India's price-fixing probe of global seed firms sparked by carrot farmers

Vilmorin & Cie SA

02/11/2021 10:51

* Several top seed companies were raided in India in Sept
    * Carrot farmer complaints behind the raids - documents
    * Raids saw seizure of company data, execs were
questioned-sources
    * Farmers alleged unfair margins, different pricing across
India

    By Aditya Kalra, Mayank Bhardwaj and Abhirup Roy
    NEW DELHI, Nov 2 (Reuters) - An Indian antitrust
investigation into suspected price collusion by some prominent
global agricultural firms was triggered by farmers who
complained about excessive pricing of imported carrot seeds,
documents seen by Reuters showed.    
    A group representing about 1,500 farmers in the mountainous
Nilgiri district of Tamil Nadu, a top carrot-growing state in
southern India, petitioned the watchdog in 2019 alleging that an
"unfair profit margin" was being charged on the carrot seeds,
the regulatory documents showed.
    This is the first time the complaint is coming into public
view. It has touched off an investigation that has the potential
to affect pricing practices in an Indian vegetable seed market
expected to be worth $1.2 billion in five years. 
    In some instances, the agricultural firms' seeds were
allegedly being sold at four times the imported price, according
to the documents. The farmers were also denied sale of such
seeds in the northern parts of India where they were available
at prices up to 50% cheaper, they alleged, according to the
documents.
    As part of the investigation, the Competition Commission of
India (CCI) conducted a multi-city search and seizure operation
https://reut.rs/2Y2e2ZY on Sept. 8 at the local units of
Germany's BASF  BASFn.DE , France's Vilmorin & Cie  VILM.PA  and
other firms. The watchdog as a policy does not disclose any
ongoing cartel investigations.
    "There appears to be an understanding/arrangement between
the seed importing companies to control the supply of imported
variety of carrot seeds and determine their prices," the CCI
said in May last year in a confidential order, in which it asked
its investigation unit to look into the matter.
    There "appears to be a restriction on dealers not to sell to
farmers other than those belonging to a particular region," and
the CCI believed "seed companies/distributors/dealers are
apparently using their market power" to control demand and
supply in the Nilgiris, added the eight-page order. 
    The subsequent September 2021 raids were conducted at the
local units of BASF, Vilmorin's HM Clause, a former distributor
entity of Dutch-based Bejo Zaden and some other Indian entities,
two people familiar with the operation said. 
    The investigation could take several months to complete and
opens up seed firms and their executives to fines if they are
found guilty of violating India's antitrust laws, the sources
added.
    The CCI did not respond to a request for comment. 
    BASF spokesperson Úlia de Domènech said in a statement
Nunhems India - its vegetable seeds unit which was raided - was
committed to complying with Indian laws and was cooperating with
all regulators, including the CCI.
    A Bejo India official, who declined to be named, said the
company sells seeds at same prices to all distributors and in
different geographical regions. 
    Franck Berger, Vilmorin's head of vegetable seeds, told
reporters in France last month five companies were raided in
India in the case, adding that HM Clause assisted the
authorities. 
    Spokespersons for Bejo and HM Clause did not respond to
requests for comment for this story.
    
            
    CCI's RAID OPERATION
    India's vegetable seed market is set to be worth $1.2
billion by 2026, growing 10% a year since 2020, according to
research firm Mordor Intelligence. The country is among the top
15 carrot producers in the world, industry estimates show.
    The farmers' 2019 complaint cited an example in which an HM
Clause's carrot seed variant was allegedly imported at 7,000
rupees ($93.63) per kilogram and sold at four times the price. A
similar margin was charged allegedly on a variant of Bejo's
seeds.
    The farmers also alleged that when they provided positive
feedback on the seeds, company dealers jacked up their prices,
which were also different across south and north India.
    Ahead of ordering the broader investigation, two CCI
officials visited the region last year and interviewed farmers
and government officials and collected some seed samples from a
laboratory, according to a separate internal CCI report. One
farmer during that visit showed the CCI a message on his phone
to claim prices of same seeds were different in north and south
India, the document stated.
    The CCI's confidential order noted that as the same type of
carrot seed can be used across India, there was "no apparent
reason" for selling them at different prices.
    During the September raids, data from laptops and
smartphones was copied by CCI officials, and some executives
were questioned about their practices, the two sources said.
    Carrot is a key crop grown in the Nilgiri mountains and R.
Rangasamy, president of the complainant farmer group, the
Nilgiri Potato & Vegetables Growers Association, told Reuters
farmers were suffering due to the high pricing and sale curbs.
    "The methodology to fix rates is not transparent ... We are
incurring heavy losses because of this randomness," he said.

 (Reporting by Aditya Kalra, Mayank Bhardwaj and Abhirup Roy;
Additional reporting by Gus Trompiz, Sybille de La Hamaide in
France and Sudarshan Varadhan in Chennai; Editing by Muralikumar
Anantharaman)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))