CCI Penalizes Uttarakhand Agricultural Produce Marketing Board for Abusing its Dominance

On March 30, 2021, CCI accepted the allegations of abuse of dominant position against Uttarakhand Agricultural Produce Marketing Board (‘UPMB’). [1]

The informant, a representative body of certain international spirits and wines companies operating in India, alleged that UPMB, the exclusive wholesale licensee for alcoholic beverages including Indian Made Foreign Liquor (‘IMFL’) in the state of Uttarakhand, along with the exclusive sub-wholesalers Garhwal Mandal Vikas Nigam Ltd. (‘GMVN’) and Kumaun Mandal Vikas Nigam Ltd. (‘KMVN’), placed orders for supply of IMFL brands in an arbitrary manner contrary to certain clauses of the Liquor Wholesale Order issued by the Chief Secretary, state of Uttarakhand. The allegations pertained to: (i) placing of orders in an arbitrary and discriminatory manner with no relation to the consumer demand for certain brands of beverages; (ii) not procuring alcoholic beverages of certain brands such as USL and Pernod leading to a significant decline in their market shares; (iii) not maintaining minimum stock levels and were not supplying IMFL brands in accordance with the retailers’ demand; and (iv) entering into an agreement with IMFL manufacturers which contained unfair and onerous conditions.

Based on the DG’s findings, CCI delineated the relevant market as (a) market for wholesale procurement of branded alcoholic beverages in the State of Uttarakhand; (b) market for distribution of branded alcoholic beverages in the licensed area of GMVN in the State of Uttarakhand; and (c) market for distribution of branded alcoholic beverages in the licensed area of KMVN in the State of Uttarakhand, and found the opposite parties to be dominant in the respective markets.

CCI observed that the sales volume of USL and Pernod significantly declined as compared to before the implementation of the Liquor Wholesale Order while the sales volume of other suppliers witnessed significant growth. However, upon revocation of the Liqour Wholesale Order, the sales volume of USL and Pernod significantly increased in conformity with the consumer demand while the sales volume of other suppliers declined. This was substantiated by submissions of GMVN that UPMB did not supply different brands of IMFL as per the demand/indents raised by it along with complaints/grievances in respect of non-availability of brands as indented by retailers who were in actual interaction with end-consumers. On the issue of maintenance of minimum stock, CCI noted that UPMB did not make any attempts to communicate to the Excise Department about being unable to comply with the requirement of maintenance of minimum stocks in violation of its obligation under the Liqour Wholesale Order. Lastly, CCI found clauses of UPMB’s agreement with IMFL manufacturers to be unfair.

Based on the above, CCI concluded that UPMB abused its dominant position in violation of Section 4(2)(c) and 4(2)(b)(i), 4(2)(a)(i) of the Act and decided to impose a penalty of INR 10 million after keeping certain mitigating factors in mind. However, CCI did not hold GMVN and KMVN liable under the provisions of the Act since they (i) fulfilled their obligations of raising indents about the liquor in demand to UPMB; and (ii) were entirely dependent on UPMB for obtaining supplies and they could not directly procure from the IMFL manufacturers.

 

[1] Case No. 2 of 2016, Order dated March 30, 2021

Published In:Inter Alia Special Edition - Competition Law - May 2021 [ English
Date: May 31, 2021