Sri Rama Agency accused Mondelēz of imposing unfair terms on rural distributors as the snacks multinational sought to enter the Indian biscuit and flavored drinks market. However, its claims were rejected by the Competition Commission of India on Tuesday last week.
Rural & Urban divide?
Sri Rama was Mondelēz‘s appointed ‘super-stockist’ in the state of Karnataka and has supplied shopkeepers in rural areas near Bangalore since 2004.
Mondelēz uses direct distributors for larger urban towns and ‘super stockists’ – whereby they supply multiple shopkeepers – for small and mid-size rural towns.
Sri Rama alleged that Mondelēz was taking payments from rural super-stockists and compelling them to maintain excess supply beyond an agreement, contrary to the Competition Act 2002.
But the Commission said: “There is nothing on record which can suggest that OP 1 [Mondelēz] has imposed conditions on the Informant [Sri Rama] or other super-stockist which can be considered as unfair in violation of the provisions of section 4 of the Act.”
Supplying shopkeepers that fail to pay
Sri Rama said Mondelēz had forced it to supply shopkeepers that had defaulted on payments. But the Commission said Mondelēz only asked Sri Rama to continue supplying shopkeepers while the payment issue was resolved, adding Mondelēz was willing to help clear any dues.
“This issue prima facie does not seem to raise any competition concern. It appears more to be a business dispute between the manufacturer and distributor,” the Commission said.
Incentives to sell biscuits and fruit flavored drinks
Sri Rama also accused Mondelēz of leveraging its strength in non-premium chocolate in India to enter the market for instant fruit flavored drinks and biscuits. It claimed the multinational had introduced an incentive program to sell these products whereby super-stockists were given 1% commission.
Indian authorities said: “The Commission is of the view that the said conduct can at most be termed as a business strategy adopted by a market player. It is not the case of the Informant [Sri Rama] that OP 1 [Mondelēz] is forcing it to buy the new range of products or is making the supply of chocolates conditional on the purchase of such other products.”
Mondelēz terminated part of its deal with Sri Rama Agency in May and has appointed a new dealer for certain areas. But Sri Rama will continue to supply Mondelēz products in Anekal & Atibele.