On December 29, 2017, CCI dismissed information filed by Dwarikesh Sugar Industries Ltd. (‘DSI’), manufacturer of crystal sugars, against several manufacturers of country liquor based in Uttar Pradesh, namely, Wave Distilleries & Breweries Ltd., National Industrial Corporation Ltd., Unnao Distilleries & Breweries Ltd., Lord Distillery Ltd., Superior Industries Ltd., Sir Shadilal Distillery & Chemical Works, Radico Khaitan Ltd., Brijnathpur Distillery Division and Simbhaoli Sugars Ltd. (collectively, ‘Liquor Manufacturers’) the determination of the purchase price of molasses at unreasonably low rates.Molasses, a natural by-product of the sugar manufacturing process, serves as a basic raw material for potable liquor. The supply and distribution of molasses is governed by the U.P. Sheera Niyantram Adhiniyam 1964 and the Molasses Policy (‘Policy’) issued by the Controller of Molasses, Uttar Pradesh (‘U.P.’) and requires sugar mills (like DSI) to supply a certain percentage of their molasses to manufacturers of country liquor (reserved molasses) in U.P. with the remaining molasses free to be sold in the open market (unreserved molasses). Owing to this Policy, DSI has alleged that Liquor Manufacturers abuse their dominant position by dictating the price of reserved molasses, which is significantly lower than the unreserved section (approximately 9 to 10 times lower), as these prices aren’t regulated by the Policy but driven by what Liquor Manufacturers are willing to offer.CCI initiated a formal inquiry by way of its prima facie order dated September 1, 2014 under Section 26(1) of the Act and directed the DG to investigate the possibility of a cartel to fix prices of reserved molasses in contravention of Sections 3(1) and 3(3) of the Act. The DG report found the existence of two distinct markets for reserved and unreserved molasses and suggested a competition impact assessment of the existing Policy, but did not find any contravention under the Act.CCI agreed with the report of the DG. CCI examined the scope of the Policy and found that in the interests of fair market competition, there should neither be any reservation nor any dispatch ratio. Market forces should be allowed to discover the price of molasses without getting impacted by any policy constraints. While acknowledging that the Supreme Court had upheld the legal validity of the notification and the provisions of the accompanying legislation, CCI nevertheless observed that market allocations or any form of quantitative restrictions on by- products of sugarcane is detrimental for competition in the country.However, CCI did not find any evidence of price parallelism or any form of price fixing between the Liquor Manufacturers for reserved molasses. CCI observed that there was no fixed pattern in the movement of prices for reserved or unreserved molasses and the prices appeared to be an outcome of independently negotiated prices at market determined rates. Accordingly, CCI concluded that there was no contravention of Sections 3 (3) (a) of the Act and closed the investigation.

* Case No. 47 of 2014.