1. This is an inquiry started suo moto on the basis of the Commission's own knowledge and information under Sections 10(a)(iv) and 37 of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as " the Act"), against seven respondents. Respondent No. 1 is publishing and selling from New Delhi the newspaper "Hindustan Times ", the respondent No. 2 is publishing and selling from New Delhi the newspaper " Statesman", the respondent No. 3 is publishing and selling from New Delhi the newspaper " Times of India ", the respondent No. 4 is publishing and selling from New Delhi and Lucknow the newspaper " National Herald ", the respondent No. 5 is publishing and selling from New Delhi the newspaper " Indian Express ", the respondent No. 6 is publishing and selling from New Delhi the newspaper " Patriot " and respondent No. 7 is an association of newspaper publishers of which the respondents Nos. 1 to 6 are members in respect of the said newspapers.
2. It was alleged in the notice dated August 26, 1975, issued by the Commission that in the sale and supply of these newspapers, the respondents appear to have been and appear to be indulging in the following trade practices (i) The prices of the newspapers, Hindustan Times, Statesman, Times of India, National Herald, Indian Express and Patriot, were increased on or near about the 1st February, 1971 ; the prices of the newspapers, Hindustan Times, Statesman, Times of India, patriot, National Herald and Indian Express, were increased on or near about the 7th December, 1973 ; the prices of newspapers, Hindustan Times, Times of India, Patriot and Indian Express, were increased on or near about the 1st May, 1974 ; and the prices of Hindustan Times, Statesman and Times of India were increased in August/September, 1974. These increases in the prices of the respective newspapers by the respective respondents appear to have been effected by acting in concert either by informal consultations amongst the respective respondents and/or through the instrumentality or with the ad and advice of respondent No. 7 and/or its regional committee.
(ii) Respondents Nos. 1 to 3 have been and are charging the same or common prices for their respective newspapers, Hindustan Times, Statesman and Times of India. In so charging the same or common prices these respondents appear to have been and are acting in concert or by mutual understanding.
(iii) Even though in the years 1973-74, the number of pages of their said newspapers were reduced by about 1/2 to 1/3rd, respondents Nos.
1 to 5 continued to charge the same prices for some time, and thereafter even increased the prices as mentioned above for their respective newspapers above mentioned. In doing so, they appear to have been and are acting in concert or by mutual understanding.
3. The following statement showing the changes in the prices of the newspapers and the dates on which they were effected was enclosed with the notice : 4. It was also alleged that these practices appear to have or may have the effect of preventing, distorting or restricting the competition amongst the publishers and sellers of the newspapers, and tended to bring about manipulation of prices of these newspapers in such manner as to impose on the consumers unjustified costs or restrictions.
5. Respondents Nos. 1 to 5 and respondent No. 7 have submitted to " cease and desist " orders by the Commission under Section 37( 1) on the assumption that conditions for passing such orders exist but without prejudice to their contentions that they were not resorting to any restrictive trade practices. The present order, therefore, is confined to respondent No. 6, i.e., M/s. Raisina Publications Ltd. It filed its memorandum of appearance on 9th September, 1975. It filed its reply on or about 8th October, 1975. It was pointed out in the reply that the service conditions of the staff employed in the newspaper industry were governed by the recommendations of the Wage Board for working journalists and also by the Wage Board for non-journalist staff and by the Working Journalists (Conditions of Service and Miscellaneous Provisions) Act, that even though according to the classification prescribed by the Wage Board " Patriot" was classified as VI class, the respondent had agreed to pay the wages" payable for V class, that when the respondent was put in the 5th class, it agreed to pay its journalists and other staff at rates relating to class IV, that there was a general strike by the employees of the other respondents because they had not agreed to pay the wages according to the recommendations of the Wage Board, that out of sympathy with the working journalists the respondent stopped publication of the newspaper "Patriot" on July 20, 1968, that respondent No. 6 did not agree with the policies of respondent No. 7, that respondent No. 7 threatened to take action against respondent No. 6, that the relations of respondent No. 6 with respondent No. 7 were far from cordial, that respondent No. 6 followed an independent policy on all issues irrespective of any directions that respondent No. 7 chose to give, that in the financial year 1968-69, as a result of the Wage Board recommendations, the wage bill increased from Rs. 7'24 lakhs to Rs. 8.68 lakhs, that after the re-classification of " Patriot " in 1973, there was a further increase of Rs. 72,000, that the respondent linked D.A. to the cost of living index as a progressive measure, that there was a shortage of newsprint in the country, that the import quota of the respondent was reduced by about 30% during the year ended March 31, 1973, that the price of imported newsprint had gone up from Rs. 1,250 per metric tonne in 1973 to Rs. 4,400 per metric tonne during the year 1974-75, that the actual cost of newsprint consumed by respondent No. 6 increased from Rs. 9.75 lakhs in 1968 to Rs. 29.68 lakhs in the financial year 1975-76, that the cost of printing which was Rs. 6.98 lakhs for the year ended February 28, 1968, increased to Rs. 9.58 lakhs for the year 1973-74, and that the respondent had accumulated losses of Rs. 79 lakhs for the period from 1970-71 to 1974-75. It was contended that the respondent had increased the price of " Patriot " in view of the higher cost of production as well as to keep the hawkers' interest in " Patriot" unabated. The respondent was paying 35% as commission to the agents and hawkers. All the newspapers paid commission almost at the same rate, and the hawkers and agents were, therefore, interested in raising the price of the newspapers.
6. It was also contended in the reply that the notice of enquiry did not disclose as to how the increase in price of the newspaper would have the effect of preventing, distorting and restricting the competition amongst the publishers, that the notice did not set out the knowledge and information on the basis of which the Commission claimed to proceed and that the knowledge and information could not be derived from a complaint which did not satisfy the provisions of Section 10(a)(i) of the Act. It was contended that the respondent had always determined the price to be charged by it for the newspaper according to its own financial conditions and depending on the market conditions which again had been linked to the prices of the consumable stores. It was also contended that the expected revenue from the revision of the price of the newspaper was never effected by the respondent after any informal consultations amongst the respective respondents and/or through the instrumentality and aid and advice of the respondent No. 7 or its regional committee. It was claimed that respondent No. 7 had never recommended and/or suggested at any time any increase in the price of the newspaper and/or reduction in the size of the newspaper, and that the said functions did not form and fall within the purview of the activities of respondent No. 7. Even assuming without admitting that the price was increased under the alleged aid and advice of respondent No. 7, it was submitted that the rise did not have the effect of preventing, distorting or restricting the competition in any manner.
7. The Director of Investigation thereafter filed his rejoinder dated November 19, 1976, and applied to the Commission for issue of directions to the respondent for answering interrogatories and filing affidavit of documents. In the affidavit of documents filed on behalf of the respondent, it was stated that so far as the question of price fixation of the newspaper or its increase were concerned it had neither received nor written any letter to respondent No. 7. It was also stated that no circulars were received by respondent No. 6 from respondent No.7 relating to the increase in price. In the affidavit of interrogatories, in answer to the interrogatory whether the respondent had at any time during the period January 1, 1971, to October 31, 1975, received any advice or directions orally or in writing from respondent No. 7 or its regional committee regarding increases in prices of newspapers, it was stated that respondent No. 6 had received no advice or directions orally or in writing from respondent No 7 or any other body regarding the increase in price of the newspaper. The respondent also filed an affidavit giving several cost data.
8. By its order dated April 2, 1976, the Commission framed the following issues : "1. Whether the enquiry under Section 10(a)(iv) can be proceeded with in view of the preliminary objections set out in para. 3 of the reply dated 8th October, 1975, of respondent No. 6 2. Whether the allegations contained in the notice of enquiry daied 26th August, 1975, constitute any restrictive trade practices? 3. If the answer to issue No. 2 is in the affirmative, whether the respondent No. 6 is indulging in the restrictive trade practices as alleged 4. If the answer to the issue No. 3 is in the affirmative, whether the respondent No. 6 is entitled to the benefit of Section 38(1)(h) of the Act.
9. Thereafter, after some interval, the final hearing was fixed. The learned counsel for respondent No. 6 examined Shri B. G. Bhagvat, secretary of the respondent. Shri Bhagvat reiterated what was stated in the reply of respondent No. 6. He further stated that neither he nor any of the officials of M/s. Raisina Publications Ltd. attended the meetings of respondent No. 7 between 1st January, 1968, and 31st December, 1974, and neither he nor any of the officials of M/s. Raisina Private Ltd. concerted with any of the officials of respondents Nos. 1 to 5 regarding the raising of prices of the newspaper. He stated that when other newspapers had increased the price or were about to increase the price, there was a pressure from their agents and hawkers in 1971 to increase their prices as well. The Commission of the hawkers and the agents was dependent on the newspapers' prices. The increase in other newspaper prices had increased the commission receivable by agents arid hawkers from those newspapers. There was also an increase in the cost of production by reason of the increase in the wages as a result of the recommendations of the Wage Board. The cost of raw materials most of which were imported had also increased and the increase in the cost of production coupled with the increased pressure from hawkers and agents was responsible for the rise which was effected in 1971, He pointed out that there had been differences of opinion between respondent No. 7 and 6 on many issues including the recommendations of the Wage Board and basis of distribution of newsprint. The question of differences on the question of prices of newspapers did not arise because respondent No. 6 had no contact with respondent No. 7 on this matter. At no time was any member of the "Patriot ' or Raisina Publications Ltd. a member of the executive of respondent No. 7. Respondent No. 6 continued to be a member of respondent No. 7 mainly because of the facility enjoyed in respect of collection of their advertisement bills. It was admitted that as a member of respondent No. 7, respondent No. 6 did receive circulars issued by respondent No. 7 right from the beginning to date Shri Bhagvat was not in a position to say whether circulars dated September 14, 1973, issued by respondent No. 7 was received by respondent No. 6. He further stated that this circular must have been received by respondent No. 6 and respondent No. 6 must have also received circulars dated August 10, 1973, November 13, 1973, and June 29, 1972. These circulars were regarding increase of price and respondent No. 6 did not write to respondent No. 7 objecting to these circulars.
10. After recording of evidence of Shri Bhagvat both the parties were heard on the issues. The learned Director of Investigation pointed out that there was no circular regarding price rise on February 1, 1971, but that in regard to other price rises there were circulars. He also pointed out that respondent No. 6 had continued to be the member of respondent No. 7 and that it must be taken to have pirticipated in the concert.. He also pointed out that other respondents had submitted to cease and desist order regarding the concert, although he very fairly added that that was without prejudice to their contentions that they had not resorted to any restrictive trade practices. He contended that the higher wages paid by respondent No. 6 to its journalists and other employees were not on commercial or business considerations but on ideological grounds and that they cannot be taken into account to decide whether there was a concert or not. He emphasised that the trend of raising cost indicated by respondent No. 7 in its circulars was confirmed by respondent No. 6 and was acted upon. He also contended that it was not necessary that a party to a concert should attend all the meetings of the concert and that the concert could be participated in by proxy.
11. The learned counsel for respondent No. 6 referred to the preliminary objections raised by respondent No. 6 in its reply and pointed out that while not arguing on these objections, he was not giving them up. He contended that the notice was vague, lacking in particulars, and the enquiry, therefore, deserved to be terminated. He also contended that the rise in prices was not due to concert with other publishers but due to pressure from hawkers and agents. He referred to the observations in Cement Manufacturers' Protective Association v. United States [1925] 268 US 588, 615, viz. : " The fact that competitors may see proper, in the exercise of their own judgment, to follow the prices of another manufacturer, does not establish any suppression of competition." He also contended that although respondents Nos. 1 to 5 had accepted cease and desist orders, there was no evidence on record about the rise of prices by respondent No. 6. He also contended that there was no evidence whatsoever regarding the concert by respondent No. 6 with any of the respondents. He pointed out that at all times the prices of the newspaper Patriot were lower than the prices of other newspapers, that it catered to a certain class of newspaper readers and that it could not afford to increase its price as high as that of other newspapers. He also contended that even after the increase in prices, the relative differential between the newspapers reniain-ned more or less unchanged and, therefore, the competitive situation in the trade was not at all affected. The learned Director of Investigation in his reply referred to the definition of " trade practice " and also contended that the theory of hawkers and agents exercising pressure did not hold good all the time because on certain occasions respondent No. 6 had not increased the prices along with other newspapers.
12. I have considered the contentions of the parties carefully and also examined the evidence and material on record. It will be convenient to discuss issues seriatim. The first issue relates to the tenability of the inquiry in view of the preliminary objections set out in paragraph 3 of the reply of respondent No. 6 dated 8th October, 1975. The objections raised were that the notice did not disclose as to how the increase in price of newspaper will have the effect of preventing, distorting and restricting the competition amongst the publishers and the sellers of the newspapers and/or tend to bring out manipulation of the prices of the newspapers. It is also pointed out that the notice did not set out the knowledge or information on the basis of which the Commission had suo motu started the inquiry under Section 10(a)(iv). It was also contended that the complaint which did not satisfy the provisions of Section 10(a)(i) could not be treated as information or knowledge by the Commission as the treating of any such complaint as " information " or " knowledge " would be rendering Section 10(a)(i) of the Act as nugatory. There is no merit in any of the objections. The first objection in fact will be met when issue No. 2 is taken up for consideration in the subsequent paragraph. In regard to the other objections, the Commission and/or the Calcutta and Allahabad High Courts have already held that it was not necessary to divulge the source of its knowledge or information and that the knowledge or information could be derived from any source so long as the knowledge or information could satisfy the Commission prima facie that inquiry into the restrictive trade practices alleged was necessary! vide (i) RTPE No. 24 of 1975, In the matter of Excel Industries Ltd., (ii) RTPE No. 32of 1974, In the matter of Graphite IndiaLtd. [1976] 46 Comp Cas 422 (MRTPC), (iii) the Calcutta High Court decision in 1TC v. MRTP Commission [1976] 46 Comp Cas 619, (iv) RTPE No. 6 of 1913, In the matter of Nylon Filament Yarn [1976] 46 Comp Cas 357 (MRTPC) and (v) the decision of the Allahabad High Court in Nylon case (J. K.Synthetics Lid. v. R. D. Saxena) [1977] 47 Comp Cas 323. Respectfully following these decisions, the first issue has to be answered in the negative and against the respondent.
13. The second issue is also capable of an easy answer and that answer will be in the affirmative. As far as respondent No. 6 is concerned, the only allegation that is relevant is the allegation contained in item (i) of the charge, i e., the allegation of concert. Now, it does not require much argument to state that if certain traders combine together or have a concert to fix the prices of commodity they deal in or to raise the price of the commodity together, i.e., at the same time, or about the same time, they voluntarily and as a group give up competition between each other in the matter of pricing. The competition is abjured and in its place a price mechanism determined by combination or concert is brought into operation. The price is no longer fixed by free forces of supply and demand but by the fiat of a combination or a concert. The consumers' reactions are completely ignored or not taken into account. Prima facie, therefore, a combination to fix prices is anti-competitive in effect and would constitute restrictive trade practice. Since the allegation in item No.(i) is that of concert, the allegation would constitute a restrictive trade practice. It was not possible to allege that the charge made in this regard in the notice was vague or silent about any essential feature. The charge clearly and unmistakably referred to " concert " and the consequences of concert could only be as detailed. There could, therefore, be no ambiguity or misunderstanding about the anti-competitive character of concert. The answer to issue No. (ii) is in the affirmative.
14. The real issue in controversy is issue No. (iii), viz., whether, on the facts and in the circumstances of the case, respondent No. 6 was indulging in restrictive trade practices as alleged in item No. (ii).
In other words, the issue is whether respondent No. 6 was a party to a concert. In this regard, the learned Director of Investigation relies on certain facts, viz., synchronisation of the dates on which the prices have been raised by respondent No. 6 with the dates on which the prices have been raised by other respondents, viz., respondents Nos. 1, 2, 3, 4 and 5. On three occasions, i e., on February 1, 1971, January 1, 1974, and May 3, 1974, the respondent had increased its price by 2 paise, 6 paise and 6 paise, respectively, on or about the dates respondent No. 1 raised its price by 2 paise, 5 paise and 5 paise and respondent No. 3 raised its price by 2 paise, 5 paise and 5 paise whereas respondent No. 5 raised its price by 2 paise, 7 paise and 5 paise. Respondent No. 2 raised its price only on two occasions, first by a paise and second time by 5 paise. Respondent No. 4 also raised its price only on two occasions, first by 3 paise and next by 6 paise. It is also important to note that respondent No. 6 did not raise the price for the fourth time when respondents Nos. 1, 2 and 3 had raised it, respondents Nos. 1 and-3 by 5 paise and respondent No. 2 by 10 paise.
The learned Director of Investigation also relied on the fact that respondent No. 6 was a member of respondent No. 7 and it received all the circulars including circulars underlining the need for increasing the prices. The learned counsel for the respondent, on the other hand, relied on the fact that there were serious differences of opinion between respondent No. 6 and respondent No. 7 and other respondents on other matters, relating to the newspaper industry, particularly the Wage Board recommendations and distribution of newsprint, that the increase was justified by increase in the cost of production and the pressure from hawkers and agents to increase their price in tune with the increase planned by other larger and major newspapers, 15. It is always a ticklish question whether, on the facts and in the circumstances of a particular case, the party impugned was a party to a concert or whether its action, although in line with the decision of its competitors, was arrived at independently by commercial consideration relevant to its own case. It is now settled law that for a concert or combination or even for conspiracy you do not require a documentary proof. It is enough if the concert or combination or conspiracy can be inferred from the conduct of the parties and/or surrounding circumstances. Section 2(a) of the Indian Act like Section 6(3) of the U.K. Act specifically includes " arrangement " within the category of " agreement" and the question always boils down to this, viz., whether, on the facts and in the circumstances of a particular case, there was an arrangement which resulted in a concert. There has been considerable case law on the subject in the U.S. law, in the E E.C. law and in the U.K. law. The scheme of U.S. law is quite different from the Indian scheme and most of the cases turn on the question whether there was combination or conspiracy but some of the criteria considered were quite helpful in determining the issue even under the Indian scheme. The E.E.C. scheme is also quite different from the Indian scheme and refers specifically to concert in practice. But its decisions were also helpful in defining our own approach. The U.K.scheme is the nearest to ours. Our Act, structurally, has taken a considerable part from the U.K. Act and the U.K. decisions.
16. The U.S. Scheme, as stated earlier, is somewhat different from the Indian scheme but the principles considered by the courts in that country to be relevant for determining whether in the circumstances of a particular case there was conspiracy or combination or not were quite useful in evolving our own formula. In Eastern States Retail Lumber Dealers' Association v. Unitfd States[1914] 234 US 600, the association circulated lists of wholesale lumber dealers who were found to be selling also at retail. After circulation of the association lists, members generally stopped buying from the companies that had been named. There had been no known agreement to boycott firms named on the lists. The U.S. Supreme Court saw the facts as sufficient to find an unlawful agreement noting that conspiracies were seldom capable of proof by direct testimony, and might be inferred. On the other hand, in Theater Enterprises Inc. v. Paramount Film Distributing Corporation [1954] 346 US 537, a suburban Baltimore theater, located in a shopping centre, was unable to obtain first run films from distributors and sued for treble damages. The distributors limited these films to eight downtown theaters, three of which were owned by them. The Supreme Court, however, found it ia favour of the distributors holding that their behaviour was consistent with independent business judgment. The crucial question was whether the conduct stemmed from their individual decision or from an agreement, tacit or express. Business behaviour was an admissible circumstantial evidence from which an agreement could be inferred but to prove parallel business behaviour would not conclusively establish agreement. In Pavely Dairy Co. v. United Slates [1949] 178 F 2d 363, two St. Luis dairies, which accounted for almost two-thirds of relevant market sales, behaved identically in many aspects of the business. The companies charged identical prices and when one changed its prices, the other followed within 48 hours.
Companies' frequency of delivery was the same and the cooling equipment they provided to retailers was identical. The circuit court held that the behaviour of the companies, although it might have implied conspiracy, was also compatible with innocent non-conspiratorial action. The mere unity of prices in the sale of standardised commodity was not itself evidence of a violation of Anti Trust Laws.
17. The question was considered in the U.S, by the Attorney-General's Committee in 1955 and it was of the considered view that the significance of uniform action may depend in any one instance on a variety of factors, viz., how pervasive is the uniformity Does it extend to price alone or to all other terms and conditions of sale How nearly identical is the uniformity How long has the uniformity continued What is the time lag, if any, between a change by one competitor and that of the other, or others Is the product involved homogeneous or differentiated Can the conduct, no matter how uniform, be adequately explained by independent business justification According to the committee on answers to questions like these, depended the weight to be accorded parallel action in any given case.
18. It would appear under the U.S. law that if behaviour of the traders seems consistent only with a mutual understanding of some kind, the conspiracy, combination or at least concert could reasonably be inferred. Where the circumstances were such as to warrant a jury in finding that the conspirators had a unity of purpose or a common design and understanding, or a meeting of minds in an agreement, the conclusion that a conspiracy, combination or concert was established would be justified. If the actions of the parties were inconsistent with any reasonable hypothesis other than conspiracy, combination or concert, the inference would be obvious. If, on the other hand, hypothesis of independence does not tax the credulity of the court, the conclusion of innocence may be reached. As a result of many competitive factors, the actions of the competitors in the market place may be similar or even uniform despite the fact that no agreements had been made.
557. On three occasions, nine or ten of the most important producers of dyestuff in the Common Market, who between themselves produced 80 per cent. of the dyes sold there, individually announced price rises. On 7th January, 1964, CIBA announced a rise of 15 per cent. for most aniline dyes in Italy to take effect immediately. I C.I. made a similar announcement on the 9th to apply in Holland and Bayer on the 10th for Belgium. In each case, the other producers followed suit within two or three days. The following October, B.A.S.F. announced that the increase would be applied in Germany from January, 1965, and that a 10 per cent.
increase would be applied there to other products. Increase of 10 per cent. for these products were announced by the leading firms in all the other common market countries except France, where the Government had imposed a price freeze. The Italian firm, A.C.N.A., decided not to increase prices in Italy because of the recession in Italy, and the other firms decided to renounce the increase in Italy. An increase in 1967 of 8 per cent. was announced to its competitors in August by Geigy, to take effect in October. Francolor, the main producer in France, decided to raise prices there by 12 per cent. and again all the producers except A.C.N.A. followed these rises. The European Commission decided that these increases were concerted and fined all the firms.
The European court in upholding the Commission's decision held that Article 85 of the Treaty of Rome prohibited a form of co-ordination between undertakings which, without going so far as to amount to an agreement properly so called, knowingly substituted a practical co-operation between them for the risks of competition. According to it, the co-ordination might appear from conduct and that although parallelism of behaviour cannot by itself be identified with a concerted practice, there would be a strong indication of such a practice when it leads to conditions of competition which do not correspond to the normal conditions of the market, especially where the parallel behaviour is such as to permit the parties to seek price equilibrium at a different level from that which would have resulted from competition. The court emphasised that every producer was entitled to change his prices freely and to this end take into account the present or foreseeable conduct of its competitors. On the other hand, it was contrary to the rules of competition in the community for a producer to co-operate with its competitors in any way to determine a guaranteed line of action relating to a rise in prices and to ensure its success by first removing any uncertainty as to reciprocal conduct in respect of the essential elements of its action, e.g., rates of increase, object, date and place. The decision turned on the evidence and no general standard could be indicated for understandable reasons.
According to a commentator (Mrs. Valentine Koran), the criterion, such as it was, was difficult to apply in a market with few producers, where each must take into account his rival's market decisions, and the criterion was based with reference to the unknowable. According to the other commentator, Ernst Steindoiff, according to the judgment, in order to show that there were concerted practices, the court expressly relied on the behaviour of the parties as well as on the characteristics of the market in relation to the products in question.
The court held that having regard to the characteristics of the market in these products, the behaviour of the parties was designed to substitute for the risks of competition and the hazards of the individual initiatives, co-operation which amounted to a concerted practice. The parties who put these practices into effect sought on the occasion of each price increase to reduce to the minimum the risk of changing the conditions of competition.
20. The guidance from the U.K. law is most useful because provisions of Section 2(a) in the Indian Act corresponds to Section 6(3) of the U.K.Act. The decision in L.R. 4 RP 116 (CA) (In re British Basic Slag Ltd.'s application : British Basic Ltd. v. Registrar of Restrictive Trading Agreements) is, therefore, quite illuminating although it did not involve the question of pricing. Basic slag, a by-product of steel manufacture could be made available as a fertiliser by very fine grinding. Several steel companies incorporated B. Ltd., as a common marketing organisation for the sale of their fertilisers. Each company took shares in it, appointed one nominee director to its board, and entered into ten year agreements with it regulating the terms on which they supplied it with fertilisers. The membership of B. Ltd. changed from time to time but each of the new members made agreements with it substantially like the original agreements. By each agreement the signatory member agreed to sell the whole of its fertiliser output to B. Ltd. and not to sell to anyone else without the consent of B. Ltd. and B. Ltd. agreed to buy as much of the member's output as it could sell, to use its best endeavours to dispose of the whole of the output, and to apportion its purchases from members in an equitable and reasonable manner.
21. On an application by B. Ltd. for a declaration that its agreements were not agreements to which Part I of the U.K. Act applied, on the ground that the agreements were not agreement or arrangement, it was held that the word "arrangement" in Section 6(3) of the Act of 1956 bore its ordinary and popular meaning, and that, on the evidence, the members had made an "arrangement" as that word was commonly understood, to enter into identical agreements with B. Ltd., for the common marketing of their fertilisers. Lord Diplock L.J. in his judgment stated that it was sufficient to constitute arrangement between A and B if, (i) A made a representation as to his future conduct with the expectation and intention that such conduct on his part would operate as an inducement to B to act in a particular way, (ii) such representation was communicated to B, who had knowledge that A so expected and intended, and (iii) such representation or A's conduct in fulfilment of it operated as an inducement, whether among other inducements or not, to B to act in that particular way. He endorsed the conclusion of the lower court which had held that all that was required to constitute an arrangement not enforceable in law was that the parties to it should have communicated with one another in some way and that as a result of the communication, each had intentionally aroused in the other an expectation that he would act in a certain way.
22. Bearing in mind these guidelines it was not possible to say without any doubt that respondent No. 6 was a party to any concert. It had serious differences of opinion with respondent No. 7 and some of the leading members of its executive committee in regard to acceptance or rejection of the recommendations of the Wage Boards for journalists and other employees and also in regard to the basis on which imported newsprint was distributed amongst newspapers. It could not, therefore, reasonably be suggested that its mere membership of respondent No. 7 made it a party and a willing party to all the proposals that emanated from respondent No. 7 and which were acceptable to other members of respondent No. 7 and particularly to the members of its executive committee. It was possible that notwithstanding the disagreement on certain matters respondent No. 6 still colluded with other members of respondent No. 7 or any other respondents, viz., respondents Nos. 1, 2, 3, 4 and 5. But for suggesting this collusion some evidence was necessary and there was no evidence to speak of to this effect. It is true that respondent No. 6 received all the circulars from respondent No. 7. There is, however, no circular about price rise on the first occasion, viz., February 1, 1971. Even other circulars which had been there, apart from underlining the fact of rise in the cost and the consequent advisability of increasing the newspaper prices and advertisement rates, did not make any concrete or specific proposal for the rise in prices. Apart from these circulars, there is nothing to show that respondent No. 6 was in communication with any of the respondents including respondent No. 7 except through agents and hawkers. It was, therefore, not possible to allege that respondent No.6 was in concert with any of the other respondents either directly or through the agency of respondent No. 7 in regard to the matter of raising prices of the newspapers. On the other hand, the two reasons given by the learned counsel for respondent No. 6 for the rise, in prices of its paper " Patriot" were quite plausible and afforded justification for the rise. These reasons were the rise in the cost of production through increase in wages and the cost of raw materials and the pressure brought to bear by agents and hawkers to increase the price of " Patriot" in tune with the rise in prices of other newspapers. The cost of production was rising so much and was so far ahead of the revenues that respondent No. 6 was losing from year to year and by the end of 1975 its losses had accumulated to Rs. 79 lakhs.
It should have raised its prices in any case but the claim that it did not do it before the others did for fear of losing even the revenues which it was getting, is something which cannot be brushed aside as unrealistic. Similarly, the pressure of agents and hawkers cannot also be under-estimated. The same agents and hawkers distribute all kinds of newspapers and respondent No. 6 could not possibly ignore the suggestions of agents and hawkers if it wanted to keep their interest in its newspaper alive. The news that the other newspapers were going to raise its prices was bound to go round at least among the agents and hawkers, and that kind of communication was inevitable. The reasons given by the respondent for rise in the prices were, therefore, quite sound. But apart from these reasons, the more important thing is the aspect stressed earlier, viz., the lack of harmony between respondent No. 6 and the other respondents, as stated earlier. It is in the context of this disharmony that two other factors had to be evaluated.
Moreover respondent No. 6 was not able to balance its budget over a period of five years and it could not possibly be alleged that it was raising prices to increase its profit. In the case of respondent No. 6, it was essentially a strategy for survival and the strategy was dictated by rising costs but could be put into practice only when the other newspaper owners raised the prices, partly for fear of losing the revenue and partly for fear of losing the patronage of agents and hawkers. The area of competition was peopled by English newspaper readers and this area contained certain strata depending on income groups as also ideological groups. Bulk of the readers formed an uncommitted market in which difference in price would tilt the demand one way or the other. In such a sensitive market respondent No. 6 catering to customers who preferred somewhat cheaper newspaper had necessarily to keep an eye on the reactions of the newspapers with higher prices so as to keep the differential between its prices and prices of other newspapers to make it worthwhile for its readers to continue that patronage. Ail things considered, therefore, the inference of concert was not plausible and respondent No. 6 cannot, therefore, be held to be guilty of any restrictive trade practices alleged in the notice. Applying the test laid down by Lord Diplock, it could not plausibly be suggested in the circumstances of the present case that the other respondents could make a representation as to their future conduct with the expectation and intention, to such conduct on their part would have operated as an inducement to respondent No. 6 to raise the prices. If the behaviour of respondent No. 6 in regard to wages was any guide, the other respondents could not possibly expect it to tow their line. There was no doubt communication from other respondents to respondent No. 6 because respondent No. 6 had received all the circulars. It had also learnt about the possible action of the other respondents through hawkers and agents. But it could not be suggested once again that the communication included the expectation and intention of the other respondents that respondent No. 6 would follow the suit. In regard to item 3 of the test, no doubt the conduct of the or her respondents operated as an inducement to raise the prices, but it is the intention and expectation on the part of the other respondents that particular conduct on their part would operate as an inducement to respondent No. 6 which is the crux of the matter.
In the circumstances of the case, the other respondents could not possibly entertain that expectation and that intention. The expectations and intentions of the members of a concert are to be clearly distinguished from expectations and intentions of a price leader. A price leader may by reason of his business judgment intend and expect that the smaller members of his trade will follow the lead given by him on account of strictly business reasons. He may intend and expect that the smaller members will adopt his prices in order to minimise the losses and in order to preserve their small market share.
But the expectations and intentions of a price leader based on business considerations are to be clearly distinguished from expectations and intentions of the members of a concert. The latter expectations and intentions stem from a tacit understanding in mutual interest. Such a tacit understanding in mutual interest cannot be discerned in so far as respondent No. 6 is concerned in the present case. To revert to the criterion given by the U. K, judge in the lower court, which has been approved by Lord Diplock, it was not possible to say that as a result of communication in the present case respondent No. 6 had intentionally aroused in the other respondents an expectation that he would act in a certain way. Moreover, as pointed out earlier, respondent No. 6 has not raised the price every time that the other respondents have raised. The extent of the rise is also not completely in consonance with the rise by others. Above everything else, the rise in the case of respondent No. 6 is not responsible for raising of any profits regardless of the cost, but has been responsible only for redaction of losses. It was, therefore, not possible to allege that respondent No. 6 was party to any concert or that it was indulging in the restrictive trade practice of the concert as alleged. The answer to issue No. 3 is in the negative.
23. In view of the fact that answer to issue No. 3 is in the negative, it would strictly not be necessary to answer issue No. 4 but in order to make the disposal of the enquiry complete, it is considered necessary to answer that question also. Assuming for the sake of argument that answer to issue No. 3 is in the affirmative, the respondent will not be entitled to gateway under Section 38(1)(h). If there was a concert to which respondent No. 6 was a party, it was clearly indulging in restrictive trade practice. The mere fact that the differential in prices between different newspapers remained the same, even after the changes were effected, did not lessen the damage done by the trade practice to competition or its potentiality to damage the competition. As stated earlier, the very fact or idea of concert meant negation of competition in so far as prices are concerned and price is the most important element of the term of " sale ". To eliminate competition in such an important aspect of the term of "sale" would clearly mean distortion of competition in regard to this important aspect. The consumers, viz., the newspaper readers who prefer lower priced papers have no choice left in regard to prices, because the prices have been fixed by newspapers by concert. What is more, as stated earlier, although the categories of newspaper readers are determined by income groups and by ideological groups, by and large there is a large body of uncommitted newspaper readers. It is this category of readers who will be deprived of choice of newspapers based not only on the quality of service of newspapers but also by prices. It was, therefore, not possible to say that concert would not restrict or discourage competition to any material degree in the relevant trade.
The answer to issue No. 4 is, therefore, in the negative.
24. There will be no order against the respondent No. 6 under Section 37(1). There will also be no order regarding costs.