In December 2020, Reuters reported that top executives of Carlsberg, SAB Miller (owned by AB InBev) and India’s United Breweries (partly owned by Heineken) exchanged commercially sensitive information and colluded to fix beer prices for over 11 years, according to a government antitrust investigation report.
The Competition Commission of India (CCI) 2018 raided the offices of the three breweries and started an inquiry against the brewers which account for 88% of India’s USD 7 billion beer market.
Danish beer giant together with other two company executives’ conversations, WhatsApp messages and emails contained in the report show the companies regularly and collectively strategized in seeking price increases in “several states”, forging a cartel the CCI said gave them more bargaining power with state authorities.
The report further found companies also used the All-India Brewers Association (AIBA) as a “common platform” to decide collectively on prices, and the local group then lobbied on the companies’ behalf for price increases. At least three times, executives exchanged messages urging one another to keep their plans quiet.
AIBA’s director general wrote in an email in 2016 to three executives of three companies including Carlsberg: “We should avoid getting caught”
The brewers coordinated to “manipulate the government machinery” and were well aware that their collective approach through the association (AIBA) was violating” competition law, said in the 248 pages of the CCI report. Henceforth the report concluded that the cartel existed between 2007 and October 2018.
While tax earnings on alcohol account for a major portion of state revenue in India, investigation revealed the beer giants had held talks at least three times between 2015 to 2018 to create artificial scarcity and pressure governments on policy changes. Thus, India’s antitrust law considers such agreements to be anti-competitive and adversely affect the market economy.
As an example, Carlsberg admitted that after a pricing policy change in eastern Odisha state in 2015, all companies “declined to limit the supply of beer”. However, the order came in September 2021, Aditya Kalra and Abhirup Roy reported in Reuters that India’s antitrust watchdog, CCI imposed a penalty of USD 16 million on top executives of Carlsberg together with SABMiller (now owned by ABInBev) and India’s United Breweries(UB) exchanged commercially sensitive information and colluded to fix beer prices in India for over 11 years.
It is not the first nor the last time Carlsberg India has violated the legal system and has been found guilty of alleged unlawful practices. Danish brewer Carlsberg A/S, according to IWSR Drinks market analysis has a 17% share of India’s USD 7 billion beer market.
An India affiliate of the Price Waterhouse Coopers (PwC) network resigned in 2021 as Carlsberg India’s financial auditor after declining for two years in a row to give an opinion on brewer’s financials, amid boardroom tussles and internal probes into local practices reported in November 2020. Since at least 2019, Carlsberg had been probing allegations levelled by some past and current employees around the promotion of alcohol in prohibited areas, kickbacks, and bribery according to regulatory filing and the document prepared by the local PwC affiliate Price Water house Charted Accountants LLP.
The investigation report concluded by PwC says: “ there were internal control weaknesses…potential improper payments made to government officials / other persons and the possibility of misappropriation of company’s funds over past years by certain customers…however the amount of misappropriation and other amounts relating to inappropriate practices could not be ascertained”
Sources:
https://www.reuters.com/article/carlsberg-india-idUSKBN29G0Y5
https://finance.yahoo.com/news/exclusive-avoid-getting-caught-report-051509221.html
