1. This is an application by the Registrar of Restrictive Trade Agreements (hereinafter for the sake of brevity referred to as "the Registrar") against M/s. Steel Age Industries Ltd., of Bombay, who are engaged in the manufacture and marketing of steel furniture and certain other equipment. The Registrar alleges that the respondent has appointed distributors at various places in the country and has entered into agreements with them in a standard form. In paragraph 3 of the application he has set out Clauses 8, 10 and 11 of the said agreements.
In paragraph 4 he has contended that Clause 8 amounts to full-line forcing, Clause 10 to resale price maintenance and Clause 11 to differential discounts. He contends that these are restrictive trade practices within the definition of that term in Section 2(o) of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter for the sake of brevity referred to as " the Act "). He prays that necessary action be taken against the respondent.
2. The respondent has filed its reply to the application denying that these clauses amount to restrictive trade practices. In addition, the respondent has filed before us today an affidavit dated 20th August, 1975, of Mr. J.S. Jamshedji, chief executive of the marketing division of the respondent, which further deals with the allegations of the Registrar. On the basis of this affidavit Mr. B.R. Agarwal submits that if we find any restrictive trade practice we may pass the necessary orders.
3. With regard to Clause 8 of the agreement, we find that the distributors are required to stock goods of certain minimum value and to display in their show room goods of a certain minimum value. There is no provision as to what kinds of goods the distributors shall stock.
There does not appear to us to flow from the clause any full-line forcing or tie-up. Notwithstanding this, in the affidavit of J.S.Jamshedji dated 20th August, 1975, filed before us to-day it has been stated that Clause 8 has never been insisted upon by the respondent and in fact some of the distributors have no show rooms for displaying stocks of the respondent. It is further stated that the respondent is prepared to give up this term about keeping a minimum stock or displaying the same and necessary intimation will he given to all the distributors by the respondent within a fortnight. In view of our having come to the conclusion that the clause does not amount to full-line forcing and the assurance contained in the affidavit of J.S.Jamshedji we think no order need be made in this connection.
4. With regard to Clause 10, on a plain reading of the clause we are of the opinion that it amounts to resale price maintenance. The agreement does impose a condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the respondent and it is not clearly stated that prices lower than those prices may be charged.
With regard to this clause it is stated in the affidavit of Mr. J.S.Jamshedji that the intention of the respondent was not to maintain resale prices. He states that from 1st August, 1975, in the price list issued by the respondent it has been clearly stated that the distributors will be at liberty to charge prices lower than the prices shown in the price list.
5. However, in view of the fact that we hold that the clause amounts to a restrictive trade practice, we propose to modify the agreement in respect of this practice in the manner indicated hereinbelow.
6. Coming to Clause 11 of the agreement we find that the agreement itself does not set out the tariff of discounts given by the respondent. In the affidavit of Mr. J.S. Jamshedji it has been stated that the commission allowed by the respondent is not related to any quantum of purchase or sale of goods. It is further stated that the respondent has 12 distributors -- 11 in India and one in Nepal. It is stated that the commission at the rate of 15% is given to 8 distributors and commission at the rate of 12 1/2% is given to the remaining 4 distributors. It is admitted that the distributor in Nepal is given a commission of 12 1/2%. As this is outside India, we can make no order with regard to the commission to distributor in Nepal. 12 1/2% discount is also given at Thana, Poona and Goa. 15% discount is given in Bombay, Bangalore, Calcutta, Ernakulam, Jabalpur, Jaipur and Agra.
We have before us the figures of minimum value of stock to be kept by distributors at these places and the minimum value of stock to be displayed by them. We find no rationale for the distinction made. It appears that the higher discount has been the result of harder bargaining. The difference appears to us to be so small that it will not directly or indirectly restrict or discourage competition to any material degree in the trade of steel furniture or equipment manufacturing and marketing and it is not likely to impede competition.
In our opinion, this practice will be covered by Section 38(1)(h) of the Act and we propose to make no order with regard to the said practice.
7. In the result, we direct that Clause 10 of the agreement shall stand modified in the manner following : The first sentence in Clause 10, namely, "distributors shall sell the goods of the company at recommended retail prices from time to time " shall be deleted and in its place the following sentence shall be inserted : " The distributors shall sell the goods of the company at prices not exceeding the recommended retail prices from time to time, and the distributors shall be at liberty to charge prices lower than those recommended by the company. " 8. We further direct that in all future price lists issued by the respondent it shall be clearly stated on the front page that the prices indicated in the price list are the maximum recommended price and that the distributors shall be at liberty to charge prices lower than those.
9. We may say that the conduct of the respondent has been commendable and it has come up with a proposal to eliminate restrictive trade practices at the earliest opportunity. However, the Registrar has had to file an application and the respondent must pay him some costs to compensate for the administrative expense. Accordingly, we direct the respondent to pay to the Registrar costs fixed at Rs. 250.