India: United Breweries filing an appeal against CCI penalty

United Breweries, India's biggest beer maker, said it is in the process of filing an appeal before the National Company Law Appellate Tribunal (NCLAT) against a Rs 752 crore penalty imposed by the Competition Commission of India (CCI) for cartelisation, The Economic Times reported on November 6.

“The company is in the process of preparing the grounds of appeal and the appeal will be filed within the time frame of two months from the date of the order. Basis legal advice, the company believes that it has a strong case on merits for successful appeal on this matter,” UBL said in an investor presentation.

In September, India’s competition watchdog found top beer companies UBL, Carlsberg India and Anheuser Busch InBev India to have indulged in price fixing for over a decade, and fined UBL and Carlsberg over Rs 870 crore to be paid within two months. Executives of the three beer companies, which together control over 90% of the market, exchanged sensitive information and colluded to fix beer prices, CCI said in its order.

UB said it has time until November end to file the appeal.

“Based on the advice of the external legal experts, the company is of the view that the Director General and CCI have not considered all aspects of its submissions particularly considering the nature of the regulations governing the manufacturing, distribution and sale of beer in India,” UB said in its earnings statement.

The Indian spirits and beer industry is heavily regulated with state-specific rules, ever-increasing taxes, price controls, distribution model changes as well as political interference, experts said. Excise and other taxes on liquor form an important source of revenue for state governments. In the states that collectively account for two-thirds of the industry’s revenue, the governments control manufacturing, distribution, retailing and pricing of liquor.

"In an appeal, NCLAT has the power to either set aside the order passed by CCI or remand the matter back for further examination. However, in the last few years, there are only a handful of cases in which NCLAT has interfered with the decision of CCI," said Ashish K Singh, managing partner of law firm Capstone Legal.

The antitrust watchdog in its order alleged that the brewers joined hands to discuss pricing strategies and exchanged cost cards to coordinate prices and, in turn, avoid price wars. They also shared periodic stock and sales data to check that each adhered to the understanding reached among them, besides monitoring market share in different states as well as nationally, it said.

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 alleged.

07 November, 2021