CCI: Trustees' Association India Cartelisation Over Debenture Fees

• The Competition Commission of India found the Trustees' Association of India and three debenture trustee companies guilty of cartelisation.
• The entities collectively fixed minimum fees for debenture trusteeship services, violating Sections 3(3)(a) and 3(3)(b) of the Competition Act.
• IDBI Trusteeship Services Limited, Axis Trustee Services Limited, and SBI CAP Trustee Company Limited were the implicated trustee companies.
• No monetary penalty was imposed due to the Association's lack of income and instances where companies charged below benchmark fees.
• The CCI issued a strong warning that any future repetition of the conduct would result in aggravated consequences for both entities and individual officials.

This ruling signals the CCI's vigilance against collective price-fixing, even when no monetary penalty is imposed, sending a clear message to industry associations regarding their fee-setting practices.

The Competition Commission of India (CCI) has issued a significant ruling, determining that the Trustees' Association of India (TAI) and three prominent debenture trustee companies engaged in cartelisation. This collective action involved the fixing of minimum fees for debenture trusteeship services, a practice deemed anti-competitive by the regulatory body. The companies identified in the CCI's order are IDBI Trusteeship Services Limited, Axis Trustee Services Limited, and SBI CAP Trustee Company Limited, all of whom were found to have participated in the illicit arrangement.

The investigation revealed that these entities, operating under the umbrella of the TAI, were involved in setting benchmark prices and restricting the availability of debenture trusteeship services. These activities spanned the financial years 2020-21 and 2021-22. The CCI's intervention followed a complaint lodged by Muthoot Finance Limited, which in August 2021, had sought a quotation from IDBI Trustees for the private placement of secured non-convertible debentures valued at ₹982 crore. This specific transaction brought the alleged price-fixing practices to the attention of the competition watchdog.

The CCI's findings explicitly state that the TAI and the three trustee companies violated specific provisions of the Competition Act. Their actions were found to contravene Sections 3(3)(a) and 3(3)(b) of the Act, which prohibit agreements that directly or indirectly determine purchase or sale prices, or limit or control production, supply, markets, technical development, investment, or provision of services. The Commission emphasized that the collective fixing of minimum fees by the TAI, along with subsequent related actions, effectively undermined the independent commercial decision-making processes of the debenture trustees.

This concerted effort to establish a minimum price for debenture trusteeship services amounted to a clear case of cartelisation under India competition law. By setting these benchmark prices and consequently limiting the supply of services, the entities stifled genuine competition within the market for debenture trusteeship services. The ruling underscores the CCI's commitment to preventing anti-competitive practices, particularly those involving price fixing associations that distort market dynamics.

Despite the clear finding of cartelisation, the Competition Commission of India opted not to impose any monetary penalty on the Trustees' Association of India or the three implicated debenture trustee companies. This decision was influenced by several mitigating factors presented during the proceedings. The CCI noted that the TAI itself had no income during the period when the contravention occurred. Furthermore, it was observed that the three trustee companies had, in numerous instances, charged fees below the established benchmark price, indicating some deviation from the cartelised rates.

However, the absence of a financial penalty does not diminish the gravity of the CCI's ruling. The Commission issued a stern warning, stating unequivocally that any future repetition of such conduct would be classified as recidivism. This would lead to significantly aggravated consequences, not only for the entities involved but also for the individual officials concerned, who could face personal liability. This ruling signals the CCI's vigilance against collective price-fixing, even when no monetary penalty is imposed, sending a clear message to industry associations regarding their fee-setting practices.

This ruling signals the CCI's vigilance against collective price-fixing, even when no monetary penalty is imposed. Lawyers should advise clients, particularly those in industry associations, to scrutinize their fee-setting practices to avoid similar findings of cartelisation, as the CCI has explicitly warned of aggravated consequences for recidivism.

Source: Original reporting on regulatory action.