Abuse of Dominant Position by Tying Sale of Additional Fertilizers with Urea in Maharashtra: CCI Orders Probe into RCFL [Read Order]

The Competition Commission of India (CCI) has directed an investigation into Rashtriya Chemicals and Fertilizers Limited (RCFL) on allegations of abusing its dominant position in the Maharashtra fertilizer market by tying the sale of additional fertilizers with Urea.

The order by the CCI was based on information provided by an Informant - Raghunath Patil, who is the president of Shetkari Sanghatana, a farmers’ organization based in Maharashtra. Patil alleged that RCF had committed violations under Sections 3 and 4 of the Competition Act, 2002.

RCFL, a “Navratna” public sector undertaking with majority government ownership, holds a dominant position in Maharashtra’s Urea market - reportedly controlling over 40% of the market share for multiple years.

The primary contention raised by the Informant was that over recent years, farmers in Maharashtra had been compelled to purchase other fertilizers alongside the purchase of Urea. due to manufacturers’ pricing restrictions on Urea itself.

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Since the maximum retail price of Urea is fixed by the Government of India, the defaulting companies could not increase the selling price. Instead they were alleged to have leveraged the situation by forcing dealers and farmers to buy additional products, which are non-subsidized, thus resulting in misuse of government subsidy schemes and anti-competitive outcomes.

The Informant supported his claims by submitting a plethora of evidence, ranging from press reports and government communications to audio-video recordings of transactions and affidavits from farmers, indicating widespread practices of tying and linking additional goods by fertilizer companies including RCFL.

The complaint also submitted that the government had on multiple occasions issued directives and warnings at the state and central levels against such practices of linking goods during sale.

The Competition Commission recognized Urea as a distinct product with unique agricultural value; the commissioner noted that urea has regulated supply and pricing mechanisms, and that dealers/farmers are unlikely to purchase Urea from companies outside the State as supply and sale of Urea is highly regulated and localized.

Accordingly, the CCI accepted the proposal by the Informant that the relevant market in the instant case could be defined as “sale and supply of Urea in the State of Maharashtra”.

The bench constituted by Ravneet Kaur - Chairperson, Anil Agrawal - Member, Sweta Kakkad-Member and Deepak Anurag-Member reviewed all the submissions and evidence and observed that RCFL’s conduct prima facie amounted to imposing unfair conditions by tying the purchase of additional fertilizers with Urea, leading to appreciable adverse effects on competition.

The CCI noted that this act of tying products not only disadvantaged farmers by limiting choice but potentially foreclosed the market for other dealers specialized in non-Urea fertilizers, constituting an abuse of dominant position under Section 4(2)(a), 4(2)(d), and 4(2)(e) of the Competition Act.

Matters being so, the Commission directed the Director General to conduct a detailed investigation under Section 26(1) of the Act and report within 60 days. The commission clarified that the order represents a prima facie view and not a final adjudication of the case.

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