The Competition Commission of India (CCI) has penalized seven entities for indulging in anti-competitive agreements for the supply of signages for State Bank of India (SBI) Branches, Offices/ATMs as per the Tender. Amongst these seven entities, one party was a lesser penalty applicant before CCI, according to CCI’s order dated 3rd February 2022. The CCI hearing panel was comprised of Ashok Kumar Gupta, Chairperson, Ms. Sangeeta Verma, Member, Bhagwant Singh Bishnoi, Member.
Under Suo Motu Case No. 02 of 2020, the CCI penalized seven Opposite Parties (OP1 to OP7) for their alleged anti-competitive conduct by various bidders in the supply and installation of signages at specified locations of the State Bank of India across India. The seven penalized parties include Diamond Display Solutions Pvt.Ltd (Rs.23,86,755); AGX Retail Solutions Pvt. Ltd (Rs.6,32,653); Opal Signs Pvt.Ltd (Rs. 3,14,742); Avery Dennison Pvt.Ltd (Rs.125,433); Amreesh Neon Pvt.Ltd (Rs. 32,15,795); Macromedia Digital Imaging Pvt. Ltd (Rs. 51,77,659); Hith Impex Pvt. Ltd (Rs.5,94,619). Further, nine individuals belonging to these alleged parties were also held liable for the anti-competitive conduct of their respective entities, in terms of the provisions of Section 48 of the said Act.
The Commission formed a prima facie view that a case of contravention of the provisions of Section 3(1) read with Section 3(3) of the Act is made out with respect to the Impugned Tender. Accordingly, the Commission passed an order dated 19.05.2020 under Section 26(1) of the Act directing the Director General (DG) to cause an investigation into the matter and submit a report.
The said case was taken up by the Commission suo motu, under Section 19(1) of the Competition Act, 2002 (the ‘Act’), pursuant to a complaint dated 28th June 2018, received in the Commission. The complaint alleged that there was a bid-rigging and cartelisation in the tender floated by SBI Infra Management Solutions Pvt. Ltd. (SBIIMS) for the supply and installation of new signages and replacement of existing signages for branches, offices, ATMs of SBI located at specified metro centres of various circles of SBI across India (Impugned Tender).
As per the facts on record, the CCI found that certain bidders in the Impugned Tender were co-ordinating and fixing the prices of their services as well as allocating the market amongst themselves, with the object of distorting the fair bidding process. The cumulative assessment of the evidence collected by the CCI investigating team, such as e-mails exchanged between the parties, etc clearly indicated the manipulation of the bidding process.
As noted in the CCI order, the DG had unearthed two crucial e-mail communications dated 02.06.2018 and 04.06.2018 exchanged between the OPs in relation to the Impugned Tender. The CCI team further found that there was an agreement amongst the parties which resulted in geographical market allocation as well as bid-rigging in the said Tender. The investigation also collected the CDRs of the key persons of the OPs. From the analysis of the CDRs, it is found that the OPs were in constant touch with each other prior to, during, and post the e-reverse bidding process of the Impugned Tender. In a few cases, the timing of the actual bid submissions closely matches the telephonic calls made between the OPs.
As per the CCI’s Order, the alleged parties were held to be guilty of contravention of the provisions of Section 3 of the Competition Act, 2002 (the Act), which prohibits anti-competitive agreements including cartels. So, after the completion of the investigation into the matter, the CCI took a lenient view and decided to impose a penalty upon these parties with 1% of their respective average turnover. The individuals found guilty under Section 48 of the Competition Act, 2002, were also imposed a penalty at1% of their respective average incomes.
According to the CCI’s final order, during the pendency of investigation before the Director-General, Avery Dennison Pvt Ltd had filed an application on 31.08.2020, under the provisions of Section 46 of the Act, read with the Competition Commission of India (Lesser Penalty) Regulations, 2009(‘Lesser Penalty Regulations’) before the Commission. So, considering the stage at which the lesser penalty applicant (Avery Dennison) approached the CCI and in light of the co-operation extended by it thereafter, CCI granted a reduction in penalty by 90% to it and its individuals.
The CCI Order proceedings noted that OP-4 and its individuals have provided vital disclosures in the form of information, documents and other evidence, co-operated with the DG and the Commission in a genuine, full, continuous and expeditious manner, and not concealed any information. Accordingly, the CCI felt that they merit the benefit of 100% reduction in penalty, as provided in Regulation 4 of the LPR. In addition to voluntary disclosures, certain mitigating factors also exist in the instant case. The company has implemented a rigorous competition compliance programme and continues to regularly train its staff to avoid any such instance of violation of the provisions of the Act in future. It has also been submitted that the impugned conduct did not result in any loss to SBI or any other entity due to their conduct as it withdrew from participation. During the oral hearing, the company submitted that it withdrew from the Impugned Tender as soon as its internal teams became aware of the inadvertent violation.
Giving background about the case, the CCI’s final order stated that SBI (State Bank of India) had issued an EOI (Expression of Interest) on 07.12.2017 for pre-qualification of signage solution providers for replacing and providing external signages. However, the said EOI could not be carried forward due to a lack of adequate response from the vendors complying with prescribed pre-qualification criteria, and as such, the process could not reach the bidding stage. After scrapping the EOI dated 07.12.2017, SBI directed SBI Infra Management Solutions (SBIIMS), a wholly-owned subsidiary of SBI for taking care of premises and estate-related matters),to take necessary action regarding the roll-out of SBI’s refreshed brand identity and standardization of the bank’s signage boards at branches/ATMs. Consequently, SBIIMS issued another EOI on 08.02.2018. In response to the said EOI, SBIIMS received 44 applications. The same was scrutinized by a committee formed for such purpose, and 9 vendors were recommended to be pre-qualified for the signage project work which included OP-1 to OP-5. Subsequently, SBIIMS issued a tender on 28.03.2018 to these 9 vendors for the supply and installation of SBI’s new LED back-lit signage and replacement of existing signages for branches, offices. ATMs located at specified metro centres of various circles of SBI across India, using specified and approved flex and vinyl with cut and paste method. In this regard, a pre-bid meeting of vendors was scheduled for 07.04.2018. Thereafter, 5 vendors qualified in the technical bid evaluation, and they were invited to submit their price bids for the project work. However, the e-reverse auction held on 03.05.2018 could not succeed due to a lack of responses.
SBIIMS held a meeting with the prospective bidders on 23.05.2018to to deliberate upon various issues about the e-reverse auction mode of tendering and difficulties faced by the bidders in the process, and to give necessary clarifications on the same. In the said meeting, it was decided that SBIIMS would conduct fresh circle-wise e-reverse bidding for all 13 circles with certain changes. The vendors were also informed that the work would be allotted on a 50:30:20 basis in terms of the number of branches, offices, ATMs of the circle, irrespective of the quantities and area of signages. All the pre-qualified vendors agreed to the said changes and submitted their written concurrences.
Subsequently, fresh e-reverse bidding was conducted on 04.06.2018 and 05.06.2018 for 12 out of 13 circles (excluding Ahmedabad) with a start bid price of ₹8,750 per sq. mt., the decremental value of ₹100 per sq. mt. and freezing the rate of timer switch at ₹4,750per sq. mt. All 5 qualified vendors (i.e., OP-1 to OP-5) participated and submitted their bids in the e-reverse auction. After completion of the e-reverse bidding process, circle-wise quotes (excluding GST) were received from L-1, L-2 and L-3 bidders.
Their rates were accepted by SBIIMS, and further, in terms of the tender conditions, it was decided to distribute the work amongst L-1, L-2 and L-3 bidders in the proportion of 50:30:20 on L-1 rates, considering that, given several branches/offices/ATMs of the circles, a single vendor may not be in a position to complete the job within the prescribed timeline. A Letter of Intent was also issued by SBIIMS to the winning bidders on 06.06.2018, and the work order was placed on 13.06.2018.
In its order, the CCI noted that most of the Ops (alleged opponent parties) are MSMEs and some of them have even acknowledged their conduct during the inquiry. Accordingly, the Commission has taken a considerate view while levying monetary penalties upon MSMEs during the ongoing pandemic. The Commission has also examined the financial statements submitted by the parties, besides considering the value and size of the Impugned Tender. Against this backdrop, on a careful and holistic consideration of the matter, the Commission takes a lenient view and decides to impose the penalty upon the parties at 1% of the average of their relevant turnover for the three financial years i.e.,2015-16 to 2017-18.
Last but not the least, in terms of Section 27(a) of the Act, the Commission directed the 7 parties and their individuals concerned, to desist in future from indulging in practices which have been found in the present order to be in contravention of the provisions of Section 3 of the Act, as detailed in the earlier part of the present order.
One may wonder whether this incidence in the signage industry is just the tip of the iceberg or there might be more, as this kind of Tender Works keep coming up from time to time from different industry and service sectors. The moral of the incidence is that ‘let there be a healthy competition.’
