India’s appellate tribunal upheld the dismissal of antitrust allegations against Kerala’s state-run liquor distributor, finding no evidence of market abuse.
Antitrust allegations against the Kerala State Beverages (Manufacturing and Marketing) Corporation, or KSBC, have been dismissed by India's antitrust tribunal, which ruled that the corporation’s procurement processes were based on objective commercial criteria rather than an abuse of its monopsony power.
The National Company Law Appellate Tribunal, or NCLAT, upheld an October 2021 order of the Competition Commission of India, or CCI, on May 20, ruling that the complaints by private liquor associations failed to establish a prima facie case of market exploitation or unlawful discrimination.
The appeal — filed jointly by the Confederation of Indian Alcoholic Beverage Companies and the Association of Distillers, Brewers and Vintners of India — alleged that KSBC, which enjoys exclusive control over the procurement and wholesale distribution of alcohol in the state of Kerala, had abused its monopsony position through unfair pricing practices, delayed payments and preferential treatment for state-owned distillery Travancore Sugar and Chemicals.
The NCLAT rejected the allegations as they were not substantiated with "material, documents or proof on record." The complainants failed to submit "actual cost sheets, margins, losses caused, prices fixed, loss due to non-revision of prices, decline in market share" to the competition watchdog, the tribunal said.
"The CCI was therefore correct to close the matter when no concrete evidence, allegations or details were disclosed in the information filed,"
the order said.
The NCLAT cited the CCI's earlier finding that the complainants had failed "to demonstrate as to how competition, in general, with the existence of so many brands in the market, is adversely affected" by KSBC's preference for Travancore Sugar.
While liquor production costs have risen by more than 150 percent over the past decade and KSBC granted only around a 30 percent price increase to suppliers during the same period, the CCI said that many manufacturers continued supplying products regularly, indicating they were unlikely to be operating at the losses claimed.
The CCI also rejected allegations of preferential treatment.
"It is contended that while a preference was accorded, the same was based on an explicitly declared policy incorporated within the tender conditions and justified on grounds of public interest,"
the commission said.
The CCI further contended that Travancore Sugar supplies a single product, Jawan Rum, whereas other manufacturers supply multiple brands. The appellants failed to demonstrate any resulting distortion of competition, harm to consumer choice or adverse impact on market dynamics, the commission said.
KSBC and Travancore Sugar had argued that the state policy — guided by Article 47 of the Indian Constitution — mandates the improvement of public health and reduction of consumption of intoxicating substances. The government policy seeks to balance revenue considerations with public welfare objectives, and the appellants cannot challenge such constitutionally valid policies merely on the ground that they affect the profit margins of private liquor manufacturers, according to NCLAT's order.
"It is contended that economic policy decisions are taken in the public interest and cannot be interfered with unless they are arbitrary or unconstitutional,"
the tribunal said.
In its 43-page order, the NCLAT said that Travancore Sugar, being a wholly state-owned company, "manufactures only a single brand of rum, namely 'Jawan' and has been operating under significant constraints, including past closures and labour disputes." The benefit of KSBC favoring Travancore Sugar "is minimal...amounting to a discount" of approximately 20 rupees ($0.20), and does not materially distort market competition, said the tribunal.
The tribunal also said that large manufacturers of Indian-made foreign liquor, beer and wine cannot reasonably claim an inability to compete with such a small-scale entity.
Source: MLex
