The Competition Commission of India (CCI) recently closed a plea alleging that Coal India Limited (CIL) abused its dominant position by allegedly introducing one-sided terms in its 2022 e-auction scheme (Bijay Poddar Vs Coal India Limited).
The CCI did not find any prima facie merit in the allegations levelled by the informant, Bijay Poddar, to conduct an full-fledged investigation against CIL.
“The Commission is of the view that there is no prima-facie case of contravention of provisions of the Act (Competition Act, 2002) warranting an investigation into the matter. Accordingly, the Information is directed to be closed forthwith,” the CCI said in its order dated December 30, 2024.
According to Poddar, the 2022 e-auction scheme included conditions such as requiring bidders to clear all outstanding dues before participating, imposing a fixed bid security with unequal effects, and granting CIL the right to cancel auctions without justification. These terms, according to the Informant, were one-sided and lack corresponding responsibilities or penalties for CIL.
CIL countered that even though it is the largest coal producer in India, it did not occupy a dominant position in the relevant market and could not act independently of market forces. It explained that CIL has to compete in the global coal supply market, as the non-coking coal supplied under its e-auction scheme it is substitutable by imported non-coking coal due to similar characteristics and its pricing.
The company claimed that it faces significant competition globally, with India contributing to only 10.67 per cent of the world’s coal production in 2023. It also maintained that it does not hold a dominant position when it came to coal supply in India. In this regard, CIL submitted that it is constrained by government regulations and Presidential directives which limit its autonomy. CIL further argued that many clauses of the 2022 e-auction scheme are similar to the earlier 2007 scheme, which was previously reviewed and cleared by the CCI in an earlier case.
CIL also highlighted that its alleged dominance in the e-auction market is under review by the Supreme Court. Earlier, in 2013, the CCI had held that CIL was in a dominant position in the coal market and had abused its position. The CCI further held that CIL through its subsidiaries, operated independently of market forces and enjoyed a dominant position in the market and contravened the Competition Act.
At the time, the CCI directed CIL to cease and desist from indulging in anti-competitive practices and make necessary modifications to its agreements with others. While CCI's initial penalty was 1773 crore, it was reduced to 591 crore in 2017 on an order by the Competition Appellate Tribunal (COMPAT). An appeal was filed in the matter, and this case is currently pending before the Supreme Court.
In view of this, CIL requested the CCI to defer from arriving at any conclusive decision in the present case as well, to avoid conflicting judicial outcomes.
Additionally, according to CIL, its pricing, influenced by global benchmarks like the National Coal Index, was competitive and fair.
The CCI identified primary issues for examination such as defining the relevant market, determining whether CIL holds a dominant position within it, and assessing whether CIL has abused its dominance under Section 4 of the Competition Act.
While CIL argued that the relevant product market in the present case should be the global market for the "sale of non-coking coal except under Fuel Supply Agreements", the CCI found this untenable. Citing Section 4 of the Competition Act, 2002, the CCI noted that the relevant market should be confined to India.
“Accordingly, ‘production and sale of non-coking coal to bidders under e-auction scheme in India’ is considered as the relevant market in the instant case," the CCI held.
Regarding dominant position, the CCI highlighted that CIL fulfils approximately 79 per cent of India’s coal production needs and contributes around 70 percent of coal production in India. Further, it noted that CIL has more than 90 per cent market share in the e-auction of coal and operates independently of market forces.
The CCI concluded that CIL appeared to hold the dominant position in the relevant market.
“Thus, in terms of dominance as defined under the Act, the OP appears to be dominant in the relevant market of ‘production and sale of non-coking coal to bidders under e-auction scheme in India," it said.
On the clauses of the e-auction scheme that allegedly violated the law, the CCI revisited its observations from 2013 regarding identical clauses in the 2007 scheme and found that the 2022 scheme adequately addressed earlier concerns and provided a balanced framework.
On the informant’s concerns about delays and lack of interest on refunds in the new scheme, the CCI found no evidence to support these claims and determined that there appeared to be no violation of the Act. On the informant’s suggestion for the need for formal complaint procedures and timeframes, the CCI concluded this is an administrative matter with no evidence of competitive harm.
While the Informant alleged unfair conditions related to determining coal quality, the CCI found the third-party sampling process comprehensive and reciprocal. The informant had also criticised certain clauses as one-sided. However, the CCI ruled that these clauses were standard for contracts of this nature and not anti-competitive.
The informant further alleged delays in refunds of excess levies. The CCI found the relevant clause to be reciprocal and noted that there was no evidence of pending refunds. The CCI thus dismissed the plea.
