Senior executives at India’s Carlsberg, SABMiller and United Breweries (UB) exchanged commercially sensitive information and conspired to fix beer prices in India for 11 years, according to a government antitrust investigation report seen by Reuters.
The Competition Commission of India (ITC) in 2018 raided the offices of the three brewers and started an investigation. The investigation’s findings, which are not a final judgment of wrongdoing, cast a shadow over the brewers, which account for 88% of India’s $ 7 billion beer market.
CCI senior members will consider the report, drawn up in March, while deciding on fines, which could exceed $ 250 million, said two sources familiar with the case. ICC members could agree or dispute the findings of your investigation team.
Executives’ conversations, WhatsApp messages, and emails contained in the report show that companies regularly and collectively strategized to seek price increases in “various states,” forging a cartel that, according to the ICC, gave more bargaining power with state authorities.
The companies also used the Indian Brewers Association (AIBA) as a “common platform” to collectively decide prices; and the local group then lobbied on behalf of the companies for price increases, according to the CCI report.
At least three times, executives exchanged messages urging each other to keep their plans a secret, the report showed. “We must avoid being caught,” the AIBA CEO wrote in an email in 2016 to the executives of the three companies.
The brewers coordinated to “manipulate the machinery of government” and “were well aware that their collective approach through association (AIBA) was violating” competition law, according to the 248-page ICC report. The report concluded that the cartel existed between 2007 and October 2018.
The ICC did not respond to Reuters inquiries. Lobbyists AIBA and Carlsberg declined to comment, citing ongoing ICC proceedings. United Breweries, partially owned by Heineken, said it had cooperated with authorities and would submit reports to the ICC. Heineken did not respond to requests for comment.
The world’s largest brewer, Anheuser-Busch InBev, which acquired SABMiller in 2016, said it takes “antitrust compliance very seriously.”
INVESTIGATION, ‘CLEAR ADMISSION’
CCI raids in 2018 seized hundreds of files and more than 2 terabytes of data from laptops, pen drives, and smartphones. The case was triggered when AB InBev used CCI’s “leniency program” to reveal that it had detected a cartel while integrating SABMiller’s operations in India. Later in 2018, UB and Carlsberg also filed clemency requests, Reuters reported.
Under the program, the ICC can reduce the penalties it imposes on companies based on the cooperation they provide. In this case, 19 beer executives engaged in anti-competitive practices, says the CCI investigation report.
“The collusion … has occurred primarily through the highest level of management in these companies,” the report said, including CEOs, vice presidents and heads of sales and marketing.
When the ICC asked former Carlsberg India Managing Director Michael Jensen whether the company “was actively coordinating with its competitors on pricing issues and taking the utmost care not to leave any documentary evidence,” the report said that “its response it was a clear admission. ” . Jensen declined to comment.
Some discussions took place via WhatsApp, the report says. The report shows that in 2013, UB Sales Director Kiran Kumar and then-SABMiller CEO Shalabh Seth exchanged WhatsApp messages to plan a price increase of Rs 60 (81 cents) per case of beer in a particular state. .
According to the report, Seth wrote in a message: “Please fix the message to other friends.” The ICC said it indicated “that other competing companies were also coordinating with them.”
Seth, who now works at the SU, and Kumar said in separate statements that they had provided “full cooperation” to the authorities and would submit proposals to the ICC. They both declined to comment further.
“DEATH OF HUNGER THE MARKET”
Collaborating on price increases gives companies greater bargaining power and avoids a price war while deterring healthy competition and hurting consumers, antitrust experts said.
The Indian alcohol market has complex rules. The states regulate taxes and prices, which are approved each year by local authorities.
Tax profits on alcohol also make up a major part of state revenue in India, with the investigation saying that beer companies had held talks at least three times between 2015 and 2018 to create an artificial shortage and pressure governments to change. the politics. India’s antitrust law says that such agreements are anti-competitive.
Carlsberg told the ICC that after a price policy change in the eastern state of Odisha in 2015, all companies “decided to limit the supply of beer.”
An internal email from early 2018 from Carlsberg’s vice president of growth markets at the time, Nilesh Patel, refers to a similar strategy implemented in the state of Maharashtra.
A fall in state sales in 2017 “was primarily driven by a conscious decision” by UB and Carlsberg to “starve the market after the excise tax increase,” Patel wrote.
Patel, who is now Carlsberg’s managing director in India, declined to comment.