The Delhi High Court on Tuesday listed for October 14 the final hearing on Monsanto’s appeals on a batch of CCI orders directing investigations against the multinational seed company and its affiliates for alleged anti-competitive conduct regarding supply of genetically modified (GM) cotton seeds.
A Division Bench of Delhi High Court comprising Justice Najmi Waziri and Justice Vikas Mahajan on Tuesday listed appeals by Monsanto, now acquired by Bayer AG, for final hearing on October 14.
The CCI had earlier received a reference from the Ministry of Agriculture as well as information from seed manufacturers (Nuziveedu Seeds, Prabhat Agri Biotech and Pravardhan Seeds) alleging anti-competitive practices by Mahyco Monsanto Biotech Ltd (MMBL) and its affiliates Monsanto Holdings Private Limited (MHPL) and Maharashtra Hybrid Seeds Co. Ltd. (Mahyco) in licensing of Bt Technology for cotton in India. Earlier in 2018, the CCI had approved the acquisition of US-based biotech major Monsanto by German chemical and Pharma major Bayer AG and specified some remedies while approving the deal.
Charges against the firm
The allegations against Monsanto included charging of unfair/excessive price for licensing technology in the name of trait value (value for the trait of insect resistance conferred by the Bt gene technology), imposition of unfair and discriminatory conditions in sublicense agreements, leveraging to protect position in the downstream cotton seeds market, where its affiliates operate; and limiting of scientific development in the technology market.
CCI, in its prima facie order directing the investigation, observed that State Governments had fixed the trait value lower than what was being sought by MMBL. It was also observed that the sub-license agreements with the informants (seed companies) were terminated on account of disputes related to trait value, while same were sub-judice.
The informants pointed out before CCI that as per the termination conditions, they were required to immediately destroy the seeds, parent lines and germ plasm that are modified to contain Monsanto technology.
Potential to distort
CCI, in its order, noted that the imposition of such terms would lead to the ouster of seed companies, besides benefitting MMBL’s group companies. With regards to the allegations related to discrimination in terms of sublicense conditions, CCI observed that the conduct needs to be examined as it had the potential to distort the level-playing field in the market.
The sub-license agreements inter alia required the sub- licensees to intimate MMBL, within 30 days, development of any hybrid cotton seed on the basis of trait obtained from a competitor of MMBL.
CCI apprehended that such notification requirement coupled with the stringent termination conditions had the effect of foreclosing competition in the upstream Bt cotton technology market as they served as a major deterrent for the sub-licensees to deal with the competitors of MMBL.
CCI further observed that these agreements prima facie are in the nature of refusal to deal and exclusive supply agreement and the conditions did not appear to be necessary for protecting the Intellectual Property Rights of MMBL or its affiliates.
Accordingly, CCI in 2016 found the conduct of MMBL and its affiliates prima facie to be in contravention of the provisions of competition law and directed its investigation arm (Director General/ DG) to carry out an investigation into the matter. Subsequently, CCI received a reference from State of Telangana and information from All India Kissan Sabha (a farmer association) and National Seed Association of India, which were clubbed by CCI, vide subsequent orders, with the earlier cases referred for investigation as they involved substantially same issues.
The order of CCI directing probe was challenged by Monsanto and its affiliates before Delhi High Court. A single judge in 2020 dismissed the challenge to CCI probe by relying on an earlier judgement in the Telefonaktiebolaget L.M. Ericsson case where the court concluded that the Patents Act does not exclude the operation of the Competition Act. The court also noted that an order passed by CCI directing probe is an administrative order and, therefore, unless it is found that the same is arbitrary, unreasonable and fails the Wednesbury test, no interference would be warranted.
Against the aforesaid order, Monsanto appealed before the Division Bench of Delhi High Court, which restrained CCI from returning any final finding in the matter. Today, the Division Bench listed the appeals for the final hearing on October 14.