Associated Alcohols and Breweries Ltd. v. Union of India: CCI’s Jurisdiction over Anti-Competitive Practices in the Liquor Industry

Introduction

The Madhya Pradesh High Court, in Associated Alcohols and Breweries Ltd. v. Union of India and Others (2026) ibclaw.in 5536 HC, examined the jurisdiction of the Competition Commission of India (CCI) to investigate alleged anti-competitive practices in the liquor industry, which is otherwise subject to extensive State regulation. The central issue was whether the State’s exclusive authority to regulate intoxicating liquor also excludes the CCI from examining agreements or arrangements between businesses that may restrict competition.

Facts of the Case

The petitioners were distilleries and bottling units engaged in the manufacture, bottling and wholesale supply of country liquor in Madhya Pradesh. Their operations were governed by the Madhya Pradesh Excise Act, 1915, and the rules framed thereunder. The State Government exercised substantial control over the industry, including licensing, manufacturing, supply arrangements and pricing.

The dispute originated from observations in the Comptroller and Auditor General’s (CAG) Audit Report concerning the State’s revenue sector for the financial year 2016–17. The report noted that certain distilleries had repeatedly emerged as the lowest bidders (L-1) in particular districts, with only narrow differences in their tender prices. These patterns raised concerns regarding possible collusion and allocation of markets among competing distilleries.

Acting on this information, the CCI initiated a suo motu inquiry under Section 19(1) of the Competition Act, 2002, and passed an order dated 4 August 2020 under Section 26(1), directing the Director General (DG) to investigate the matter.

The distilleries challenged the CCI’s proceedings before the Madhya Pradesh High Court, questioning its jurisdiction and the legality of the investigation. They also raised objections concerning the reliance on the CAG report and the manner in which confidential information in the DG’s report had been handled.

Analysis

The principal question before the High Court was whether the CCI could exercise jurisdiction over the liquor industry despite the State’s exclusive legislative authority over intoxicating liquor.

The petitioners relied on Entries 8 and 51 of List II of the Seventh Schedule to the Constitution, which confer legislative powers on State Legislatures in relation to intoxicating liquors and duties of excise. They argued that the regulation of the liquor industry fell exclusively within the State’s domain and that the CCI could not interfere with the State’s regulatory framework.

The High Court rejected this contention by distinguishing between the objectives of the two legislations. The Madhya Pradesh Excise Act primarily regulates the manufacture, possession, transport and sale of liquor, whereas the Competition Act seeks to prevent practices that adversely affect competition in the market.

In this regard, the Court clarified that the two legislations operate in different fields. While the State determines the regulatory framework governing the liquor trade, the CCI examines whether businesses have entered into agreements that restrict competition. Consequently, the State’s authority over the liquor industry does not automatically exclude the CCI’s jurisdiction to investigate anti-competitive conduct.

The Court also considered the allegations of bid-rigging and market allocation. Under Section 3 of the Competition Act, agreements between enterprises that cause or are likely to cause an appreciable adverse effect on competition are prohibited. Section 3(3) specifically addresses certain agreements between competitors, including bid-rigging and market sharing.

Bid-rigging refers to an arrangement between bidders intended to manipulate the outcome of a bidding process, rather than allowing competition to determine the successful bidder. Similarly, market allocation involves competitors agreeing to divide markets, customers or geographical areas among themselves. Such arrangements can undermine fair competition and adversely affect the interests of consumers and other market participants.

The petitioners contended that similarities in tender prices did not necessarily establish collusion, particularly because the State exercised considerable control over pricing and the tender process. However, the Court did not undertake a final examination of whether cartelisation had actually occurred. Its consideration was limited to whether the CCI could proceed with the investigation.

The Court also examined the CCI’s reliance on the CAG report. It observed that the report was not treated as conclusive proof of anti-competitive conduct but merely as information that prompted the CCI to initiate an inquiry. The Competition Act permits the CCI to form a prima facie opinion and direct an investigation under Section 26(1).

Judgment

The Madhya Pradesh High Court dismissed the writ petitions and upheld the continuation of the CCI proceedings. It held that the State’s regulatory authority over intoxicating liquor does not bar the CCI from investigating alleged anti-competitive agreements among enterprises operating in the sector.

The Court also noted that an order under Section 26(1) is preliminary in nature, as it merely directs an investigation and does not finally determine whether the provisions of the Competition Act have been violated. Further, considering the stage at which the petitioners approached the Court, their participation in the CCI proceedings and the availability of an alternative statutory remedy, the Court declined to interfere with the investigation.

Accordingly, the CCI was directed to complete the inquiry and pass an appropriate final order under Section 27 of the Competition Act.

The judgment reinforces the principle that businesses operating in highly regulated sectors are not automatically exempt from competition-law scrutiny. It recognises that State regulatory powers and competition-law enforcement serve distinct purposes and can coexist. Importantly, the judgment does not establish that the distilleries were guilty of cartelisation; it permits the CCI to complete its investigation and determine the issue in accordance with law.