w w w . L a w y e r S e r v i c e s . i n

Hiveloop Technology Pvt. Ltd. v/s Britannia Industries Ltd.

    Case No. 18 of 2021
    Decided On, 16 June 2022
    At, In The Competition Commission Of India New Delhi

Judgment Text
Order under Section 26(2) of the Competition Act, 2002

1. The present Information has been filed by Hiveloop Technology Private Limited (hereinafter, 'Informant'/'Udaan'/'HTPL') under Section 19(1)(a) of the Competition Act, 2002 (hereinafter, 'Act'), inter alia, alleging contravention of provisions of Section 3(4) read with Section 3(1) of the Act by Britannia Industries Limited (hereinafter, 'Opposite Party'/'OP'/Britannia').

Facts and allegations as stated in the Information

2. The Informant is stated to be a network-centric Business-to-Business(B2B) trade platform/marketplace engaged in buying, selling and trading in different product categories, including Fast Moving Consumer Goods (FMCG), electronics, pharmaceuticals, lifestyle, home and kitchen appliances, fruits and vegetables, toys, and general merchandise of different brands. It brings traders, wholesalers, retailers, manufacturers, and brands in India on to a single platform. It allows retailers and businesses to source merchandise from manufacturers, brands, white labels, importers, etc. It claims to be the largest B2B platform leveraging the use of technology and bringing innovation and efficiencies in the digital B2B market with a coverage of 50 cities. The Informant is also stated to provide credit through Udaan credit system, which facilitates smooth working of the operations on its platform, and therefore, retailers perceive it as a reliable partner for their business.

3. The OP is stated to be one of the largest food companies with, a diverse portfolio of products, such as biscuits, breads, cakes, rusk, and dairy products being sold across more than five million retail outlets in the country. Among all Britannia's biscuit brands, 'Good Day' and 'Marie Gold' are the fastest moving and highest demanded in the biscuits segment and stated to be the Stock Keeping Units (SKUs), and thus, are 'must have' stock for any distributor. According to the Informant, SKUs are certain categories of products within the brands which are demanded more compared to other variants of the same brands.

4. Based on the following factors, the Informant has delineated the relevant market to be considered in the instant case as 'market for mid-premium segment biscuits in India':

4.1. Biscuits can be distinguished on the basis of their nature, characteristics, taste, price and shelf-life. 'Good Day' and 'Marie Gold' biscuits of Britannia have been developed into 'legacy brands' by virtue of effective marketing over a very long period of time and corresponding brand loyalty exhibited by customers.

4.2. Industry trends suggest that consumer preference is shifting away from glucose type biscuits, which consists of mass-segment biscuits (valued at below Rs. 100 per kg), to non-glucose type biscuits, comprising mid-premium segment (valued at Rs. 100 per kg) and premium segment (valued at more than Rs. 100 per kg). The aforesaid three biscuit segments are clearly distinguishable in terms of Section 19(7)(b) of the Act. It is stated that certain brands of biscuits in the mid-premium segment commands a level of brand loyalty that has helped them attain the status of 'must stock' item for the retailers (and in turn distributors). Owing to that, mid-premium segment biscuits must fall in a separate relevant market in terms of the provisions of Section 19(7)(c) of the Act. 'Marie Gold' biscuits fall within the mid-premium segment and, with 60% share in the segment, Britannia leads the market. Britannia's 'Good Day' biscuits are 'cookies' falling under 'premium' segment and is the market leader in the 'cookies' segment, with over 33% market share.

Market Share/Market Power of Britannia

5. The Informant has quoted the data from A.C. Nielsen in the Forbes Cover Story and stated that Britannia wielded a market share of approximately 30.8% for FY 2017-18, 31.2% for FY 2018-19, and 32.1% for FY 2019-20 in the broader biscuits market. It also enjoys high profitability and strong brand loyalty, which confirms that it possesses strong, durable, and consistent market power. The demand for Britannia biscuits is primarily driven by its specific brands 'Good Day' and 'Marie Gold', which are fast moving products and high demand drivers for Britannia and contribute up to 80% of its revenues. Its closest competitor, Parle, had a market share of approximately 27% in the broader biscuit market in FY 2020.


6. There has been a trading arrangement of a vertical nature between the Informant and Britannia since 2019. There were numerous attempts on behalf of the Informant since then to improve the trading relationship between the two parties so as to ensure that the Informant gets the right mix of Britannia's products. However, the same have not been provided deliberately by Britannia, which is in stark contrast to its arrangement with its other distributors. Despite consistent efforts and attempts to deal in good faith on terms at par with other distributors, the Informant has been unable to secure fair treatment from Britannia.

7. It is alleged that the fast-moving SKUs are provided in a very restricted manner to the Informant. Despite multiple rounds of discussions and meetings, Britannia categorically denied providing the Informant: (i) the requisite quantity of SKUs due to which the Informant is unable to meet the demand on its platform, (ii) the requisite quantity of cheaper/smaller quantity product variants for these brands that drive the maximum demand in the market, and (iii) access to SKUs for other Tier 1/Tier 2 cities where such products are high in demand. Thus, there is a clear case of constructive refusal to deal on the part of Britannia, which is having an appreciable adverse effect on the market. The Informant is also not given products in geographical markets where its supply network will create efficiencies in the market. Britannia agreed to supply directly to the Informant for a very restricted profile of 10 Tier 2 and Tier 3 cities to run a pilot project and a highly limited allocation of fast-moving SKUs.

8. The Informant stated that, since there is a great demand for Britannia's products by SMEs, it procures such products from the open market, which increases the final cost to the retailers, restricts the Informant's freedom to engage with SMEs on its platform, and puts the Informant at a significant competitive disadvantage position qua other distributors.

9. It is stated that, in January 2020, a pilot project was initiated in four cities encompassing the Delhi/NCR region to better the terms of engagement. The said business arrangement of Britannia with the Informant came to a standstill post the onset of the COVID-19 pandemic in March 2020. Both parties again met on 09.11.2020 to discuss the mechanism for developing their direct business arrangements.

10. The Informant, while referring to the email dated 05.04.2021 (minutes of meeting held on 01.04.2021 between both the parties), highlighted issues such as meeting less than 5% of the demand on the Informant's platform by Britannia. However, such issues remained unresolved.

11. It is stated that, while confirming its 'Action Points', Britannia reverted to the Informant regarding the reasons of rationing supply its products. Britannia confirmed to provide the Informant with adequate SKUs to meet the existing demand and to extend launch of products to all 50 cities where the Informant has its presence. Udaan, in the same mail, also attached its demand forecast for the month of April 2021 for effecting supplies accordingly.

12. Britannia, vide email dated 06.04.2021, intimated its closure of the forecasting cycle for the month of April 2021 and its inability to meet the additional demand for SKUs by the Informant. The Informant, thereafter, vide its email dated 07.04.2021, requested its demand forecast of April 2021 to be considered as demand forecast for May 2021 as well. According to the Informant, Britannia replied, vide its email dated 17.04.2021, that the forecast cycle for May 2021 was already complete by 15.04.2021.

13. The Informant, thereafter, sent an email dated 21.04.2021 to Britannia, stating that none of its 'Action Points' were fulfilled, to which Britannia responded that the process to finalise the list of cities and stock allocation was taking time, as it involved discussion with various stakeholders. Britannia sent another email on the very same day stating about its pilot review in proposed cities as a confidence building measure before scaling up supplies across all cities. However, the rationale behind the selection of the proposed cities was neither disclosed nor discussed with the Informant.

14. The Informant, vide its email dated 24.04.2021, agreed to the pilot review by Britannia and also proposed 'additional cities', a mix of Tier-1 and Tier-2 cities. Britannia, in its email dated 05.05.2021, reiterated its stand to proceed with only the proposed cities with limited quantities.

15. A detailed list of SKUs provided by Britannia where the allocation is less than 70% (sent by Britannia along with email dated 05.05.2021) is as follows:

16. It is alleged that not only did Britannia agree to supply only 50% of the demand raised by the Informant but also restricted its supplies to a list of cities proposed by it, which characteristically exhibited a very low demand and where Britannia had a comparatively lower presence.

17. According to the Informant, Britannia had agreed to engage with the Informant in all cities and provide SKUs aligned with the actual demand on its platform. Britannia unilaterally and without furnishing reasons offered to initiate a 'pilot review' to assess the Informant's capabilities in the cities proposed by Britannia. Moreover, these cities were Tier 2 cities where demand for Britannia product is limited. Even in these cities, a right product mix in the requisite allocation as per the demand of retailers was also not given, which impacted level playing field of the Informant qua other distributors of Britannia. This review, according to the Informant, was not necessary since it had already participated in one pilot review prior to the COVID-19 pandemic in the Delhi NCR region.

18. Further, even in the proposed cities, Britannia proposed to provide only 50% of the total quantity of SKUs demanded on Informant's platform and denied to supply requisite quantities of the relevant SKUs. Over the last few years, the Informant had been providing Britannia's products to its retailers in the market and has a dedicated consumer base.

19. It is stated that Britannia's conduct towards the Informant is not only highly restrictive but also discriminatory in nature, considering that Britannia continues to fully fulfill its supply obligations to its other wholesale distributors. While other distributors enjoy the benefit of better terms of trade and entire mix of the products, the Informant is compelled to suffer the unfavourable terms and also restrictions in obtaining the fast-moving SKU's in the high demand markets, which reduces its competitiveness in the relevant market. The existing arrangement being forced upon the Informant is, therefore, a clear case of refusal to deal, and such arrangement causes appreciable adverse effect on competition in India, which is in contravention of Section 3(4)(d) read with Section 3(1) of the Act. Owing to its strong and durable position in the relevant market with 60% market share and the vertical restraints imposed by way of a constructive refusal to deal with the Informant, Britannia significantly increases the propensity to appreciably and adversely affect competition in the market on the touchstone of factors under Section 19(3) of the Act.

20. Besides the above, there are restrictions which are imposed by Britannia on other fast-moving SKUs such as Tiger, etc. Thus, restrictions imposed by Britannia qua the Informant are twin, i.e., (a) refusal to deal in cities where there is high demand and hence, requirement for more B2B efficiencies; and (b) limited SKUs being made available for must stock items even for those Tier 2/3 cities that were proposed by Britannia itself.

Impact on the Informant

21. According to the Informant, Britannia's refusal to deal creates a market distortion owing to unavailability of an equitable mix of SKUs and geographies.

22. It is submitted that due to non-availability of supplies of Marie Gold and Good Day, retailers would fail to procure these products on the Informant's platform. According to the Informant, this was evident from an increasing number of null-search results experienced by retailers on the platform. This is damaging for the Informant's business, since retailers generally source products from few distributors to reduce their search and procurement costs across categories. Thus, unable to find high demand products like Marie Gold and Good Day on the Informant's platform, many retailers would shift away from the platform as a whole and the Informant's business would suffer across products in other categories. If the said anti-competitive practices of Britannia are allowed to continue, then the Informant's business would not survive. Moreover, the Informant would be forced to meet the demand by securing Britannia biscuits from its competing distributors by forgoing its own margins, which defeats the very rationale of directly approaching Britannia.

23. The Informant emphasised that it has brought efficiency in the market by leveraging the use of emerging technology, trustworthy payment systems and its strong and reliable logistic network. It has emerged as an innovator and created a level playing field for both manufacturers and retailers.

24. In support of its contentions, the Informant elaborated on purchasing behaviour named 'point of purchase myopia', wherein due to brand loyalty, consumers and retailers make up their mind about what products to procure prior to their metaphorical 'point-of-purchase'. Thus, the retailers may in fact choose to go to another distributor rather than searching for competing and identical products. This will impair market efficiency and again widen the supply-demand gap. The Informant operating in the e-commerce space is prone to network effects, and continuously increasing null searches on its platform will start a negative feedback loop, with an increasing number of retailers leaving the platform altogether. Therefore, the foreclosure may cause the Informant to exit the market.

25. The additional input cost borne by the Informant for securing supplies of Britannia's products to meet demand on platform, and denial of discount schemes by Britannia is creating effective barriers for the Informant to effectively compete and sustain in the relevant market on an equal footing with other distributors. The Informant further submitted that the entity, even if not dominant, but having high market power, can cause appreciable adverse effect on competition by entering into an agreement in the nature of constructive refusal to deal, leading to denial of market access.

26. The Informant submitted that the alleged behaviour of Britannia is without any justification and is causing negative effects in market as, firstly, the existing distributor network is insulated against competitive constrains from the Informant, secondly, the Informant will continue to face barriers to entry in the relevant market, and lastly, the existing distributors will neither have to innovate nor improve upon their services in the absence of competition from the Informant. The Informant submitted that it is currently being provided only truncated SKUs and is forced to procure its products through Britannia's intermediary distributors, leading to significantly low profit margins to retailers and, in turn, also to ultimate consumers, which would otherwise have been available if the Informant were dealing directly with Britannia, like its other distributors.

27. The Informant has further stated it has advanced machine learning and technological capabilities, and with its wide geographic and online presence, if Britannia agrees to deal directly with it, the efficiency and innovation of the distribution channel will also trickle down to retailers.

28. Based on the above, the Informant has prayed the Commission for the following reliefs:

28.1. Direct the Director General (DG) to investigate the matter;

28.2. Direct the Opposite Party to cease and desist from indulging in anti-competitive activities under the provisions of Section 3 of the Act;

28.3. Direct Britannia to supply all SKUs across all cities to Udaan at prevailing terms and at par with Udaan's competing distributors and Britannia's existing distributors;

28.4. Declare that the conditions which were imposed by Britannia on the Informant are in violation of Section 3(4) read with Section 3(1) of the Act;

28.5. Impose maximum penalty on Britannia under Section 27 of the Act.

29. The Commission considered the Information on 12.08.2021 and directed Britannia to file its written response to the Information and also gave opportunity to the Informant to file its rejoinder, if any, to such reply of Britannia. After seeking due extensions of time, Britannia filed confidential and non-confidential version of its response on 08.11.2021.

30. The Informant was allowed access to the confidential version of reply filed by Britannia, pursuant to its request and subject to undertaking to maintain confidentiality. The Informant, after seeking due extension of time, filed its further response/rejoinder, in both confidential and non-confidential version, to the confidential reply of Britannia on 08.03.2022.

31. The Commission considered the Information along with the written submissions and documents filed by the parties on record in its meeting held on 26.04.2022 and decided to pass an appropriate order in due course.

32. The response filed by Britannia is, inter alia, succinctly described below:

32.1. Comments on the Informant's business model

32.1.1. The Informant has made conflicting submissions as to its business model in the Information. On the one hand, the Informant submitted that it is only a B2B platform, and on the other hand, it has alleged Britannia's refusal to supply its products to it directly and that it is compelled to purchase Britannia's products from the open market and to fulfill the demands of the retailers for Britannia's products. The Informant is directly operating as a B2B seller, which claims only to be a marketplace. The claim that the Informant's multiproduct marketplace can be disrupted by Britannia's offering a single product category is ex facie untenable and amounts to pressurising Britannia to accepting its commercial demands and free ride on the reputation of Britannia and its market making efforts undertaken along with thousands of its wholesalers and distributors operating across the length and breadth of the country.

32.1.2. Particulars of the Informant's sister concerns/group companies engaged in B2B businesses and listed as sellers on the platform are not disclosed in the Information. The Informant's B2B distribution network is near captive in nature.

32.2. No locus standi of the Informant

32.2.1. Britannia submitted that all through the negotiations and the subsequent execution of the trade relationship with the Informant during Pilot 1 and Pilot 2, the conduct of Udaan created an impression that it was undertaking B2B distribution of Britannia's products under the name and style of Granary, and the Informant/Udaan and Granary were the same corporate entity. Udaan's representatives had approached Britannia to ensure supply of product to Granary which, in turn, largely appears to be the exclusive seller of Britannia's products on Udaan. The Informant [Hiveloop Technology Pvt. Ltd.] was an unknown entity for Britannia before gaining knowledge of the Information filed before the Commission. Therefore, the relationship for the supply of Britannia's products was between Britannia and Granary only.

32.2.2. There has never been any business relationship between Britannia and the Informant. Therefore, the Informant has no locus standi to raise any grievances arising out of a business relationship between Granary and Britannia. Also, the Informant has no locus standi to raise allegations pertaining to 'constructive refusal to deal' against Britannia.

32.3. Evidence not led in the Information

32.3.1. Britannia has not discriminated against the Informant or any of its associates. The Informant has failed to establish a framework within which an allegation of 'discrimination' can be considered. No evidence has been led in the Information to suggest that terms offered to other distributors of Britannia are more favourable than that offered to Granary.

32.4. Information filed is premature and mala fide intention

32.4.1. An assessment of AAEC must be conducted at the prima facie stage itself in respect of allegations made under Section 3(4) of the Act. Therefore, the Commission should take into consideration the competitive effect of the supplies made by Britannia under Pilot 2.

32.4.2. It is pertinent to note that the Information was filed on 07.07.2021; however, the first invoice was raised by Britannia under Pilot 2 on 08.07.2021. Britannia was completely unaware of the Information filed till it received a notice on 23.08.2021 and the supplies were being made by Britannia to Granary on a good faith basis and as per the understanding between Britannia and Granary.

32.4.3. The present Information was filed even before Pilot 2 could take effect and thus, no prima facie effects-based analysis under Section 3(4) of the Act can be undertaken.

32.4.4. Without prejudice, even on considering supplies made by Britannia in the months of July and August 2021, the competitive conditions prevailing in any of the concerned markets cannot be assessed purely on the basis of supplies made in just a period of 2 months.

Nature of arrangement between Britannia and Granary

32.4.5. The distribution arrangement under Pilot 2 was temporary in nature and was only implemented for Britannia and Granary to assess the long-term scope of the distribution partnership between them. Therefore, Pilot 2 is not an appropriate subject matter for scrutiny under the Act, and the Commission's intervention based on such Pilot arrangement is unwarranted and premature at this juncture.

32.5. Absence of direct or constructive refusal to deal

No Agreement

32.5.1. Section 3(4)(d) as alleged by the Informant deals with agreements that are in the nature of 'refusal to deal'. In the present case, there is no such agreement in the nature of 'refusal to deal'. Explanation (d) provided in Section 3(4) implies that there must be an agreement of refusal to deal, not with each other, but with third parties. An agreement entered between Britannia and Granary to supply SKUs is not covered under the definition of refusal to deal.

32.5.2. There is no refusal to deal vis--vis the Informant or its preferred distributor (i.e. Granary). Britannia has been supplying its products directly to Granary since November 2019 and this supply arrangement continues to exist.

Absence of AAEC

32.5.3. AAEC is an essential requirement for establishing an allegation of 'refusal to deal', and the present information fails to fulfill the threshold. There is no likelihood of AECC in any of the plausible upstream or downstream markets.

32.5.4. The relevant market is fragmented, with the presence of several domestic and international brands. The key players offering products like chips, biscuits, crispers, nuts, namkeen, bhujia, etc., in the upstream relevant market have a higher markets share and power compared to Britannia. Thus, it does not enjoy any significant power in the relevant market. It is continually innovating its products to compete with the products offered by other key players.

32.5.5. In order to cause AAEC in the downstream market, the enterprise should have significant market power in the upstream market, which is lacking with Britannia. Therefore, there is no cause for any AAEC.

32.5.6. Market share is not the sole criteria to determine market power. The Commission in the past in, Case No. 106 of 2015, assessed the position of Britannia based on number of players, comparable size, resources, and their offerings in different categories/range of biscuits, and held that the market for biscuits, including each of segments therein, exhibited intense competition, and it did not possess sufficient market power to act independently of the competitive forces in the relevant market. The biscuit industry has continued to witness intense competition since 2016, when the said case was decided. Moreover, the competitive factors in the organised biscuit industry are not limited to pricing and glucose content as suggested but also includes product quality, taste, advertising, promotion, innovation of products, access to supermarket shelf space, brand awareness, product packaging, etc. Turnover and accessibility are also other factors for determining market power, which have been intentionally ignored by the Informant.

Application of de minimis

32.5.7. Vertical restraints are generally not perceived as being anti-competitive when a substantial portion of market is not affected.

32.5.8. The Informant started its operations only 5-6 years ago. Britannia's products were supplied to Granary/Udaan only in November 2019, whereas the distribution network of Britannia has been in existence for several years. Even if it is presumed that the alleged vertical restraint does not allow the Informant to distribute Britannia's biscuits, including the alleged 'must have' SKUs, there can only be de minimis impact on the downstream market. It does not affect the final consumers at all and, at best, affects the Informant in competing with other online and offline distributors of Britannia's SKUs. The Informant does not hold any significant position in the distribution of biscuits. Thus, a substantial portion of none of the plausible relevant markets (upstream and downstream) is likely to be affected.

32.5.9. It has been further submitted that the Informant's claims to be an online B2B marketplace that has continued to expand exponentially since it began its operations contradicts the narrative that it is dependent upon Britannia SKUs to survive in the downstream market. No case of dependency is made out from the Information. No effort has been made to compare the revenue generated through Britannia SKUs with comparable products. These contradictions and omissions again support the submission of Britannia that the present information has been filed only with the intention to arm-twist and harass Britannia and, as such, do not disclose a competition issue that attracts scrutiny under the Act.

32.6. Distributorship network of Britannia and no obligation to deal

32.6.1. Britannia has been operating for decades and has a network of more than three thousand distributors across India with distributorship agreements for various town and cities who, alongside Britannia, weathered and adapted to changing market conditions. Britannia is eager to partner with new distributors, which helps improve and enhance its distribution network. The only motive of the Informant is to free ride on Britannia's established network and 'cannibalise' the existing distribution network by disrupting the existing distribution channel through foreign funding.

32.6.2. For most of Britannia's products, except some bread and dairy-based products, the shelf life ranges between 4 to 9 months. Therefore, its objective is to ensure that the finished products are available for sale with retailers at the earliest so that end-consumers are able to purchase its products with sufficient shelf life remaining. In order to achieve this, it has worked over decades to build a strong distributorship network across India. Its relationship with its distributors is vital for business continuity, as they are the only route to retailers and end-consumers, including in remote areas, which still remain unserviceable by large, organised, retail chains as well as online distribution channels.

32.6.3. Britannia believes in maintaining relationships with local dealerships and distributors to strengthen and expand its 'local' footprint across India. In the market of FMCG products, small retailers, especially in non-metro cities and towns, tend to develop a longstanding relationship with local distributors and wholesalers whose accountability as local B2B players is perceived to be higher than that of direct sales and marketing representatives of FMCG companies as they may get transferred from time to time. Britannia faces challenges in expanding its distribution network and forging a mutually beneficial partnership with distributors having knowledge of local markets, sufficient market standing and experience to undertake and facilitate the wholesale distribution of Britannia's products. This challenge of forging a relationship with experienced distributors is in light of the presence of intense competition by strong competitors such as Parle, ITC, Patanjali, Unibic, Bisk Farm and Mondelez. Its stated policy is to actively work towards increasing its distribution footprint across all channels, using technology to ensure future growth. Thus, there is no commercial incentive for Britannia to restrict the supplies to the Informant or Granary, especially when the Informant claims to bring in efficiency in the wholesale distribution chain. Presumption is in favour of Britannia, and the Information fails to dispel the presumption.

32.6.4. Britannia understands the demand for its products more than the Informant or any other distributor, and it is incumbent upon Britannia to ensure fair distribution of product across its distribution to ensure robust intra-brand competition. However, when the demand is evidently exorbitant and raised without any credible demand projection and with the intent of disrupting the existing distributorship channel, Britannia is not obligated to supply its SKUs as demanded by the Informant.

32.6.5. On the other hand, the Informant's primary assertion is that Britannia must deal/give preference to Udaan at the expense of Britannia's long trusted distribution network comprising thousands of small and medium scale distributors who have been associated with Britannia for several years, and supply goods outside of its production plan (like availability of raw materials, capacity of manufacturing unit, demand forecast, festive season, etc.) by starving its existing distribution network, and thus, except for bald allegations, the Informant has not made out any case which causes or may violate the provisions of the Act.

32.6.6. The right to choose its distributors lies with Britannia, and this freedom cannot be curtailed by compelling it to enter into distribution agreements with the Informant.

32.6.7. As a manufacturer, Britannia has to cater to its distributors across India and to ensure that its products are available for retail immediately after manufacturing, considering the perishability of such products. As per the Informant, it is operating only in 50 cities. Any supply to the Informant, in excess of its ability would only prejudice the objective of Britannia to reach out to the final consumer through small retailers located all across the country in a fast and effective manner. Further, Britannia's wide distribution network ipso facto demonstrates that there is no AAEC on competition in any of the relevant market in India.

32.6.8. Relying upon past cases decided by the Commission, Britannia stated that the distributor cannot be allowed to dictate the terms of supply to the manufacturer, and the Commission has, through its previous orders, endorsed the rights of manufacturers to decide their distribution channel.

32.7. No direct/indirect restrictions imposed by Britannia

32.7.1. Britannia has not imposed any commercial or contractual restrictions either directly or indirectly on its distributors to sell its products on the Informant's marketplace or any other marketplace, nor has it refused to deal with Informant marketplace or any other marketplace or through any other online medium or offline channels of distribution. Britannia submitted that Granary, being the only third-party seller of Britannia's products on the Informant's marketplace, is either intentional or a case of failure to attract other third-party sellers to sell Britannia's products on the Informant's marketplace.

32.8. Market/Relevant Market

32.8.1. Britannia delineated the upstream relevant product market as 'market for manufacturing of packaged snack food items' on the basis of high degree of demand side substitutability of its products with other sweet and savoury food items such as biscuits, cakes, dairy products, and chips. All these would fall within the broad category of savoury or sweet food items. Competitive constraints faced by biscuits would cut across various pre-packaged food categories.

32.8.2. From supply side substitution, Britannia's products not only include sweet biscuits but also savoury biscuits and chips offered to its distributors and retailers. The scope of standard distribution agreements offered by Britannia typically covers all products. The competitors of Britannia include companies such as Parle, ITC, Patanjali and Future, besides others. Packaged snack foods are also traded/displayed/shelved together. All packaged snack food items comprise a single product market and are, inter se, substitutable.

32.8.3. Biscuits cannot be said to comprise a distinct and standalone relevant market. The Commission in the past had specifically considered Britannia's product portfolio and distinguished between biscuits, breads, cakes, rusk, milk, butter and cheese based on their shelf life while delving into the aspects of the relevant market. Britannia, inter alia, submitted that the shelf life among biscuits is not constant and may vary with different biscuit types. Even the shelf life of various snack foods is comparable and can no longer be considered as distinguishing between biscuits and other food items.

32.8.4. Alternatively, the narrowest relevant product market can be delineated as 'market for biscuits' as decided by the Commission in the past. The classification of biscuits into 'mass', 'mid-premium' and 'premium' based on price, as has been done by the Informant, is not correct. The sub classification of biscuits would contradict the settled jurisprudence of the Commission.

32.8.5. The relevant product market as delineated by the Informant is a self-serving attempt and creates an artificial and untenable market segment to show that Britannia wields a high market power in the market for biscuits in India, which is not correct.

32.8.6. It is stated that even assuming Britannia enjoys market power in the upstream market, AAEC has to be seen in the downstream market and thus, downstream relevant market is necessary for Udaan. Udaan is a B2B ecommerce platform operating across multiple product categories, and the broader market can comprise all B2B sales and, at the narrower level, the market can be defined segment wise. Granary is the only third-party seller of Britannia's products on Udaan and is classified as a seller of staples and FMCG products on Udaan marketplace. The commercial success of Granary is not dependent upon B2B trade of snacks or bakery items but its ability to conduct B2B sales of 'groceries and food items.' The downstream relevant market at broader level may comprise B2B sales and, at the narrower level, comprise 'market for B2B sales of groceries and food items.'

32.8.7. The geographic scope of all relevant markets in the present case is pan-India.

32.9. Market Power

32.9.1. Mid-premium segment as delineated by the Informant is an artificial category created solely to target Britannia's popular biscuits brands such as Marie Gold. The narrower relevant market as delineated are extremely competitive markets and no manufacturer has the ability to affect competitive conditions in upstream or downstream markets in its favour. Market share is the only indicative factor and cannot be treated as a determining factor. Market shares are required to be assessed in conjunction, inter alia, with the number of players in the market, intensity of competition prevailing in the market, level of intra brand competition, etc.

32.9.2. Britannia relied upon to indicate that its closest competitor Parle leads the market in terms of volume of sales while it has an incremental lead over Parle in terms of value. Britannia also faces significant competitive constraints from other leading national and regional brands which have strong national/regional/local presence. It also faces competitive constraints from the unorganised sector, including loose biscuits or biscuits without manufacturer name, which also has a sizable presence in relevant market as well as the narrower relevant market. Packaged snack food items market as well as the biscuit market are intensely competitive markets with many FMCG players which continue to innovate through differentiated offerings regularly. The source of disruption is not limited to companies traditionally present but may also come from large FMCG company which enjoys high brand goodwill and reputation, such as Unilever, ITC and Patanjali.

32.9.3. Britannia competes with various FMCG companies present in the packaged snack food items and biscuits market, wherein some are Indian subsidiaries of large FMCG giants like PepsiCo, Nestle India, HUL, P&G and Mondelez India and large Indian conglomerates such as ITC and Parle in the relevant market having access to large resources.

32.9.4. Since 2016, there has been no exit of a brand from the market, and recent entrants Unibic and United Biscuits have only intensified the competition existing in the market. Britannia's Marie Gold and Good Day have been asserted as 'must stock' items by the Informant without any evidence. Had it been so, as contemplated by the Informant, Britannia would not have been required to innovate continuously with variants of biscuits introduced into the market.

32.9.5. Economic Times publication has been wrongly relied upon by the Informant since it is based on a very small sample size and cannot be used to establish the market power of Britannia. The relevant geographic market extends to the whole of India and survey is based upon 2200 responses. Improving profitability and reduced wastages are not the metrics for assessing market power. Moreover, the Informant/Udaan in a span of 5 years has emerged as India's largest B2B platform. It also provides logistics for fulfillment and delivery service through Udaan Express and trade financing through Udaan Capital. It is a multiproduct marketplace, and the Informant is not dependent upon Britannia's products, which forms a minuscule part of the Informant's portfolio of product offering.

32.10. Pilot 1 and Pilot 2

32.10.1. The Informant omitted to provide any information with respect to Granary's role and its engagement with Britannia pursuant to Pilot 1. The terms of trade as finalised and executed in respect of Pilot 1 was executed in November 2019 between Britannia and Granary. The Informant did not disclose in the Information that Granary was appointed Britannia's distributor in NCR.

32.10.2. It was Granary which fulfilled all legal compliances. However, the Informant claims to be a procuring entity though it is a B2B marketplace. Pursuant to the completion of legal and commercial compliances by Granary, Britannia supplied its products against purchase orders raised by Granary from April 2020 onwards.

32.10.3. During Pilot 1, Britannia supplied its products to Granary for distribution in the NCR region, which was a relatively saturated market for Britannia, against purchase orders raised from April 2020 onwards. However, the performance was not satisfactory and the supply arrangement came to an end post June 2020. In November 2020, negotiations resumed to finalise the scope of distribution. In April 2021, after finalisation of distribution arrangement between them, it was mutually agreed to cover 9 more cities.

32.10.4. Britannia submitted that the scope of Pilot 2 was fair, reasonable and commercially justified. It shows transparent and bona fide commercial dealing by Britannia.

32.10.5. Notwithstanding that Britannia was under no obligation to deal with the Informant or its preferred distributor (i.e., Granary). However, with a view to explore the opportunity of expanding its distribution network, Britannia decided to enter into partnership with Granary on two separate occasions. On the date of filing of Information, there was subsisting relation between Granary and Britannia.

Selection of cities in Pilot 2

32.10.6. Cities selected under Pilot 2 were based on objective criteria and the past performance of Granary in the NCR region.

Better Terms

32.10.7. The entire narrative relating to discriminatory conduct is false and misleading .

Credit Period

32.10.9. Britannia has not discriminated against the Informant or any of its associated concerns; rather, it has facilitated its entry. No evidence has been led in the Information as to how the Informant has been discriminated vis--vis its other distributors by providing better terms of trade.

32.10.10. On supply restriction, Britannia submitted that there has been no short supply of Britannia SKUs as alleged. Pursuant to execution of terms of trade (ToT), actual supplies started in April 2020, which ended in June 2020 owing to low demand and supply of Britannia SKUs. Again, supply resumed in July 2021 after negotiation and fulfillment of necessary compliances.

33. In response to the averments made by Britannia, the Informant filed its rejoinder, inter alia, reiterating its averments contained in the Information along with further submissions, which are recorded as under:

33.1. Locus Standi of the Informant

33.1.1. Annexure 12 of Britannia's response clearly demonstrates that Granary was buying Britannia's SKUs for making online sales through Udaan. Even Udaan's name is mentioned a few times in the same document. The said document was signed by an employee on behalf of Granary/Udaan. Thus, the contention of Britannia is wrong. Its website, Udaan.com, also mentions HTPL FSSAI number, where HTPL stands for Hiveloop Technology Pvt. Ltd.

33.1.2. Granary and the Informant are part of the Udaan ecosystem. Even the domain name for email addresses used by Granary contains the Udaan domain name. Even the email communications annexed with Britannia's response were from the domain name of Udaan, which establishes prior knowledge of Britannia that Granary is a part of Udaan ecosystem. They constitute a Single Economic Entity (SEE) for the purposes of the Act. Granary is engaged in the wholesale of fruits and vegetables. Its listing as a seller on the Informant's platform is immaterial. All businesses seek to organically or inorganically integrate vertically to boost productivity and enhance cost efficiencies to improve overall quality of product/service offered. Granary and the Informant are fellow subsidiaries, and their inter-relationships is irrelevant to the present case. Granary is not the only seller on Udaan as alleged by Britannia and it has 25,000 to 30,000 sellers across more than 900 cities.

33.1.3. Thus, a refusal to deal and a denial of market access against Granary ipso facto adversely impacts the business prospects of the Informant. Non-supply of Britannia's products hurts the Informant's overall business and credibility in the B2B space. Such actions have an AAEC on the market.

33.2. Information is not premature

33.2.1. The Information filed is not premature since there have been attempts by Britannia to ensure that the Informant fails through multiple pilot reviews, by inordinately delaying negotiations, delaying shipments, perceiving the Informant as a threat rather than as another distributor in the chain and ring fencing its existing distribution network from newcomers like the Informant.

33.2.2. It is clarified that the Informant's concern is not specific to the cities allotted, quantum of supply of SKUs or delayed responses by Britannia, but pertains to overall incisive strategy of Britannia to preclude the Informant/and or its group entities from acting as a distributor of its products.

33.2.3. The Commission is only required to take notice of the Information and the documents supplied with the Information without entering into any adjudicatory or determinative process if there is an inkling of a meritorious case at the preliminary stage.

33.3. Presence of Refusal to Deal

Existence of Agreement

33.3.1. The Act provides a wide definition of 'Agreement' under Section 2(b) of the Act. It is apparent that there is clearly concerted action between Britannia and its distributors, so that Britannia does not engage with the Informant in order to ring fence and insulate its distribution network and ensure that there is no innovation in the market and status quo inefficiencies remain.

33.3.2. The implicit agreement exists between Britannia and its existing distributors to oust the Informant from the supply chain as the Informant's business model would cut into the margins of existing distributors. There have been numerous threats by traditional distributors to FMCG companies opting to distribute its products through B2B e-commerce platforms, and Britannia is also aware that if existing distributors would revolt against them, the supply of products would get hampered. Therefore, there is no doubt that an agreement exists between Britannia and its distributors as aforementioned.

33.3.3. The traditional distribution network and Britannia are in cahoots to hinder entry and expansion of the Informant and together, prevent access to small retailers from benefiting from improved margins, profitability and superior inventory management, wider assortment and reliable logistics.

33.3.4. While referring to past cases decided by the Commission, the Informant stated that Britannia misrepresented the ratio decidendi in these cases to mislead the Commission.

Presence of AAEC

33.3.5. The alleged agreement between Britannia and its distributors is causing AAEC in the market as per Section 19(3) of the Act. The alleged conduct of Britannia has the effect of softening intra-brand competition in the market to the detriment of retailers, end-consumers and competitive dynamics. The price and non-price efficiencies are not able to reach the retailers or end-consumers and the market gets severely impacted. Britannia's refusal to deal significantly forecloses a significant part of the relevant market for the Informant, which controls approximately 60% of the market. If the Informant is not given access to the said market on fair and equitable terms, the Informant (maverick and innovator) may have to exit the market altogether. Retailers would be forced to procure Britannia's products from existing distributors. The same consequence would occur if broader definition of market for biscuits is taken, where Britannia has over 30% market power. This will not be offset by pro-competitive factors under Section 19(3) of the Act. The Informant is compelled to procure products through Britannia's existing distributors, which significantly and adversely affects the Informant's margins. This directly impinges its ability to drive innovation and improvements in the distribution of products in the market but also discourages the Informant's competitors to innovate and develop their own capabilities in improving distribution of goods and provision of synergistic services in the market to retailers, traders, etc. Britannia is adopting exclusionary tactics not only to the detriment of entry and expansion of the Informant but also restricting the overall advancement of FMCG sector and consumers in contravention of Sections 4(2)(b)(i) and 4(2)(b)(ii) of the Act.

33.3.6. The Informant reiterated that Britannia holds a high market share in the relevant market and holds dominance/market power in both premium and mid-premium biscuit markets in India. A refusal to deal by such a dominant enterprise could constitute an abuse. The conduct of Britannia results in denial of market access, and whether the said denial is complete or partial is of no significance. This is squarely covered under Section 4(2)(c) of the Act, which is denial of market access, not denial of market entry. The Commission needs to protect a maverick and innovator like the Informant.

Non-application of de minimis

33.3.7. The Informant has to procure Britannia's products from third parties because of the demand of retailers which it has gauged through numerous null searches, which cannot be ignored. The Informant is a distributor in the downstream market which is being discriminated against by Britannia. Since the Informant is in the e-commerce space, it is prone to network effects/feedback loops. High null searches on its platform starts the negative feedback loop, with increasing number of retailers/traders leaving the platform if they have to rely on other distributors for 'must have' SKUs of Britannia. Such AAEC would trickle down from the retailers to the end-consumers, as they would be deprived of the cost efficiencies brought in by the Informant.

33.3.8. A large portion of the relevant market is controlled by Britannia, and the absence of supplies restricts the Informant's operation in the downstream market, where it supplies such products to retailers. Britannia's market share is high and stable in both the broad and the relevant market and thus, de minimis test does not apply.

33.3.9. Refusal to deal and denial of market access is perpetrated by various FMCG companies including Britannia for various other market segments as well. Such behaviour seriously impacts the operations of the Informant. Britannia has stopped all supplies to the Informant even for Pilot 2 and it might resort to more tactics, seeing the exit of the Informant from the market.

33.4. Role of the Informant

33.4.1. The Informant has emerged as a 'saviour' of retail and kirana stores, which can use Udaan's mobile application to purchase stock rather than dealing with multiple suppliers. The Informant's business model is legitimate as per extant laws. Its fellow subsidiaries Granary Wholesale Pvt. Ltd. (Granary); Grantrail Wholesale Pvt. Ltd.; Stackrail Cash & Carry Pvt. Ltd.; Leadmark Wholesale Pvt. Ltd.; and Stapel Wholesale Pvt. Ltd. are adequately disclosed publicly by the Informant in financial statements for FY 2019-20.

33.4.2. Retailers have to rely upon middlemen and wholesalers and have to chase down multiple vendors to get the best price and have to part with a large part of commissions. Sourcing goods in this thoroughly unorganised and disaggregated market is an uphill task. To overcome these issues, the Informant directly sources the products. This reduces multiple players/intermediaries in the supply chain and brings down the input costs for retailers in terms of commissions. They are able to compare prices offered by multiple vendors by using the platform and propagate strong price competition between suppliers. The information asymmetry, continuous supplies with last mile delivery support and unequal bargaining power have been disrupted by the Informant.

33.4.3. Attracting investments and funds cannot represent market power without the presence of other, more important factors, which allows it to operate independent of market forces, as alleged by Britannia. It is Britannia which is one of the leading companies in terms of market capitalisation amongst FMCG companies in India.

33.4.4. FMCG supply and distribution is a very capital intensive and product-based market. FMCG distribution network derives its revenues from FMCG companies' SKUs to retailers, and the operations of FMCG distributors are based on a back-to-back supply arrangement with FMCG players, and this is even more capital-intensive than the upstream FMCG sector.

33.4.5. Britannia is thwarting any attempt to engage with the Informant and engaging on terms which are designed to fail or depriving the Informant from effectively competing in the market. Britannia has refused to engage and has terminated the relationship with the Informant post filing of the Information.

33.4.6. Media reports are evident that FMCG companies, including Britannia, wish to boycott the Informant. Traditional B2B distribution network is owned and operated under the patronage of large FMCG companies like Britannia, Hindustan Lever Ltd., ITC Ltd., Nestle India Ltd., Marico Ltd., Colgate Palmolive, Parle Agro, P&G, the Godrej Group, Amul, Dabur, etc. Moreover, traditional distributors publicly asked for sidelining online distributors like the Informant and are attempting to coerce the FMCG players to align themselves in not dealing with online B2B distributors by staging protests and dharnas.

33.4.7. Product assortment/product availability, convenience and rates available to retailers are important from retailers' perspective for choosing a platform/vendor. If the Informant is unable to offer the same rates and convenience and the complete assortment, the retailer will exit the platform altogether and continue with the existing inefficient market model.

33.4.8. The Informant has stated that there is an alliance between FMCG companies like Britannia and distributors which is averting competition from the Informant and other B2B ecommerce platforms in the market by creating entry barriers.

33.4.9. The Informant's business model is devoid of competition concerns, since Udaan is merely the Informant's B2B platform through which it operates, whereas Granary is engaged in the wholesale of fruits and vegetables and is listed as a seller on Udaan. From Annexure 12 of Britannia's response, it is clear that Granary is buying products from Britannia for online sales, with Udaan using common trading/brand name of the Informant.

33.4.10. Required assortment at the frequency and reliability needed on a platform cannot be assured when products are bought from the open market. The Informant has to procure at higher rate in the market and also does not have access to the same promotional/discount schemes passed down by such companies to their distributors/general trade network. Vertically integrated entities help the Informant procure products directly from FMCG companies and provide it to retailers using the platform. Otherwise, the process becomes erratic, inefficient and unreliable.

33.4.11. Even if Granary is independent and competing with Britannia's distributorship network, it does not invalidate refusal to deal by Britannia. This is arising out of the arrangement of Britannia with its existing distributors, whereby it is unlawfully refusing to deal with Granary to protect its own distributorship network. It is stated that the business model of the Informant is in compliance with FDI Policy on B2B ecommerce. Other than the Informant, there are other B2B ecommerce platforms such as India Mart, Bizongo, Moglix, Power2SME, etc., operating in India.

33.4.12. Britannia is overlooking the fact that the Informant can benefit it and increase its local footprint. As per the Nielson study carried out by it, the Informant helped two leading FMCG companies add retail stores. It also shows that retailers can multihome through both the traditional channel and Udaan. The Informant's intention is not to eliminate or cannibalise the existing brick-and-mortar distribution chain, as alleged by Britannia. It provides an omnichannel/multichannel approach to companies.

33.4.13. The contention of Britannia that the Informant is attempting to monopolise the B2B market in its favour is untenable. There are many other B2B platforms and newer and better platforms that are emerging.

33.5. Relevant Market and Market Power

33.5.1. The Informant termed the relevant market definition proposed by Britannia as absurd and stated that the fungibility between all snack items is completely misplaced and unfounded. As per the Informant, it is not plausible to rely on the Statista report, which states that the snack food market be treated as standalone market.

33.5.2. The Informant stated that an incremental lead of Parle in terms of market share over Britannia would not discount it from being examined under the provisions of Section 3(4) of the Act for its alleged conducts. There can also be a case of abuse of dominance by Britannia under Section 4(2) of the Act, as its established market power in the relevant market would not undergo any change in the broad market of biscuits.

33.6. Pilot 1 and Pilot 2

33.6.1. The arguments taken by Britannia in its response betrays its intention to protect its existing distribution network from the perceived competitive threats posed by more efficient and effective business models. Online B2B platforms have equal reliability compared to traditional distributors.

33.6.2. The allegations about the Informant's intention becoming a near exclusive seller of goods of various categories and free ride on Britannia's established network is mischievous for many reasons. For example, the Informant is creating a technological infrastructure which can create a win-win situation for all stakeholders and create a level playing field. It is incurring losses since it is required to establish itself as an effective and reliable market player. On the other hand, Britannia is a deeply entrenched market player. The Informant wants to be a part of Britannia's direct distributorship network to address the demands of retailers on its platform and not deal with it exclusively nor monopolise the distribution network as has been averred by Britannia in its reply.

33.6.3. Britannia's products supply during Pilot 2 was only 6.81% and 3.44% respectively of the total value of purchase made by the Informant of Britannia's products for supplying retailers on its platform. Even after such large-scale procurement from the local market, the Informant is consistently unable to meet at least 25% of the demand on its platform for Britannia's products, and this gap can only be met with the cooperation of Britannia.

33.6.4. All relevant emails from an evidentiary perspective were contained in the Information in respect of averments. To develop the trading relationship, the Informant had initiated contact in January 2020, based on which pilot engagement was initiated in the Delhi-NCR region, and it was premised on advance payments, contrary to market practices. Pilot 1 did not proceed at all after the negotiation stage. Pilot 1 was abandoned because Britannia offered discriminatory, unreasonable and one-sided terms to the Informant, such as non-extension of credit. Post COVID-19, it showed no inclination to extend the business arrangement. This shows that the arrangement was superficial. The Informant once again met to discuss direct business arrangements. Britannia promised the Informant direct business relations in all 50 cities where it was present and supply SKUs aligned with the overall demand of the Informant's platform.

33.6.5. There were 10 cities instead of 09 as mentioned by Britannia in its response. On 21.04.2021, the Informant highlighted inaction on behalf of Britannia regarding its promise. Later, the Informant reverted with the list of 10 cities. Through another email dated 24.04.2021, the Informant highlighted that Britannia's inaction was a stark departure from its action points discussed and agreed in the meeting dated 01.04.2021. However, Britannia reneged on its promise by simply delaying meaningful entry of the Informant. However, in order to continue the potential business relationship, it agreed to Pilot 2 but proposed an addition of 10 more cities.

33.6.6. The objective criteria to select Pilot 2 cities as stated by Britannia should be a matter of investigation. Such parameters were never mentioned, let alone discussed with the Informant. It ought to have provided a mix of metro/Tier 2 cities for a successful pilot from the Informant's perspective. However, Britannia chose the smallest markets from the Informant's geographic reach, where the demand for Britannia's products were the lowest. 7 out of 10 cities had a projected demand of less than ` 20 lakhs and are outside the top 10 cities as per the Informant's projected demand. The right mix of cities could have benefited all stakeholders. Thus, deliberate selection of Tier 2 cities shows mala fide intent of Britannia in ensuring that Pilot 2 should not succeed. Even for such cities, allocation requested by the Informant was not agreed upon.

33.6.7. Despite requesting allocation of adequate SKUs for Pilot 2 cities, only reduced quantities of Britannia's KVIs were allotted by Britannia for April 2021. For the sake of complete disclosure, emails in May and June 2021 were provided as Annexure D to rejoinder. From the email exchanges, the Informant submitted that Britannia discriminated against it by not providing promotional support to the Informant. The Informant was aware of certain promotional schemes being availed of by distributors in Pilot 2 cities. Later, Britannia misled (email dated 16.06.2021) by claiming that it would treat the Informant at par with its peers and general trade distributors of Britannia. When the supplies for the month of July 2021 were complete, the Informant collected all the bills and concluded that their current selling rates are higher than the rates at which OP's existing distributors are supplying to retailers in the market. This was unambiguous and glaring evidence of discrimination against the Informant, as there were additional schemes for 67 products across cities. This was promptly brought to the notice of Britannia on 04 and 05.08.2021. Further, there is market evidence of SKUs being sold in different Pilot 2 cities, which were at a higher rate than market rates. The price at which certain products were available on the Informant's platform is significantly higher than the price at which Britannia's distributors were selling to retailers in the market. Annexure F to rejoinder indicates that Britannia has dealt with it on discriminatory and inequitable terms in Pilot 2 cities, at least making it less competitive and thereby softening effective competition at the distributorship level.

33.6.8. Moreover, the supply was not only at higher rates but was besot with innumerable delays. Britannia did not abide by its allocation in August 2021 and also failed to supply most of its allocated products in Pilot 2 cities despite multiple reminders while relying on emails provided in Annexure H to the rejoinder. Referring to Annexure 19 of Britannia's response relating to supplies made in July-August 2021, the Informant stated that a total fulfillment rate of 76% was quite low in the FMCG sector, considering that stocks usually last only 10-15 days. Some had 100% fulfillment rate but allocated quantities were low. But some SKUs' fulfillment rates were very low. Further, supply was critical since it was not sourcing Britannia's products from the open market and relied upon Britannia. Britannia made supplies only till 23.08.2021. Follow-up emails were sent to Britannia in September 2021 but to no avail.

33.6.9. With respect to landing price comparison between the Informant and other distributors, the Informant is not privy to the rates of distributors in the open market, and this is a matter for investigation, and the Commission should not place reliance on landing rates in the market.

33.6.10. The absence of optimum product mix/SKUs along with skewed geographic allocation was predesigned to willfully impair the Informant's ability to effectively participate in the relevant market (as delineated by the Informant). Britannia unilaterally changed the terms for Pilot 2. The said actions have had a debilitating effect on the entire supply chain and competition at large. Post the filing of Information, Britannia brought an end to this commercial relationship by stopping all supplies without citing any reason.

33.6.11. Whether the said conduct of Britannia to refuse supply of its products to the Informant can attract provisions of the Act can only be completed post a detailed investigation of the market. The issues agitated in this case are not inter se disputes but posing larger issues over the industry, which is already affected by chronic vulnerabilities across the supply chain. On one hand, Britannia stated that it did not want to affect its existing distributors, whereas on the other hand, Britannia stated that it gave better terms of trade despite an apparent failure of Pilot 1. According to the Informant, the same is contradictory.

Observations and Analysis of the Commission

34. The Commission has perused the Information, Britannia's response and the rejoinder of the Informant thereto and information that is available in the public domain in this context.

35. At the outset, the Commission notes that Britannia in its response has submitted that the Informant did not disclose the fact that Granary Wholesale Pvt. Ltd., a group entity, was directly dealing with Britannia to procure its biscuits/products and listing them on the Informant's platform as an exclusive seller. In the rejoinder, the Informant stated that such disclosure is immaterial from a competition perspective, and, in any case, the Informant and Granary are part of the same group/ecosystem and may be considered a Single Economic Entity.

36. To address this aspect, the Commission perused the material on record and notes that the Informant operated platform, Udaan, is basically performing the core function of listing manufacturers/wholesalers/distributors on its platform to match the demand of the retailers on the other side of the platform as a B2B intermediary, and the Informant is present in the distributor's chain through Granary as its fellow subsidiary. This is apparent from the reading of Annexure 12 annexed with Britannia's response, which entails the ToT between Britannia and Granary. The Informant has admitted in its rejoinder that an employee signed the same on behalf of Granary/Informant. It further becomes apparent from the reading of email dated 25.05.2021 sent from Udaan's domain name to Britannia, at the time of Pilot 2 engagement and the documents annexed as Annexure 17 of Britannia's response that Granary was dealing with Britannia. The contents of the same have not been specifically denied by the Informant in its rejoinder. Further, from the document provided by Britannia from the Informant's/Udaan's website, it appears that Granary exclusively lists/sells Britannia's products, including biscuits, on the Informant's platform. This has not been specifically denied by the Informant in its rejoinder as well.

37. Thus, the Commission notes that Granary formed an important part of the engagement with Britannia and the Informant never disclosed any fact related to the procurement of Britannia's biscuits for its platform in the Information and impressed upon the Commission that due to alleged conduct of Britannia, Udaan is compelled to procure Britannia's biscuits from open market in order to meet demand raised on its platform by the retailers. The Commission is of the view that the Informant which is seeking relief in the present case ought to have disclosed these facts on its own and in the first instance itself. Considering the nature of prima facie proceedings before the Commission, it appears that the Informant chose not to disclose the fact in the first instance and disclosed only after the Commission received the reply from Britannia wherein it made the objection of concealment on the part of the Informant and that the Informant has no locus standi to file the present Information.

38. The Commission, at the outset, shall deal with the preliminary objection raised by Britannia regarding lack of locus standi of the Informant in the present matter. The Commission disagrees with the said contention of Britannia. The issue of locus standi stands settled by the Hon'ble Supreme Court of India in the case of Civil Appeal No. 3100/2020 Samir Agarwal vs. CCI & Others and therefore, the locus of the Informant/Udaan cannot be doubted in the present case. However, this does not take away the fact that the Informant ought to have approached the Commission disclosing the correct facts pertinent to the case rather than waiting for Britannia to put facts on records. This is particularly relevant as the Commission can direct an investigation under Section 26(1) of the Act on the basis of the averments contained in the Information. The prudence, which was expected of an Informant, has, thus, been clearly lacking. The plea of the Informant that guidance in this regard is available from the documents, in its annual statements publicly available, which have been annexed to the reply of Britannia, is not tenable as it is incumbent upon the Informant to disclose relevant facts when filing the Information, and the onus does not shift either on the Opposite Party or the Commission.

39. Adverting to the case, the facts as have emerged show that if a relationship were to fructify with Britannia, the same would have enured to the benefit of Granary directly as a distributor and, indirectly, the Informant, as a platform where Granary would have procured Britannia's products and sold it on the platform. Thus, in view of the Commission, any party which comes before the Commission should disclose true and complete facts which is in its knowledge at the time of filing of the Information, more so when such Information becomes relevant in the context of some relief that may be availed of or any detriment that may accrue to any person. Such a requirement cannot be obviated by raising the plea of a single economic entity. Be that as it may, the Commission further notes that there has been an addition of allegation in the rejoinder by the Informant of Section 4 of the Act, which was missing in the Information. Britannia, thus, did not get the opportunity to respond to Section 4 allegations made for the first time in the rejoinder.

40. Having regard to the above and without dilating further on this aspect, the Commission now proceeds to analyse the case based on the facts and evidence on record at this stage.

41. The Commission notes that the crux of allegations of the Informant in the present case is that Britannia provided the Informant/Granary restrictive terms of trade by not providing 'must stock' SKUs of Marie Gold and Good Day biscuits and not extending the schemes as available to its existing distributors during the pilot engagement and did not even supply the products as allocated to it. Further, it is also alleged that Britannia did not assign desired cities to the Informant and employed dilatory tactics to thwart/restrict/hamper the ability of the Informant/Udaan to effectively compete with the distributors of Britannia. Owing to this, it was not able to provide better margins and optimum assortment mix to the retailers. Since the Informant is not in a position to fulfill the demand raised on its platform even after procurement from open market, retailers would shift to traditional means. This would eliminate/reduce network effects advantage of an online platform and affect the ability of the Informant to compete.

42. Before proceeding further in examining the allegations raised under the provisions of Section 3(4)(d) of the Act, the Commission notes that the allegations have been made pertaining to the biscuits market. The Commission in the past had the occasion of examining the relevant market under Section 4 of the Act, in case pertaining to this market, in Case No. 106 of 2015 In Re: Tamil Nadu Consumer Products Distributors Association and Britannia Industries Ltd. (decided on 29.03.2016) and had observed the following

8. The Informant has not provided any information or description about the relevant market. However, the allegations pertain to the products manufactured/produced by OPs. As per the details available on their website, OPs are engaged in manufacture/production of a variety of bakery and dairy products such as biscuits, breads, cakes, rusk, milk, butter and cheese. It is observed that the biscuits segment constitutes the major component of the business of OPs and hence has been considered from the perspective of defining relevant market. The nature of other products manufactured and supplied by OPs under the categories of dairy products, breads and cakes could be distinguished from biscuits in terms of their characteristics, taste and price. More particularly, these products have lesser shelf-life than that of biscuits. Accordingly, the market for biscuits appears to constitute a separate and distinct relevant product market. As regards the relevant geographic market, it appears that the conditions of competition are homogeneous across India. In the absence of any material on record brought by the Informant to suggest heterogeneity in the conditions of competition across India, the whole of India is considered as the relevant geographic market. Resultantly, the relevant market in the instant case is the 'market for biscuits in India'.
43. The Commission has noted that the Informant has painstakingly deliberated on the segmentation of biscuits market comprising many brands and then defining the relevant market, subsequent thereto. On the contrary, Britannia has stated that relevant product ought to be the market for manufacturing of packaged snack food items. Alternatively, it has submitted that a narrower market could be market for biscuits. The Commission has perused the reasons given by the Informant to segment the market into mid-premium and premium biscuits. For the purpose of an analysis under Section 3(4) of the Act, defining a precise relevant market is not necessary. Nevertheless, the Commission, in the facts and circumstances of the case, does not find a requirement to depart from its decision in the Tamil Nadu Consumer Product Distributors case; when, at the distributors' and retailers' level, all kinds of biscuits, are available in a price/quality continuum, there is no occasion to segment the market further merely because some sub-brands of biscuits are more popular across consumers and, in the view of the Informant, are SKUs. Defining a narrow product market merely on the factors of popularity of a few sub brands may not be appropriate to the facts and circumstances of the case. The Commission is, thus, not inclined to agree with the Informant on the segmentation of the biscuits market. Therefore, in view of the facts and circumstances of the instant case, the Commission is of the prima facie view that, broadly, the market can be stated as the market for biscuits in India.

44. As per the material available on record, Britannia enjoys approximately 32% market share in the biscuits market, which can be taken as proxy for market power, closely followed by its competitor Parle (approximately 27% market share). From the information available in the public domain, there are other biscuits manufacturers present in the market as well, such as ITC, McVitie's, Patanjali, Cremica etc., and the companies also appear to have products similar to Marie and Good Day, etc. There are new entrants like 'Unibic' and 'McVitie's' who are also operating in the market. Moreover, Britannia is facing intense competition from Parle, which is closely competing with it. However, from the material available on record with regard to the presence of a vast network of distributors, as well as taking into account the presence of Britannia's reach throughout India on the strength of a wide distribution network, it cannot be said that Britannia does not have any market power.


45. Now, the Commission has to see whether there is an 'agreement' in the nature of Section 3(4)(d) of the Act, i.e., refusal to deal and the same is causing AAEC in the market. The Commission perused the material more particularly contained in the rejoinder filed by the Informant and notes that the Informant has alleged that an agreement as defined under the Act, exists between Britannia and its distributors not to deal with the Informant qua products of Britannia, which is in violation of the provisions of the Act. The Commission notes that for the purposes of Section 3(4) of the Act, the Informant, other than averring that there is an inter se arrangement between Britannia and its distributors to restrict the Informant from dealing with certain brands and biscuits of Britannia, has not provided any evidence and is a mere conjecture. Further, the fact that the Informant has been able to source the biscuits to some extent to fulfill the demand of retailers coupled with the fact that Britannia has stated that it has not instructed its distributors not to deal with the Informant may tend to show that no vertical restraints have been imposed within the meaning of Section 3(4) of the Act. The argument of the Informant appears to be a conjecture rather than a fact fortified with evidence.

46. The Informant has sought to indicate that providing discriminatory terms to it, in order to render the Informant ineffective, would tantamount to constructive/implicit refusal to deal. In the rejoinder, the Informant states that after filing of information, Britannia has refused to directly deal with the Informant/Udaan. The Commission notes that the terms and conditions of trade between Britannia and distributors are not available except some bills which the Informant has annexed along with the rejoinder to indicate that the rates are being offered on different terms. However, Britannia has categorically stated that it has not imposed any restriction on any of its distributors on dealing with the Informant's platform or any other B2B platform. Moreover, Britannia has asserted that it even offered to the Informant such terms which were not unfavourable in any manner than what is given to its existing distributors.

AAEC/Likely AAEC in the market

47. Nevertheless, the Commission now proceeds to analyse the AAEC or likely AAEC either in the market of distributors or online B2B platforms.

48. The Commission observes that the alleged non-dealing of Britannia with the Informant is not having any deleterious effects on competition, as has been canvassed. In this regard, on an appreciation of the facts under Section 19(3) of the Act, the Commission is of the prima facie view that there entails no market foreclosure. Britannia is stated to have a robust network of about more than three thousand distributors. There are no allegations that its existing distributors have exited the market on account of any anti-competitive conduct. There has neither been any allegation nor evidence that the demand of retailers or end-consumers remained unfulfilled. It may also not be fair to assume that technological innovation and disruptive technology is only introduced by the Informant, as a similar model has been displayed by others as well. In this regard, the Commission observes from the public domain that there is the presence of players like Arzooo1, Flipkart Wholesale2, Amazon Business3 and other competitors, in the online B2B segment. The Commission also notes that most of the B2B platforms apparently follow a similar business model as that of the Informant, and there appears to be no unique strategy followed by the Informant in terms of extending facilities like credit, logistics, etc., similar to those claimed by the Informant as part of its B2B ecosystems4.

49. The Commission observes that, in the present case, resolution of two competing rights has been posited. On the one hand, the Informant is seeking a right to do business with Britannia with respect to certain products, and on the other hand, Britannia has asserted its right not to engage with the Informant on the premise that no such positive right rests with the Informant. According to Britannia, it has the autonomy to choose its partners in the vertical chain and it has freedom of choice as to whom to contract with as well as its level of engagement. In the realm of competition law, it is widely understood that firms have an autonomy to choose their trading partners as long as the exercise of such autonomy does not affect the fair functioning of the markets. Depending upon the market power held by entities, their conduct on refusal to deal may lead to foreclosure of market for other players. This, thus, is a mixed question of law and fact. Further, refusal to deal need not be absolute and ought to be seen in the context of the factual setting coupled with the factors under Section 19(3) of the Act. A refusal, either total or partial, could also have underlying valid justifications with commercial consideration, especially in the backdrop that it makes little economic sense for businesses to take a restrictive approach when it comes to expanding their horizon and reach. Though refusal to deal may be, inter se, two or more parties, its anti-competitive effect would have to be seen in the context of the overall market conditions that exist at the relevant point of time. Distribution networks are built and strengthened over a period of time, with sound underlying commercial consideration, trust, adequacy and performance, and a manufacturer cannot be forced to onboard any person/entity in the chain on an asking. It is also no ground that can be forcefully argued that, but for entry into the network, the new entrant will likely perish. What would tend to weigh is the impact actual or likely on existing competition and the benefit, if any, that accrues to the stakeholders upon a new entrant entering the market. A careful balanced approach is, thus, required to deal with the issue, having regard to the fact that what is the ill (perceived or actual) that can be likely remedied. 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. As discussed supra, the distribution network of Britannia appears to be quite wide and no foreclosure seems to have arisen in the facts and circumstances of the case.

50. That said, Britannia has stated that the Britannia has not imposed any restrictive conditions upon any of its distributors to deal with the Informant/Udaan. Britannia has stated that there were objective parameters/criteria, viz., fulfillment of demand of existing distributor network, exploring relationship with the Informant on pilot basis in respect of such market, which were relatively unsaturated vis--vis Britannia products, etc., while deciding the allocations and cities as per its requirement. Udaan's entry into Britannia's distribution network The Informant cannot dictate commercial terms with it since they are only engaged on a pilot basis. Importantly, there is no obligation to deal with Granary/Udaan. Britannia is stated to have been making efforts to enlarge its footprint across India.

51. The Commission notes that it is apparent from Britannia's response that biscuits need to be supplied to its existing distribution system in place as well. Britannia has stated that the allocation was made since the demand placed by the Informant/Udaan was exorbitant. The Commission is of the view that accepting the contentions of the Informant to direct Britannia to deal with the Informant/conclude terms of engagement the way it desires, has a consequence of replacing the business/commercial prudence of an entity by taking away the autonomy of such undertaking/entity. Based on justifications provided by Britannia as above, 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 ab

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solute right to deal with a particular business. Similarly, there is no absolute right of refusal. This will depend upon the facts and circumstances of each case; even a dominant entity, at times, has the freedom to refuse to conclude contracts based on objective justifications. 52. As regards 'must stock' items as claimed by the Informant, the Commission notes that the Informant has attempted to portray that the stock of a particular type of biscuits of Britannia are akin to 'essential', and direct access to procure the same is also necessary. The Commission is of the view that free exercise of right of manufacturer may only be limited to the extent of making competition prevail in the market. In the present case, the overall competition is not getting or likely to get adversely affected in any of the markets at this stage. The Commission is also not inclined to agree with the Informant that one brand biscuits is 'must stock' or so indispensable that not directly dealing with Britannia would pose existential threat to the Informant/Udaan in the biscuits market. 53. The Commission finds that, with respect to the allegation of discrimination between the Informant and other distributors of Britannia, neither the Informant nor its group entity can be said to be similarly placed as other, more than three thousand, distributors of Britannia. In the absence of evidence of any formal relationship between the Informant and Britannia, there may not exist any inherent right to claim any parity, as has been canvassed by the Informant. Further, the Commission notes that Britannia has averred that while undertaking Pilot projects it had offered certain terms, which according to Britannia, is not even extended to its existing distributors. Thus, the Commission does not find any merit in the submissions on the aspect of 'discrimination'. 54. The Informant has contended that by not getting terms at par with the existing distributors, while directly dealing with Britannia, it was unable to provide better margins to retailers. In other words, the Informant would be put at a cost disadvantage vis--vis other distributors of Britannia. In this regard, the Commission observes that there is no formal relationship between Britannia and the Informant whereby Britannia is obligated to supply to the Informant at terms that the Informant claims should be at parity with other distributors. Britannia and the Informant cannot be yet said to be in a formal business relationship as no agreement appears to exist between them except for a brief period when the pilot project was in operation. In any case, the conduct of Britannia does not appear to have caused any AAEC or likelihood of AAEC in view of the discussion above. 55. The Commission also notes that Britannia did engage with the Informant for some time and has stated to have been dissatisfied with the performance of the Informant. The Informant has stated that Britannia tied its hands by restricting choice of cities of supply as well as did not supply the committed/desired quantities of product. The Commission is of the view that it is not necessary to go into these vexed facts in view of larger finding that no obligation to deal has been found on the part of Britannia in the facts and circumstances of the case. 56. As far as factors as enumerated in Section 19(3) of the Act are concerned, there are apparently no barriers to entry either in the manufacturers' market nor in the distributor's market, considering the presence of large number of biscuit manufacturers (including foreign entrants in recent years) in the upstream and large number of distributors of Britannia in the downstream market. Moreover, there appears to be no existential threat or foreclosure as regards Granary and the Informant, considering that the Informant is an online B2B platform catering to multiple product segments across the country and is not significantly dependent on Britannia's products. As per information available in public domain, more than 5 lakh products are curated across 2500 brands that are available on the Informant's platform and it delivers around 1.75 lakh orders daily (both food and non-food category).5 The Commission observes that similar B2B platforms such as Flipkart Wholesale, and Amazon Business are present in the B2B online platforms as well. Thus, in the Commission's view, there is apparently absence of actual or likely AAEC in the markets. 57. The Commission further observes that the Informant has not been able to prima facie demonstrate that the non-supply of certain brand of biscuits by Britannia, in respect of which present action has been brought, has impeded competition in the distribution chain. While disruptive technologies undoubtedly enhance efficiency in the market, in the facts and circumstances of the present case, there is nothing to suggest that either the retailer or end-consumers have been facing any supply constraints. If that were the case, no prudent business will allow the demand and supply gap to persist in respect of its products, which would be to its own detriment in the long run. No positive direction can be given to Britannia in this case to directly deal with the Informant, as has been sought, when Britannia has stated about its sound practices of appointing distributors based on careful scrutiny, and considerable number of distributors exist throughout the length and breadth of the country. The Commission is mindful that a large distribution network provides more choices to retailers and consumers, but it cannot stretch this concept too far to support establishment and survival of every downstream entity in the fold, having regard to the underlying product and the existing conditions in the market. Moreover, selective distribution is an industry practice and one of the business strategies adopted by businesses. This falls within the domain of reasonable autonomy given to any trade participant, which autonomy, however, is not absolute. Nothing, however, indicates in this case that the autonomy of Britannia needs to be curtailed. Moreover, as far as the supplies under pilot projects are concerned, the non-engagement to the extent required by the Informant from Britannia prima facie does not seem to have caused AAEC or is likely to cause AAEC in the market, and the Informant has not been able to demonstrate the same except the Informant getting lesser margins. As stated by Britannia, the pilot engagement was of the temporary nature to gauge effectiveness of the project. Moreover, Britannia has stated that the demand projections were exorbitantly large and expressed its inability due to its production plan. Britannia has to cater to its already existing distributors and accommodate a new player, like Granary (which appears to be generating its demand solely through the Informant), in the system, and cannot be compelled to supply as per the demand projections of the Informant, and that too, when there is pilot engagement. 58. The Commission notes that, in the rejoinder, the Informant states that the Commission is only required to take cognisance of the averments contained in the Information and the documents supplied with such Information. The Commission is of the view that the proceedings before the Commission are inquisitorial in nature and it is at a liberty to call comments from other such persons as it deems necessary to help it form a prima facie view in the matter. In the present case the facts and averments made in the Information were not complete in nature. For example, the role of the Informant in the procurement of Britannia's biscuits was not coming out clearly when it claims itself to be a B2B platform. Secondly, while referring to the email exchanges in the Information, the arrangement between Britannia and Udaan during Pilot 1 and Pilot 2 was also not clear in the Information. 59. The Commission is of the prima facie view that, in the present case, the Informant has not been able to demonstrate any exclusionary practice on behalf of Britannia, within the purview of the Act, which may hinder the development of a competing supply chain for the products of Britannia. 60. As far as allegations under Section 4 of the Act are concerned averred for the first time in the rejoinder, the Commission does not find any abuse, more so as the Informant has failed to establish any right on its part. Therefore, further assessment on this aspect is not required. In any case, the Commission has observed that a narrow market, based on segmentation, may not be justified in the facts and circumstances of the case. 61. Thus, the Commission is of the opinion that there exists no prima facie case of contravention of the provisions of Sections 3(4) and Section 4 of the Act against Britannia, and therefore, the matter be closed forthwith under Section 26(2) of the Act. 62. Before concluding with this order, the Commission observes that parties have submitted their responses/submissions in confidential as well as non-confidential version. Accordingly, confidentiality, as claimed, is granted for a period of 3 years from the passing of this order, subject to the provisions of Section 57 of the Act. It is, however, made clear that no such confidentiality claim shall be available in respect of the information that might have been referred to in this order, and has not been specifically redacted herein. 63. The Secretary is directed to communicate to the parties by email/speed post, through their respective counsel, accordingly.