No abuse of dominance by KSBC due to the presence of several other liquor brands in the relevant market: CCI

Case Details: Confederation of Indian Alcoholic Beverage Companies v. Kerala State Beverages (Manufacturing and Marketing) Corporation Ltd. (KSBC) - [2022] 134 taxmann.com 81 (CCI)

Judiciary and Counsel Details

• • Ashok Kumar Gupta, Chairperson
  • Ms. Sangeeta Verma and Bhagwant Singh Bishnoi, Member

Facts of the Case

In the instant case, information was filed by the Confederation of Indian Alcoholic Beverage Companies (CIABC) and Association of Distillers, Brewers and Vintners of India (collectively referred to as ‘Informants’) under section 19(1)(a) of the Competition Act, 2002 alleging contravention of the provisions of section 4 of the Act by Kerala State Beverages Corporation Ltd (‘OP1’/’KSBC’) and Travancore Sugar & Chemicals Ltd. (‘OP-2’/’TSCL’) (collectively referred to as ‘OPs’)

CIABC is an industry association representing alcohol beverages companies in India or companies closely associated with the Indian alcohol beverage industry.

The informant had alleged that OP-1 had abused its dominant position by imposing unfair and discriminatory prices and terms on private alcoholic beverages manufacturers as against Government-owned and controlled distillery and leveraged its monopoly position by providing favorable prices as well as terms and conditions on the purchase of the product of OP-1.

It was also alleged that OP-1 grants preferential treatment and considerations to the OP-2 in terms of lower wholesale margin, lower cash discount, and priority in unloading at depots, thereby placing private brands at a competitive disadvantage.

In response to the above submission, the OPs submitted that OP-1’s exclusive right is only concerning the wholesale purchase of liquor in the State of Kerala from manufacturers, and retail sale is conducted by more than 1300 vendors across the State under various categories of licenses. Thus, a monopoly in the retail sale as alleged by the IPs does not exist.

Additionally, it was stated that OP-1 has exclusive right to procure liquor in the State of Kerala is a statutory right and not a situation resulting from marketing operations. If there was no reservation in the statute providing wholesale purchase solely by OP-2, there would not have arisen a situation of an exclusive right.

Informants countered the submission of OP by stating that it not only enjoys dominance in the relevant market but also controls the retail sale of branded alcoholic beverages in the relevant geographic market. This is because of the architecture of the governing laws, which provide that manufacturers have to sell their alcoholic beverages exclusively through OP-1. As a result, the suppliers are not at liberty to make direct sales to vendors at the retail level.

CCI Held

The Commission considered the information and submission of the parties and noted that Informants have made an allegation of abuse of dominant position by OPs in respect of procurement and distribution of branded alcoholic beverages in the State of Kerala. It was noted that several manufacturers were supplying multiple liquor brands to OP-1, whereas OP-2 is supplying only one brand of rum i.e., Jawan Rum of 1000 ml, and the informant had not been able to demonstrate as to how competition, in general, with the existence of so many brands in the market, was adversely affected by granting such preference to OP 2.

The CCI further noted that the informant had not been able to demonstrate that any favor accruing to one product had resulted in the distortion of demand/consumer preference or that choice of the consumer was being impaired in any manner. Thus, no case of contravention of provisions section 4 was made out against OPs, warranting investigation.

List of Cases Referred to

• • Xavier Residency v. State of Kerala [WP (C) No. 22195 of 2014] (para 10)
  • State of Madhya Pradesh v. Nandlal Jaiswal AIR 1987 SC 251 (para 41).