Competition Commission Orders Another Probe Against GAIL

Competition Commission Orders Another Probe Against GAIL

The Competition Commission has ordered a fresh investigation against state-owned GAIL (India) for alleged abuse of dominant position with regard to supply of natural gas.

This is the second time in less than a week the company has come under the lens of the watchdog for alleged unfair business practices.
The Competition Commission of India ( CCI) has ordered the probe based on a complaint by Uttar Pradesh-based glass-bottle manufacturer Mohan Meakin, after finding a prima-facie evidence of violation of Section 4 of the Competition Act.
Section 4 pertains to abuse of dominant market position.

Mohan Meakin had entered into a Gas Sale Agreement (GSA) with GAIL in December 2008.
It was alleged that GAIL had demanded Mohan Meakin to sign a side letter, amending the terms and conditions of the GSA, failing to abide by which, ToP (Take-or-Pay) liability would be raised upon the Uttar Pradesh-based firm.
The watchdog noted that as per the GSA, Mohan Meakin had to take 90 per cent of the contracted quantity every year failing which it had to pay for the quantities unlifted.

The conduct of GAIL in implementing ToP liability from 2015 appears to be a modus to ensure de facto exclusivity of the contractual arrangement, the CCI said in a 15-page order today.

“This, besides prohibiting the buyers from shifting to alternatives or terminating the GSA in the event of closure of their business, also appears to create entry barriers for alternative suppliers to enter the market of supply of natural gas or build up a viable customer base,” the regulator said.
It is observed that imposition of ToP liability as per contractual terms cannot be regarded as abuse of dominant position, the CCI said.

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However, the “same being imposed in an exploitative manner without justification or to ensure de facto exclusivity thereby causing hurdles to potential entrants or to the expansion of competitors warrants investigation under the provisions of the (Competition) Act prohibiting abuse of dominant position,” it noted.

Last week, the CCI had directed a probe by the Director General (DG), its investigation arm, against GAIL in a similar matter pertaining to supply and distribution of natural gas.

Prior to that, the fair trade regulator had ordered a probe against the state-owned firm in October 2016 in similar cases.

The DG is directed to file a consolidated investigation report in all these matters, the CCI said in today’s order.

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