The Competition Commission of India (CCI) turned down a plea filed by Udaan against Parle Products Private Ltd, the manufacturer of Parle-G biscuits, seeking direct access to its biscuits. Udaan is a B2B online marketplace run by Bengaluru-based Hiveloop Technologies, allowing retailers and businesses to source merchandise directly from manufacturers and importers.
Last September, the startup filed an anti-trust case against Parle Products, claiming that the latter abused its dominant position in the biscuits market. It claims to have faced a competitive setback because Parle refused to directly supply its popular Parle-G products "without any objective justification". Since Parle products reportedly enjoy high consumer demand, and Udaan lacked a direct supply, the B2B e-commerce company was compelled to buy the biscuits from the former's existing distributors in the open market, which pushed up its operating costs.
In its plea, it also cites that Parle's refusal to deal created and strengthened barriers in the market for distribution of its goods, thereby softening intra-brand competition to the detriment of retailers and end-consumers. "If Udaan is not given access to the said market adequately in the same terms as its competitors, it may have to exit the market altogether, since they would not be able to compete effectively, implying it would remain foreclosed for 83% of the relevant market," it implores.
Sending A Terse Message Across
Not one to take kindly to these allegations, Parle submits a counter-plea to CCI, calling Udaan's legal act "a misguided attempt by a disgruntled enterprise to settle a commercial grievance by blatantly abusing the machinery of the Act to interfere with the independence of Parle to deal with companies in its own commercial wisdom and compel it to appoint the Informant as distributor/wholesaler when it is not obliged to do so."
Questioning Udaan's definition of biscuits, it maintains that glucose biscuits are only a sub-category in the total market of sweet biscuits, which are a further sub-category of the snacking sector. It claims that Parle-G accounts for 16% of the market share in the sweet biscuit category for FY 2020-21 and further accounts for 13% of the total biscuit market (sweet and salty) in India. This disproves the contention that Parle is a dominant player in India's sweet biscuit market.
It also states that Udaan's business model was "based on accumulating massive debts through raising funds from venture capitalists and other markets and, as per publicly available information, it is a massive loss-making enterprise year on year". It moreover harbours concerns over the e-commerce entity's long-term viability as a reliable partner vis a vis its traditional distribution channel.
In this July 6 not, the CCI also observed that a narrow market, based on segmentation, may not be justified in the facts and circumstances of the case, thereby not warranting any further assessment of dominance. "The commission does not find any abuse, more so as the informant (Udaan) has failed to establish any right on its part," it notes.
Another Rap On Udaan's Knuckles
This is not the first rejection that came Udaan's way in recent times. In June, CCI dismissed a similar case that the e-commerce player had filed against Britannia Industries Ltd. It stated that 'Good Day' and 'Marie Gold' were amongst the fastest moving SKUs in the FMCG's biscuit portfolio and hence are 'must have' stock for any distributor. Citing section 19(7)(b) of the Competition Act, 2002, it recommends the bifurcation of the biscuits industry into three segments—mass, mid-premium and premium.
Britannia discloses to CCI that Udaan's affiliate company, Granary Wholesale, listed as a seller on its B2B e-commerce platform, was dealing with the FMCG major, which was not revealed in the latter's plea. It also maintains that as a manufacturer, it has the autonomy to choose its distributors. Since it already had a robust network of distributors throughout the country, not dealing with Udaan was unlikely to cause any appreciable adverse effects in India's biscuit market.
Taking a stern view of this plea, the CCI noted that there is no specific allegation of any distributor of Britannia exiting the market. While elaborating on a manufacturer's autonomy in choosing its business partner, the agency noted, "from a competition perspective, business decisions to engage or not to engage with a downstream entity such as the Informant has to be seen in the context of likely AAEC, should the upstream entity choose not to deal with the downstream entity ... the Commission is of the view that there must be some autonomy available to the manufacturers to deal with their goods the way they want, in alignment with their business requirements. Nobody can ask for an absolute right to deal with a particular business."