TaxTMI 
TaxTMI 
2026 (5) TMI 1307
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...., under Section 53(b) of the Competition Act, 2002 (the "Competition Act/Act") challenging the Impugned Order dated 21.10.2021 in Case No. 10 of 2021 passed by the Competition Commission of India under Section 26 of the Competition Act. Competition Commission of India (CCI) is the Respondent No.1 herein. Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, is a government corporation established under the Foreign Liquor Rules, 1953 (formulated under the Cochin Akbari Act, 1077 ("Akbari Act"), is the Respondent No.2 herein. Travancore Sugar and Chemicals Limited, who is a government owned and controlled distillery, is the Respondent No.3 herein. 2. It has been stated that Appellant No. 1 was incorporated on 30.07.1998 as a non-profit public limited company under Section 25 of the Companies Act, 1956, now corresponding to Section 8 of the Companies Act, 2013. The Appellant No. 1 is an industry association representing alcohol beverage companies in India and companies closely associated with the Indian alcohol beverage industry and its members include both international and domestic companies engaged in several branded segments of the alcoholic beverag....
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....nuing pattern of coercive conduct arising from Respondent No. 2's dominant position. 7. The Appellants submitted that, in support of these allegations, it had placed before Respondent No. 1 sufficient documentary and circumstantial evidence to raise a prima facie case. The Appellants contended that the evidence included the tender issued by Respondent No. 2, representations made by private manufacturers to governmental authorities illustrative cost cards showing that supplies were being made loss, and comparison charts showing discriminatory margins and cash discounts between private and government brands. The Appellants further stated that the material on record also showed exit of private players from the market, thereby demonstrating harm to competition. 8. The Appellants submitted that despite strong evidence in form of substantive material, the CCI failed to direct an investigation under Section 26(1) of the Competition Act and instead closed the matter by the impugned order dated 21.10.2021. The Appellants contended that the impugned order incorrectly treated the prima facie stage as though it were a final adjudication on merits. The Appellants further submitted that th....
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....one-sided and gives Respondent No. 2 final, unchallengeable authority. 13. The Appellants contended that the purchase prices fixed by Respondent No. 2 bear no rational nexus with the cost of production submitted by private manufacturers. The Appellants submitted that the illustrative cost cards annexed to the information given to the CCI showed a clear mismatch between actual production cost and the purchase price imposed by Respondent No. 2. The Appellants further stated that raw material costs had increased substantially over time, but the contract rates had increased only marginally, thereby causing persistent losses or severely reduced margins to private suppliers. 14. The Appellants submitted that Respondent No. 2 does not engage in genuine negotiation over prices, but instead exercises undue coercive power over manufacturers who have no alternative buyer. The Appellants contended that such conduct amounts to unfair and discriminatory price fixation within the meaning of Section 4(2)(a)(ii) of the Competition Act. The Appellants further stated that the absence of alternative market access makes the conduct especially oppressive and anti-competitive. 15. The Appellants....
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....ustify discrimination that results in competitive distortion, denial of fair market access, or exclusionary effects on private brands. 20. The Appellants also submitted that the discriminatory treatment between government and private brands is inconsistent with competition law principles and constitutional equality norms. The Appellants contended that once the State allows trade in liquor, it cannot act arbitrarily or selectively favor one class of suppliers without lawful justification. The Appellants further relied on judicial precedents to submit that state agencies engaged in commercial activity are not immune from scrutiny under competition law. 21. The Appellants submitted that Respondent No. 2 levies highly discriminatory cash discounts, including 7.75% for ranked brands and 21.75% for non-ranked brands. The Appellants contended that the classification between ranked and non-ranked brands is itself determined unilaterally by Respondent No. 2 and lacks transparent criteria. The Appellants further stated that newer brands are especially burdened because they are usually treated as non-ranked brands and subjected to heavier deductions. 22. The Appellants submitted that....
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....ion vs Competition Commission of India and Others (COMPAT Appeal No.51 of 2014). The Appellants contended that the principle emerging from those cases is that the CCI must not shut out investigation when the information discloses a plausible abuse of dominance. The Appellants further stated that the impugned order's approach defeats the very scheme of the Competition Act. 27. The Appellants submitted that Section 18 of the Competition Act imposes a statutory duty upon Respondent No. 1 to prevent anti-competitive practices, promote competition, safeguard consumer interests, and ensure freedom of trade. It was further contended that Sections 36(1) and 36(2), read with Sections 60 and 61 of the Competition Act, provide a comprehensive framework enabling the CCI to investigate allegations under Chapter V and pass a reasoned order on merits. The Appellants argued that despite the presence of corroborative evidence against Respondent Nos. 2 and 3, the Appellants have been left without any effective remedy to address the economic harm suffered. 28. The Appellants further submitted that the CCI has acted inconsistently compared to its approach as in similar cases, where the CCI had t....
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....tion of purchase prices were thoroughly examined in the Impugned Order. It is contended that the price fixation mechanism adopted by Respondent No. 2 is based on a structured and transparent process wherein manufacturers themselves submit detailed cost sheets, duly certified by chartered accountants, containing granular break-up of costs including prime cost, factory cost, administrative overheads, cost of production, selling and distribution overheads, cost of sales, profit margins, and selling expenses. The CCI contended that such cost-based price discovery negates any allegation of arbitrariness or unfairness, as the procurement price is determined after due consideration of all relevant cost components furnished by the manufacturers themselves. 34. The CCI submitted that the allegation regarding arbitrary periodicity of tenders and delayed revision of prices was also found to be unsubstantiated. It is contended that although the Appellants alleged that revision of prices occurs with a lag of approximately 3 to 5 years and that costs of production have increased by over 150% in the last decade while price increase was only about 30%, no empirical evidence, financial data, or ....
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....sing from such preference. 38. The CCI further submitted that the allegation concerning differential cash discounts ranging between approximately 7% to 22% was also devoid of merit. It is contended that such discounts are applied on wholesale prices determined through the cost-based mechanism and are structured based on commercial considerations such as sales velocity of brands. The CCI submitted that lower discounts for fast-moving brands and higher discounts for slow-moving brands are rational and partly compensate distribution costs. It is further contended that no evidence was placed on record to establish that such discount structures resulted in discriminatory treatment, financial loss, or impairment of the competitive ability of any manufacturer. 39. The CCI submitted that the challenge to various tender clauses as being unilateral and unfair was also rightly not entertained in detail, as the principal allegations of abuse were themselves found to be unsustainable. It is contended that, in any event, no material was placed to demonstrate that such clauses were implemented in a manner detrimental to manufacturers over the years. 40. The CCI contended that Respondent ....
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....46. The CCI submitted that the Impugned Order correctly records that the allegations were general, vague, and unsupported by documentary evidence, and therefore, the closure of the Information was justified and in consonance with established legal principles and decisional practice. 47. Concluding arguments, the CCI requested this Appellate Tribunal to dismiss the Appeal. 48. Per contra, the Respondent No. 2 & 3 denied all averments made by the Appellants as misleading and baseless. 49. The Respondent No. 2 & 3 submitted the appellants have approached this Appellate Tribunal in a representative capacity without placing on record any authorization, consent, or power of attorney from the entities whom they claim to represent. The Respondent No. 2 & 3 further submitted that in the absence of such authorization, the appellants cannot be permitted to maintain the present proceedings, as it is a settled principle that a representative body must demonstrate its authority through cogent documentary evidence. The failure to do so strikes at the root of the maintainability of the Appeal. 50. The Respondent No. 2 & 3 contended that the appellant has also failed to disclose the com....
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....ed with inconsistent reliefs sought before different forums, amount to abuse of judicial process. 55. The Respondent No. 2 & 3 contended that the Appellants have taken contradictory stands in different proceedings. It is submitted that while before the Hon'ble High Court the Appellants have challenged alleged preferential treatment whereas before this Appellate Tribunal, they are advocating for free pricing mechanisms. The Respondent No. 2 & 3 submitted that such inconsistent positions on the part of the Appellants reveal self-serving approach aimed solely at enhancing profits, rather than addressing any genuine competition concern. 56. The Respondent No. 2 & 3 submitted that they are fully State-owned entities functioning under the control and policy directions of the Government of Kerala. It is contended that Respondent No. 2, namely Kerala State Beverages (Manufacturing and Marketing) Corporation, was established following the tragic Vypin liquor incident of 1982, which resulted in the death of approximately 100 persons due to consumption of spurious liquor. The Respondent No. 2 & 3 submitted that the establishment of the Corporation was a policy measure aimed at ensuring ....
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....t towards a more liberalized framework while retaining necessary regulatory controls. It is contended that the introduction of the new policy has rendered many of the grievances raised in the present Appeal academic. 60. The Respondent No. 2 & 3 submitted that there is no abuse of dominant position as alleged by the Appellants. It is contended that Respondent No. 2 has exclusive rights only in respect of wholesale procurement, which is a policy decision taken in public interest. The Respondent No. 2 & 3 further submitted that retail sale is carried out through numerous independent vendors, thereby ensuring competition at the distribution level. It is contended that there is no denial of market access to any manufacturer. 61. The Respondent No. 2 & 3 submitted that the procurement process is carried out through a transparent tender mechanism based on rate contracts. It is contended that manufacturers themselves quote prices, and adequate opportunity is provided for negotiation before finalization. The Respondent No. 2 & 3 further submitted that the allegation of unilateral price fixation is incorrect. It is contended that price escalation is permitted based on actual cost incr....
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....ad Load Workers' Board through KSBC, thereby ensuring transparency and preventing exploitation. The Respondent No. 2 & 3 further submitted that this arrangement also provided relief to lorry drivers of the suppliers, who were otherwise forced to undertake loading and unloading operations in a tense environment marked by trade union disputes. It was stated that the deductions pursuant to the Circular were implemented only for the limited period from April to July 2021, with adjustments reflected in payments made in September 2021. Thereafter, the Circular was withdrawn, and suppliers were duly informed to make payments directly to the headload workers. 66. Concluding arguments, the Respondent No. 2 & 3 requested this Appellate Tribunal to dismiss the appeal with cost. Findings 67. We will examine the allegations of the Appellants with respect to unilateral and unfair determination of purchase prices and loses caused to private manufacturing which is Anti- competitive in nature. In this connection, we note the detailed mechanism for price fixation as provided under the Rate Contract have been discussed in the Impugned Order and stated that: - 68. We note that the CCI foun....
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....s had not produced cost and price evidence, why did R1 not in exercise of its suo motu powers call for such evidence? It could not, therefore, shut the present matter at the threshold despite the material already placed before it." This however does not mean that the Appellants were not required to do any efforts on this part to make out prima facie case. Despite over pointing out on more than one occasions, the Appellants could not link such evidence or sustainability the same. Hence, we are not pursued by the arguments of the Appellants. 73. We also take into consideration that the CCI after noting the regulated nature of the product i.e. alcoholic beverages as well as its prices, which also involves payments to the state exchequer in the form of taxes and levies which are linked to the prices that are fixed, concluded that prices may be required to be fixed taking into account various factors, including cost, until the State decides to free the sector of its control. The CCI also recorded that Clause 11(c) of its Rate Contract dealing with the control of the liquor price does not prima facie appear to be an abuse, and it is not for the competition authority to determine wh....
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....nalties and also recover expenses incurred towards revalidation/regularization etc., from the respective seller. Further, (a) Where the goods sold to the Corporation do not get exhausted through sales within 90 days from the date of receipt of goods in the depots of the Corporation, the Corporation shall levy a penalty of Rs.10/- per case, per month, for the goods remaining unsold beyond 90 days from the date of their receipt in the depots (FL-9 shops) of the Corporation and until they are finally disposed off. The penalty amount will be calculated brand wise on FIFO basis or such other basis as may be determined by the Corporation from time to time. The amount of penalty so levied will be deducted from the payment due/Security Deposit etc. of the Seller. The Corporation will reserve the right to move these goods to another warehouse for effecting sale etc. and the expenses incurred thereon shall be debited to the account of the seller. (b) Where goods continue to be held up, without being sold out for more than 240 days, in addition to the provisions of Clause (a) above, the Corporation reserves the right to debit all expenses and other statutory duties incurred ....
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...., this Hon'ble Bench repeatedly queried whether R2 had been according preferential treatment to R3 when counsel appearing for Respondent Nos. 2 and 3, in the presence of Counsels of the Appellants and R1, admitted repeatedly that preferential treatment was in fact being accorded to R3 as per the State policy. This admission goes to the root of the matter and directly implicates Section 4(2)(a)(i) of the Act. We would like to record that we provided an opportunity to furnish details of various brands of RUM sold by the members of the Appellants, vis-à-vis data of Brand Rum "JAWAN" of 1000 ml to substantiate the allegations. We were not given any such data by the Appellants neither during pleading nor in the written submissions furnished by the Appellants dated 28.04.2026 after reserving the order. As such we do not find any basis for the allegations of the Appellants. We also take into consideration that this was based of tender calculations as per terms of tender, which were pre-announced and provided the Appellants opportunity to submit their bids and finally got contracts awarded in their favour by the Respondent No.2. We do not, thus find any error on this account ....
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....sion of India (General) Regulations, 2024 requires that the contents of the information or the reference mentioned under sub-regulations (1) and (2), along with the appendices and attachments thereto, as well as application under sub-regulation (3), shall be complete. 81. The allegations levelled in the present case seems general allegations without substantiating material, documents or proof on record, which ought to have been supplied by the Informants to the CCI including to data qua actual cost sheets, margins, losses caused, prices fixed, loss due to non-revision of prices, decline in market share etc. We find that the CCI was therefore correct to close the matter when no concrete evidence, allegations or details were disclosed in the Information filed. We also observe that the CCI considered the information on 15.06.2021 and directed the Opposite Parties to file para wise response(s), if any, to the information, latest by 19.07.2021, with an advance copy to each of the Informants. The Informants were also directed to file their comments, if any, to the response of Opposite Parties, latest by 02.08.2021. In deference to the said order, the Opposite Parties and Informants, a....
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.... that under Clause (19)(a)(i) of the Competition Act, an enquiry may be instituted on receipt of any information from anyone including the informant and the CCI, if required, may form its opinion about existence of prima-facie within 60 days. In terms of Regulation 16(2) of the CCI (General Regulation) 2009, in such eventuality, if the CCI forms an opinion that prima-facie case exists, the directions are required to be issued to the DG to investigate the matters. However, it needs to be consciously and clearly understood that if the CCI is of opinion that there exists no prima-facie case, the matter may be closed forthwith and the CCI may pass such orders as deemed fit and send a copy of its order to the parties concerned. 131. In the present case, we note that the Appellant filed an information under Section 19(1) of the Competition Act, but the CCI after examining the relevant facts and giving opportunity of being heard to the concerned parties as well as after examining the submissions made by the parties, the CCI formed an opinion that no prima-facie case existed and thus, passed the Impugned Order communicating to all parties including the Appellant. 132. We ....
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....o the conclusion that no further investigation was required. Therefore, in our opinion the CCI passed the Impugned Order correctly..." (Emphasis Supplied) 83. We observe that that Sections 21 and 21A of the Competition Act, provide for institutional coordination to align competition policy with broader public interest considerations. It is further noted that Section 49 of the Competition Act, relating to advocacy, offers an additional mechanism to promote public interest, while Section 54 of the Competition Act empowers the Government to exempt specific sectors or industries where necessary. The Preamble of the Act, particularly the phrase "keeping in view the economic development of the country," has guided the CCI approach in facilitating the transition towards a liberalized market economy, with public interest remaining the dominant consideration. 84. We would like to take into consideration the relevant paragraph of the impugned order, which reads as under: "As regards allegations that OP-1 grants certain preferential treatments to OP-2's product, the Commission notes that OP-1 has accepted the preferential treatment accorded to OP2's product. Ex facie....