beer prices: Price-fixing case: CCI imposes penalty on beer companies
In an order passed by the antitrust watchdog on Friday, United Breweries was fined Rs 751.83 crore while Carlsberg was imposed a penalty of Rs120.56 crore. In addition, about 11 top management executives including former managing directors of both companies and beer association AIBA were directed to pay an amount ranging between Rs1.7 lakh to Rs17 lakh within the next two months. Anheuser-Busch InBev, which alerted the
to the cartel in the beer industry after it acquired SABMiller six years ago, was not fined. Execs of these three beer companies, that together control over 90% of the market, exchanged sensitive information and colluded to fix beer prices since 2005, CCI concluded.
“We are examining the order and will decide on further course of action, ” said a spokesperson for Heineken owned UB. Carlsberg didn’t respond to an email query.
CCI noted that these companies joined hands to discuss their pricing strategies and exchanged cost cards to co-ordinate their prices and in turn, avoid price-wars. They also shared their periodical stock and sales data with each other to check that each adhered to the understanding reached among them, besides monitoring their market share in different states, as well as nationally.
“The decision of CCI seems to be supported by detailed facts. Although it is likely that this order will be challenged, it will be difficult to controvert the factual aspects of the order,” said Ashish K Singh, managing partner of law firm Capstone Legal.
The Indian spirits and beer industry is heavily regulated with state-specific rules, ever increasing taxes, price control, distribution model changes as well as political interference. Excise and other taxes on liquor form an important source of revenue for state governments. In fact, in states that collectively account for two third of the industry’s revenue, the government controls manufacturing, distribution, retailing and pricing of liquor. This makes it difficult for most companies to register higher profits.
CCI alleged that companies held discussions among themselves about their prospective quotes and the way forward with state excise departments, and the representatives of these member companies used to meet excise authorities under the umbrella of AIBA so that there would collectively be better chances of getting price increases.
These brewers also collectively decided upon the strategy to oppose government policies. “In a few cases, for instance in Odisha, Maharashtra and West Bengal, whenever state governments hiked the excise duty or reduced prices of beer, these firms collectively decided to stop production and supplies in the state,” the CCI order added.
Heineken owned UB, in its latest annual report, said after the enquiry initiated by CCI in 2018 in relation to allegations of price-fixation and cartelisation, the office of the Director General, CCI had completed its investigation in November 2019 and had filed its investigation report. UB filed its response and argued during the oral hearings countering the DG report and subsequently written submissions were filed with the CCI. “The management, along-with its legal advisors, believe that there are likely mitigating circumstances to counter presumptions made against the company by the CCI as contained in the Competition Act, 2002,” said the report released before the final orders was passed.