The Indian Competition Commission’s (CCI) investigative body has held senior executives – CEOs or managing directors – of units of Holcim ACC and Ambuja, market leader UltraTech and 17 other companies such as Shree Cement and Dalmia Cement for violations of antitrust laws.
The investigation report, published last month and seen by Reuters, is the penultimate but most important step in the CCI probe that began in 2019. The report, which is not public, will now be examined by the three most senior ICC officials who have the power to issue fines and will give companies one last chance to defend themselves.
Potentially, cement gloves could face multi-million dollar fines. Together, the 20 companies control more than three quarters of the installed capacity of more than 500 million tonnes of cement in India, the world’s second largest producer after China.
The report said company executives discussed coordinated price hikes in Zoom calls and in-person meetings at company guesthouses, with some officials using their personal mail to communicate with rivals. WhatsApp messaging was also widely used.
A company official’s WhatsApp message quoted in the report said a business “forum” had agreed to gradually raise cement prices in some areas from 5 to 10 rupees (6 to 12 US cents). Senior executives, including from ACC and Holcim’s UltraTech, have been appointed as “coordinators” for various states.
“Price will increase each week by a gal amount,” the message read.
The message did not give details, but typically the cement is sold in 50 kg (110 lb) bags to retail consumers, and the cost is between 350 and 450 rupees ($4-6) per bag, depending on the location and quality of cement.
The CCI did not respond to a request for comment.
Holcim said in a statement that “Indian companies are handling this matter responsibly and we expect them to continue to do so accordingly.”
ACC, Ambuja and UltraTech Cement declined to comment, while Shree Cement and Dalmia Cement did not respond.
India’s Adani Group, which struck a $10.5 billion deal with Holcim in May to acquire its Indian business, has also not responded.
SYSTEMATIC CARTELIZATION
Cement production is a lucrative business in India’s booming economy, with high demand, especially from rural housing and infrastructure companies.
An official from the Pavers and Blocks Manufacturers Association, whose members sell concrete pavers, told Reuters that the price hikes practiced by cement companies in recent years were coordinated, leaving no room to cut costs by changing vendor.
“We sometimes pass the higher cost on to consumers,” said the official, who declined to be named because he does business with cement companies to the tune of 50,000 bags a month and feared reprisals.
Overall, the ICC survey report concluded that cement companies colluded in 13 states in eastern and southern India, with more than 50 industry executives involved in construction activities. “cartelization” in an “extremely organized” way.
The CCI report says the Cement Manufacturers Association, an industry body, “facilitated and penetrated anti-competitive cartel conduct” by gathering and sharing price details between companies. The group did not respond to questions from Reuters.
Cement companies have been accused of fixing prices for more than a decade. In 2016, the ICC fined 10 companies $800 million for price-fixing, including units Holcim and UltraTech, but the decision has since been challenged in the Supreme Court.
In the 2016 ruling, the ICC said the manufacturers’ association had helped the companies come to terms, and ordered it to “disengage and disassociate itself from collecting” prices or production-related details.
Although cement prices vary across India, the ICC report showed that they were moving in the same direction.
Kolkata and Patna in eastern India, for example, prices for bags of cement fell for several months until January 2021 to Rs 300 and Rs 350, respectively. Then they rose in tandem for four months to hit 360 Kolkata rupees and 390 Patna rupees, before easing again, the ICC said.
OVEN CLOSING SYSTEM
In southern India, UltraTech and many other small companies controlled cement production and supply through informal “kiln-stop” arrangements on a mutually agreed schedule, the report said. .
The objective, according to the CCI, was to coordinate production, restrict the supply of cement and increase prices.
To ensure compliance with the informal agreement, a verification system has been devised, according to the report. Investigators found a sheet listing the names of the companies and the location of their factories, and designating a rival company to visit and verify production stoppages, according to the report.
The sheet stated that the visiting “guest” company team should have a four-wheeled vehicle and a driver during the inspections, which were to take place at least twice a week.
The “host” company – the one being inspected – must “allow all guests personal access to all oven platforms”, the sheet states.
The evidence reaffirms that an elaborate mechanism has been developed by the cartel to verify and report the operation/closure of the ‘ovens’…in accordance with the agreement reached,” the ICC report states.
CLEAR EVIDENCE
The CCI report says cement executives were deciding on plans to raise prices down to the district level in each state, dividing companies into categories such as “group A” for large companies, and recommending lower prices for small “group B” companies.
The report contains a price chart which it says was shared in January 2020 by Shailesh Ambastha, sales and marketing manager of Holcim’s ACC unit. It detailed current and target ‘Group B’ prices for 42 districts in the eastern state of Bihar.
The report indicates that “tables presenting the agreed prices by state have been distributed by Ambastha to the competitors and meetings have been organized to guide those in charge in their implementation.”
The ICC said Ambastha wrote in a message: “Try to be 10 above your current level. That’s what everyone is trying to do.”
In another, he wrote: “Why do you supply in the (non-commercial) segment 220 when all supply 230”.
Presented with evidence, the ICC report said Ambastha “submitted evasive responses” saying he did not recall the communication. Ambastha did not respond to Reuters requests for comment.
Some executives like Anil Kaushik, a co-vice president of marketing at Shree Cement, “confessed”, according to the report, admitting during questioning to sharing pricing data with a rival for “mutual benefit”. . Kaushik declined to comment to Reuters.
But the report says he told investigators: “In the cement business, no company can raise prices in isolation and survive.”