CCI probe finds market abuse by Monsanto arm in India: report
22 May 2019
The investigation arm of anti-trust regulator Competition Commission of India (CCI) is reported to have found Mahyco Monsanto Biotech Ltd (MMBL), a joint venture of US biotech giant Monsanto and Mahyco of India, abusing its dominant position in the market by charging unfair licence fee for its Bt Cotton technology and entering into seed pricing agreements that result in overcharging farmers.
The investigation also found that the trait fees charged by MMBL were not based on real costs incurred by MMBL as it is “merely a licensing entity with very limited fixed costs,” says a report in The Economic Times.
MMBL is an equal joint venture of Maharashtra-based seed company Mahyco and Monsanto Holding Pvt Ltd, which sells genetically modified seeds to Indian companies and charges a licensing fee called ‘trait fee’, or technology fee.
The CCI ordered an investigation following complaints by Hyderabad-based seed firm Nuziveedu, the All India Kissan Sabha, the government of Telangana and the central government.
The CCI has sent notices to MMBL as well as the complainants and has sought replies from them. The commission will consider the report of the investigation arm as well as the response of various parties before taking a view on the matter.
Nuziveedu and the union agriculture ministry jointly moved the CCI in 2015 with a complaint alleging that MMBL has been abusing its dominant position in the Bt Cotton technology market.
Monsanto, meanwhile, filed a petition in the Delhi High Court challenging the role of CCI in the dispute.
“It has been shown that trait fee was linked with the maximum retail price of seed packets by MMBL just to extract surplus as much as possible from the end consumer of Bt Cotton seeds i.e. farmers,” said the report by the director general (DG) of CCI, the ET quoted from the report.
The report cites various instances of market abuse by MMBL, especially by charging higher trait fees from seed producers in Haryana, Punjab and Rajasthan compared with others as there was no price regulation in these states.
“Charging different prices in different geographic locations in the light of local conditions especially when such variation is not related to costs can distort competition and is in the nature of third degree price discrimination exercised by a monopolist. There is no evidence of welfare enhancement of consumers on account of the price discrimination,” it said. Further, MMBL also charged a higher trait fee in states such as Maharashtra and Andhra Pradesh where the government had fixed trait fees “on the pretext of pendency of litigation”.
The investigation also found that the trait fees charged by MMBL were not based on high costs incurred by MMBL as it is “merely a licensing entity with very limited fixed costs”. It noted that MMBL also does not undertake any research and development activity which could push up its costs.
MMBL abused its dominant position to prevent the entry of competition by mandating that producers using its technology and provide notice to MMBL before entering into agreements with any provider of competing technologies, the report cited the report as saying.
Also, according to the report, Monsanto sought to deliberately exclude certain seed companies which fulfilled all requirements prescribed by Monsanto from time to time.
DG CCI also found that MMBL’s requirement that sub licensees dispose of all inventory within two years of the termination of their licensing agreement was in contravention to the Competition Act. Further, the report states that this clause was not applied uniformly which “put many seed companies in a disadvantageous situation as compared to the competitors”.
The reports also said restriction imposed by MMBL that seed companies only use proprietary germplasm for production has affected the development of innovation and increased cost of seeds for farmers.