Finding prima-facie violation of competition law, fair trade regulator CCI has ordered a detailed probe into alleged abuse of dominance by an Indian arm of the US-based genetically modified seed giant Monsanto.
The majority order, passed by six out of seven members including Chairman of the Competition Commission, follows two separate complaints filed against Mahyco Monsanto Biotech India Limited (MMBL) -- one by the Agriculture Ministry and another by three domestic seed companies -- alleging abuse of dominance in the country's Bt cotton seeds market.
The ministry had referred to the Competition Commission of India complaints filed against MMBL, including about "abuse of dominant position by charging unreasonably high trait fees (royalty) for Bt cotton seeds".
The company was also accused of exploiting the government permissions to market Bt cotton technology by creating a monopoly through restrictive agreements for unjust enrichment by charging high trait value from its licensees and ultimately from farmers.
Besides, it was accused of entering into anti-competitive sub-licensing agreements with the Indian seed manufacturers.
The ministry informed the regulator that it had received many representations and complaints including from the BJP Kisan Morcha (Andhra Pradesh and Telangana) and industry body National Seed Association of India (NSAI), against MMBL.
The second set of complaints was filed with CCI by Nuziveedu Seeds, Prabhat Agri Biotech Ltd Pravardhan Seeds Pvt Ltd against MMBL, as also its US-based co-parent Monsanto Inc, Maharashtra Hybrid Seeds Company (Mahyco), and Monsanto Holdings.
MMBL is a 50-50 joint venture between Monsanto and Mahyco.
After looking into the complaints, CCI in its majority order said that it "holds that the conduct of MMBL prima facie appears to be in violation of Section 4 of the Act". This section deals with abuse of dominance including by way of unfair and predatory pricing.
The Commission further said it "is of the view that there exists a prima facie case of contravention of the provisions of Section 3(4) and Section 4 of the Act by the OP Group (Monsanto) and it is a fit case for investigation by the Director General".
The section 3(4) deals with anti-competitive agreements.
Accordingly, CCI directed the DG, its investigation arm, to conduct a probe into the matter and complete the same within 60 days.
In case the DG finds that the companies have acted in contravention of the Competition Act, the DG has also been asked to investigate the role of the officials or persons who at the time of such contravention were in-charge of and responsible for the conduct of their business.
Earlier in December, the government had passed an order to control pricing of cotton seeds including the Bt Cotton -- the genetically modified version. It was also decided to fix and regulate the license fees including the royalty or trait value.
One CCI Member MS Sahoo, however, gave a dissent note,
stating that there was no need of any investigation as the BT cotton technology BG1 as such was not in use and the licensing agreement was also not in force.
Further, he said that the contracts in respect to this technology were entered prior to the Competition Act and the disputes were settled under 'Settlement and Release of Claims Agreement' in 2007.
Meanwhile, for the case, the Commission has considered 'provision for Bt cotton technology in India' as the relevant market.
CCI observed that the relevant geographic market for the downstream product market appears to be India as conditions of competition faced by the domestic seed manufacturing companies are distinctly homogeneous throughout the country.
"Out of 1,128 Bt cotton hybrids approved by the GEAC (Genetic Engineering Appraisal Committee) till May 2012, 986 hybrids were incorporated with Bt technology sub-licensed by MMBL.
"Therefore, it appears that MMBL is having significant presence amongst the technology providers in terms of its market share in the upstream relevant market of provision of Bt cotton technology in India," the regulator said.
Monsanto Inc (MIU) was the first company in the world to develop and commercialise Bt cotton technology and the same was licensed to MMBL for further sublicensing to seed manufacturers in India.
As per CCI, many Indian seed companies entered into sub-license agreement with MMBL for procuring its Bt cotton technology in consideration of an upfront one time non- refundable fee of Rs 50 lakh and recurring fee called 'trait value'.
"By terminating the sub-license agreements with the informants on account of disputes related to trait value, while the matter is sub-judice and invoking stringent termination conditions which would lead to ouster of the informants from the downstream market, MMBL appears to be using its dominance in the upstream market to protect its presence in the downstream market through its group entities...," the regulator said.
