The Competition Commission of India penalized Carlsberg India Private Limited (CIPL), All India Brewers' Association (AIBA), and other parties a total of about Rs 873 crore by the Competition Commission of India for engaging in cartel activity in the sale and supply of beer in various states and Union Territories and for failing to maintain continuous communication with regard to the planning and coordination of price increases to be proposed to state authorities. With CIPL joining in 2012, and with AIBA acting as a platform for supporting such cartelization from 2013, the era of cartelization was deemed to span from 2009 until at least October 10, 2018.
Following the filing of an application by Crown Beers India Private Limited (OP-2) and SABMiller India Limited (SAB) (OP-3), both ultimately held by Anheuser Busch InBev SA/NV (Ab InBev) against the captioned parties (OPs) for alleged cartelization in respect to the production, marketing, distribution, and sale of beer in India, CCI initiated the current case suo moto. SAB added that communication between the breweries was helped by a number of meetings at the bilateral, multilateral, and internal levels as well as by email exchanges and the shared AIBE platform. The timeframe of such cooperation between the beer businesses, according to CCI, appears to run from March 2005 to March 2017. In light of this, CCI instructed the DG to look into the situation since it appeared, at least on the surface, that multiple brewing businesses had agreed to set the rates to be quoted to each state government.
The evidence gathered by the DG's office included email conversations about (i) sensitive price information (Andhra Pradesh, National Capital Territory (NCT) of Delhi, Karnataka, Odisha, Maharashtra, Rajasthan, West Bengal, and Puducherry); (ii) revenue, stock, and sales data (Maharashtra); and (iii) limiting the availability of beer in the market (Odisha, West Bengal, and Maharashtra). According to DG, OPs 1, 3, and 4 engaged in private and sensitive business information sharing. Through the shared platform of the OP-5, these companies approached the state governments collectively in order to obtain price revisions to agreed-upon levels and prevent price wars amongst the companies. A few SAB, UBL, CIPL, and AIBE employees were held accountable by the DG for their role in the cartel's facilitation.
The final say in pricing for all alcoholic beverages (including beer) in each state belonged to the government of that state. To that end, each beer manufacturer is expected to submit the suggested prices (including the requested price increases over existing brands) for approval, along with a breakdown of all costs incurred to arrive at the suggested price (such as production costs, promotional costs, and promotional costs, and the profit margins).
According to the DG, each state in India has its own unique manner of regulating the sale of beer within its area, resulting in disparities in pricing regulations and approvals as well as the enforcement of varied taxes, excise duties, and licensing terms. The DG found that diverse models for beer distribution were used by states and union territories in India.
The companies in the present matter were found to have violated Section 3(1) and 3(3) of the Competition Act, 2002 across Indian states and union territories. In violation of section 3(3)(a) of the Competition Act of 2002, the parties are accused of engaging in price coordination in the states of Andhra Pradesh, Karnataka, Maharashtra, Odisha, Rajasthan, West Bengal, the National Capital Territory of Delhi, and the Union Territory of Puducherry. They are also charged with conspiring to restrict the supply of beer in violation of section 3(3)(b) of the Act in the states of Maharashtra, Odisha, and West Bengal as well as in the State of Maharashtra and with coordinating the sale of beer to upscale institutions in the city of Bengaluru. In this case, DG has done extensive research on the pricing, taxation, and roles of the various state governments in relation to the sale of beer and has gathered very fine evidence pertaining to the cartel.
In accordance with the DG's conclusions, the Commission carried out a state-by-state independent assessment of the anti-competitive behaviour of the opposing parties. The Commission found that the DG had established cartelization among the OPs in 10 of those 36 states and UTs in India. In the end, each state's findings were presented independently to the Commission, as follows:
- Andhra Pradesh: According to the CCI, in 2009 and 2013, UBL and SAB personnel shared commercially sensitive information regarding MRP and the basic rates to be charged to the Andhra Pradesh State Corporation (or "APSC") via emails, SMS messages, and WhatsApp. The rivalry among rivals for the contracts launched by the APSC was hampered as a result of the simple interchange of commercially sensitive price information, according to CCI.
- Daman and Diu: The UBL and SAB representatives exchanged commercially sensitive information on the determination of beer wholesale pricing in the Daman and Diu markets. These transactions, nevertheless, took place in 2008 . Because of this, Daman and Diu were found to be in compliance with Section 3 of the Act.
- Delhi: By utilizing the platform provided by AIBE, CCI discovered that the representatives of CIPL, SAB, and UBL had planned the price increase for beers supplied in Delhi in 2013. The internal e-mails of CIPL were another source of support for CCI since they showed that the company's executives were aware of the anti-competitive nature of their conversations. The execution of an anti-competitive agreement had already been created, according to CCI, which is why the government had received the updated price quotations.
- Karnataka: The officials of UBL, SAB, and CIPL had communicated by email to coordinate the price modifications that each of them had sent to the Karnataka government. CIPL, SAB, and UBL all cited similar rates of price increases, despite the fact that the price changes were made on separate days by the Karnataka government. According to CCI, the conversation that they had prior to the submission deadline was the main reason why each of these organizations quoted price increases that were so close together. CCI indicated that the alleged behaviour was violated from 2011 to 2018 (with CIPL joining in from 2012).
- Maharashtra: The CCI found that the executives of UBL, SAB, and CIPL had via email coordinated the price modifications that each of them made to their selling prices that were reported to the Maharashtra Government. According to CCI, each of these businesses would talk about the specifics of the pricing cards they had filed to the Maharashtra government, which included facts on the base price, bottle price, distributor profit, and the indicated cost of manufacturing.
The Commission observed that OPs 2 and 3, United Breweries (OP-1), and Carlsberg India Private Limited (OP-4) looked to be engaging in collusion and found that AIBA was also found guilty and in violation of the law for providing a common platform for the sharing of commercially sensitive information, facilitating and actively assisting in the formation of such cartels between United Brewers Limited (UBL), SABMiller India, and Carlsberg. The CCI agreed with the DG's conclusions and decided that the beer manufacturers were guilty of cartelization because (i) they set beer prices, (ii) they restricted beer supplies and (iii) they divided or distributed the beer market. The Commission levied a substantial penalty of INR 751.83 crore on UBL, and INR 120.56 crore on Carlsberg, and INR 0.6 crore on AIBA for violating sections 3(3)(a), 3(3)(b), and 3(3)(c) of the Competition Act, 2002, read with Section 3(1).
In situations of catelisation, the Commission is entitled to impose a penalty of up to three times the profit of each year of the cartel's continuation, or 10% of its turnover for each year of the cartel's continuation, whichever is greater, under a proviso to Section 27(b) of the Competition Act. The Commission has tried to discourage cartels by imposing increasingly hefty penalties on cartel participation. Although India's competition law system is still in its development phase, it has shown exceptional tenacity in identifying and prosecuting cartel instances and has done a good job of thoroughly analysing the DG report in specific situations and identifying cartel formations.
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