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COMPETITION APPELLATE TRIBUNAL, NEW DELHI
G.S. SINGHVI, CHAIRMAN & MR. RAJEEV KHER, MEMBER
ALL ODISHA STEEL FEDERATION - Appellant
Versus
ORISSA MINING CORPORATION LTD. & ANR - Respondents
Appeal No. 02 of 2014
Decided On : 30-08-2016
The Competition Commission of India (CCI) dismissed an appeal filed against an order passed by the Director General (DG) finding that Odisha Mining Corporation (OMC) was in a dominant position in the relevant product market but did not abuse its position by charging excessive prices for chrome ore.
Fact of the Case:
OMC was a State Government company established in 1956 with the objects of raising, assembling, and transporting Ore/other minerals in Orissa. OMC started as a joint venture of Government of Odisha and Government of India in 1956. However, subsequently, it became a wholly-owned company of Government of Odisha in 1961. In Odisha, mining of chromite is mostly dominated by six principal producers namely Tata Steel Ltd., OMC, IMFAL, FACOR, Balasore Alloys Ltd., and Misrilal Mines (P) Ltd. The percentage share in the production of these six companies to the total production, operating 12 mines together, was 92.8% during the year 2011-12. Three public sector companies, namely OMC, IMFAL, and IDCOL having 7 mines, together contributed approximately 16% of the total production while the remaining approximately 84% was contributed by private sector mines. In the private sector, Tata Steel Ltd., IMFAL, and FACOR having their own plants and operating 7 mines, produced 70.4% of the total production. The share of public sector in the total production of chromites in the years 2009-10, 2010-11, 2011-12 was reported to be 17.71%, 29.58%, and 16.24%. The rest of the production was in the private sector. It is clear that production in private sector far-outweighs the production in public sector but the private sector players either use the chrome ore for captive purposes for making their own Ferro Chrome or export the Chrome concentrate made out of the chrome ore. It is apparent that respondent OMC, as a consequence, turns out to be the main supplier of chrome ore to those users who do not have captive supplies and are forced to use raw material bought from OMC. Therefore, in the relevant market of Friable Chrome Ore in Odisha, OMC has a dominant status.
Finding of the Court:
The CCI found that OMC was in a dominant position in the relevant product market but did not abuse its position by charging excessive prices for chrome ore. The CCI noted that OMC had pursued a policy of maximizing profits while keeping the supply chain operation to the downstream industry. However, the CCI did not find any ground to reverse the finding reached by the DG, which had been approved by the Commission, that the allegation of abuse of dominance by OMC had not been established and the price charged by it was not unfair.
Issues: Whether OMC was in a dominant position in the relevant product market.
Ratio Decidendi: The CCI held that OMC was in a dominant position in the relevant product market based on the following factors: * OMC controlled 77.66% of the chromite mining lease area in Odisha. * OMC had a significant share of the market for chrome ore, with 85.81% of the market in 2010-11. * OMC's dominant position was bestowed upon it by State action as a result of policy decision rather than acquired as a result of free market competitive process. * The Government had not been allotting chrome ore mines to private entrepreneurs who had set up plants in Odisha for production of steel. * According to Government of Odisha resolution dated 18.9.2012, areas bearing Chrome Ore etc. for undertaking prospecting or mining operation have been reserved through the OMC, excluding the areas already held under any prospecting license or mining lease or reserved by Central Government under Section 17(a) of the said Act for central PSU or recommended to Government of India for their prior approval under Section 5(1) of the said Act. Thus, as a result of state policy, fresh entry in the market of open sale of Friable Chrome Ore may not be possible. As such, the dominant position of OMC in the relevant market will continue.
Final Decision: The CCI dismissed the appeal.
ORDER :
1. The questions which arise for consideration in this appeal filed against order dated 19.9.2013 passed by the Competition Commission of India (for short, the ‘Commission’) in case No. 12/2012 under Section 26(6) of Competition Act, 2002 (for short ‘the Act’) are whether Respondent No. 1 M/s. Odisha Mining Corporation (OMC) is in a dominant position in the relevant product market and whether it has abused that position by charging excessive price for chrome ore provided to various buyers and whether the price charged from the purchasers could be considered as unfair price under Section 4 of the Act.
2. M/s. All Odisha Steel Federation (AOSF) is an Association of approximately 69 steel manufacturing and related industries. The Respondent No. 1 M/s. Odisha Mining Corporation Ltd. (OMC) is a State Government company established on 16.5.1956 under the Companies Act, 1956 with the objects of raising, assembling and transportation of Ore/other minerals in Orissa.
3. On 27.2.2012, the appellant filed an information under Section 19(1)(a) of the Act. After two months, the appellant filed additional information. After examining the original as well as additional information, the Commission felt satisfied that there exists a prima facie case of abuse of dominant position by the respondent and passed order dated 18.6.2012 under Section 26(1) of the Act, whereby the Director General (DG) was directed to conduct investigation.
4. The DG issued notice to the parties under Section 36(2) read with Section 41(2) of the Act to elicit the specified information and documents. He also addressed a questionnaire to the informant, OMC, M/s. Tata Steel Limited, a major producer of Chrome Ore, M/s. Mysore Minerals Ltd., a PSU of the Government of Karnataka, and the Department of Steel and Mines Odisha. He also recorded the statements of Chairman-cum-Managing Director of OMC, President of the appellant and Executive-in-charge, Ferro Alloys & Minerals, Tata Steel Ltd.
5. After conducting the investigation, the DG submitted report dated 28.3.2013. He very succinctly summarized the substance of the information and the allegations made by the Informant-appellant, as is evident from the following portions of the report :
“3.1 The informant has submitted that the O.P., which has monopoly over extraction of chrome ore in the State of Orissa, has been indulging in anti-competitive practices and abusing its dominant position in fixing an arbitrary and highly unreasonable price of the chrome ore. It has submitted that up to the year 2007, the O.P. determined its price of chrome ore by considering the sale price of the State owned IFCAL or the purchase price of ferrochrome by Alloy Steel Plant of SAII. However, from the year 2007, the O.P. changed its method of deriving the price of the chrome ore by resorting to a Price Setting Tender (PST) every quarter. It has contended that the price at which ore is sold by the O.P. through the PST mechanism has no relation to either its fair market value or the production cost.
3.2 The I.P. has further submitted that according to the said mechanism of PST, a very small quantity, which is not representative of the overall annual/quarter production, is tendered for sale. As a result, a few unknown companies, whose lifting of Chrome Ore is less than 2% of OMC’s total sales, quote abnormally high price and become H-1 in the tender and such price becomes the benchmark for all plants including the members of the Informant’s Association, who account for around 70% of the OMC’s total sales volume of chrome ore. The I.P. has submitted that the price bid for a meager amount of Chrome Ore made by Industries located in States, such as Jammu & Kashmir, where the power tariffs, water cess and tax reliefs, etc. are substantially lower and by industries like chemical industries, located outside the State, whose need for quantity/grade
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