CCI Directs Investigation Against Venkateshwara Hatcheries Group, Finds Prima Facie Vertical Restraints

Today, the Competition Commission of India (CCI) found a prima facie case of vertical restraints against the Venkateshwara Hatcheries Group and its group companies and directed an investigation under Section 26(1) of the Competition Act, 2002.

A Bench comprising Chairperson Ravneet Kaur and Members Anil Agrawal, Sweta Kakkad, and Deepak Anurag directed the Director General (DG) to conduct the probe and submit a report within 90 days. The Bench held:

“In view of the foregoing, the Commission is of the opinion that there exists a prima facie case in the present matter, which requires an investigation by the DG, to determine whether the same has resulted in contravention of the provisions of Section 3(4) of the Act, as detailed in this order.”

Venkateshwara Hatcheries, part of a fully integrated poultry group in Asia, allegedly dominate the supply of parent stock of layer hens (BV 300) and broiler chickens (Vencobb).

People for Animals had filed the information seeking an inquiry into the alleged abuse of dominance and vertical restraints by the Venkateshwara Hatcheries Group in the poultry sector.

The Informant alleged that Hatcheries, through Broiler Breeder Agreements (BBA) and Layer Breeder Agreements (LBA), restricted contract breeders by prohibiting sales to “unauthorised persons” and limiting the sale of commercial broiler chicks and hatching eggs, amounting to vertical restraints under Section 3(4) of the Act.

It also claimed abuse of dominance through unfair contractual terms, supply restrictions, and denial of market access, causing appreciable adverse effects on competition, and sought investigation under Sections 3 and 4.

Venkateshwara Hatcheries argued that the Informant failed to show harm to competition, market foreclosure, consumer harm, or restrictions on technical or scientific development.

The Commission accepted the Informant's market definition: (i) production and supply of parent stock of commercially viable layer hen breeds in India, and (ii) production and supply of grandparent/parent stock of commercially viable broiler chicken breeds in India. It noted that the Opposite Parties face competition from other domestic players, international breeds, and government-developed poultry lines. It observed:

“ In view of the above, the Commission notes that prima facie in the facts of the case, the aspect of dominance of the OPs in the market may not be required to be examined further at this stage.”

The Bench found that the Opposite Parties use standardised BBA and LBA agreements to restrict contract breeders from distributing their own products:

“The Commission notes that this restriction or limitation on the market of commercial broiler chicks and hatching eggs without adequate reason amounts to an imposition of vertical restraints in the form of exclusive supply and distribution agreement as provided under Section 3(4) of the Act.”

It noted that the agreements also prevent breeders from procuring other breeds of parent stock:

“The restrictions imposed on breeder's prima facie amount to a contravention of Section 3(4) of the Act, since the breeders have been prohibited from procuring alternative breeds of parent stock from the competitors of the OPs.”

The Commission observed that the Opposite Parties exercise significant influence through the National Egg Coordination Committee (NECC) and the Broiler Breeders Association of India (BEPA), the largest associations of poultry farmers in India. It held:

“The consumers of eggs and meat may be paying higher prices for the said products because of such tight control of contract farmers by the OPs.”

Accordingly, the CCI directed the DG to investigate the Venkateshwara Hatcheries Group and submit a report within 90 days.