Hot Potatoes

PepsiCo began the fight with potato farmers, but can the company end it?

May 2: PepsiCo India, a subsidiary of the $64 billion snack food and drinks major PepsiCo Inc., USA, announced a decision to withdraw all the cases it had filed against some farmers of Gujarat for unauthorised use of a potato variety developed by the company.

Four days later, the company withdrew the first case - against two of the 11 farmers it had sued - as it came up for hearing in a local court in Deesa, Gujarat. On May 10, PepsiCo obtained early hearing in its cases against four others in the Commercial Court of Ahmedabad and five in the District Court of Modasa and withdrew those legal suits too.

Given the severe criticism PepsiCo had to face from civil society groups, farmers' organisations and political parties of all hues, which in the first place compelled the company to review its legal position, the company decision was on predicable lines.

PepsiCo India says it was compelled to take the litigation route to protect its registered variety of potato called FL-2027 or FC-5 to safeguard the larger interests of hundreds of farmers associated with the company through a collaborative potato farming programme. The company had authorised these farmers to cultivate the potato seed variety it supplied to them, and to harvest and re-sow it, on the condition that the produce is sold to the company, which uses it as the key raw material for its potato chips, Lays. The company took the litigation route after it found that 11 farmers - who were not part of its collaborative farming initiative - were also cultivating and selling the FC-5 variety potatoes in the open market. The company says this is a violation of its intellectual property rights (IPRs) as it took years of research to develop this variety (see Journey of the Seed) for which it enjoys a registration under the Protection of Plant Varieties & Farmers Rights Act (PPV & FR) Act 2001.

The fact that two of the farmers (the cases against them have been withdrawn now) had direct business and investment interests in cold storages and food processing units, including a local potato chip manufacturing company, indicates that the company, in addition to the loss of market exclusivity to its registered seed, also feared loss of business to competition. The potato chips segment, where PepsiCo's Lays is the leading brand, is a significant component of the Rs 27,000 crore (annual sales) potato snacks market in India. Haldiram and ITC are other major organised players in the segment.

Ram Kaundinya, Director General of the Federation of Seed Industry of India (FSII), considers this (litigation) to be "a trendsetter, because nobody has done it so far. The practice of (dishonoring contract farming agreements) is rampant in India. So this might actually set a good legal interpretation."

"Farmers are not allowed to sell branded seed. In that context and in the context of contractual cultivation, now the courts will interpret the law, which will be interesting to see," adds Kaundinya.

The public outcry that followed the litigation, which sought a penalty of Rs 1.05 crore on some of these farmers, was something which PepsiCo could not manage, and hence the 'unconditional' withdrawal of the cases. The official explanation given by PepsiCo is that it is withdrawing from the cases on the basis of "its discussions with the Gujarat government to find a long-term and an amicable solution of issues around its seed protection".

Not the End

Meanwhile, the mystery surrounding this agreement (PepsiCo has declined to reveal the details) with the Gujarat government may trigger a second round of fighting between PepsiCo and farmers. Instead of the company suing the farmers, it may be the other way round this time.

"This development (on May 10th) in no way means that the public campaign is over. While the defendant farmers at least have the profit-hungry MNC off their back in court, the battle is only half won on the field. The government of India had maintained an ominous silence on the legal situation in the country on farmers' seed freedoms, taking cover of the matter being sub judice. Now it must make it amply clear that such litigation is not acceptable", the civil society groups who were supporting the farmers' cause said in a statement.

"PepsiCo has withdrawn the suits on the basis of what has transpired behind the curtain between PepsiCo and the State of Gujarat in the context of ongoing parliamentary elections as is reflected in its withdrawal application. Therefore, this withdrawal is not unconditional but appears to be motivated and malicious. Farmers of Gujarat, I say as a lawyer, must not feel protected and above any further pernicious prosecution and litigation. Unless the government of Gujarat makes it clear in writing what transpired between them and PepsiCo and gives an assurance that it shall not allow multinational companies to litigate against its own farmers, the future may not be very bright for the farmers," Anand Yagnik, the legal counsel for the farmers, told BT.

These cases have also put the spotlight on the law itself. "They raise matters of immense significance not just for the sued potato farmers in Gujarat but for the seed freedoms of all Indian farmers. There was a clear legislative intent behind the creation of the PPV & FR Act 2001. Many farmers' groups, civil society organisations, intellectual property experts, public interest lawyers, agriculture scientists, plant breeders and even seed industry representatives were involved in the shaping of the statute in India. Our lawmakers reiterated the need to protect farmers' rights as cultivators (of both crop and seed), using seed from even varieties protected by IPR. This legislative intent is very important to note in any interpretation of farmers' legally guaranteed rights in this," says Shalini Bhutani, a Delhi-based legal expert.

It is known that a loose coalition of farmers groups, civil society activists and legal experts will meet the 11 farmers from three districts of Gujarat to chart out their next course of action in the coming weeks.

"First of all we need to understand the farmers who are affected and are likely to be affected. Once they express their concerns, they can be articulated. We will announce our action plan only after the interaction. The farmers will decide what they want to do with the help of lawyers and activists," says Yagnik.

According to him, a class action suit against PepsiCo in the US can be contemplated. Indian farmers can seek compensation for the trouble PepsiCo has caused to them. "The farmers can file a Public Interest Litigation in India. Possibility of personal litigations is also there. We may also think of seeking an interpretation of Section 39 (this specific section of the PPV & FR Act provides entitlement to farmers of India to cultivate any variety that they would like to, including PVP-registered varieties), says Yagnik.

PepsiCo can only hope that the farmers will choose not to retaliate.