Competition LawRulings

CCI dismisses Informant complaint stating it lacks diligent and bonafide intention

Oil Country Tubular Ltd. vs. Maharashtra Seamless Limited

In the present case, information has been filed by Oil Country Tubular Ltd under Section 19(1)(a) of the Competition Act, 2002 against Maharashtra Seamless Limited for alleged contravention of section 3(4) and 4 of the Competition Act.

Oil Country Tubular Ltd. is part of the Kamineni Group of Companies and is engaged in the business of processing of a wide range of Oil Country Tubular Goods and Drilling Products required for the Oil Drilling and Exploration Industry in the Oil and Gas sector in India. It has an integrated processing facility which takes non-processed and non-treated Plain End Seamless Pipes (‘Green Pipes’) and subjects them to various processes. Once Green Pipes are processed and converted to finished products of Casing, Tubing and Drill Pipe conforming to relevant American Petroleum Institute specifications, it supplies it to companies like Oil and Natural Gas Corporation Limited and Oil India Limited.

Green Pipes are essential raw material for the informant’s processing facility to function. Informant is a preferred customer of United Seamless Tubular Pvt. Ltd. which is a hot roll seamless pipe manufacturing mill. United Seamless Tubular Pvt. Ltd. does not have a processing and finishing facility and manufactures only Green Pipes in the size range of 5” outer diameter to 13-3/8” outer diameter.

There are only 4 (four) manufacturers of finished casing and tubing and out of these only 2 (two), Maharashtra Seamless Limited and Informant, supply seamless casing pipes of size 7” outer diameter including 9 5/8” and 13 3/8” outer diameter. Unlike Informant, Maharashtra Seamless Limited has both manufacturing facility for producing Green Pipes and a processing and finishing facility for turning those Green Pipes into finished products.  

Government of India vide G.S.R. 451 (E) dated 8th May 2017 announced the policy for providing preference to domestically manufactured iron and steel products in Government procurement. It mentioned that for government procurement of iron and steel products, preference will be given to domestically manufactured products by entities which are registered and established in India. Furthermore, import is permitted only for certain inputs provided that value addition by domestic bidders in producing the finished product should be more than 15%. In the base of manufacturing of seamless casing pipes Green Pipes are not included as an input that can be imported for further processing. Hence, bidders like the Informant, who produce seamless casing pipes using Green Pipes as an input cannot use imported Green Pipes for supply of seamless casing pipes to Government entities.

Informant is struggling to source Green Pipes and has not been able to participate in tenders floated by ONGC and Oil for seamless casing pipes. Hence, Informant has to source Green Pipes from either MSL, Jindal Saw Limited or ISMT Limited to be considered as a domestic manufacturer. ISMT Limited is not active in manufacturing seamless pipes whereas Jindal Saw Limited manufactures Green Pipes less than 7” outer diameter. Therefore, MSL may result in monopoly supplier of seamless Casing Pipes above 7” outer diameter.

Informant alleges that MSL will not supply Green Pipes to it for the tender floater by ONGC for procurement of seamless casing pipes. Hence, Informant alleges contravention of 4(2)(c), 4(2) (a)(i) read with Section 4(1) of the Act and Section 3(4)(d) read with Section 3(1) of the Act.

After analysing the arguments and evidences, Commission observed that Informant had mailed to MSL seeking the details for procurement of green pipes and also asked for price quotes in respect to tender floated by ONGC. However, CCI observed that Informant approached MSL at the belated stage for supply of Green Pipes that it did not seem to be diligent and lacks bonafide. In addition, CCI state that Informant conduct did not appear to be consistent with the ordinary course of business behaviour.

In addition, MSL highlighted that they did not response to the e-mails as they are party to Integrity Pact which prohibits discreet arrangements between the bidders. In addition, both the Informant and MSL were potential competitors in respect of the tender floated by ONGC.

In addition, CCI observed that Steel Policy of 2017 restricts import of green pipes, itself provides for waivers where supply requirement in the government procurement cannot be met through domestic sources. In addition, MSL has no presence in the upstream market which was defined by Informant as relevant market and MSL manufactures greenpipes only for its captive consumption as raw material required for processing casing pipes. Further, CCI observed that MSL usually does not have any surplus greenpipes which can be supplied to other entities.

Hence, Commission held that claim of the Informant that the conduct of MSL amounted to refusal to deal besides denial of market access, stands falsified from the sequence of events as adumbrated above and material available on record. Further, hold that MSL has not violated Section Section 4 or Section 3 of the Act. 

 

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