Section 27 of the Competition Act, 2002 authorizes CCI to impose penalty for the violation of Section 3 and 4 of the Act. These provisions deal with anti-competitive agreements and abuse of dominant position. The Section 27 order in the case of Indian Sugar Mills Association & Ors. v. Indian Jute Mills Association & Ors [i] deals with the monopoly of jute mills to supply gunny bags to the sugar industry. As per the provisions of the Jute Packaging Materials (Compulsory Use in Packaging Commodities) Act, 1987 (‘the JPM Act’), the sugar industry is required to sell its goods in jute bags. Though earlier, cement and fertilizers industries were also subjected to this provision, but they have been exempted by the government. The informants have alleged that the office bearers and executive members of jute mills association were fixing prices of these bags through their daily bulletins. Instead of allowing market forces to determine the price of jute bags, the jute owners were deciding the amount and the rate of increase in price was higher than the rate at which the rate of raw jute had been rising in the market. These associations were interacting frequently which clearly showed that there was some kind of collusion between them to fix the prices. There was a constant increase in the demand of the jute bags on the one hand and a constant reduction in production on the other hand. Further, no steps were taken by the government to stop this practice. Many of these office bearers have a large stake in the jute industry. The Commission held that such practices were against the provisions of the Act and jute mills associations were ordered to stop this practice (cease and desist orders were issued). The Commission held that no single enterprise of jute was in a position to dominate the market within the meaning of explanation to section 4 of the Act. Ministry of Textiles is not considered as “enterprise” under Section 2(h) of the Act. However, the Commission did notice that it was because of the JPM Act, that such practice were prevalent and that the Act was passed to ease the suffering the of jute mill industry and jute farmers. Though no violation of the Competition Act was found against the government/ministry of textiles, the Commission recommended the repeal of this Act as there has been significant change in the market of jute industry and further newer and cheaper technology to manufacture bags is available with the sugar industry. This situation escalates the cost which is borne by the common people.
Further, the Commission imposed the penalty on not only the jute mills associations, but also on their office bearers and executive members. This was done under Section 48 of the Competition Act, 2002 which allows the Commission to impose penalty on such person who was in charge when violations under the Act were committed.
The Commission has rightly imposed the penalty on the individual office bearers after finding that they havea significant stake in the jute industry. Though the amount may not be significant, but the penalty itself will bring disrepute to individual office holders, forcing them to desist from doing such activities.
The Commission should have examined the role of the government in this case more extensively. The Commission should have asked DG to find out that how other industries were granted exemption from provisions the JPM Act while sugar industry was still within its ambit. The government might take notice of the Commission’s recommendation in due time as there is counter pressure fromthe sugar industry too.
It must be kept in mind that such practices are prevalent across the country where manufacturers are forced to buy raw material or sell their finished products to certain class due to restrictions imposed by the government regulations. Although in this case, the Commission held that the Ministry of Textiles is not an enterprise, but the real question that arises is about the power of the CCI to quash such regulations. Although the Ministry of Textiles was not indulging in any sort of trade, yet it was facilitating anti-competitive practice and therefore, action could have been taken against it.. Last year, the CCI[ii] had penalized CIL (Coal India Limited) for their alleged anti-competitive practices where it was operating without the control of market forces. CIL is also a state entity and it derives its powers for government regulations.The CCI has ruled that the CIL through its subsidiaries operated independently of market forces, enjoyed undisputed dominance and had imposed unfair/ discriminatory conditions in the matter of supply of non-coking coal to power producers. It must be remembered that the market has changed a lot and the policy of the government of protecting certain industries needs to be curbed, if it encourages anti-competitive practices. Such policies might have been effective when industries were in their nascent stages and required protection.But, now giving them any sort of protection would be equivalent togiving them an unfair advantage, as we can see in the instant case.
[i]Case No.38/2011 of CCI available at