Department of
Agriculture, Cooperation & Farmers Welfare Ministry of Agriculture &
Farmers Welfare Government of India (‘MOA&FW’) - Informant
And M/s Mahyco
Monsanto Biotech (India) Limited (‘MMBL’)
- Opposite Party No.1[1]
WITH
Nuziveedu Seeds
Ltd. (‘NSL’) – Informant 1, Prabhat
Agri Biotech Ltd. (‘PABL’) –
Informant2 and Pravardhan Seeds Pvt. Ltd. (‘PSPL’) – Informant 3
AND
Mahyco Monsanto
Biotech (India) Limited (MMBL) -
Opposite Party No.1, Monsanto Inc, USA (MIU)-
Opposite Party No. 2, Maharashtra Hybrid Seeds Company (MAHYCO)- Opposite Party No. 3, Monsanto Holdings Private Limited (MHPL)- Opposite Party No. 4[2]
Monsanto, engaged in
the activities of developing and licensing of Genetically Modified (GM) trait
of Bt cotton hybrid seeds and sublicensing of Bt cotton technology in India,
had made headlines, for abusing its dominant position in the market. The
Competition Commission of India (“CCI”),
on receiving information
took up the matter. The order of CCI dealt with two cases[3],
due to commonality of issues involved.
The issue arose
when many Indian seed companies including the Informants entered into
sub-license agreement with MMBL for procuring its Bt cotton technology namely,
Bollgard-I i.e. (“BG-I”) and second generation
cotton technology namely, Bollgard –II (“BG-II”),
in consideration of an upfront one-time non–refundable fee of INR 50 lacs (INR
5 Million) and recurring fee called as, i.e. ‘Trait Value’. The ‘Trait Value’
is the estimated value for the trait of insect resistance conferred by the Bt
gene technology. The trait value is determined by MMBL on the basis of Maximum
Retail Price (MRP) per packet, in advance for each crop season.
However, the
fixation of trait value has been a matter of dispute since 2005 when the trait value
for BG-I was Rs.1250/-
per packet/-. The matter was first taken to the erstwhile Monopolies and
Restrictive Trade Practices Commission (“MRTPC”),
pending proceeding of which, MMBL reduced the trait value to Rs.900/- per
packet. Post the ‘Settlement and Release of Claims Agreement’ and consequent
‘Supplementary and Amendment Agreement’ entered into by MMBL with the Indian
seed companies, the MRP was set as Rs. 750/- per packet (Including trait price
of Rs. 148.50/-). After dissolution of the MRTPC, the matter was transferred to
the Competition Appellate Tribunal (“COMPAT”)
and thereafter, various State Governments came up with their own legislations,
and fixed the MSP of cotton seeds, specifying the MSP’s, ranging from (BG-I) at
Rs.650/- and (BG-II) at Rs.750/-, with trait values as Rs.50/- and Rs.90/ per
packet-, (BG-I) at Rs.830/- and (BG-II) at Rs.930/-, with trait values as
Rs.50/- and Rs.90/- per packet, against which MMBL filed writs, some of which
are pending adjudication till date.
The sub-licenses
granted for BG-I and BG-II expired during the pendency of the litigations
and MMBL renewed the sub–license agreements in March 2015 for BG-II only (as BG-II
replaced BG-I) fixing the trait values at Rs.163.28/- to Rs.174.90/- (plus
taxes) on the MRP of Rs.930/- to Rs.1100/- per packet in various states.
The informants
alleged that the sub-license agreements between MMBL and the seed companies are
one-sided, arbitrary and onerous as the amount recovered by MMBL from seed
companies over the years on account of royalty charges and trait value is much
more than the expenses incurred in developing the said technology, and the
trait value charged is much higher than those of the state governments and
thus, there is no justification to charge such high trait values at increased
rates. Further the group companies of MMBL are not being subjected to the
unfair conditions as imposed upon the Informants and they are not required to
pay such trait
MMBL however,
has always defended its actions contending that the issues raised were merely contractual
disputes between the parties and has no competition issue involved therein. Further,
the allegations with regard to unfairness of the sub-license agreement were misplaced
as the agreements entered into between the parties after negotiations and the
trait value charged from Indian seed companies is lowest in the world and the
increase was justified as reward for innovation.
CCI observed
that since the ultimate aim of choosing Bt cotton technology is to protect the
cotton crop from the pests (Bollworm) all the Bt technologies technologies,
irrespective of the gene constituents, are considered as substitutable. Thus,
the relevant upstream product market in the present case appears to be market
for ‘provision of Bt cotton technology.’
As the Bt cotton
technology cannot be sold directly to the farmers, the technology needs to be
added to the hybrid by seed manufacturers to produce Bt cotton seeds which have
an inbuilt resistance mechanism to deal with harmful pests like bollworm.
Therefore, the technology provider needs to partner with seed companies through
technology licensing agreements so as to integrate the technology into cotton
hybrids. CCI noted that there also exists a downstream relevant market i.e.
market for ‘manufacture and sale of Bt
cotton seeds in India’ connected
with the upstream relevant market.
CCI was of the
view that MMBL holds a dominant position in the relevant upstream market as the
Bt cotton technology sub-licensed by MMBL is used in more than 99% of the area
under Bt cotton cultivation in India, and the competitors of MMBL do not seem
to pose effective competitive constraints and there is huge consumer
dependence. Further entry of a new technology is subject to regulatory
approvals and huge investments which create significant entry barriers.
CCI observed the
allegations of imposition of unfair conditions in the sub-license agreements,
charging of unfair price, discriminatory treatment, limiting and restriction of
technical and scientific development relating to Bt cotton technology and
cotton seeds market, denial of market access and leveraging of dominant
position in the Bt cotton technology market to protect cotton seeds market, and
was of the view that the termination conditions are excessively harsh and do
not appear to be reasonable as may be necessary for protecting any of the IPR rights.
Such agreements discourage and serve as a major deterrent for the sub licensee
from exploring dealing with competitors. The agreements would have the
effect of denial of market access to the seed manufacturers, given their
dependence on MMBL for Bt cotton technology and thus, have the effect of
foreclosing competition in the upstream Bt Technology market which is characterized
by high entry barriers. In view of these aspects, the agreements entered by
MMBL with sub-licensees appear to be causing appreciable adverse effect on
competition and as such are anti-competitive agreements and as a result is abuse
of dominant position by MMBL in the Bt cotton technology market in India, in
terms of Section 3(4) r/w Section 19(3) and section 4 of the Act.
Accordingly,
under the provisions of Section 26(1) of the Act, CCI directed the Director
General of the Commission (“DG”) to investigate
the MMBL and the role of the officials/ persons who at the time of such
contravention were in-charge of and responsible for the conduct of their
business.
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