United Breweries may have to raise debt to pay the ₹752-crore penalty imposed on it by the Competition Commission of India (CCI), for being part of a cartel to fix beer prices in several states.

Last week, the CCI imposed a penalty on United Breweries and Carlsberg worth ₹872.39 crore for exchanging commercially sensitive information and for colluding to fix beer prices in seven States and one Union Territory.

The CCI in its order said United Breweries Ltd, SABMiller India Limited (now renamed as Anheuser Busch InBev India Ltd. after being acquired by Anheuser Busch InBev SA/NV (AB InBev) and Carlsberg India Private Ltd for indulging in cartelisation in the sale and supply of beer in various states and Union Territories in India, including through the platform of All India Brewers’ Association. No penalty has been imposed on AB InBev-SAB Miller as it is the whistleblower. A total of 11 executives belonging to these entities have been charged separately.

United Breweries had cash and cash equivalents of ₹470 crore (net cash of ₹354 crore) at the end of FY21. “As per our current forecasts, it may have the net cash to pay the penalty of ₹752 crore by end of FY22 or else it may have to raise debt,” Motilal Oswal said in its note to investors.

Legal options

UBBL has stated in its press release that it is reviewing the order in consultation with its legal advisors and will evaluate further legal options. “It is possible that the penalty will have to be paid even if UBBL and CIPL appeal to higher authorities,” the Motilal Oswal note to the investors said.

Industry insiders pointed out that when the case had come up before the CCI, provisions should have been set aside so that in case a penalty is imposed, it could have been paid off. However, there were some objections to doing so as the company felt that they could fall foul of the regulator if they had made such provisions. Therefore, as far as paying the penalty is concerned, UB has three choices: either raise debt or seek more time to pay the penalty or get the parent, Heineken to take on the burden.

The CCI in its report said there are multiple e-mails that evidence that the beer companies, as well as the industry body, were aware that their joint representations on pricing to Government Authorities and discussions with competitors on restraint of trade, pricing etc., violate the provisions of competition law.

The top managerial personnel of the beer companies had warned/advised each other from holding such discussions on the All India Brewers’ Association platform. However, the parties continued to participate in such discussions with each other and also involved the industry body, while making joint representations to State Government Authorities on pricing issues.

The period of the cartel was held to be from 2009 to at least October 10, 2018 (the date on which the Director-General conducted search and seizure operations at the premises of the beer companies), with CIPL joining in from 2012 and AIBA serving as a platform for facilitating such cartelisation since 2013. Besides, they were found collectively restricting the supply of beer to Maharashtra, Odisha, and West Bengal, ‘sharing’ the market in Maharashtra, as well as coordinating the supply of beer to premium institutions in Bengaluru. The fair trade regulator also found coordination among UBBL and AB InBev in the purchase of second-hand bottles.


The Motilal Oswal report points out that AB InBev became a whistleblower alleging collusion between SAB Miller, UBBL, and CIPL in the past. These three players have a share of 88 per cent of the beer market, with UBBL being the market leader with over 50 per cent market share.

The order grants benefit of a reduction in penalty: 100 per cent to AB InBev and its individuals, 40 per cent to UBBL and its individuals and 20 per cent to CIPL and its individuals.

However, earlier reports suggested that the penalty was expected to be ₹1,852 crore which now has been reduced to ₹874 crore. As per reports, UBBL and CIPL also filed leniency applications in 2018, which would explain the lower than expected penalty imposed.