Cement Cartelization in India

Cement Cartelization in India
TRIMESTER I
ECONOMICS
__________________________________________________________
__________________________________________________________
_________________________________________________________
CEMENT CARTELIZATION
IN INDIA
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Date of submission: 6th September 2013
Submitted by:
Submitted to:
Harsh Mishra
Asst. Prof. Rajesh Gautam
Roll. No. : 2013BALLB08

Enroll. No. : A-1259
National Law Institute University
Page
TABLE OF CONTENTS
S. No.
Name of Chapter
Page No.
1.
INTRODUCTION..3
2.
REVIEW OF LITERATURE...4
3.
CARTELS...4
4.
RECENT CASES OF CEMENT

CARTELIZATION6
5.
FACTORS WHICH FACILITATE

OR HINDER CARTELIZATION11
6.
HOW DID CCI FIND OUT THE

EXISTENCE OF CARTELS?..........................................14
7.
CONCLUSION..16
8.
BIBLIOGRAPHY.17
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INTRODUCTION
In an economy, there are certain types of markets, for example, monopoly, oligopoly etc.
Oligopoly market is the one in which only a few firms compete with one another. Sometimes,
these firms also operate strategically. It controls the rate of price and also, profitably charges a
price that exceeds marginal cost.1 This strategic working of firms together can be termed as
Cartelization. An economy is expected to be free from manipulation and governance of prices by
the major companies or firms. The increasing number of cases of Cartelization proves our
regulatory system to be very lenient. The pre-planning of prices and the manipulation of the
prices is only derogatory for a society to grow economically. Regulatory bodies like The
Competition Commission of India always needs to be cautious to prevent the economy from
directly being controlled by some specific firms.
In the following project, I have tried to answer questions like, What Cartels are? What factors
facilitate or hinder the sustenance of cartelization? What are the fines imposed on them and also
the severity of the situation? What are the difficulties faced while distinguishing if it is a cartel or
not? I have also discussed about the companies found guilty of Cartelization and also, how the
Competition Commission of India found out that these companies were forming a cartel? How
could it be easier to figure out which firms are indulging into Cartelization?
For answering the aforementioned questions, I have used secondary sources like Newspaper
articles, Journals, Websites, Books etc.
Microeconomics, Robert S. Pindyck, Daniel L. Rubinfeld, Prem L. Mehta, (7 th edn., Pearson,2009), pg. 371
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CARTELS
Cartels refer to an organization formed by certain firms of a specific business, in order to

regulate the prices of the goods or services provided by the firm.2 This group of companies
which acts as a single body is called a Cartel. Cartels influence the prices of commodities by
manipulating the statistics of production and marketing. Cartels are agreements formed in
confidentiality, which shall or shall not be in writing between the firms indulged in cartelization.3
Cartels are mainly formed because firms do not prefer competition as competition reduces the
profit margin.4 Cartels comprise of multiple productive structures which allow producers to
practice monopoly power. It is defined as illegal as the prices of commodities are intentionally
regulated, restricting the competition in the market. These businesses result in extraordinarily
high profits. The OECD (Organisation for Economic Co-operation and Development) claimed
that the economic harm from cartels is very substantial.5 Collusion is an important term with
regards to Cartelization.
COLLUSION
When rival companies come together to disrupt the equilibrium of the markets economy, that
agreement is called collusion. By forming a cartel, rival firms look to alter the price of a good to
their advantage. The parties may collectively choose to restrict the supply of a good, and/or agree
to increase its price in order to maximize profits. Groups may also collude by sharing private
information, allowing them to benefit from insider knowledge.6
http://www.investopedia.com/terms/c/cartel.asp (last visited on 3rd August 2013).

Predicting business cartels- some lessons for India, M.M. Sharma, Corporate Law (October,2008,Issue 10,Vol.
04), pg. 463-469.
4
http://www.cci.gov.in/images/media/completed/cartel_report1_20080812115152.pdf (last visited on 8th August
2013).
5
04), pg. 463-469.
6
http://www.investopedia.com/terms/c/cartel.asp (last visited on 3rd August 2013).
3
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HOW ARE CARTELS FORMED?

Cartels are based on either explicit agreements or implicit collusion. When cartel members meet
to decide the measures to be taken to control the market, then it is called Explicit Agreement.
Explicit Agreements are secretive, as they are declared illegal in jurisdictions with certain.7
Implicit collusion, also known as Tacit collusion, takes place when it becomes evident that the
members of the cartel are keen to engage in collusive behavior. For instance, when one firm
takes the lead of setting a price, in order to boost the profits for all the members of the cartel,
then it becomes an Implicit Collusion. There is no formal agreement in Tacit collusion, hence it
becomes very difficult to prosecute firms for cartelization.8
The existence of cartels guarantees the manipulation of price of the commodities. There is a dire
need for implementing the legal provisions of cartelization. There are only a few reported cases
of cartelization, cement cartelization being prominent amongst those few.
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=collusion (last visited on 7th August 2013).

http://www.cci.gov.in/images/media/completed/cartel_report1_20080812115152.pdf (last visited on 5th August
2013).
8
Page
RECENT CASES OF CEMENT CARTELIZATION

There are 183 large cement plants and over 360 mini cement plants with a capacity of producing
330 million tonnes of cement per year. 97% of which is produced by large cement plants. 21 top
companies control 90% of the economy and are mostly responsible for cartelization.9
Richard Whish, a leading anti-trust expert once said that the very first thing for a new
competition regulator should be to go out and find for cement cartels. He believed that no matter
we are aware of them or not, cement cartels always exist.10
In the year 2012, the Competition Commission of India found out that as many as 11 cement
companies were indulged in cartelization. The charge lodged against these cement companies is
that they intentionally did not run their factories up to the potential in order to keep cement
supply dear. This forced the customers to pay more and hence it increased the profit margin of
these companies.11 The profit earned by a few companies is as follows-
Gross Profit
ACC Ltd
Ultra Tech Cement Ltd
23%
Ambuja Cement Ltd.
India Cement Ltd.
23%
22%
32%
12
http://forbesindia.com/article/briefing/cci-the-cement-cartel-of-india/33354/1 (last visited on 7th August 2013).
10
http://centreright.in/2013/05/a-tale-of-two-cartels-2/ (last visited on 7th August 2013).
11
Id.
http://amrita.edu/asb/pdfs/workingpaper/Working-Paper-No.133.pdf (last visited on 21st July 2013).
12
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As soon as the Competition Commission of India (CCI) figured out about the cartels, it imposed
a penalty of Rs 6037 crores on all 11 cement companies involved in cartelization. In particular,
Cement Manufacturers Association (CMA) was fined Rs 72 lakh, the biggest penalty imposed by
CCI since the inception in 2008. The penalty charged is only 50 percent of the profits incurred by
the companies. The cost to sales ratio of the top four cement companies is1
0.9
0.8
0.7
0.6
ACC Ltd
0.5
Ultra Tech Cement Ltd

Ambuja Cement Ltd
0.4
India Cement Ltd
0.3
0.2
0.1
0
2008
2009
2010
2011
13
Following are few of the cement companies that have been charged of cartelization, India
Cement, Binani Cement, Lafarge India, JP Associates, Ambuja Cement, J.K. Cement and
Madras Cement.14 The top manufacturers of Cement, which were caught in cartelization are-
13

http://www.thehindubusinessline.com/companies/cement-cartel-case-compat-to-resume-hearing-onmonday/article4448980.ece (last visited on 1st August 2013).
14
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March 2012 top 12 Players ~ 70% Production

Kesoram
Industries Ltd.
4%
ACC Ltd.
15%
Ultratech Cement
Ltd.
22%
Ambuja Cements Ltd.

13%
Binani Cement Ltd

4%
Jaiprakash Associated
Ltd.
10%
India
Cements
Ltd.
7%
Birla Corporation Ltd.

4%
Shree
Cement
Ltd.
6%
Lafarge India Pvt. Ltd.

5%
Madras Cements Ltd.
5%
Century Textiles and
Inds. Ltd.
5%
The percentage in the graph shows the amount of cement manufactured by these companies in
the year 2011.15
15
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The cement companies which were slapped with the highest penalties are depicted in the table
below-16
Ambuja Cements was penalized the most and had to pay 1164 crores for its indulgence in
cartelization. All the 11 cement companies that have been slapped with penalty are mentioned in
the table above with the amount of fine they are supposed to pay.
The Competition Commission of India found out that by creating artificial scarcity, these top
producers have colluded to lower capacity utilization from the year 2008 to 2011.17
According to the Builders Association of Indias submissions to the CCI, all major cement
manufacturers divided the market into five zones, which helped them to control the supple and
decide prices by forming cartels.18
16
http://www.thehindubusinessline.com/industry-and-economy/cartel-case-rs-669cr-provision-to-hit-11-cementfirms-profits-in-june-quarter/article4895472.ece (last visited on 1st August 2013).

17
http://forbesindia.com/article/briefing/cci-the-cement-cartel-of-india/33354/1 (last visited on 7th August 2013).
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Although, the companies are not willing to accept the orders of the CCI and are planning to
appeal to the Competition Appellate Tribunal, thereby, making it unlikely to receive the
compensation from the companies. Something similar had happened in the year 1990 and it took
almost 17 years to prove that the companies were forming cartels. It is difficult to detect a cartel,
most times it is thought that the companies attaining maximum profit are indulged in
cartelization but it isnt always true as the high profits may be because of better efficiencies or a
sudden increase in demand etc. Although there are certain ways for a regulatory body to know if
it is a company is a part of a cartel or not. For instance, the profit should be sufficiently more
than the cost of capital. It is very important to figure out the existence of cartels as it has many
negative implications on our society.
REGULATORY BODIES
Cartels and other joint non-competitive practices, in India, are checked by regulatory bodies like
the Competition Commission of India. The first enactment to deal with issues like cartelization
was the MRTP Act (Monopolies and Restrictive Trade Practices Act). But, due to the
insufficiency of the MRTP Act, it was replaced by the Competition Act, 2002 which was
amended in the year 2007 for better efficiency.19 The Competition Act, 2002 was enacted in
order to contribute towards the economic development of the Indian economy, removal of
controls and consequent economic freedom. The objective of the Competition Act, 2002 is to
prevent adverse practices, to promote and sustain competition and to ensure freedom of trade.20 It
called for a quasi-judicial body, Competition Commission of India.
18
http://www.business-standard.com/article/companies/busted-cartelising-cement-firms-112062600067_1.html (last
visited on 1st August 2013).
19
20
Competition Act,2002(Principles and Practices), Dr. V.K. Agarwal (Bharat Law House Pvt. Ltd.,2011),pg. 21.
Id. Pg. 22.
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FACTORS WHICH FACILTATE OR HINDER

CARTELIZATION
Cartels are formed to increase individual profit for any particular firm. This can be accomplished
by decreasing output and/or increasing the price. Any firm can decrease output or increase the
prices independently in an oligopoly. To furnish a cartel, firms must be able to raise the price
without introducing competition; expected punishment, that is the fine should be less than the
expected gain; also, the cost for establishing and enforcing the cartel must be less than the profit
margin.
Following is the data related to cement companies portraying a false scarcity99.5
99
98.5
98
97.5
Cement Production
97
Cement Despatches
96.5
96
95.5
95
94.5
2010-11
21
2011-12
21
http://www.iseindia.com/ResearchPDF/Cement_Update2.pdf (last visited on 5th August 2013).
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If through cartelization, firms govern the economy and also the price of commodities, then they
are imposing themselves and their prices on the consumers. If all the companies work together
and form a cartel and fix a price, then no person would get cement at a price lower than the price
fixed by the cartels, thereby, the cartels imparting its prices onto the customers and leaving the
customer without a choice.
The factors that influence cartels in a positive and a negative way are as follows.
FACTORS WHICH FACILITATE CARTELIZATION
The study of cartels suggests that there are a few features of a market which help in making it
easier for the firms to collude to fix a specific price or to avoid competition between them. The
first feature is elasticity of demand. In markets linked to construction sectors, where there are no
substitute products, cartels can be easily formed as people would not mind a slight increase in the
price of cement. Second factor is the level of competition in the market. If the competition is
very intense and the prices are low then there is a larger chance of formation of cartels because,
the companies would be more interested in making profit. So, there is a large possibility that all
the companies form a cartel and manipulate the prices for their gain. The third factor is the
existence of barriers to enter into a market. Removal of barriers is not favourable for the
formation of cartels. If the barriers are removed or their prices are decreased drastically then any
new company could enter the market and there is a possibility that the new company might
undermine the cartelized price.22
FACTORS WHICH HINDER CARTELIZATION
It is not an easy task to sustain a cartel for a long time. There is a huge possibility that any
member of the cartel decides on cheating other members of the cartel. The other possibility can
be the likelihood of the cheating being detected by the cartel members, on such disclosure, the
cartel usually falls by itself or a disappointed member might go up to the regulatory authorities
22
04), pg. 463-469.
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and reveal it in front of them. These can be a few reasons which most probably result in ending a
cartel.
There are a few more factors which affect the sustainability of cartels like frequent interaction
among firms (one should always be in touch with the firms to protect oneself from deception);
small, regular and predictable demand by buyers; involvement of markets with low fixed cost
and other reasons can help in sustaining the cartel for a longer period of time.
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HOW DID CCI FIND OUT THE EXISTENCE OF CARTELS?
Cartels are always intrinsically secretive in nature. As mentioned earlier, in most of the cases, it
is legally possible to sustain a cartel, but it is risky to do so. Generally, many cartel investigations
have been started once the competition authorities receive certain information about the
existence of such alliance. Usually, this information is generated through a member of the cartel
only or maybe through a competitor who was excluded from the cartel. But it is possible that this
information generates from any aggrieved member of the general public who may become aware
of the issue somehow or might be just suspicious about it. The third source of information could
be discontented employees. Information regarding cartels is found more quickly when it is found
through some inner source.23 It is difficult to make out if it is a cartel or not so, the best way to
figure it out is through someone who is or was a part of that cartel. One of the concerns of such a
whistleblower is that they too would be prosecuted, so the regulatory bodies promise leniency or
pardon to the whistleblowers.
It is although possible that the information given be an attempt to cause trouble for the
competitor. So, keeping everything into consideration, the Competition Commission of India
starts its investigation.
CCI hence looks for a source to find out if cartelization exists or not. To encourage this, the CCI
guarantees that the identity of the whistleblower will be hidden. But the consequence to this is
that because the identity of the complainant will not be revealed so the complain would not be
used in evidence.
Despite all the hard-work put in to find out cartels, it can still not be guaranteed that the cartel
will be prosecuted successfully. This is all because of the secretive nature of all the cartels.
Recently, the CCI discovered the practice of cartelization in the cement industry through the
same procedure.
WAYS TO DETECT A CARTEL EARLY

23
http://www.cci.gov.in/images/media/completed/cartel_report1_20080812115152.pdf (last visited on 5 th August

2013).
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Detecting the presence of a cartel has become a more difficult over the times. Globalization has
worsened it. The transactions taking place in digital form too is a reason why it is comparatively
difficult to figure out a cartel. Also, the firms are now comparatively more powerful and better
equipped, so it becomes, moreover, difficult for regulatory bodies to find out the presence of
cartelization.
Although cartelization can be detected by checking sharp increase in prices, relatively
sophisticated intermediate goods and services could be checked on a regular basis, stability of
the market is also an indication of cartelization. The profit margin tendency should be verified
and if it decreases over time, the complaint should be dismissed as the market is displaying a
normal competitive behavior.24
First, the profit margin tendency is verified. If the profit margin decreases over time, the market
is considered to be under a competitive behavior, in which case the complaint is dismissed.
Second, if the margin and price dispersion behavior follows the same pattern within a state
geographical area then the case is supposed to be dismissed as these two are the consequences of
genuine competition in the market. Dawn Raids is an efficient method of finding the cartels
red-handed. Unannounced visit to the office of suspected cartel for the purpose of seizing
documents or other evidence can help in catching the cartels.
SUGGESTIONS FOR CHANGE

The rules of the Competition Commission of India should be implemented strictly in order to set
a precedent. Also, the present rules need to be more stringent. Only slapping the companies with
fine wont be of much help as, even after the current impositions of fines, cartels continue to
exist. There should be an additional punishment in order to restrict the practice of cartelization.
There should be more than one regulatory body, one for looking into the formation of cartels and
the other for the execution of punishment to the accused companies. The most important step
taken to curb cartelization could be would be the imparting of laws which declare a company
bankrupt or insolvent and hence prevents the company from making any contracts would create a
sense of apprehension amongst the potential cartelizing firms and hence would discourage the
continuation of cartelization.
24
http://www.cci.gov.in/images/media/completed/cartel_report1_20080812115152.pdf
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CONCLUSION
There is no doubt at all that the cartels have high impact on the economy. Manipulation of the
prices for their own benefit does not seem like a problem, but it, indeed, is. Competition in an
economy lowers the prices of the products, making it beneficial for the consumers. This also
reduces inflation, benefits the poor and the middle class and also improves economic growth.
Cartels prevent competition as the firms participate collectively as a monopoly or a near
monopoly. As the firms act collectively, there is no competition hence lowering the growth of
the economy. Cartels are, thereby, a bad thing for customers and also for the economy. This is
why the Competition Commission of India challenges the formation of cartels and restricts the
formation of more cartels.
However, there is always scope for improvement in the working of the regulatory bodies. The
leniency prospectus could be improvised upon and also, a few more incentives could be
promised to the whistle blowers in order to encourage them to inform the regulatory bodies about
the formation of cartels. Also, the process of penalizing the companies indulged in cartelization
should be quicker.
Cartels can flourish in certain situations only, if made sure that those conditions are not fulfilled
then the existence of cartels will become difficult and henceforth, help the economy grow
accordingly. Also, finding the existence of a cartel in time can help in oppressing cartelization.
Stringent laws should be made and should be implemented strictly, in order to set an example for
future.
It has been discussed in the project that how the current cartelization cases took place and how
the CCI found out about the existence of cartels, followed by the ways to detect a cartel and
curbing the practice then and there. The project concludes with a few suggestions for
improvement in the current measures taken against the companies indulged in Cartelization.
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BIBLIOGRAPHY
WEBSITES
http://www.investopedia.com/terms/c/cartel.asp
http://www.cci.gov.in/images/media/completed/cartel_report1_20080812115152.pdf
http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=collusion
http://amrita.edu/asb/pdfs/workingpaper/Working-Paper-No.133.pdf
http://www.iseindia.com/ResearchPDF/Cement_Update2.pdf
NEWSPAPER ARTICLES
http://forbesindia.com/article/briefing/cci-the-cement-cartel-of-india/33354/1
http://centreright.in/2013/05/a-tale-of-two-cartels-2/
http://www.thehindubusinessline.com/companies/cement-cartel-case-compat-to-resumehearing-on-monday/article4448980.ece
http://www.thehindubusinessline.com/industry-and-economy/cartel-case-rs-669crprovision-to-hit-11-cement-firms-profits-in-june-quarter/article4895472.ece
http://www.business-standard.com/article/companies/busted-cartelising-cement-firms112062600067_1.
ARTICLES
Predicting Business Cartels-Some lessons for India
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LITERARY REVIEW
THE INCREDIBLE INDIAN CEMENT INDUSTRY
Peter Edwards (2013) in his article The incredible Indian cement industry revealed that
Indias cement industry is booming and it has become the second largest cement producing
country in the world. Given this rampant growth of the Indian cement industry, few are betting
against continued capacity additions in the short- to medium-term. The extent of capacity
addition, however, and whether or not demand will rise to match it more closely than at present,
is up for debate.
Further in his work he hints at the possibility of future consolidation in the industry. His
study found that, despite capacity utilisation falling across all cements producers in India from
2006 to 2011, it was those with the smallest market share that experienced by far the worst
reduction. Binani Cement, for example, recorded utilization rates of only around 55-60%.
Conversely mega-players like Ultratech have been more stable, with rates of 80-95%. In January
2013 India Ratings reported that smaller businesses were less likely to benefit from the expected
improvement in the industry.
Conclusion:
The Indian cement industry is large, growing and, with consumption of just 185kg/capita/yr in
2011 the country itself has the capacity to demand significantly more cement as it develops.
However, the industry is at a tricky point in its development. Capacity is way ahead of actual
consumption. However, cement producers are keen to maintain their market share and so expand
to secure future demand. Producers in this situation should bear in mind the Indian cement
industry of the early 20th Century, when companies expanded, lowered prices and, in many
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cases, went out of business. Some have cautioned against rapid capacity addition in the coming
years.
It is foreseeable that the Indian cement industry will see consolidation over the coming years.
Producers that can differentiate their cement from others or can make savings on production
costs by, for example, using alternative fuels, will be able to take advantage of increasing
demand while remaining ahead of their competitors.
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Cartel in Cement Industry in India:

Is there enough evidence?
Deepika M G, Upasana Mishra, Vaishnavi B, Suganya N and Rakesh Y (2012) in their work
Cartel in cement industry in India: Is there enough evidence? revealed that there is a cartel
formation going on in the Indian cement Industry and the countrys
anti-monopoly watch dog
CCI i.e. Competition Commission of India is keeping a close eye on the industry. The
Competition Commission of India (CCI) in June 2012 has severely censured cartelisation in the
cement industry by imposing a penalty of Rs 6,300 crore on the top 11 cement manufacturers in
India.
Further in their work they said that Very often there is a high level of difficulty involved
in detecting cartels since it is difficult to dierentiate between a competitive behaviour and a
cartel. There are two methodological approaches to detect cartels- Behavioural and Structural.
And thus they made comprehensive studies on the cement market using these methods.
Conclusion:
One can empirically test the existence of the cartel in the cement industry using the
structural and behavioural methodologies. The economic indicators like price of cement in India,
the cost structure, supply demand imbalances, capacity utilisations and the company level
indicators to some extent, though not completely support the existence of cartels. In spite of high
increase in demand the capacity utilisation has been on the fall. Expense to sales ratio has
marginally increased when the prices have shot up. In spite of the economic slowdown the
cement companies had made substantial profits. All cement manufacturers had increased prices
per bag uniformly across all regions. Price parallelism by the companies gets unjustified since
the cost of production, transportation charge, etc varies from company to company. However, the
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behavioural indicators of whistle blowing by the Builders Association of India against the
Cement Manufacturers Association and the major 13 cement companies on formation of cartels
provide some strong support to the argument. Holcim Cements earlier involvement in
cartelisation elsewhere, its resignation from the CMA, CMAs support in terms of dissemination
of information to the cement companies, and other evidences provided by the Builders
Association of India provides reasonable evidence on the existence of collusive activities in the
cement industry in India.
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Detecting Cartels in the Indian cement industry:

An Analytical Framework
Ritu Raj Arora and Runa Sarkar (2012) in their work Detecting cartels in the Indian
cement industry: An analytical Framework analysed the reason behind such a rapid rise in
cement price and to predict if there is actually a cartel among the major players in the country.
Given that it took 17 years for the MRTPC to come to a decision on an old case of the pernicious
cement cartel in India of 1990s (source: comments by Mr. Pradeep S. Mehta, editor,
COMPETITION & REGULATION IN INDIA, 2007, The Hindu Business Line, 26 December,
2007), this paper is an attempt to develop elements of a cartel detection policy and highlight
through those elements, possible cartelization in the Indian cement industry.
Further they stated that The boom in the real estate and construction industry in India saw
a sudden and sharp increase in the price of cement, to the extent of a price increment as high as
17 percent in a single month. Collusive behaviour of cartel formation refers to the illegal
behavior of firms within an industry to explicitly or tacitly collude to regulate their market
behavior so as to restrict competition. There is a very thin blurred line of distinction between
legitimate cooperation and illegitimate collusion. Cartel members agree on fixing prices, total
industry output, market shares, rigging bids, setting common sale agencies, allocating territories,
or a combination of these measures to gain supernormal profits.
Conclusion:
In this paper they sought to develop a framework for cartel detection. Besides discussing
some of the desirable features of a detection methodology, they discussed two approaches to
developing the methodology. They then went on the apply one of the methodologies to the
cement industry in India, using publicly available data. Their very preliminary analysis suggests
definite evidence of cartel formation. Further refinement and testing of the methodology is
desirable and could pave the path for future work.
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CEMENT CARTILISATION IN INDIA & EUROPE
Nidhi Singh (2010) in her research work Cement Cartelization in India and Europe
revealed that the cement manufacturers all over the world try to raise the market prices above
competition levels and exclude competition. The cement manufacturers in India are on a move to
increase prices from time to time, however they fail to pass on the benefits to the consumers.
Even when the prices of the raw materials like coal are cooling off, the cement prices do not
seem to go down.
Further she stated that India is the second biggest producer of cement in the world after
China. There are 125 large plants owned by 54 companies. Both price and demand has been
increasing in the cement industry, therefore international players find it to be a lucrative market.
Lafarge and Italcementi are good examples of the international players who have already entered
the market.
Conclusion:
In most of the cartel cases, a cease and desist order has been passed by the
MRTPC, cement cartel being one of them. Due to the design of the new competition
regime in the process, the number of cartel cases being reported gradually fell down.
There is comparatively a high incidence of cartelization in the cement sector due to its
very nature that is homogeneity. This makes it easier for the traders to agree on the terms
of the cartel agreement. In order to establish the existence of a cartel one has to identify
the following behavior:
(i)
fixing of prices,
(ii)
agreement by way of concerted action suggesting conspiracy, and
(iii)
intent to gain monopoly or restrict/eliminate competition.
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ASSESSMENT OF COMPETITION IN CEMENT

INDUSTRY IN INDIA
Sumit Pal Singh (2012) in his research work Assessment of Competition in Cement
Industry in India revealed that the Reports on the cement industry by renowned companies
mention their views in certain manner that should be taken note of by The Competition
Commission of India.
Further the author revealed that the cement companies rigged the prices of cement in
India for 17 years and that the top 12 players in the cement Industry controlled 70% of the total
cement production in India. It was only after the complain by the BCI i.e. Builders Commission
of India that the CCI started looking into the industry more carefully and reached the conclusion
that there was a formation of a cement cartel in India. The CCI also fined the companies
violating the law.
Conclusion:
There is a suspicion of a functioning cement cartel in the zonal markets in India except for the
central zone market. The suspicion is well placed since most of the conditions for cartel
formation are strongly satisfied in the cement markets in India. With the findings of the data
analysed in the report, there is a strong suspicion of the presence of price control and market
sharing in the zonal markets. Signs of collusion are there especially on the zonal level with
capacity utilization and production levels of companies in zones moving in tandem with each
other (as shown in graphs in Appendix B) and operating profit margins of almost all the
companies being highly volatile.
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Cement Cartelization in India

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Cement Cartelization in India

Asst. Prof. Rajesh Gautam

Roll. No. : 2013BALLB08

National Law Institute University