The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) has clarified that at the Section 26 stage, the Competition Commission of India (CCI) is required to form a prima facie opinion on the basis of adequate, objective, and substantiated material placed by the informant, and it is entitled to close the matter under Section 26(2) where allegations of abuse of dominance are general, vague, or unsupported by concrete evidence showing possible harm to competition.
The Tribunal held that mere existence of dominance, including monopsony power, is not sufficient; what must be shown, even at the threshold stage, is some credible material indicating abusive conduct and its competitive harm. The Tribunal reaffirmed that the CCI is not bound to order investigation merely because allegations are made, and that in regulated sectors such as liquor procurement, competition law scrutiny cannot proceed in the absence of tangible material showing that the impugned conduct crossed the threshold of prima facie abuse under Section 4. On that basis, the Tribunal found no error in the CCI’s closure order and dismissed the appeal.
The Division Bench comprising Justice Mohammad Faiz Alam Khan (Judicial Member) and Naresh Salecha (Technical Member) observed that the principal deficiency in the informants’ case was the absence of concrete and credible material to substantiate the allegations of abuse. It noted that although the appellants relied on sample cost cards and general assertions regarding increased production costs, losses, discriminatory discounts, and preferential treatment, they did not furnish actual data on costs, margins, losses, market exit, loss of market share, or distortion of consumer preference sufficient to enable the CCI to form a prima facie opinion warranting investigation.
The Tribunal also accepted that the liquor sector in Kerala operates within a heavily regulated statutory and policy framework, including state control over pricing and procurement, and recorded that Clause 11(c) of the rate contract relating to price fixation did not prima facie amount to abuse. As regards preference shown to Respondent No. 3’s “Jawan Rum,” the Tribunal observed that such preference was declared upfront in the tender and justified as a matter of stated public policy, and that the appellants had failed to demonstrate any actual adverse effect on competition, consumer choice, or market dynamics.
Briefly, the appeal was filed by two industry associations, CIABC and ADBVI, under Section 53B of the Competition Act, 2002, challenging the CCI’s order dated Oct 21, 2021 passed under Section 26(2). The associations had originally filed information under Section 19(1)(a) alleging abuse of dominant position by Kerala State Beverages (Manufacturing and Marketing) Corporation Limited (KSBC) in the market for wholesale procurement and distribution of branded alcoholic beverages in Kerala.
Their case was that KSBC, being the exclusive purchaser and wholesale distributor, occupied a monopsony position and abused that dominance through unilateral fixation of purchase prices, arbitrary and one-sided tender conditions, discriminatory treatment in favour of the government-owned distillery Travancore Sugar and Chemicals Limited, delayed payments, differential cash discounts, and deduction of additional administrative charges. The CCI, while noting KSBC’s dominance for prima facie purposes, closed the matter on the ground that no prima facie case of contravention of Section 4 was made out.
