Mere Floating of the Tender does not amount to entering into an Agreement

Mere Floating of the Tender does not amount to entering into an Agreement

AdCept Technologies Pvt. Ltd. vs. Bharat Coking Coal Limited (BCCL)
Case No. 16 of 2013, decided on 8th May 2013 by Competition Commission of India

For the purpose of monitoring the slope stability of the relevant mines, BCCL, a subsidiary of Coal India Ltd., floated global tender inviting bids from proven manufacturer(s) for supply of Mine Slope Stability Monitoring Radar (MSSM RADAR). The informant submitted that:

• There were two leading Radar Technologies available worldwide for monitoring the slope stability of open pit mines in real time.
• However the specification given in the tender documents as floated by BCCL was allegedly biased and specifically intended to favour ‘X’.
• Tender allegedly defined large parameter value for “scan angle” and by doing so BCCL eliminated the participation of others in this global tender.
• It was thus alleged that presence of discriminatory condition in the tender document amounted to abuse of dominant position by BCCL in the Indian market within the meaning of the Explanation (a) of Section 4 of the Competition Act, 2002.
• Further any intended agreement by BCCL with the manufacturers/firms in respect of production and supply of Mine Slope Stability Monitoring Radar will cause an appreciable adverse effect on competition within India, and shall thus be contravention of Section 3(3) of the Act.

The Commission held that BCCL was a dominant player with respect to a particular relevant market. However, the informant did not define the relevant market. BCCL is the procurer while the informant is the supplier of slope stability monitoring services, a common technique to determine slope stability so as to monitor the small precursory movements, which occur prior to collapse.

A ‘slope stability radar’ system remotely scans a rock slope to continuously monitor the spatial deformation of the face and is currently in use across the global mining and civil industries. It was concluded that since BCCL is the procurer of slope stability monitoring services, the relevant product market in the instant case ostensibly would be a market of “procurement of slope stability radar services” and it will have to look at the competition effects only within the geographic market of India. The dominant player (or enterprise) is the seller of goods/services who/which adversely affects the buying side i.e. the consumer. In the present case, the buyer was contended to be dominant and affecting the competition on selling side of the market by excluding some of the players. It was accordingly held that:

• In the case of buyer power it is the procurement markets, not the supply markets, which have to be defined.
• The demand-side oriented market concept is applied inversely in this context.
• What needed to be seen in the case was that whether BCCL, if at all it is found to be dominant in the relevant market defined by the Commission, was able to adversely affect the competition in the supply side of the market.
• BCCL is engaged in the business of only coal mining and allied activities. Therefore, it is only one of the procurers of the service in the relevant market.
• BCCL thus not a dominant player as there are ample numbers of players purchasing the Slope Stability Radar services in India to determine slope stability of the mines.
• Since BCCL not dominant in the relevant market, it cannot be held guilty of abusing its dominant position.
• Further, even if assuming that BCCL was dominant in the relevant market, the instant case was in relation to the procurement of a technology by a PSU and since services were being procured for measuring slope stability of the mines, it was for the procurer of technology to decide which technology it wants to use. This free choice of any procurer cannot be interfered with.
• The Commission, on the issue of consumer choice, has earlier observed (in Pandrol Rahee vs. DMRC) that:

A consumer must be allowed to exercise its consumer choice and freely select between competing products or services. This right of consumer’s choice must be sacrosanct in a market economy because it is expected that a consumer would decide what is best for it and free exercise of consumer choice would maximize the utility of the product or service for the consumer. For an individual, that consumer’s choice is based on personal assessment of competing products or services, their relative price or personal preferences. For any other type of consumer, this process of decision making in exercise of consumer’s choice is more structured and reflected in procurement procedures. Such a consumer may use experts or consultants to advise, do its own technical assessment, take advice of others it may trust or even purchase from known and reliable sources. The process of such decision making may result in purchase by nomination or limited tender or open tender. Normally, open tenders without a brand bias are desirable as it may give the best value for money. However, each of the purchase process is acceptable and valid as a process of decision making. The consumer is the best judge. In case of public entities, the entity is a representative consumer on behalf of the public. There are administrative mechanisms in place for carrying on the due process of exercising consumer’s choice on behalf of the public.”

Accordingly, it was held that no prima facie case of abuse of dominant position against BCCL was made out and also there was no anti-competitive conduct apparent on part of BCCL by insisting upon a particular type of technology for its use. There was no agreement existing at the relevant time which could be tested on the touchstone of section 3 as mere floating of the tender does not amount to entering into an agreement.