CCI Dismisses Information Alleging Abuse of Dominance Against Social Welfare and Nutritious Meal Program Department and Cooperation, Food and Consumer Protection Department

On August 6, 2018, CCI dismissed information against the Principal Secretary, Social Welfare and Nutritious Meal Program Department (‘SWNMPD’) and Principal Secretary, Cooperation, Food and Consumer Protection Department (‘FCPD’) (collectively, ‘Respondents’). It was alleged that by modifying the pre-qualification criteria in the tender process for procuring tur dal/Canadian yellow lentil, palmolein oil and eggs (‘Products’), the Respondents had restricted several stakeholders from participating in the tender process allegedly resulting in a contravention of Section 4 of the Act. CCI duly noted that the Government of Tamil Nadu had appointed Tamil Nadu Civil Supplies Corporation (‘TNCSC’) to procure tur dal/Canadian yellow lentil and palmolein oil to distribute the Products to family cardholders under the Special Public Distribution Scheme (‘SPDS’), by way of a tender process

For the purpose of defining the relevant market, CCI noted that the demand and supply of each of the Products were distinct. CCI noted that while the Products were not fungible, they were complementary. It was also noted that the producers/ distributors of each of the Products were separate. CCI accordingly delineated three distinct relevant markets, namely, the market for (a) procurement of tur dal in India; (b) procurement of palmolein oil in India; and (c) market for procurement of eggs for noon meal scheme in India.

1.  Market for Procurement of Tur Dal in India: Relying on its decision in Maheshwari Agro Products v. Tamil Nadu Civil Supplies Corporation,[1] CCI found that there existed several State and Central agencies engaged in procuring tur dal, similar to TNCSC, that were equally supported by various corporations. As the TNCSC faced competitive constraints from such central and state agencies, CCI held that it could not be held dominant in the market for procurement of tur dal in India. CCI also noted that the relevant market appeared fragmented and no evidence was furnished to conclude otherwise. CCI also rejected the contention that the introduction of certain pre requisites that resulted in the elimination of certain bidders, was in and of itself as abuse of dominance. CCI was of the opinion that TNCSC has the right to determine necessary pre requisites to ensure that bidders have requisite capacity and resources to meet high demand to avoid subsequent concerns relating to scarcity, once the tender has been allotted.

2.   Market for Procurement of Palmolein Oil: For palmolein oil, CCI noted that the pre requisites were to be decided by TNCSC, and TNCSC in order to ensure seamless supply of palmolein oil, ensured that the potential bidders had the capacity and resources to provide the said product by adding such pre requisites. TNCSC faced competitive constraints from various other State agencies and did not have the capability to operate independently of its competitors. For these reasons, TNCSC could not have said to be dominant. CCI also noted that asking bidders to abide with statutory compliances, that may have the potential effect of eliminating certain bidders, could not be construed as anti competitive.

3.   Market for Procurement of Eggs for noon meal scheme: In addition to the aforementioned factors, CCI noted that the bidder pre-requisites introduced in this market had been issued under the Integrated Child Development Services scheme (‘ICDS’) for children. Several States had issued similar tenders under the Public Distribution Scheme (‘PDS’) and at least 13 States had issued tenders under the ICDS – each of which had similar pre-requisites. CCI also noted the presence of several procurement agencies in the market, because of which it held that the Respondents could not be held dominant. It was also noted that SWNMPD was procuring eggs for the benefit of weaker sections of society because of which certain conditions were necessary to ensure capacity for the tendered product. Additionally, the seamless delivery of eggs also ensures efficient use of funds by the State Government as suggested by the Accountant General since a bidder with sufficient resources and capacity would only be able to bid and the State Government will not have to employ other suppliers at the last minute.

CCI accordingly concluded there was no prima facie case of contravention and dismissed the information.

[1] Case No. 2 of 2018

Published In:Inter Alia Special Edition Competition Law October 2018 [ English
Date: October 30, 2018