DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

INDIA GLYCOLS LTD. V. INDIAN SUGAR MILLS ASSOCIATION & ORS

Investment and Competition Law

SUBMITTED BY-

Swastika Raushni

Roll no.- 2014128

NAME OF THE FACULTY

Ms. Prathyusha Samvedam

 INDIA GLYCOLS LTD. V. INDIAN SUGAR MILLS ASSOCIATION & ORS

Citation: 2018C ompLR582(C C I)

 The present case was decided in the Competition Commission of India, New Delhi on 11-
05-2018.
 Hon'ble Judges/Coram: Devender Kumar Sikri, Chairperson, Augustine Peter, U.C. Nahta,
Members and G.P. Mittal, J. (Member).

Facts of the case-

The Informant is a company engaged in the business of manufacturing and marketing ethanol
based chemicals. The Informant is stated to be dependent upon sugar mills for securing
uninterrupted supply of ethanol which is made from molasses, a byproduct of sugar industry, and
is one of the basic inputs required for running the core business of the Informant.

The five opposition parties in the present case are as follows-

 Indian Sugar Mills Association Opposite Party No. 1

 National Federation of Cooperative Sugar Factories Ltd. Opposite Party No. 2
 Indian Oil Corporation Ltd. Opposite Party No. 3
 Hindustan Petroleum Corporation Ltd. Opposite Party No. 4
 Bharat Petroleum Corporation Ltd. Opposite Party No. 5

The informant alleged that OP-1 is forcing the PSU OMCs to purchase ethanol at an artificially
higher price and the same amounts to violation of Section 4 of the Act. It has also been alleged
that the role of OP-2 is equally anti-competitive since it has colluded with OP-1 in artificially
raising the price of ethanol in contravention of the provisions of Section 3 (3) (a) of the Act.

The Informant is also aggrieved at the mandatory Ethanol Blending Programme (EBP)
promulgated by the Ministry of Petroleum and Natural Gas ('MoPNG') vide its notification dated
02.01.2013 whereby the OMCs were directed to sell only petrol blended with ethanol with
percentage of ethanol upto 10%. It is alleged that such a programme has created anti-competitive
conditions in the market for supply of ethanol by encouraging members of OP-1 and OP-2 to rig
bids and to artificially increase the prices of ethanol. Thus, while seeking discontinuance of such
a programme, the Informant has sought that joint tender mechanism of PSU OMCs be scrapped

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and the same be replaced by independent tendering by all the OMCs including private OMCs for
procurement of ethanol at market-driven prices so that proper competition amongst all the OMCs
is ensured and the Informant and other buyers of ethanol are also benefited by fair competition in
the market for sale and purchase of ethanol.

In the present problem I am representing the Director General.

Under section 26 of the competition act, 2002, the procedure for investigation is laid down which
is to be carried out by the Director General.

 According to the section, on receipt of a complaint or a reference from the Central

Government or a State Government or a statutory authority or on its own knowledge or
information, under section 19, if the Commission is of the opinion that there exists a prima
facie case, it shall direct the Director General to cause an investigation to be made into the
matter.
 Further, The Director General shall, on receipt of direction submit a report on his findings
within such period as may be specified by the Commission.
 If the report of the Director General relates on a complaint and such report recommends
that there is no contravention of any of the provisions of this Act, the complainant shall be
given an opportunity to rebut the findings of the Director-General.
 If, after hearing the complainant, the Commission agrees with the recommendation of the
Director General, it shall dismiss the complaint.
 If, after hearing the complainant, the Commission is of the opinion that further inquiry is
called for, it shall direct the complainant to proceed with the complaint.

Role of Director General: Importance in Decision Making

 If the report of the Director General relates on a reference made under sub-section (1) and
such report recommends that there is no contravention of the provisions of this Act, the
Commission shall invite comments of the Central Government or the State Government or
the statutory authority, as the case may be, on such report and on receipt of such comments,
the Commission shall return the reference if there is no prima facie case or proceed with
the reference as a complaint if there is a prima facie case.

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  If the report of the Director General referred to in sub-section (2) recommends that there is
contravention of any of the provisions of this Act, and the Commission is of the opinion
that further inquiry is called for, it shall inquire into such contravention in accordance with
the provisions of this Act.

REPORT OF THE DIRECTOR GENERAL: MAJOR ISSUES

Issue 1: Abuse of dominant position by OP 1?

OP-1 is not an 'enterprise' for the purposes of Section 2(h) of the Act at all. Hence, OP-1 cannot
be a dominant 'enterprise' in making supply of ethanol to the OMCs and there is no question of
OP-1 abusing its dominant position by demanding higher price for ethanol.

Issue 2: (i) mandatory EBP notified by MoPNG; (ii) joint tendering by the OMCs; and (iii)
procurement of ethanol by the OMCs at fixed notified prices instead of at market driven prices;
breach the observance of principle of competitive neutrality?

the allegation by the Informant that mandatory EBP notified by MoPNG breaches the observance
of principle of competitive neutrality is not found to be substantiated. The allegation by the
informant that process of joint tendering by the OMCs for procurement of ethanol breaches the
observance of principle of competitive neutrality is also not found to be substantiated.

Issue 3: OP-1 and OP-2 are in collusion to create an artificial scarcity of ethanol by limiting
production and supply of ethanol at a low level and thereby forcing the OMCs (OP-3 to OP-5)
to purchase ethanol at an artificially higher price?

availability and supply of molasses in the country has a huge and decisive impact on the production
and supply of ethanol and OP-1 and OP-2 cannot be said to be in collusion to create any artificial
scarcity of ethanol by limiting production and supply of ethanol at a lower level which may force
the OMCs (OP-3 to OP-5) to purchase ethanol at an artificially higher price.

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