Explained | The allegations of cartelisation among domestic tyre manufacturers Premium

The Supreme Court recently issued notices to MRF, JK Tyre, Apollo, CEAT and Birla Tyres and the Automotive Tyre Manufacturers’ Association pertaining to CCI’s appeal against the NCLAT order over alleged cartelisation

The story so far: Last week, the Supreme Court issued notices to five tyre companies and industry body Automotive Tyre Manufacturers’ Association (ATMA) in the context of the Competition Commission of India’s (CCI) appeal against the National Company Law Appellate Tribunal (NCLAT) order over alleged cartelisation.

The latter had asked the competition regulator to reconsider the penalties imposed on tyre companies MRF, JK Tyre, Apollo, CEAT and Birla Tyres alongside ATMA for alleged cartelisation. The apex court will now hear the matter in September 2023. 

The chain of events started with a reference made by the All-India Tyre Dealers Federation (AITDF) to the Ministry of Corporate Affairs (MCA) against the five tyre companies and the industry body. It alleged that the tyre companies, who controlled 90% of the tyre production in India, engaged in price parallelism. It was alleged that the companies raised tyre prices on the pretext of rise in prices of raw materials (natural rubber and other inputs) but did not correspondingly decrease prices when raw material prices fell.

These actions were deemed not in line with typical competitive market practices with a largely homogeneous product. Hence, the allegations about coordination, price parallelism and cartelisation.  

In February 2022, the competition regulator imposed penalties of approximately Rs 1,788 crore on the five tyre companies combined with a cease-and-desist order. ATMA was fined Rs 8.4 lakh. It said that the companies exchanged price-sensitive information through ATMA and took collective decisions on regulating the price of tyres. The regulator added that ATMA collected and compiled company-wise and segment-wise data (both monthly and cumulative) on production, domestic sales and export of tyres that made the coordination among the companies easier. 

In December 2022, the order was challenged at the NCLAT – and was overturned.  

The tribunal ordered that the matter be remitted back to the CCI to “re-examine the calculation of arithmetical errors”. It asked the regulator to review thethe penalties imposed “to save domestic industry in view of the fact that domestic tyre industry is under lot of pressure from global tyre manufacturing where lot of unutilised capacity is available.”