Anti-monopoly watchdog, Competition Commission of India (CCI) has approved the equivalent of five-bed tire companies in the country for an Rs. A 1,788 crore fine has been imposed. In which five-third company has been fined Maha – Apollo Tires Ltd., MRF Ltd., Cet Ltd., JK Tyre & Industries Ltd., and Birla Tires Ltd. Cartilization is the main reason for ISS penalty.
Now you are thinking, what is this cartelization because of that CCI, not one but on five tire companies hit a fine – and also in crores – let's see what is cartelization and this tire manufactures issue.
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Let's go back a bit to settle the case
This penalty series is not of today, the story is of August 2018 when CCI fined-
622.09 crore on MRF,
Apollo Tires Rs 425.53 crore
Rs 309.95 cr on JK Tires
CEAT tire Rs 252.16 crore and
Birla Tires was fined 178.33 crores
Apart from this, a fine of 8.4 lakh was also imposed by the regulatory body on the Automotive Tire Manufacturers Association (ATMA).
The companies have appealed against the issue in the Madras Court also, which was recently dismissed on 6th January. Even after the dismissal, the companies appealed to the Supreme Court as well, but on January 28, this appeal was also cancelled.
Let me tell you, this case was initiated by CCI on the basis of a reference. The reference came from the Ministry of Corporate Affairs – the reference to the Ministry came from the All India Tire Dealers Federation (AITDF) – they said that the five companies and associations together are controlling the market production and supply.
Seeing all the things, CCI accused the five tire companies of cartelization.
So what is this cartelization?
Faction is an illegal practice where rival companies from ‘one' industry meet, collaborate, and coordinate with each other, also share sensitive data, and then collectively reduce competition. fix prices and make plans to maximize profits.
Apart from this, Google India was also taken in the dock by the CCI last year for competitive, unfair, and restrictive business practices. Apart from this, in the year 2018, CCI also imposed a penalty of crores on about 10 cement companies and their trade association Cement Manufacturing Association.
Now that the penalty has been imposed, the question is – will the CCI penalty affect the tire stocks?
Well, can't see much volatility in the stock even when the penalty news comes in. Around 10 o clock, Apollo Tires and MRF both were trading at flat rates, while the other three stocks were not much, but less than 1 to 2%. If seen, these tire stocks are still not under much pressure, but they can come later.
It is Shocking, that this is not the first time that tire companies have been penalized by the CCI for price-fixing and anti-competitive practices. In the year 2016 too, the CCI had penalized tire manufacturers for cartelization.
You are seeing how the market leaders of all the industries are fooling all of us consumers with their connivance. Be it tires, cars, cement, then paper makers, how are they trying to manipulate us with some sort of gimmick. Even the beer companies are involved in the unfair games and they have also got penalties from CCI.
Every business wants profit and this is not a bad thing, but when marketing competitors together price-fix, then it directly affects the buyers and we know to compulsively stand on that price. Just imagine in the market price of a basic item is shot and whether it is brand A or B, the rate of C is the same and quite high – so how will the common man buy his goods? And when all are together, how will new innovative products and manufacturers' in this segment? Isn't it a serious problem? But, the good thing is that there is a regulatory body Competition Commission of India (CCI) to stop all this and hopefully it will do its job and not only protect consumers but also businesses from this malpractice.