New Delhi, Appellate tribunal NCLAT has upheld an order of fair trade regulator CCI for closing a complaint alleging abuse of dominant position by Kerala's state-owned liquor procurement agency, citing a lack of evidence.
A two-member NCLAT bench dismissed an appeal filed by the Confederation of Indian Alcoholic Beverage Companies (CIABC) and the Association of Distillers, Brewers and Vintners of India (ADBVI), alleging abuse of dominant position by the Kerala State Beverages (Manufacturing and Marketing) Corporation (KSBC) in the state.
The Competition Commission of India (CCI), on October 21, 2021, declined to order a probe into allegations against KSBC Ltd and Travancore Sugar and Chemicals Ltd. This order was challenged before the NCLAT, which is an appellate authority over the orders passed by the CCI.
The applicants had alleged that KSBC, which has exclusive control over wholesale liquor procurement and distribution in Kerala, abused its dominant position by unilaterally fixing purchase prices, imposing arbitrary tender conditions, delaying payments, and favouring state-owned brands over private manufacturers.
However, the National Company Law Appellate Tribunal (NCLAT) observed that both the appellants failed to provide "concrete evidence" of anti-competitive conduct.
"We find that the CCI evaluated the limited evidence and the documents furnished by the Informants before concluding that a prima facie case did not exist. The informants did not make out any case as to the harm or loss occasioned on account of the alleged conduct, which is an essential ingredient, even at the prima facie stage," said NCLAT.
It also consented with CCI findings that Clause 11(c) of its rate contract, dealing with the control of the liquor price in Kerala, does not prima facie appear to be an abuse, and it is not for the competition authority to determine what the appropriate price ought to be
NCLAT also rejected the allegations of discriminatory treatment towards the state-owned 'Jawan' rum brand supplied by Travancore Sugar and Chemicals Ltd (TSCL), and noted that the appellants failed to show any distortion in consumer choice or market competition or that they received any preferential treatment.
"It is observed that Respondent No 3 (TSCL), being a wholly state-owned entity, manufactures only a single brand of rum, namely 'Jawan', and has been operating under significant constraints, including past closures and labour disputes," the NCLAT said in its 43-page order.
The benefit extended is minimal in nature, amounting to a discount of approximately Rs 20, and does not materially distort market competition, it said.
"Further, large IMFL (India-made foreign liquor), beer, and wine manufacturers cannot reasonably claim an inability to compete with such a small-scale entity," said the NCLAT bench comprising justices Mohammad Faiz Alam Khan and Naresh Salecha.
The industry body had alleged that KSBC abused its dominant position through a series of unfair and unilateral trade practices, including unilateral fixation of purchase prices, arbitrary tender conditions, discriminatory treatment between government and private manufacturers, delayed payments, and the imposition of additional charges without justification.
NCLAT, in its order, noted down CCI's observations that KSBC provides cash discounts to manufacturers ranging from approximately 7 per cent to 22 per cent, with lower discounts being more favourable to manufacturers. These discounts are applied to the wholesale price, which is determined by KSBC, based on cost sheets submitted by the manufacturers.
NCLAT said that CCI has justified the differential discount structure by distinguishing between fast-moving and slow-moving brands, with lower discounts for fast-moving brands and higher discounts for slow-moving ones.
Such a structure was stated to be commercially justified, as it partly offsets the distribution costs incurred by KSBC.
"In the view of above detailed discussions, we do not find any error in the Impugned Order. The Appeal fails and stands rejected," the NCLAT said.
