Competition Commission Orders Fresh Probe Against GAIL

Competition Commission Orders Fresh Probe Against GAIL

The Competition Commission today 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 one year that the company has come under the lens of the watchdog for alleged unfair business practices.

After finding prima-facie evidence of competition norms violations, the CCI has ordered the probe based on a complaint by Rajasthan-based TMT bars maker Shri Rathi Steel (Dakshin) Ltd.

It was alleged that GAIL abused its dominant position by incorporating unfair terms and conditions in the Gas Sale Agreement (GSA).

For this case, the regulator considered the market for supply and distribution of natural gas to industrial consumers at Alwar in Rajasthan as the relevant one.

Shri Rathi Steel had entered into a GSA pact with GAIL in March 2009.

The watchdog said the conduct of GAIL in implementing such ToP (Take-or-Pay) liability from 2015 appears to be a modus to ensure de facto exclusivity of the contractual arrangement.

“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 or build up a viable customer base,” it said in a 13-page order.

It is observed that imposition of ToP liability as per contractual terms cannot per se be regarded as abuse of dominant position, the CCI said.

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

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In October 2016, the Competition Commission of India had directed a probe by the Director General (DG), its investigation arm, in a similar matter pertaining to supply and distribution of natural gas.

At that time, the investigation was ordered after looking into complaints.

The DG shall file a consolidated investigation report in all the cases, the regulator’s order today said.

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