For the Love of Food: The Role of Competition Law in the Indian Food Sector

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– Dr. Amber Darr*

1.          Introduction

Hundreds of millions of Indians continue to have poor nutritional health despite the country being self-sufficient in a number of food crops. I argue that the shortcomings of the Indian food sector stem from limited ‘accessibility’ to food. I further argue that the Competition Commission of India (‘CCI’), established in pursuance of the Indian Competition Act 2002 (‘the Act’), has a positive role to play in increasing accessibility to food in India and thereby enhancing nutritional health throughout the country.[1] I conclude that the role of CCI in this regard is of even greater significance in the wake of the Covid-19 pandemic.

2.          Understanding ‘accessibility’

Accessibility to food is part of an individual’s right to food, first articulated in the Universal Declaration of Human Rights 1948, as a dimension of the “right to a standard of living adequate for the health and wellbeing”. The right was expanded in the International Covenant on Economic, Social and Cultural Rights 1976 (‘ICESCR’), as the independent “fundamental right of everyone to be free from hunger”As a signatory to the UN Declaration and the ICESCR India has affirmed her commitment to take all measures necessary to realise the right to food, individually and in co-operation with the international community.

In April 1999, the UN Committee on Economic, Social and Cultural Rights adopted General Comment No. 12 (the ‘Comment’) to provide a plan of action for implementing the right to food. According to paragraph 8 of the Comment, the right to food is essentially about the availability and accessibility of food. Availability means availability in a quantity and quality sufficient to satisfy the dietary needs of individuals (para 9) in accordance with their culture (para 11) and accessibility means accessibility in ways that are sustainable and do not interfere with the enjoyment of other human rights (para 8).

‘Accessibility’ so defined, includes economic as well as physical access to food. ‘Economic accessibility’ implies that the personal or household financial costs associated with the acquisition of food for an adequate diet neither threaten nor compromise the attainment and satisfaction of the person or household’s other basic needs, whilst ‘physical accessibility’ implies that all persons, regardless of age, health or ability have access to adequate food (para 13). Accessibility, like availability, is linked to the nutritional appropriateness of the food (para 7), and access to food means access to food that this nutritionally and culturally appropriate for individuals.

The right to food, like any other human right, imposes three types of obligations on states: the obligations to respect, to protect and to fulfil. The obligation to respect requires states not to take any measures that result in preventing existing  access to food. The obligation to protect requires measures by the state to ensure that enterprises or individuals do not deprive individuals of their access to adequate food, whilst the obligation to fulfil or facilitate means the state must proactively engage in activities intended to strengthen people’s access to and utilization of resources and means to ensure their livelihood (para 15).

3.          The role of CCI in enhancing accessibility

CCI has a role to play in supporting  the state in both the proection  and fulfilment of the right to food. In terms of the Preamble of the Act, CCI’s twofold mandate is to promote and sustain competition in markets and to protect the interests of consumers. However, unlike traditional consumer protection authorities, CCI’s remit with regard to consumers is limited to checking higher prices, limited choice, or restricted availability of particular goods or services for consumers which stem from practices that adversely affect competition in Indian markets. These practices include horizontal or vertical agreements between persons and firms that ‘cause an appreciable adverse effect on competition within India’ (Section 3 of the Act) and ‘abuse of a dominant position’ by a firm by imposing unfair or discriminatory conditions on consumers (Section 4 of the Act).

a)         Landmark cases

Three landmark cases in which CCI has intervened in the food sector are Suo Motu Case no. 1 of 2010—In Re Sugar Mills (decided 30.11.2011), Suo Motu Case 1 of 2011 – In Re Rise in Onion Prices(decided 10.04.2012), and Suo Motu case No. 2 of 2011—Re Aluminum Phosphide Tablets Manufacturers (decided 23.04.2012). In each of these cases, CCI took notice of allegedly anti-competitive market practices of its own volition rather than in response to a complaint filed before it. However, CCI’s decisions in these cases are varied:

  1. The issue in the Sugar Mills case was alleged cartelisation amongst Sugar Mills and resultant increase in the ex-factory price of sugar by 4-6%. In its order, CCI noted that sugar was a regulated industry and, therefore, was not free to work in a competitive manner. CCI, therefore, recommended that the government frame a policy that allows market and competitive forces to play a bigger role in the sector.
  2. In the Onions case, CCI investigated an unusual rise in the price of onions during December 2010. However, on the basis of the investigation report, CCI concluded that although some collusion amongst onion traders could not be fully ruled out, the unusual price hike was the result of unseasonal and erratic rain which had adversely impacted the onion crop and resulted in reduced supply of onions in the market.
  • In the Aluminum Phosphide Tablets Case, CCI took notice of an allegedly anti-competitive agreement amongst manufacturers of Aluminum Phosphide tablets on a complaint from the Food Corporation of India which used these tablets for the preservation of food grains. After investigations and hearings, CCI concluded that the manufacturers had engaged in collusive bidding and penalised them. The manufacturers appealed to the Competition Appellate Tribunal, where their penalty was substantially reduced. The reduction was also confirmed by the Supreme Court.

b)         Enhancing nutritional variety: lessons of Monsanto

Enhancing nutritional adequacy is an important aspect of enhancing accessibility to food. CCI’s potential role in contributing to nutritional variety and adequacy may be seen from its 2016 preliminary order in the Monsanto cases. In its order under section 26(1) of the Act, issued on 10 February 2016, CCI found that Monsanto’s Indian subsidiary, Mahyco Monsanto Biotech India Limited (‘MMBL’), had abused its dominant position in the market for the “provision of Bt cotton technology in India”, by entering into “stringent and unfair” sub-licensing agreements with Indian seed manufacturers that also had the effect of “curbing innovation”.

Although the Monsanto cases do not directly relate to the food sector, CCI’s preliminary order suggests that CCI may potentially be able to balance the IP rights of large multinationals in genetically modified seeds with the need of local farmers to grow a range of indigenous crop varieties. This raises the possibility of CCI engaging in a similar balancing exercise in the case of genetically modified seeds in the food sector and, thereby, increase the nutritional variety of food in the country. However, the Monsanto cases are still pending and it remains to be seen what CCI finally decides in this regard.[2]

c)          Increasing earning capacity of low-income farmers: regulating buyer power

Nearly 86.2% of India’s farmers are small holders and own or cultivate less than 2 hectares of land.[3] These farmers live on the bottom-most rung of food supply chain and are dependent for their livelihood on wholesalers, multinational food processing or retail companies that purchase produce from them. Although CCI has the power to take cognizance of vertical anti-competitive agreements or to check abuse of dominance that stems from vertical integration, this power is exercised in relation to actions or practices of sellers that translate into higher prices or restricting output or choice for the end consumer.

CCI’s present focus does not help the seller/farmer who is at the receiving end of market conditions determined by buyers with superior bargaining power, who exercise this bargaining power not only to odrive down the price at which the farmer may sell his produce but also to dictate the type and quantity of produce he may cultivate. This has the dual effect of depressing the income of the farmer as well as his ability to optimally utilise his resources. However, whether CCI can integrate the regulation of buyer power in its operations depends not only on the extraterritorial reach of its powers[4] but also on its conception and interpretation of goals of competition.

4.          Broadening the competition horizon: can efficiency have a heart?

Competition law has increasingly espoused an exclusively technocratic quest for economic efficiency which measures welfare entirely in terms of price. More recently, however, there is a call for a more expansive role of competition law which takes into account considerations of human rights, fairness and equality.[5] For instance, in respect of the right to health, it has been argued that competition law can contribute towards its realisation in relation to practices associated with abusive licensing,[6] and vaccines.[7]

The role of competition law in the progressive realisation of the right to health creates potential for a similar realisation of the right to food, particularly with regard to the protection of plant varieties, patents and other IP rights essential to modern agriculture.[8] However, whilst CCI’s preliminary order in the Monsanto cases, gives hope that it may think beyond the straightjacket of neo-classical economics, the extent to which CCI takes into account not only the holistic wellbeing of seed manufacturers, but also that of farmers further downstream, remains to be seen.

5.          CCI in times of COVID-19:  to regulate or not to regulate?

Covid-19 has raised concerns throughout the world and in India, of higher prices and reduced supply of even essential food items. Almost immediately, this led to a worldwide call for relaxation of competition regulation. CCI was amongst the several regulators that issued an advisory in response to this call in which it clarified that whilst it may be necessary for firms to coordinate certain activities in the crisis, it did not allow them to indulge in anti-competitive activities. Indeed, it is even more important in present times to ensure that the pandemic does not become an excuse for cartelisation, market abuse or consolidation of market power through mergers, to the detriment of the economy and the consumer. In fact, this may just be the time for CCI to lead the way in adopting a more expansive and inclusive vision of competition law.

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