CCI imposes a penalty on AB InBev for price-Fixing
According to the e-paper “Mint”, the Competition Commission of India (CCI) has found three beer companies to be engaging in beer price cartelization in the country and imposed huge penalties. Under the provisions of Sections 46 of the Competition Act 2002. The discovered beer price cartel was active from 2009 till 2018 among the beer giants through the platform of Big Alcohol’s front group All India Brewers’ Association (AIBA).
As Movendi International reported last year, an investigation by India’s antitrust watchdog, the Competition Commission of India (CCI), revealed a price cartel among Carlsberg, AB InBev acquired SABMiller, and Heineken-controlled United Breweries (UB). The three beer giants have exchanged commercially sensitive information and colluded to fix beer prices in India over an 11 years period. Further, they used the price cartel to pressure governments and undermine alcohol policies in states.
CCI initiated the investigation after AB InBev played whistleblower in 2019 saying that they detected a price cartel leading to the raiding of offices of the three alcohol industry giants for evidence.
After a long deliberation the CCI has decided to fine Heineken-controlled beer giant United Breweries Rs. 7.5 billion ($102 million) and the local unit of Denmark’s Carlsberg Rs. 1.2 billion ($16 million) for antitrust practices.
AB InBev received a 100% exemption on grounds of reporting the price cartel to authorities first and aiding in the investigation. The above final fines for United Breweries and Carlsberg were after 40% and 20% exemptions respectively for aiding the investigation.
Eleven individuals who were directly involved in the price cartel were also fined. Among them were a $23,684 fine on Carlsberg India Managing Director Nilesh Patel and a $6,497 fine on United Breweries chief of sales Kiran Kumar. The All India Brewers Association (AIBA), which the three brewers used as a platform for their cartel, was also fined.
Both United Breweries and Carlsberg have said they are “reviewing the order” by CCI before considering next steps.
Combined, the three brewers, AB InBev controlled SABMiller, Heineken’s United Breweries and Carlsberg account for 88% of India’s $7 billion beer market.
The CCI found the price cartelization among the three beer giants in Andhra Pradesh, Karnataka, Maharashtra, Odisha, Rajasthan, West Bengal, Delhi and Puducherry. The beer producers were also restricting the supply of beer in Maharashtra, Odisha and West Bengal, and sharing the market in Maharashtra. The companies were also coordinating concerning the supply of beer to premium institutions in the city of Bengaluru.
During the investigation, the CCI also found coordination amongst UBL and AB InBev concerning purchasing second-hand bottles.
What did the beer price cartel in India do?
In India, states regulate beer prices and taxes, which must be approved by state authorities each year. The three brewers colluded to fix beer prices to have more bargaining power with state authorities. The three companies also used AIBA as a platform to coordinate prices and bargain with excise authorities.
- Key managerial personnel emailed competitors about the price hikes they were planning to propose to state authorities in various states and sought to coordinate price hikes.
- Representatives of the beer giants discussed among themselves about prices and the way forward with state excise departments and met with excise authorities under the umbrella of the AIBA so that they would have a better chance of getting proposed price increases approved.
- The three beer companies coordinated cuts in the supply of beer in the states of Odisha, Maharashtra and West Bengal, thus creating artificial scarcity to oppose alcohol policies by state governments, such as excise tax increases.
- United Breweries and AB InBev had agreements on the price at which they would procure used bottles from bottle collectors for reuse at their breweries.
In the 231 page order, the CCI, “directs the parties to cease and desist in future from indulging in such activities”.
The futility of WHO dialogue with Big Alcohol
Meanwhile, as Movendi International previously reported, the World Health Organization Secretariat periodically convenes dialogues with representatives of Big Alcohol, including Carlsberg and AB InBev (participants list).
On paper these dialogues with Big Alcohol corporations aim to discuss “how they best can contribute to the reduction of alcohol-related harm in their role as developers, producers, marketers and sellers of alcoholic beverages” with a focus on several technical areas including “practices of retail sales and serving”.
The alcohol industry’s conduct in India demonstrates the futility of such “dialogue” with the alcohol industry. The revelations of price fixing schemes over more than a decade illustrates that Big Alcohol does not engage in the dialogue about “practices of retail sales and serving” in good faith. To the contrary, the alcohol industry arranges prices illegally in order to boost profits as well as to undermine and derail alcohol policy systems.
Not the first time for Big Alcohol unethical business practices in India
Big Alcohol has previously been caught in unethical business practices in India ranging from AB InBev’s tax avoidance to Carlsberg’s bribery practices.
Alcohol Giant AB InBev Fined For Bribery in India
Already in 2016 Movendi International reported, the world’s largest brewer AB InBev was fined $6 million for paying bribes to Indian officials.
AB InBev has been fined $6 million after being caught bribing Indian officials to boost sales of its beer – and then trying to silence a whistleblower by threatening them with a $200,000 fine.
The Securities and Exchange Commission (SEC) of the United States said that AB InBev would pay $6 million to settle charges that an Indian unit of the beer giant made unethical payments to Indian government officials and then threatened a whistleblower who reported the misconduct.
Sources
Reuters: “India antitrust body fines United Breweries, Carlsberg in price fixing case“
Reuters: “Exclusive: India probe finds AB InBev, Carlsberg, United Breweries colluded on prices – sources“
The Indian Express: “Why has CCI penalised beer companies UB, Carlsberg and spared AB InBev?“
Yahoo Finance: “India antitrust body fines United Breweries, Carlsberg in price fixing case“
Law360: “India’s Antitrust Unit Pours Out $118M In Beer Cartel Fines“
