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A recent workshop conducted by the CCI on 'Competition Issues in the Pharmaceutical Sector in India' shows that the CCI is again actively examining the pharmaceutical industry. The CCI had initiated a market study in October 2020 to assess the competitive landscape in the pharmaceutical sector. Key highlights from the workshop are:
KEY ENFORCEMENT MATTERS
#1 CCI penalizes beer companies for cartelization
Background and Allegations
A suo-moto investigation was initiated by the CCI in 2017, pursuant to an application filed by AB In-Bev under the lesser penalty provisions under the Competition Act, 2002 (Act). The allegations pertained to determination/fixing of prices in certain states, by four beer manufacturing companies, United Breweries Limited (UBL), Carlsberg India Pvt Ltd (CIPL), Crown Beers India Pvt. Ltd. and SABMiller India Limited (now known as Anheuser Busch InBev India Ltd. (AB In-Bev), and their association (All India Brewers' Association (AIBA) (collectively OPs).
The DG during its investigation also conducted a search and seizure, pursuant to which, UBL and CIPL also filed their respective leniency applications before the CCI.
Key Observations and Conclusion
The CCI observed that the OPs had engaged in anti-competitive conduct in respect of the following:
- Sharing of pricing information and coordination on price – The CCI observed that the mere sharing of commercially sensitive pricing information compromised the integrity of independent bidding/pricing process and hence was likely to stifle competition amongst the OPs.
- Supplies to premium institutions – The CCI observed that agreeing to co-ordinate in respect of supplies to premium institutions/ bulk buyers was likely to stifle competition amongst them and was likely to cause an appreciable adverse effect on competition (AAEC) in the market in violation of Section 3(3) of the Act.
- Restricting / Limiting of supply – The CCI observed that even if the supplies were limited / restricted to protest against an action by the state, the same amounted to limiting supplies and hence violation of Section 3(3) of the Act.
- Second-hand bottles – The CCI observed that even if the coordination amongst the OPs was aimed at the interest of the consumers, the coordination would have resulted in harm to the bottle collectors.
- Using association as platform for coordination – The CCI observed that OPs collectively met the excise authorities under the aegis of AIBA so that there were better chances of getting price revisions. The AIBA was also found to have facilitated discussions amongst OPs on various issues including pricing.
- The CCI ultimately decided to impose a penalty on the OPs (except AIBA) on 2% of the turnover of the cartel or 0.5 times of their profits during the continuation of the cartel. As regards AIBA and the employees of the OPs, the CCI imposed a penalty of 3% of their average income for the years 2016-17 to 2018-19. A cumulative monetary penalty of INR 8.64 billion (approx.) on beer companies, their association and respective employees has been imposed.
- The CCI granted a 100% waiver to AB In-Bev, 40% to UBL and 20% to CIPL under the leniency regime, based on their contribution to the investigation and vital disclosures made by them which aided the investigation.
The decision of the CCI is available here
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Originally published 9 November 2021
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