Cartel Allegations Rock Global Market: HP India and 17 Resellers Face Penalty Over Supplies Product Bid Rigging

Cartel Allegations Rock Global Market: HP India and 17 Resellers Face Penalty Over Supplies Product Bid Rigging​

The Competition Commission of India (CCI) has delivered a landmark ruling concerning alleged cartelisation within the supply chain of printing consumables. The CCI found that HP India Sales Private Limited, alongside seventeen designated resellers, contravened competition laws regarding the sale and supply of HP Supplies Products to government bodies in Delhi. This addresses systemic practices involving bid rigging, price control, and customer allocation within the B2G procurement space.

The investigation centered on tenders floated on the Government e-Marketplace (GeM) platform, where the value exceeded INR ₹ 20 lakhs. The CCI concluded that the coordinated conduct among HP India and its resellers created an adverse effect on competition in the designated market.

Allegations of Cartelisation in Supplies Procurement​

The detailed investigation uncovered evidence of a long-running collusive arrangement spanning from 2017 to 2020. This alleged cartel involved mechanisms such as customer allocation (Most Valued Customer or MVC accounts) and the restrictive issuance of Manufacturing Authorization Forms (MAFs).

Resellers, who were part of this network, sought and provided support bids in specific tenders. They also actively participated in coordination through shared WhatsApp groups and meetings facilitated by HP India officials. These activities restricted the freedom of other competitors to participate legitimately.

The findings detailed that the resellers often operated as sister concerns or affiliated entities. This arrangement was designed to retain designated MVC accounts, even after the introduction of transparent bidding processes via GeM.

HP India’s Role and The CCI Verdict​

The Commission determined that HP India played a central role in orchestrating this collusive conduct. While HP argued that it merely responded to commercial difficulties caused by new market entrants and counterfeit products, the CCI found its active involvement significant.

HP was noted to have issued MAFs selectively to resellers who had existing MVC accounts. This practice limited participation for others. The Commission ruled that the OEM’s influence in this captive supply chain meant it could not be considered a neutral party. Consequently, HP India was held liable under Section 3(3)(d) read with Section 3(1) of the Act.

Resellers OPs (Opposite Parties) were also found culpable for complicity. The collective misconduct involved seeking and providing support bids to ensure designated resellers won tenders. This action directly compromised the integrity of the independent bidding process in government procurement.

Penalties Imposed on Corporate and Individual Entities​

The CCI directed all contravening companies and their respective individuals to cease and desist from any similar practices moving forward. The Commission is empowered to levy appropriate monetary penalties against those entities found guilty.

Penalties were assessed based on the average relevant turnover or income for the three preceding financial years (2017-18, 2018-19, and 2019-2020). This approach adheres to principles established by the Supreme Court regarding concentration of penalties.

HP India received a significant reduction in penalty due to its prompt disclosure of the cartel arrangement and active cooperation during the investigation. The Commission acknowledged HP’s disclosures, finding it as a mitigating factor. However, other resellers faced stringent financial penalties based on their involvement in the anti-competitive activities.

Consequences for Reseller Networks​

Multiple small enterprise OPs were found guilty, including DD Enterprises (OP-2), Ascent Information Systems (OP-3), and Kaypee Enterprises (OP-4). These enterprises admitted to conducting business under the dictates of HP India.

The penalty assessments highlighted that while reseller entities claimed limited role or adherence to corporate guidelines, this did not negate their responsibility in manipulating the tender process. The CCI emphasized that securing a win was often achieved by favoring MVC accounts over true market competition.

Future Compliance Mandate​

The Commission has mandated all contravening OPs and their individuals to undertake a comprehensive competition compliance training program. This measure aims to raise awareness about competition laws and foster a culture of compliance within the organizations. The companies are required to submit a compliance report within 60 days of receiving the final order.