Government-Owned GAIL India Under Investigation For Unfair Business Practices
Watchdog calls for a detailed probe after complaints alleging unfair business practices
Competition Commission has ordered an investigation against state-owned GAIL India for indulging in alleged unfair business practices with regard to supply and distribution of gas to industrial players.
The watchdog has called for a detailed probe after clubbing five complaints which alleged unfair business practices. It has prima facie found violations of competition rules, after looking into complaints filed by automotive components manufacturers Rico Auto Industries, Omax Autos and Rico Castings.
"In pursuance of the GSA (Gas Supply Agreement), the opposite party (GAIL) imposed take or pay liability and encashed the Letter of Credit furnished by the informants.
These acts of the opposite party, when seen in conjunction with other conducts... cannot be treated as mere non- compliance of contractual terms.
"Rather such high handed approach of the opposite party in dealing with its customers is indicative of abusive conduct," CCI said in a 22-page order dated October 3 but made public today.
The regulator noted that a holistic appreciation of the facts and circumstances suggests that the aforesaid conducts of GAIL "prima facie" contravenes competition norms, which merits investigation.
Among others, the allegations pertained to suspension of gas supply without notice, denial of dispute resolution mechanism as envisaged under the agreement and forcing payments against incomprehensible invoices.
To assess the complaints, CCI considered 'supply and distribution of natural gas to industrial consumers' as the relevant market. For three complaints, Gurgaon district was taken as the relevant one while it is Rewari district for the remaining two cases.
It was also alleged that GAIL imposed 'take or pay liability', wherein buyer was required to pay even for the quantities of gas which GAIL was unable to supply due to some deficiency. Terming GAIL's activities as "unexpected business behaviour", CCI said the company did not come forward for amicable settlement for the dispute as provided in the GSA.
The watchdog also noted the company suspended supplies of the informants for more than a month which was likely to have serious impact on the business of the informants. The probe would be done by CCI's investigation arm -- Director General (DG).
The informants were represented by Advocates Sharad Gupta and Vinayak Gupta while Advocates Balbir Singh, Abhishek Singh Baghel, Harsha Rathore and Nikita Ved appeared for GAIL.