On July 9, 2018, CCI directed an investigation against Flora and Fauna Housing & Land Developments Private Limited (‘OP 1’), Patiala Kings Liquor Pvt. Ltd. (‘OP 2’), Royal Beverages Pvt. Ltd. Ltd. (‘OP 3’), Kiwi Wines And Beverages Pvt. Ltd. (‘OP 4’), Chadha Holdings Pvt. Ltd. (‘OP 5’) and Government of Uttar Pradesh (‘OP 6’) (collectively, ‘OPs’), alleging inter alia discrimination in procurement of country liquor in violation of Section 3 and Section 4 of the Act[1]. As per the information, OP 1 to OP 4 are controlled by the same parent holding company, i.e., OP 5, which in turn is the holding company for the Chadha Group. OP 6 is the Government of the State of Uttar Pradesh which is responsible for framing policy for the manufacture, sale and distribution of liquor in the State of Uttar Pradesh under the powers granted by the United Provinces Excise Act, 1910 (‘UPE Act’). It is also empowered to grant licenses under the UPE Act.Starlight Bruchem Ltd. (‘Informant’) is engaged in the business of manufacturing and trading liquor and is present in the states of Uttar Pradesh, Madhya Pradesh, Punjab and Haryana among others. The Informant alleged that the OPs have been abusing their dominant position by following a non-transparent policy of procurement, based on an arrangement/understanding to buy from only certain manufacturers who belong to the same group, or from some ‘favoured’ manufacturers. Since manufacturers/ distillers cannot sell liquor directly to the retailer or end-consumer, such conduct of denial of market access to the other manufacturers from selling their products.  This has resulted in severe losses for the other manufacturers. They also allege that OP 6 has framed a policy stipulating that a single wholesaler would be granted license in each zone of the State, without any safeguards to ensure that not all the wholesale licenses are with a single group. Further, the conditions for eligibility to apply for licenses were so restrictive that only a certain business group could apply for license, thus creating conditions whereby OP 5 group became a monopsony.While assessing the allegations of the Informant, CCI noted that that there was no credible evidence on record to show the existence of any agreement amongst OP 1 to OP 4 in violation of Section 3 of the Act. In examining the allegations under Section 4, CCI delineated five relevant markets, namely: (i) market for procurement of country liquor from licensed manufacturers within the Special Meerut Zone in the State of Uttar Pradesh; (ii) market for procurement of country liquor from licensed manufacturers within the Lucknow Zone in the State of Uttar Pradesh; (iii) market for procurement of country liquor from licensed manufacturers within the Gorakhpur Zone in the State of Uttar Pradesh; (iv) market for procurement of country liquor from licensed manufacturers within the Agra Zone in the State of Uttar Pradesh; and (v) market for procurement of country liquor from licensed manufacturers within the Varanasi Zone in the State of Uttar Pradesh. In all such markets, CCI was of the prima facie view that OP 1 to OP 4 are dominant. CCI observed that OP 1 to OP 4 have been procuring country liquor from more than one distillery. However, significant percentage i.e., around 25 to 55%, of the procurement by OP 1, OP 3 and OP 4 in this period was from two distilleries, namely, Wave Distilleries and Breweries Limited and Lords Distilleries Limited, which are group companies of OP 5.CCI also noted several contradictions in the contentions put forward by the OPs. In addition, the facts of the case clearly demonstrated that procurement by each OP was not restricted by the zone to which the distilleries belonged.Based on the above, CCI opined that the reasons given by the OPs appear to be an attempt to subvert the fact that procurement from various distillers/ manufacturers was being made in an arbitrary and discriminatory manner, thereby resulting in denial of market access to certain distillers/ manufacturers like the Informant. Given this, CCI was of a prima facie view that there was a violation of Section 4(2)(a)(i) and Section 4(2)(c) of the Act and directed an investigation into the matter.[1] Case No. 53 of 2017 (Order dated July 9, 2018)