Citizens' Issues
Competition Commission probing alleged cartelisation in pharma and telecom

CCI is investigating alleged cartelisation in various sectors such as pharmaceuticals, telecom and milk distribution

 
New Delhi: The Competition Commission of India (CCI) is investigating alleged cartelisation in various sectors such as pharmaceuticals, telecom and milk distribution, the government said on Monday, reports PTI.
 
CCI keeps gathering information on issues related to cartelisation and if prima facie case is found, then it takes up the issue for further investigation, Minister of State for Corporate Affairs RPN Singh informed the Parliament.
 
"Some such sectors recently have been taken up by the Commission in respect to alleged cartelisation related to real estate, pharmaceuticals, civil aviation, telecom, tyre manufacturing, cement, milk distribution, onion and asbestos," Singh said in a written reply to the Rajya Sabha.
 
CCI is mandated to look into the cartelisation by enterprises, which is anti-competitive activity having appreciable adverse effect on competition that could adversely affect prices, the Minister said.
 
He noted further that data on price rise is not maintained by the CCI.
 
According to the Minister, parties involved in cartelisation activities are dealth with severely by the Commission as per provisions in the Competition Act 2002.
 
In June, the anti-competition regulator had slapped a hefty penalty of about Rs 6,200 crore on 11 leading cement companies including ACC, Ambuja Cements, Ultratech and Jaypee Cements for price cartelisation.
 
The other companies found guilty were Grasim Cements now merged with Ultratech Cements, Lafarge India, JK Cement, India Cements, Madras Cements, Century Cements and Binani Cements.
 
The industry body Cement Manufacturers Association (CMA) was also fined.
 
The regulator was looking into 39 cases and 26 other cases were under investigation with the Commission's Director General as on 30 June 2012. Majority of them were related to the infrastructure sector.
 
There were also cases related to banking and financial services, film/entertainment/TV, information technology/ telecom, medical/pharmaceuticals, civil aviation, petroleum /gas and automobiles, among others.
 
The pending cases are mostly related to anti-competitive agreements and abuse of dominant market position.
 

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MLMs to face scrutiny by FIPB following action by Andhra Police

The FIPB, in its forthcoming meeting may discuss various alternatives, including whether action should be taken against MLM companies, as states such as Andhra Pradesh have found their business model prohibited under the PCMCS Act and have requested a review of approvals for these operators

 
Multi-level marketing (MLM) companies that follow the model of Amway, one of the largest direct selling companies in India, will come under Foreign Investment Promotion Board (FIPB) scrutiny at its meeting in the third week of this month, says a Business Standard report.
 
According to newspaper, the issue has been referred to the FIPB after an inter-departmental meeting, which involved representatives from the Department of Financial Services (which administers the  Prize Chits and Money Circulation Schemes (Banning) Act or PCMCS Act, 1978) and the Department of Economic Affairs (DEA), responding to requests from the Andhra Pradesh government, decided that as there were many companies engaged in similar activities as Amway it was imperative that clear provisions be incorporated in the foreign direct investment (FDI) policy at the earliest, the reports said.
 
The report quotes a spokesperson for Amway India as saying that the company has filed a special leave petition (SLP) before the Supreme Court following a decision of the high court, which observed that the company’s business model may come within the mischief of money circulation scheme under the PCMCS Act.
 
However, a former superintendent of police, Economic Offenses Wing, Andhra Pradesh, who was involved in the investigation of Amway, said this (the comment of the spokesperson) is nothing  but a propaganda used by the company to continue its MLM operations. “Section 3 of the PCMCS Act prohibits any entity from promoting, conducting any prize chit or money circulation scheme, enrolling any member of any such chit or scheme, or participating in it otherwise, or from receiving or remitting any money in pursuance of such chit or scheme. This is the provision we used to ban Japan Life, Amway and GoldQuest,” said the officer, who is now DIG at Hyderabad.
 
At present, the FIPB is not approving any new proposals for FDI in MLMs or network marketing companies. The Board, in its next meeting is also expected to discuss whether action in one state (Andhra Pradesh) should merit such companies to lose their FDI approval across the country, says the Business Standard report.
 
EAS Sarma, former secretary to the Government of India (GoI), has written to Arvind Mayaram, secretary for economic affairs, warning, “I apprehend that the FIPB route will be sought to be misused to obtain cover for these MLM companies which are nothing but a way to swindle the public to raise illegal funds to enrich unethical and anti-social persons.”
 
“Many of these (MLM) companies are not even registered under the Companies Act. Even those registered evade regulation. Those booked regroup under different names and continue to cheat the people. All these companies and those that promote them should be dealt with an iron hand and be prosecuted effectively,” he said. 
 
This follows several letters by him to the prime minister, ministry of corporate affairs, ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and others, on the subject. All of this has been backed by a solid body of investigation and research by Hyderabad-based Deputy Inspector General (DIG) of Police, VC Sajjanar. But he is fighting the battle alone.
 
Interestingly, the PCMCS Act, 1978, was promulgated only after large-scale loot by these dubious companies and a report by the James Raj Committee (1974) called for a total ban on such schemes arguing that they were prejudicial to public interest. It is clear the Act has failed in the 35 years thereafter, barring sporadic action by exceptional police officers like Mr Sajjanar.
 
In India, AP was the first State to enact a law to ban money circulation schemes in 1965. Both the Supreme Court and several high courts have passed landmark judgements against the operation of these schemes as they violate the law of the land and are detrimental to the interests of the public. There are ongoing cases against SpeakAsia and Amway, to cite two examples.
 
“While there are existing laws such as the PCMCS Act and others under which the concerned agencies could prosecute the culprits, there is no effective mechanism in place today to ensure a coordinated approach to identify the fraudulent operators in advance and book them well before they destroy the livelihoods of thousands of households and launder the ill-gotten funds to unknown destinations,” says Mr Sarma.
 
He said, there are infirmities in the existing laws to tackle the problem of these schemes effectively. For example, the penalty for offences committed under PCMCS Act does not exceed a few years of imprisonment and a few thousands of crore of rupees of fine, whereas the schemes act as a “slow poison” in the society; the culprits would have violated several economic laws and have links to anti-national groups and swindled thousands of crore of public money, the former secretary explained. 
 

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COMMENTS
Sensex, Nifty in no man’s land: Monday Closing Report

For the first time in 7 days, the market did not make a lower low. A big move is now needed to decide further direction

 
The market settled lower amid volatile trade as a slew of economic indicators and possibility of a washout of the Monsoon Session of Parliament weakened investor sentiments. On Friday we had mentioned that a higher high and higher low on the Nifty will be the first sign of reversal. Since 24th August, when the fall began, the index has made a lower high and a lower low. However, today the benchmark managed to make a higher low and ended marginally in the negative. The Nifty needs to see a real big move for a proper direction to emerge. The National Stock Exchange (NSE) saw a volume of 46.82 crore shares and an advance decline ratio of 756:617. 
 
The market witnessed a gap up opening on positive global cues and domestic triggers. On the global front, assertion by the US Federal Reserve on Friday that it would take necessary steps to boost the country’s economy lifted Asian markets in morning trade today. On the domestic front, the expert committee on General Anti Avoidance Rules (GAAR) on Saturday recommended postponement of the controversial tax provision by three years and abolition of capital gains tax on transfer of securities.
 
The Nifty opened 18 points higher at 5,277 and the Sensex resumed trade at 17,466, 36 points over its previous close. Capital goods, metal and power led the all-round buying in early trade, helping the benchmarks scale their intraday highs. At the highs, the Nifty rose to 5,296 and the Sensex climbed to 17,510.
 
The market was sideways till mid-morning trade as continuing disruption of Parliament proceedings, for the ninth day today, worried investors about the fate of reforms chalked out by the government to woo fresh investments. 
 
Manufacturing output for the month of August, as measured by the HSBC factory Purchase Managers’ Index, which came in at a nine-month low of 52.8 from 52.9 in the previous month, resulted in the benchmarks paring their gains and slipping into the negative in late morning trade. 
 
The market touched its low around 12.10pm with the Nifty falling to 5,243 and the Sensex moving back to 17,350. The positive opening of the key European indices enabled the domestic benchmarks recover from their lows and enter into the positive. However, the gains were short-lived as selling pressure pushed them into the red once more.
 
A fair degree of choppiness saw the indices hover on both sides of their previous close in post-noon trade. The market settled marginally in the negative on selling pressure in realty, oil & gas and metal sectors in late trade. The Nifty closed five points lower at 5,254 and the Sensex settled 45 points down at 17,384.
 
While the Sensex settled marginally lower, the broader indices ended in the positive. The BSE Mid-cap index added 0.09% and the BSE Small-cap index rose 0.03%.
 
The sectoral gainers were BSE Capital Goods (up 0.53%); BSE Consumer Durables (up 0.61%); BSE Auto (up 0.40%) and BSE Power (up 0.12%). The main losers were BSE Realty (down 0.86%); BSE Oil & Gas (down 0.80%); BSE Bankex (down 0.65%); BSE Metal (down 0.59%) and BSE Healthcare (down 0.34%).
 
Of the 30 shares in the Sensex list, 12 settled in the green. The top gainers were Bajaj Auto (up 3.04%); Coal India (up 2.18%); Cipla, Maruti Suzuki (up 1.79% each) and BHEL (up 0.98%). Jindal Steel (down 2.23%); Tata Power (down 1.91%); Tata Motors (down 1.24%); Tata Steel (down 1.23%) and ONGC (down 1.20%) settled at the bottom of the index.
 
The top two A Group gainers on the BSE were—Aurobindo Pharma (up 6.78%) and Exide Industries (up 5.34%).
The top two A Group losers on the BSE were—Piramal Healthcare (down 6.39%) and IFCI (down 4.79%).
 
The top two B Group gainers on the BSE were—Advance Metering Technology (up 16.32%) and Mahavir Impex (up 16.18%).
The top two B Group losers on the BSE were—Arunjyoti Enterprises (down 12.93%) and Sambandham Spinning Mills (down 12.58%).
 
Out of the 50 stocks listed on the Nifty, 16 settled in the positive. The index was led by Ranbaxy Laboratories (up 3.12%); Coal India (up 2.66%); Bajaj Auto (up 2.65%); Maruti Suzuki (up 2.32%) and Hero MotoCorp (up 2.21%). The major losers were SAIL (down 2.24%); Tata Power (down 2.21%); Jindal Steel (down 2.03%); IDFC (down 2.01%) and Ambuja Cement (down 2%).
 
The Asian pack settled mostly higher as economic data from across the region kindled fresh hopes of the central banks might takes steps to spur growth. Two separate readings of China’s manufacturing activity for August has pointed to a slowdown, a sign that the decline is likely to continue into the third quarter.
 
The Shanghai Composite gained 0.57%; the Hang Seng rose 0.39%; the Jakarta Composite surged 1.42%; the KLSE Composite climbed 0.47%; the Seoul Composite advanced 0.40% and the Taiwan Weighted settled 0.72% higher. On the other hand, the Nikkei 225 declined 0.63% and the Straits Times fell 0.27%.
 
At the time of writing, the key European markets were in the green and US stock futures were mixed. However, the US markets will remain closed on Monday for the Labor Day holiday. 
 
Back home, institutional investors—both foreign and domestic—were net sellers of shares on Friday. While foreign institutional investors withdrew Rs211.08 crore from stocks, domestic institutional investors pulled out Rs172.54 crore.
 
Pharma major Wockhardt today said it has received final approval from the US health regulator for marketing generic bupropion hydrochloride tablets used for treating depression and is launching the product immediately. Bupropion tablets are generic version of Glaxo Smithkline's Wellbutrin SR tablets. Wockhardt declined 1.03% to close at Rs1,217 on the NSE.
 
The Serious Fraud Investigation Office (SFIO) has received complaints about alleged violation of corporate governance and other norms by textile major S Kumars Nationwide and the matter is being examined by the Registrar of Companies, ministry of corporate affairs said today. The stock fell 1.28% to settle at Rs19.25 on the NSE.
 
Wind turbine maker Suzlon today said its overseas subsidiary REpower Systems has bagged a 131.2 MW contract from Meridian Energy of Australia to supply 64 turbines for its wind farm project. The project will have a total capital cost of around 260 million Australian dollars and is scheduled to be installed and commissioned between September 2013 and January 2015. Suzlon closed at Rs15.40 on the NSE, up 2.67% over its previous close.
 

 

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