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2025 (4) TMI 15 - CCI - Law of CompetitionAnti-competitive agreements - abuse of dominant position - lack of variety and choice available to consumers suggesting a potential monopolistic control exerted by certain liquor manufacturing companies in collusion with TASMAC - contravention of the provisions of Section 4 of Competition Act 2002 - HELD THAT - On analysis of the data furnished by TASMAC regarding brand-wise and manufacturer-wise procurement of beer in the last 3 financial years it is observed that the share of brands of two manufacturers i.e Kals Breweries Pvt. Ltd. and SNJ Breweries Pvt. Ltd. such as British Empire SNJ 10000 Black Pearl High Voltage etc. is significantly higher compared to other brands (with the exception of Kingfisher and Zingaro) in TASMAC s procurement in the last three financial years. The Informant has also alleged that these brands receive preferential procurement over other brands and their names have also been mentioned in the abovementioned news reports regarding availability of select brands in TASMAC outlets. It is also observed that the combined share of Kals Breweries Pvt. Ltd. and SNJ Breweries Pvt. Ltd. has significantly increased in the last three financial years from 40.22% in 2021-22 to 58.41% in 2022-23 and 56.76% in 2023-24. It appears from the data provided by TASMAC that only a few brands dominate the share of its procurement of beer and the well-known brands in TASMAC price list command a significantly lower share in procurement - In consideration of the facts and circumstances of the present case the Commission is of the prima facie view that TASMAC appears to be abusing its dominant position by limiting market access to certain brands of beer in the state of Tamil Nadu in contravention of Section 4(2)(c) of the Act. On the basis of the material available on record there appears to be substance in the allegations levelled by the Informant and the same merits investigation by the Director General (DG). The Commission directs the DG to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act. The Commission also directs the DG to complete the investigation and submit the investigation report within a period of 60 days from the receipt of this order. Conclusion - TASMAC as a monopolistic entity in the beer market of Tamil Nadu holds a dominant position. The procurement practices of TASMAC which favor certain brands and potentially limit market access for others warrant investigation for possible abuse of dominance under Section 4(2)(c) of the Act. The Secretary is directed to send a copy of this order along with the material available on record to the DG forthwith through speed post/email. The Secretary is directed to serve a copy of this order to the parties also through speed post/e-mail.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment revolve around the alleged contravention of Section 4 of the Competition Act, 2002 by Tamil Nadu State Marketing Corporation Limited (TASMAC). Specifically, the issues include:
ISSUE-WISE DETAILED ANALYSIS 1. Dominance of TASMAC in the Relevant Market The relevant legal framework involves the definition of "enterprise" under Section 2(h) of the Act and the determination of a "dominant position" as per the explanation to Section 4. The Court assessed whether TASMAC qualifies as an enterprise engaged in economic activity and whether it holds a dominant position in the relevant market. The Court observed that TASMAC is engaged in the distribution and sale of alcoholic beverages, thus qualifying as an enterprise under Section 2(h). The relevant market was delineated as the "procurement, marketing, distribution, and sale of beer in the state of Tamil Nadu," considering the unique regulatory framework for liquor in each Indian state. TASMAC's exclusive privilege in wholesale and retail vending of Indian Made Foreign Liquor (IMFL) in Tamil Nadu, as per the Tamil Nadu Prohibition Act, 1937, was noted. The Court concluded that TASMAC operates independently of competitive forces, affirming its dominant position in the relevant market. 2. Alleged Abuse of Dominant Position The Court examined whether TASMAC's procurement practices limit market access for certain beer brands, thereby abusing its dominant position. The legal framework under Section 4(2)(c) of the Act was considered, which prohibits practices that limit market access. Evidence included the Informant's allegations and supporting documents, such as a white paper and media reports indicating limited availability of certain beer brands at TASMAC outlets. TASMAC's response highlighted its system-based indent generation method for procurement, which relies on weighted average sales calculations. The Court scrutinized TASMAC's procurement data, revealing a significant share of beer procurement from specific manufacturers, notably SNJ Breweries and Kals Breweries, over others. The weighted average formula used by TASMAC was found to potentially perpetuate existing sales trends, disadvantaging less stocked brands. Competing arguments from TASMAC emphasized impartiality in procurement based on consumer preferences and sales data. However, the Court noted the lack of demand-side considerations in TASMAC's formula, potentially skewing procurement in favor of already popular brands. 3. Criteria and Process for Beer Brand Selection The Court sought clarity on TASMAC's selection criteria for beer brands, requesting detailed procurement data. TASMAC's eventual response outlined its computerized, formula-driven procurement process, which considers past sales but not direct consumer demand. The Court found that TASMAC's procurement practices, while systematized, may not adequately reflect consumer choice, potentially limiting market access for diverse beer brands. SIGNIFICANT HOLDINGS The Court held that TASMAC, as a monopolistic entity in the beer market of Tamil Nadu, holds a dominant position. The procurement practices of TASMAC, which favor certain brands and potentially limit market access for others, warrant investigation for possible abuse of dominance under Section 4(2)(c) of the Act. Significant legal reasoning includes the observation that TASMAC's formula for procurement perpetuates existing market conditions, potentially disadvantaging less popular brands. The Court emphasized the need for an investigation by the Director General to ascertain the veracity of the allegations and the impact on market competition. The Court directed the Director General to conduct an investigation into the matter within 60 days, clarifying that this order does not constitute a final opinion on the merits of the case.
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