On September 24, 2021, CCI concluded that United Breweries Limited (‘UBL’), Crown Beers India Private Limited and its parent company SABMiller India Limited (together referred as ‘SAB’), Carlsberg India Private Limited (‘CIPL’) operated a cartel in the sale and supply of beer in various states and union territories in India. CCI also imputed liability on the All-India Brewers Association (‘AIBE’) which through its platform facilitated the cartel and the exchange of commercially sensitive information between UBL, SAB and CIPL.^[1]

CCI had directed the DG to investigate this case upon a leniency application filed by SAB on July 26, 2017 (‘SAB Application’). In its Application, SAB had disclosed the collusion that existed between SAB, UBL and CIPL to align the prices of beer and seek / implement price adjustments in several states and union territories of India. SAB further disclosed that co-ordination between the beer companies was facilitated through a series of bilateral and multilateral meetings and e-mail exchanges amongst themselves as well as through the common platform of AIBE. CCI further noted that the period of such coordination between the beer companies appeared to be from March 2005 to March 2017. On this basis, CCI had a prima facie reason to believe that several beer companies agreed to decide prices to be quoted to each state Government and accordingly directed the DG to investigate the matter.

Investigation by the DG revealing cartelization

During its investigation, the DG on October 10 and 11, 2018 conducted a search and seizure operation (‘Dawn Raid’) on the premises of UBL, CIPL and AIBE to collect evidence. Post the Dawn Raid, leniency applications were filed by UBL, CIPL and certain other officials of the beer companies.

The DG noted that under the regulatory framework in India, each state had its own unique method of regulating the sale of beer within its territory leading to differences in pricing regulations and approvals, imposition of different taxes, excise duties and licensing terms. The DG observed that there existed different models for the distribution of beer followed by states / union territories in India. However, irrespective of the type of model followed, each respective state Government had the ultimate power to decide on the prices for all alcoholic beverages (including beer) in their respective state. To that extent, each beer company is required to submit the suggested prices (including the suggested price increases over existing brands) for approval, along with all a break-up of all costs to arrive at the suggested price (such as production cost, promotional cost and the profit margins).

The DG in its report concluded that there was an exchange of pricing information between UBL, CIPL and SAB through e-mails, SMSs and meeting across various states. Apart from this, the DG also noted other instances of cooperation between the beer companies, which included (i) sharing of periodical sales and sales data with each other as a monitoring mechanism, and (ii) collectively deciding upon the strategy to oppose Government policies (including fixation of  prices),  where in certain instances, beer companies collectively decided to stop production and supplies in various states, and (iii) UBL, SAB and CIPL also cartelized amongst themselves to fix the rate at which each of them would purchase old beer bottles from the market for reuse in each of their breweries. In sum, a contravention of Section 3(3) of the Act was found across states / union territories in India. The DG also imputed liability on certain individuals of SAB, UBL, CIPL and AIBE that facilitates the cartel. The final report with DG’s conclusive findings was submitted to CCI on June 28, 2019.

CCI’s findings

CCI’s findings in its order were divided on a state-by-state basis. As a result, the arguments presented by each beer company, the evidence collected by the DG and ultimately the findings were presented separately for each state.

Andhra Pradesh

CCI noted the officials of UBL and SAB had through e-mails, SMSs and WhatsApp, exchanged commercially sensitive information regarding MRP and the basic prices to be quoted to the Andhra Pradesh State Corporation (‘APSC’) in 2009 and 2013. CCI further noted that mere exchange of commercially sensitive pricing information amongst competitors compromised the integrity of the independent bidding process and accordingly stifled competition amongst them for the tenders floated by the APSC.

Daman and Diu

CCI noted that there was exchange of commercially sensitive information between the officials of UBL and SAB regarding the calculation of wholesale prices of beer in the Daman Market. However, these exchanges happened in 2008 and (i.e., time period prior to when the provisions of Section 3 of the Act came into force). Accordingly, no contravention of Section 3 of the Act was made out in Daman and Diu.

Delhi

CCI noted that the officials of CIPL, SAB and UBL had coordinated the price hike for beers sold in Delhi in 2013 taking advantage of the platform offered by AIBE. CCI also relied on internal e-mails of CIPL from which it was clear that the officials of CIPL were aware of the anti-competitive nature of their discussions. CCI noted that the revised price quotations were submitted to the Government in furtherance of the internal discussion, implementation of an anti-competitive agreement stood established.

Karnataka

CCI noted that the officials of UBL, SAB and CIPL had through e-mails coordinated on the price revisions that each of them quoted to the Karnataka Government. While the price revisions were made on different days to the Karnataka Government, there was minimal difference in the rate of price hikes quoted by CIPL, SAB and UBL. CCI noted that quoting price hikes by each of these entities in such close range was a direct outcome of the discussion that they held prior to the submission date. CCI noted that the period of contravention for the alleged conduct started from 2011 (with CIPL joining in from 2012) and continued until 2018.

Apart from this, CCI also noted that UBL and SAB had also coordinated with each other for the discounts / other financial incentives offered to premium institutions and bulk buyers in Bengaluru.

Maharashtra

CCI noted that the officials of UBL, SAB and CIPL had through e-mails coordinated in the price revisions that each of them made to their selling prices that were submitted to the Maharashtra Government. CCI noted that each of these companies would internally discuss the details of the price cards submitted to the Maharashtra Government which contained information relating to basic price, bottle price, distributor margin and the indicative cost of production. CCI noted that the coordination between UBL, SAB and CIPL started in 2011 (with CIPL joining in from 2012) and continued until 2018. Apart from this, in 2017, UBL, SAB and CIPL had also coordinated to strategically oppose the Maharashtra Government’s policy regarding hike in excise duty by deciding to stop production and supply of beer in the state.

Odisha

CCI noted that the top managerial level officers of UBL, CIPL and SAB had exchanged information on the suggested price revision that each of them made to their selling prices that were submitted to the Odisha Government. CCI noted that coordination between UBL and SAB happened in 2009 and 2010 with (CIPL joining in the internal price coordination with UBL and SAB in 2015 and 2016). Apart from this, CCI also noted that in 2015 and 2016 UBL, SAB and CIPL had (under the umbrella of AIBE) internally agreed to stop supply of beer as a protest against certain duties levied by the Odisha Government on the sale of beer.

Puducherry

CCI noted that certain officials of UBL, SAB and CIPL had through e-mails, SMSs and through physical meetings discussed the price revisions that each of these companies would quote to the Puducherry Government for the sale of beer. CCI noted that the coordination between UBL, SAB and CIPL had happened in 2017, just prior to the submission of the prices to the state Government.

Rajasthan

CCI noted that the top managerial level officers of UBL, CIPL and SAB had through e-mails internally discussed the price revisions that each of these companies would quote to the Rajasthan Excise Department. CCI also noted that such coordination was facilitated through discussions initiated by certain officials of AIBE. CCI noted that the coordination between UBL and SAB and CIPL started in 2011 (with CIPL joining in from 2012) and continued until 2018.

West Bengal

CCI noted that certain officials of UBL and CIPL had through e-mails discussed the price revisions that each of these companies would quote and subsequently submitted their price revision quote made to the West Bengal Government based on such decided prices. CCI noted that the coordination between UBL and CIPL started in 2011 (with CIPL joining in from 2012) and continued until 2018. CCI also noted that AIBE had facilitated the exchange of information between UBL and CIPL in West Bengal. Apart from this, CCI also noted that in March 2018, UBL and CIPL had (under the umbrella of AIBE) internally agreed to stop supply of beer as a protest against an increase in excise duty levied by the West Bengal Government on the sale of beer.

To defend its overall conduct, UBL and CIPL tried to justify the various instances of an exchange of commercially sensitive information by arguing that the exchange of pricing information across various states was never followed by actual implementation of such prices either by (a) UBL and CIPL while submitting the bids to the relevant Government authority responsible for finalizing the prices of beer or even (b) by each of these relevant Government authorities for each state which ultimately decided the prices without accepting the price revisions suggested by UBL and CIPL. In other words, the anti-competitive agreement supposedly entered into by UBL, CIPL and SAB in each state was never implemented and as a result no liability was attributable to the beer companies. CCI however rejected this argument by holding that mere exchange of commercially sensitive information was sufficient to compromise the integrity of the competitive process and was likely to stifle competition in the market.

CCI also noted that certain officials of UBL and SAB had shared certain commercially sensitive information regarding the purchase of second hand bottles from the market (including the discussion on the rate at which second hand bottles were purchased). Such conduct of UBL and SAB resulted in the limiting and controlling the supply of second hand beer bottles in the market, which in CCI’s eyes amounted to a contravention of Section 3(3)(b) of the Act.

In sum, UBL, CIPL and SAB were found to have acted in contravention of Section 3(3)(a) read with Section 3(1) of the Act for exchange of pricing information across various states / union territories in India. In addition, in West Bengal, Odisha and Maharashtra, UBL, SAB and CIPL had acted in contravention of Section 3(3)(b) read with Section 3(1) of the Act for limiting supply of beer to protest against hike in duties / Government taxes levied by the state Government. The key officials that facilitated the cartel were also held liable by CCI under Section 48 of the Act.

CCI took into consideration the disclosures made and the co-operation extended by SAB (being the first leniency applicant), UBL (being the second leniency applicant) and CIPL (being the third leniency applicant). CCI offered a 100% penalty reduction to SAB, a 40% penalty reduction to UBL and 20% penalty reduction to CIPL. Accordingly, the total penalty payable by UBL was around INR 751.83 crores and the total penalty payable by CIPL was around INR 111.38 crores. Similar reduction in penalty was also given to the penalty imposed on the officials of SAB, UBL and CIPL. Lastly, a penalty of around 0.06 crores was imposed on AIBE for the role it played in facilitating the cartel.

[1] In re: Alleged ant-competitive conduct in the Beer Market in India, Suo Motu Case No. 06 of 2017, Order dated September 24,  2021.