Examining any anticompetitive conduct on part of CRAs falls within the ambit of the Commission: CCI

Examining any anticompetitive conduct on part of CRAs falls within the ambit of the Commission: CCI

In the matter of Brickwork Ratings India Pvt. Ltd. Vs. CRISIL Ltd. And Others, the Competition Commission Of India (CCI) has observed that although regulation of CRAs may be the subject-matter domain of the Securities and Exchange Board Of India (SEBI), examining any anticompetitive conduct on part of CRAs falls within the jurisdiction of the Commission.

The Commission also relied on the judgment of the Hon'ble Supreme Court of India in the matter of Competition Commission of India v. Bharti Airtel Limited and Others, (2019) 2 SCC 521, where it has been opined that mere presence of a sectoral regulator does not oust the jurisdiction of the Commission.

In this case, the CCI opined that there existed no prima facie case of contravention of the provisions of Section 3 (3) read with Section 3 (1) of the Competition Act, 2002 (Act) or of Section 4 of the Act against CRISIL Ltd; India Ratings and Reserach Pvt. Ltd.; CARE Ratings Ltd. and ICRA Ltd. (collectively the Opposite Parties).

This matter was filed by Brickwork Ratings India Pvt. Ltd. (Informant), a pan-India credit rating agency (CRA) under Section 19 (1) (a) of the Act against four other CRAs i.e. the Opposite Parties.

The Informant alleged that in the 2019-20 tender invited by National Highways Authority of India (NHAI) to rate its upcoming Rs. 75,000 crore bond issuances, the Opposite Parties cartelised and quoted identical/ similar rates. As per the Informant, certain quotes also evidence bid-rigging amongst the Opposite Parties.

It was also alleged that there was evidently predatory pricing being indulged into by the Opposite Parties to drive the Informant out of the market. As per the Informant, the difference in the bids of the Opposite Parties in both circumstances proved collusion on their part in the 2019 tender.

The Informant primarily averred that the Opposite Parties were involved in anti-competitive practices in contravention of the provisions of Section 3 which was causing an appreciable adverse effect on the competition in India as well as on the Indian economy. The ratings given by the Opposite Parties were causing huge financial loss to the bond holders and they were disrupting the economy.

As such, the Informant had prayed the Commission that directions under Section 26 (1) of the Act be issued for investigation into formation of cartel and collusive bidding by the Opposite Parties in the tender processes of various PSUs for the period 2009 till date, the Opposite Parties be directed to discontinue their collusive bidding for various PSU tenders and penalty be imposed on the Opposite Parties.

The CCI observed that there was no material available on record which may show that there was any meeting of minds between the Opposite Parties. In other words, apart from the alleged price parallelism in the NHAI tender for the FY 2019-20 which had been explained through the transparent historical price trends, there was no other material available on record which might indicate collusion or any concerted action between the Opposite Parties in respect of NHAI tender for the FY 2019-20.

As far as the allegation of the Informant regarding predatory pricing by the Opposite Parties in contravention of the provisions of Section 4 of the Act was concerned, the Commission noted that the provisions of Section 4 do not provide for abuse of 'collective dominance' by multiple entities. Further, the Opposite Parties in their responses, have explained the rationale behind participating in NHAI tenders despite low historical quotations being tendered.

In the light of the above, no case of abuse of dominance by the Opposite Parties, in contravention of the provisions of Section 4 of the Act, was made out in the present matter.

The Informant had made a fresh allegation regarding OP-1 being dominant in the market and abusing its dominance by indulging in predatory pricing in NHAI tenders. In this regard, it was noticed that such allegation had not been made by the Informant in the Information filed by it under Section 19 (1) (a) of the Act at the first place.

As such, while giving its response to the Information, OP-1 had no occasion to meet such allegation. So, the Commission was not inclined to examine the said fresh allegation of abuse of dominance made by the Informant against OP-1 in its rejoinder submissions.

However, it was put forth that allegations pertaining to abuse of dominance by OP-1 for alleged predatory pricing in various government tenders had earlier been looked into by the Commission earlier in Case No. 95 of 2014 titled Brickwork Ratings India Private Limited v. CRISIL Limited and Another which the Commission had disposed of vide order dated 18.03.2015 passed under Section 26 (2) of the Act.

The Commission ordered that the matter be closed forthwith in terms of the provisions of Section 26 (2) of the Act.