NCLAT upholds Rs 873-crore penalty on United Breweries, other beer makers

The Competition Commission of India (CCI) on September 24, 2021, imposed penalties totalling over Rs 873 crore on UBL, Carlsberg India, All India Brewers' Association (AIBA) and 11 individuals for cartelisation in the sale and supply of beer.

The National Company Law Appellate Tribunal (NCLAT) has upheld the Rs 873-crore penalty imposed by fair trade regulator CCI on United Breweries and other beer makers.

A two-member bench said after examining the materials and considering the arguments, it was of opinion that the "appellants had already admitted in the leniency application regarding their involvement in the cartelisation".

"Lesser penalty application is like an admission of guilt in a cartel. Once they have admitted their involvement in an application filed under Section 46 read with Regulation 5, they were only entitled to question the imposition of penalty," said the two-member bench comprising Justices Rakesh Kumar and Ashok Kumar Mishra.

The Competition Commission of India (CCI) had on September 24, 2021, imposed penalties totalling over Rs 873 crore on UBL, Carlsberg India, All India Brewers' Association (AIBA) and 11 individuals for cartelisation in the sale and supply of beer.

The said order was challenged before the NCLAT, which is an appellate authority over the CCI against any direction issued or decision made or order passed by the regulator.

The NCLAT also dismissed the submissions made by the beer makers that a CCI order is liable to be set aside in the absence of a judicial member, which is required to be noticed only for its rejection.

Rejecting it, the NCLAT observed that "nowhere it has been indicated that CCI must consist a judicial member and the Act (Competition Act) does not reflect to add a judicial member for deciding the proceeding". CCI had rejected their pleas for leniency application and Gopal Subramaniam, senior counsel appearing for the beer maker, had argued that the order forming a prima facie case and directing enquiry on the basis of leniency application was not valid.

"However, we are of the opinion that there is no substance in such argument, particularly in view of the fact that in the present case while respondent/Carlsberg India Pvt Ltd had filed a leniency application he had claimed confidentiality," said NCLAT in its 81-page order.

Over the quantum of penalty, the NCLAT said it is evident that though the CCI was having discretion to impose a penalty up to 10 percent average turnover for the last three financial years, in the present case, besides granting benefit on leniency application, the CCI has taken a lenient view. It determined the quantum of penalty at 0.5 times profit for each year of the continuance of cartel or 2 percent of the turnover for each year of the continuance of cartel whichever was higher.

The CCI had passed the final order against United Breweries Ltd (UBL), SABMiller India Ltd, now renamed as Anheuser Busch InBev India Ltd (AB InBev), and Carlsberg India Private Ltd (CIPL), among other entities.

The period of cartelisation was considered to be from 2009 to at least October 10, 2018, with Carlsberg India joining in from 2012 and AIBA serving as a platform for facilitating such cartelisation since 2013. All three beer companies were lesser penalty applicants before the regulator.

In the afternoon trade, shares of United Breweries were trading flatline at Rs 1702 on the National Stock Exchange.

(With inputs from agencies)