CCI penalty may send guilty in frenzy of appeal: Trilegal

Rahul Singh, counsel, Trilegal explains to CNBC-TV18 that the imposition of the penalty on the cement companies guilty of cartelisation by the Competition Commission marks a watershed in the history of regulatory bodies established to check monopolies and unfair trade practices.

Rahul Singh points out the reality where most of the guilty companies are large and hence are able to stall the payment of by appealing to the Competition Appellate Tribunal. Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: Sources have confirmed that the CCI has found cement companies guilty of cartelisation. What is this going to mean now for the cement companies?
A: You are absolutely right, this is not very new. Time and again the MRTPC launched several investigations against cement companies. However, no punitive action was initiated on violation as the MRTPC per se did not have much teeth.
If the news of an 8% penalty is correct, then this is going to be a coming-of-age for the Competition Commission because it is under an obligation to justify such a heavy penalty it has imposed. Also Read: CCI finds cement cos guilty of cartelisation, to fine 10 cos Q: How will the cease-and-desist order work as far as the cement companies are concerned? Will the companies have to cut prices and increase utilisation? I am just trying to understand what this is actually going to mean as far as manufacturers are concerned?
A: It would be very surprising if the Competition Commission orders cement companies to increase their production capacity or to utilise whatever production capacity is available.
In the past, the Competition Commission was very pragmatic and directed companies to promise in writing and that in future they will not cartelise or indulge in any kind of bid-rigging. Q: Do you believe that companies will now need to maintain a certain level of production and capacity utilisation?
A: Not necessarily, because that is a kind of economic analysis. A company can have an independent business justification for not being able to utilise the entire capacity it has have.
Therefore I do not think that Competition Commission is going to ask the cement companies to fully utilise their capacity or to justify why they are not utilising their capacity, so long as the companies have independent business justification for not doing it. Q: What about the payment of the penalty? DLF hasn't paid even in the case of other adverse orders. DLF has appealed to the COMPAT and even if the penalty is 8%, it will be the highest ever imposed by the CCI. But what is the road ahead in terms of payment and perhaps these companies will also appeal?
A: That's the reality. None of the guilty companies have really paid the penalty to the commission. They have gone to the appellate tribunal and won a stay.
But smaller companies found guilty and imposed a  penalty of Rs 1 lakh or Rs 2 lakh, the penalty was paid promptly.
The imposition of the 8% turnover penalty is likely to send the guilty companies in a frenzy of appeal at the Competition Appellate Tribunal. But the Competition Appellate Tribunal has also undergone a change with Justice Sirpurkar at the helm.