Equal treatment is not a bounden obligation cast in iron and stone. Even distributors of the same company can be subjected to different terms when such distinction is based on a sound commercial logic, the Competition Commission of India noted, in its order rejecting Udaan's request of direct access to Parle-G biscuits.
In saying so, the CCI dismissed the complaint of Hiveloop Technology Pvt., which runs the B2B trade platform Udaan. The platform had complained that Parle Products Pvt.'s denial to directly supply its products to it was a clear case of refusal to deal, and constituted anti-competitive conduct.
The regulator rejected Udaan's case observing that there was no case to curtail Parle's autonomy in deciding its distributors.
Parle Argued Refusal To Deal Was Justified
Udaan submitted that Parle-G biscuits fall in the category of ‘must have’ stock for distributors and retailers. It stated that ‘must stock’ or ‘must have’ essentially refers to the idea that a dominant firm does not face any significant competitive constraints over at least a certain part of its demand.
And so, the platform has no option but to trade in such products by procuring them from Parle’s existing distributors in the open market or risk the chance of rapidly losing out its retailers, Udaan told the regulator.
"Parle refuses to engage in negotiations with Udaan, thus fortifying the abusive/anti-competitive conduct. Parle has a special responsibility to deal with downstream players in a fair manner, which is absent in the present case."- Udaan's Complaint
It is noteworthy that 115 of 235 vendors from whom the retailers of Udaan could purchase on Udaan's platform are Parle's distributors. The informant further states that this is being done to ensure that the existing distributorship network remains insulated from the competitive effects brought by Udaan.Hiveloop Technology Pvt.
In response, Parle Products said that its refusal to deal was based on an objective business justification.
The business model of Udaan, Parle argued, was based on accumulating massive debts through raising funds from venture capitalists and was a ‘’massive loss-making enterprise year-on-year’’.
…in view of such precarious financial position and risky debt-driven business model of the informant, Parle has legitimate business justifications and concerns about the long-term viability of the informant as a reliable partner in the distribution channel.Parle Products Pvt.
In any case, Udaan was not entirely foreclosed and could purchase Parle-G from the wholesale market, the company said in reply. Parle called Hiveloop’s information a ‘’misguided attempt by a disgruntled enterprise to settle a commercial grievance…‘’.
CCI Agreed With Parle Products
The CCI noted that Hiveloop has nothing credible that suggests that it's unable to deal in Parle’s products. The regulator agreed with Parle’s contention that the company was under no obligation to deal with Udaan. It also rejected Hiveloop’s contention that Parle’s refusal to deal would lead to exit of customers from the platform.
….no evidence has been given that some retailers have indeed stopped dealing with the Informant for want of supply of Parle’s products.Competition Commission of India
Udaan failed to demonstrate that Parle's refusal to deal with it directly had any adverse appreciable effect on competition in the market, except lesser margins for the platform, the CCI said.
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