Even HP resellers thought the price of toner and ink was too high – so HP India facilitated an illegal cartel

legal

Regulator fines PC and printer giant for rigged tender bids and collusion

The Competition Commission of India (CCI) has fined HP Inc. and some of its resellers, for what it calls “cartelisation” activities that inflated the cost of PCs and printers – and which it says HP used to head off threats from resellers to sell counterfeit ink cartridges.

The ₹138.85 crores/$14.4 million fine won’t be a massive inconvenience to HP.

The facts of the case may be, as the CCI found HP told its resellers what prices to charge when they bid for tenders posted to a government procurement site. The PC and printer giant also prohibited some of its resellers from bidding on tenders.

In its order related to HP’s bids to sell printer supplies, the regulator reveals it accessed WhatsApp records that show HP staff and some of its resellers “were operating in a collusive arrangement and shows the practice of bid rigging including cover bidding, price fixation, and customer allocation, during 2017-2020.”

Cover bidding is the practice of having one reseller make a ridiculously high bid that a vendor knows won’t win a deal, in the hope other resellers who offer more reasonable quotes will get the sale. The order also claims that HP would decide in advance which of its resellers would sell to which customer.

The CCI found that one of HP’s motives was to ensure that it remained competitive with other PC and printer makers, rather than to favor a particular reseller.

Another motive was to stop resellers from selling counterfeit ink and toner.

“Due to constant downward pressure on pricing because of new resellers, Tier-2 resellers threatened a shift to low-cost counterfeit products to compete on price,” the order states. Some of those resellers formed an “understanding” about the prices they would charge, so they would not undercut each other’s bids. The order says HP “facilitated”  development of that understanding to defend its printer supplies business.

“HP India was commercially forced into a position where it had to support the collusive arrangement adopted by the Tier-2 resellers,” the order states.

In a second order regarding the sale of PCs, the CCI found HP’s actions helped HP to navigate the reverse auction process used to determine the winner of some tenders.

“HP India faced the risk if its resellers exited early due to unsustainable downward pricing pressure resulting in no sale for HP India,” the order states. “The coordination amongst HP India’s reseller was accordingly designed to ensure that at least one HP reseller remained present in the final round.”

The orders compel HP, and the resellers it worked with, to cease all such activity. ®