3rd UPDATE: India Antitrust Body Imposes $1.1 Billion Fine on 11 Cement Firms

--India body imposes penalty on ACC, Ambuja, Ultratech, Jaiprakash

--Penalties also on Lafarge unit, Madras Cements, India Cements

--Antitrust body asks cement firms to pay fine within 90 days

(Adds details on penalty in 5th paragraph and Holcim, Lafarge reactions in 12th and 13th paragraphs.)

 
   By Prasenjit Bhattacharya 
 

NEW DELHI--India's antitrust body Thursday imposed a penalty of a combined 60 billion rupees ($1.1 billion) on 11 cement companies for price fixing, in the biggest fine during the regulator's three-year-old existence.

The companies penalised by the Competition Commission of India include the two units of Swiss cement-maker Holcim Ltd (HOLN.VX)-- ACC Ltd. (500410.BY) and Ambuja Cements Ltd. (500425.BY), UltraTech Cement Ltd. (532538.BY), Jaiprakash Associates Ltd. (532532.BY), India Cements Ltd. (530005.BY), Madras Cements Ltd. (500260.BY), and the local unit of France's Lafarge SA (LG.FR).

"The commission has found that the cement companies have not utilised the available capacity so as to reduce supplies and raise prices in times of higher demand," it said in its judgement.

It said the penalty on each company amounted to 50% of profit for the financial years 2009-10 and 2010-11.

ACC has been fined INR11.47 billion and Ambuja has to pay INR11.63 billion. India's largest producer of the building material, Ultratech Cement, has to pay INR11.75 billion, while Lafarge's India unit will have to shell out INR4.8 billion. Jaiprakash Associates has been fined INR13.23 billion.

The commission started accepting cases in 2009, replacing a relatively toothless antitrust body that had been in place since 1970, and has been becoming increasingly assertive. The biggest penalty it had imposed so far was last year when it ordered DLF Ltd., India's biggest property developer by sales, to pay $120 million for abusing its dominant market position by changing agreements signed with some property buyers.

Thursday, the regulator said that the cement companies' action of limiting supplies to the market through an "anti-competitive agreement" was not only detrimental to consumers but also to the economy, as the building material is a critical input for infrastructure projects. The regulator asked the companies to pay the fine within 90 days.

The judgement comes at a bad time for cement companies, as demand for the construction material is weak due to sluggish economic growth and a fall in spending on infrastructure projects. The cost of raw materials such as coal is on the rise as well, pressuring margins.

Also, the order isn't likely to result in any reduction in product prices by manufacturers, said Sanjay Ladiwala, president of the Cement Stockists & Dealers Association of Bombay.

Companies can challenge the regulator's orders in the Competition Appellate Tribunal, a quasi-judicial body, and can then appeal to India's Supreme Court.

UltraTech, India's largest cement producer by sales, said that it hasn't indulged in any cartelisation and that it would appeal against the order in the appellate tribunal.

In Zurich, the Holcim group said it "contest the allegations and findings against [ACC and Ambuja] in the order and will pursue all available legal steps to defend their respective position."

In Paris, Lafarge said, "We will see the detailed report and decide the suitable actions to take. Lafarge has a strict policy to comply with competition laws."

Write to Prasenjit Bhattacharya at [e-mail]

(Marta Falconi in Zurich and Paris bureau contributed to the article.)