A small company in the glass industry has taken on an international major head-on and brought it to book for using anti-competitive practices and abusing its dominant position in the market to snuff out small competitors.  

The Competition Commission of India has found Schott Glass India Pvt Ltd to have abused its dominant position in the neutral borosilicate glass tubes and glass ampoules market. Schott Glass India is part of the Schott AG group, and a wholly-owned subsidiary of Schott GmBH. With an annual turnover of 2.85 bln Euro, the Schott group has a presence across South America, Europe and Asia in the borosilicate glass tubes sector, mainly for the pharmaceutical industry.

A competitor of Schott, Kapoor Glass Pvt Ltd had moved the Competition Commission in 2008. Kapoor Glass has been producing glass ampoules and vials for the past five decades and also produced glass tubing from 1997 to 2008 which was in direct competition to Schott Glass.

Sanjeev Kapoor, managing director of Kapoor Glass, told this correspondent, “We were the only new successful entrant in production of neutral glass tubes of high quality across the globe in the last many decades. But we have been forced out due to Schott’s anti-competitive practices.

“Schott has been trying to get us to sell out for many years now. In fact, we will not stop here. We plan to appeal the CCI order at the appellate tribunal since neither Schott Germany nor its directors have been penalised,” Kapoor said.

Attempts to get Schott Glass to react failed. Calls to the office of Mohan Joshi, president of Schott Glass India Pvt Ltd, were met with the response, “Mr Joshi is out of the office.” 

While ordering Schott Glass India recently to cease and desist from several practices that the Commission found anti-competitive, the CCI has imposed a penalty of Rs 5.66 cr on Schott India, having calculated at 4% on average of three years’ turnover of Rs 141.46 cr.

Schott Packaging, a subsidiary of Schott Germany, also signed a joint venture partnership in India with Kaisha Manufacturers Pvt Ltd in 2008 for the manufacture of glass ampoules. The head honcho of a prominent construction group in Mumbai holds a stake in this joint venture.
It is this JV with whom Schott India is found to have played out its anti-competitive practices.

While the CCI found the allegation of predatory pricing by Schott in 2008 not relevant since the enforcement provisions of the Act came into force in May 2009, it found Schott India in violation on the main section of abuse of dominant position, including through the Trademark License Agreements it signed with the consumers of its glass tubes, that is, the manufacturers of ampoules and vials.

The Commission called the Trademark Licence Agreement “one sided and heavily loaded in favour of Schott and even contains provisions that it (sic) may reduce the converters to perform the task of contract manufacturing for the OP (Schott)”.

The relevant market in the dispute was considered broadly in the upstream market for Neutral Glass Clear Tubes and Neutral Glass Amber Tubes in India. In the downstream market it was considered for ampoules, vials, dental cartridges etc.

While in the upstream tubing business, the competitors of Schott are Gerresheimer, Amcor (now acquired by Nipro Japan), Nippon Electric Glass Japan and Neubor, in the downstream ampoules business, various Indian manufacturers also compete with Schott-Kaisha.

The CCI’s order brings out how Schott India used its dominance in the tubes supply business to “lessen the competition in the downstream market in favour of joint venture, the Schott Kaisha (sic)”. This was a violation of section 4 (2) (e) of the Act which stipulates that no enterprise will use its dominant position in one market to enter into or protect other relevant market, the Commission said.

The Commission has found that Schott India followed a dissimilar and discriminatory policy towards its converters (of glass tubes to ampoules) vis-a-vis its JV, Schott Kaisha. This includes quantum and conditions of discounts. It found the discount policy unfair and discriminatory and violative of sections 4 (2) (a) (i) and 4 (2) (a) (ii) of the Act.
Section 4 (2) (d) of the CC Act states that there shall be an abuse of dominant position of an enterprise or group if it  makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which by their nature or according to commercial usage have no connection with the subject of such contracts. Schott seems to have violated this one also.

The CCI’s order states: “The Commission observes that the conduct of the OP (opposite party-that is,-Schott Glass  India) is abusive because the converters are obligated to purchase Amber Tubes along with the Clear Tubes in order to avail discounts in violation of provision of section 4 (2) (d) of the Act.”

The Commission also found that the discount policies, the trademark licence agreements, supply agreement and marketing support agreement attempt to bind the converters to procure glass tubes only from Schott.

In one case, Kishore Industries provided details to the Commission of how Schott allegedly stopped supplies to it since it had agreed to take up job work for Strides Arcolab Ltd, who was importing tubes from sources other than Schott.

In fact, on Oct 19, 2011 Bloomberg reported that Asahi Glass Co., Nippon Electric Glass Co. and Schott AG agreed to pay 128.7 mln Euros ($178 mln) in fines “to end a European Union probe into price-fixing of glass used for television and computer screens”. Of this, Schott was fined 40.4 mln Euros.