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Liquor makers approach NCLAT against CCI order, allege abuse of dominance by KSBC in Kerala

The National Company Law Appellate Tribunal (NCLAT), which is an appellate authority, on January 24 issued notice to the Kerala State Beverages Corporation (KSBC) and Travancore Sugar and Chemicals Ltd (TSCL) on their pleas

The appellate tribunal has fixed February 28 as the next date of hearing.

Liquor industry bodies CIABC and ADBVI have approached the NCLAT alleging abuse of dominant position by the Kerala State Beverages (Manufacturing and Marketing) Corporation in the state. The Confederation of Indian Alcoholic Beverage Companies (CIABC) and Association of Distillers Brewers and Vintners of India (ADBVI) have challenged an earlier order passed by the Competition Commission of India (CCI), which had in October 2020 rejected their pleas and said there exists no prima facie case.

The National Company Law Appellate Tribunal (NCLAT), which is an appellate authority, on January 24 issued notice to the Kerala State Beverages Corporation (KSBC) and Travancore Sugar and Chemicals Ltd (TSCL) on their pleas. “Issue notice to Respondents No. 2 (KSBC) and 3 (TSCL) returnable within four weeks. Requisites along with process fee be filed within three days,” the NCLAT order said.

The appellate tribunal has fixed February 28 as the next date of hearing.

Kerala State Beverages (Manufacturing and Marketing) Corporation is a public sector body entrusted with exclusive control over the procurement, wholesale and retail sale of liquor in the state. In 2001, KSBC was also entrusted with the majority of retail outlets for the sale of alcoholic beverages in Kerala.

The associations submitted before the CCI that the entire supply chain, from procurement to distribution and sale of liquor, including India Made Foreign Liquor (IMFL), beer, wine, Foreign Made Foreign Liquor (FMFL) and Foreign Made Wine (FMW), in Kerala is controlled by it.

They had alleged that KSBC, for the purpose of procurement of liquor, floats tenders periodically, inviting liquor manufacturers to participate, and “unilaterally and unfairly” fixes the contract price.

Moreover, abusing its dominant position, it imposes “unfair and discriminatory prices and terms on private alcoholic beverages manufacturers as against government brands and leverages its monopoly position by providing favourable prices as well as terms and conditions in the purchase of the product of TSCL”.

It was alleged that KSBC grants preferential treatment to TSCL in terms of lower wholesale margin, lower cash discount, and priority in unloading at depots, thereby placing private brands at a competitive disadvantage. However, this was rejected by the CCI, which observed that several manufacturers were supplying multiple liquor brands to KSBC whereas TSCL was supplying only one brand of rum.

The CCI had also observed that the complainants had not been able to demonstrate how competition, in general, with the existence of so many brands in the market, was adversely affected.

“In light of the facts and evidence on record and based on the submissions of parties, the allegations of abuse raised by the Informants are not found to be validated and no case of contravention of provisions of Section 4 of the Act can be stated to have arisen…,” the CCI had said.

Act refers to the Competition Act, 2002. Section 4 of the Act relates to the abuse of dominant position.

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