF TABLES TABLE NUMBER CAPTION PAGE NUMBER 2.1 Prisoner’s Dilemma. 45 v TABLE OF CONTENTS S.No. TITLE PAGE NO. DECLARATION BY THE CANDIDATE I CERTIFICATE OF SUPERVISOR ii ACKNOWLEDGEMENT iii LIST OF ABBREVIATIONS iv LIST OF CASES V LIST OF TABLES V 1 CHAPTER 1 INTRODUCTION 1.2 LITERATURE REVIEW 2 1.3 STATEMENT OF PROBLEM 3 1.4 HYPOTHESIS 3 1.5 RESEARCH QUESTIONS 4 1.6 RESEARCH OBJECTIVE 4 1.7 RESEARCH METHODOLOGY 4 5 CHAPTER 2 DEFINING CARTELS 2.1 FORMATION OF A CARTEL 7 2.2 LAWS PROHIBITING CARTELS 13 2.3 ESSENTIALS OF A CARTEL 14 2.3.1 ESSENTIALS OF AN AGREEMENT 14 vi 2.3.1.1 AGREEMENT BETWEEN WHOM. 16 2.3.1.2 AGREEMENT NEEDS TO BE A 18 HORIZONTAL ONE. 2.3.1.3 EXCEPTIONS TO THE RULE OF 20 AGREEMENTS 2.3.1.4 RAGHAVAN COMMITTEE’S VIEWS 21 2.3.2 PURPOSE AND CONDUCT OF A 22 CARETL. 2.3.2.1 PRICE FIXING 22 2.3.2.2 MARKET SHARING 23 2.3.2.3 OUTPUT RESTRICTING 24 2.3.2.4 BID RIGGING 25 CHAPTER 3 ROLE OF ECONOMIC EVIDENCES IN 27 DETECTION OF CARTELS 3.1 DETECTION OF CARTELS 30 3.1.1 PROBLEMS OF AN OLIGOPOLISTIC 31 MARKET 3.2 METHODS OF DETECTION 34 3.2.1 KINDS OF EVIDENCES 34 3.2.1.1 DIRECT EVIDENCES 35 3.2.1.2 INDIRECT EVIDENCES 35 3.3 APPROACHES FOR DETECTION OF 38 CARTELS 3.3.1 LENIENCY APPROACH OF DETECTION 43 OF CARTELS 3.3.2 DAWN RAIDS 46 EVIDENTIARY VALUE OF CHAPTER 4 ECONOMIC EVIDENCES 47 4.1 PRICE PARALLELISM AND 48 vii EVIDENTIARY VALUE OF ECONOMIC EVIDENCES. 4.1.1 CONCERTED PRACTICES IN EU 49 4.1.2 CONSPIRACY IN US 51 4.1.3 ACTION IN CONCERT IN INDIA. 52 CHAPTER 5 CCI’s APPROACH IN 54 APPLICATION OF ECONOMIC EVIDENCES. 5.1.1 ALL INDIA TYRE’S DEALERS 54 FEDERATION V. TYRE MANUFACTURER 5.1.2 BUILDERS ASSOCIATION OF INDIA V. 57 CEMENT MANUFACTURERS 5.1.3 IN RE ALLEGED CARTELISATION BY 58 STEEL PRODUCERS 5.2 CRITICAL ANALYSIS OF THE CASE 60 STUDIES 5.1 SUGGESTIONS 62 BIBLIOGRAPHY 63 BOOKS 63 STATUTES 64 REPORTS 64 ARTICLES 64 WEBSITES 65 viii CHAPTER 1 INTRODUCTION “Competition law is all about economics and economic behaviour.1” -Fali S. Nariman. As the statement suggests, it is quite evident that economic plays an important in the regime of Competition Law. The roots of the Competition Law are found in the theories and concepts of the Economics. The Anti-Trust legislations all over the world are drafted based on economic theories and concepts. The main aim of the Anti-Trust Law in a country is to promote its economic development. This explains well the importance of economics with respect to the Competition Law. Economics and Competition law walks hand in hand. The litigators, judges and competition authorities all over the world to interpret the competition law, to apply it and to enforce the law, use it. Various economic concepts, theories and evidences are used by the competition authorities to identify and understand the market structure and behaviour of the firms in the market, which helps the authorities and the lawyers to support their arguments and to proceed in the further investigation if needed. In the cases related to Anit-Competitive Agreements, or Abuse of dominance, or in the case of Mergers, the competition authorities used the economic analysis, economic theories and concepts to figure out the economic data of supply and demand, demand elasticity, market power, market concentration etc. With respect to prosecution of cartels, economic analysis and theories of economics and data collected as economic evidences holds a very important role, as it is very difficult to detect a cartel. Other direct and circumstantial evidences also plays an important role in prosecution of cartels. The economic analysis helps the investigating authorities to establish a prima face case to the existence of a cartel and cause further investigation. Therefore, economic evidences do hold an imperative role in prosecution of cartels. 1 Fali S. Nariman, ‘Law and Economics’, in vinod dhall (ed), Competition Law Today: Concepts, Issues and Law in Practice xv (New Delhi: Oxford Press, 2007) 1 1.1 LITERATURE REVIEW There have been many research works done by various scholars on approaches of economic analysis and gathering of economic evidences in the cases involving the prosecution of cartels. A few of the works are reviewed as below: Patrick Rey, “On the Use of Economic Analysis in Cartel Detection”, (2006): The author in his paper have discussed various economic approaches for detecting a cartel.
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