1. In the three separate complaints filed, common allegations have been levelled against the three respondents namely M/s. Hindustan Lever Limited, M/s. Colgate Palmolive India Limited and M/s. Ponds (India) Ltd. in allowing discriminatory discounts varying from 4% to 8.15% to Kendriya Bhandar, Super Bazar and Canteen Store Department and non-extension of trade promotion schemes open to retail dealers as well as discrimination in availability of credit facilities to Super Bazar, Kendriya Bhandar and Canteen Store Department vis-avis stockists/distributors. These practices are contended to be restrictive trade practices as covered under Section 2(o) and Section 33(1)(e) of the Monopolistic Trade Practices Act (in short "Act). It is prayed that inquiries be instituted against the said respondents and cease and desist order be passed against them.
2. In view of the same cause of action pertaining to the same subject matter, we dispose of the matter by a common order for the sake of convenience.
3. The Commission directed the Director General of Investigation and Registration to investigate into the matter. The Director General of Investigation and Registration submitted the Preliminary Investigation Report. Subsequently, Notice of Enquiry was issued to each of the respondents. All the respondents contended that the inquiry is not maintainable as the alleged trade practices stated to have been adopted by the respondents do not constitute Restrictive Trade Practices Act within the meaning of provisions of the Act as cited. Inquiry instituted on comparison of non-comparable who operate in different and distinct fields in no way affects the competition. Even the concerned Departments of Government have supported the policy as covered in letter dated 16th August, 1995, by the Under Secretary to the Government of India to the Director General of Investigation and Registration, M.R.T.P. Commission (Annexure-A). A letter dated 8th August, 1995 addressed by Shri N. Bala Haskar, Joint Secretary to Shri G.R. Bhatia, Deputy Director (Legal), MRTP Commission, MRTP House further supports the policy of the respondents in allowing discounts.
Letters of Kendriya Bhandar, Super Bazar and Canteen Stores addressed to the Director General of Investigation and Registration explains the reasons for allowance of discounts. The Notice of Enquiry accordingly needs to be discharged, contend the respondents.
4. After completion of the pleadings, the following issues were framed : (1) Whether the inquiry is not maintainable for the preliminary objections taken by the respondent in Paras 1 to 4 of its reply (2) Whether the respondent has indulged in or indulging in the restrictive trade practices listed in the NOE (3) Whether the alleged restrictive trade practices are not prejudicial to public interest in the light of the gateways pleaded by the respondent (1) Whether the NOE is maintainable or not in view of the objections take by the respondent in its reply (2) Whether the respondent is or has been indulging in the restrictive trade practices as stated in the NOE (3) If the answer to the issue No. 2 is in the affirmative, whether the restrictive trade practices are prejudicial to public interest.
(1) Whether the inquiry is not maintainable for the preliminary objections taken by the respondent in Paras 1 to 4 of its reply (2) Whether the respondent has indulged in or indulging in the restrictive trade practices listed in the NOE (3) Whether the alleged restrictive trade practices are not prejudicial to public interest in the light of the gateways pleaded by the respondent 5. Both the parties supported their respective stands by furnishing documents. Respondent gave up the right to cross-examine the witnesses to be produced by the Director General of Investigation and Registration.
6. We have given a careful thought to the submissions made on both sides. We are of the considered view that Notice of Enquiry needs to be discharged on the facts as brought on record as well for the reason given in the paragraphs hereinafter. Section 33(1)(e) of the Act reads as under : (1) [Every agreement falling within one or more of the following categories shall be deemed, for the purposes of this Act, to be an agreement relating to restrictive trade practices and shall be subject to registration] in accordance with the provisions of this Chapter, namely-- (e) any agreement to grant or allow concessions or benefits, including allowances, discount, rebates or credit in connection with, or by reason of dealings.'' 7. These provisions cannot be applied in vacuum and in isolation from the economic constellation of the facts pertaining to trade and industry. The respondents deal in various consumer items such as soap, shampoo, toiletries, dental cream, etc. The respondents market these products through wholesale dealers known as redistribution stockists 'on principal to principal basis'. The wholesale dealers sell them to retail dealers who in turn sell them to consumers. The respondents allow specific percentage of discount for example 5% as in case of Hindustan Lever who in turn in their discretion may pass on the same to the retail dealers/consumers as the market warrants. Super Bazar, Kendriya Bhandar and Canteen Stores Department which sell to the consumers directly and are akin to the retail dealers were allowed discounts at the following rates at the relevant period of time.
"In the year 1990 an undertaking to the effect that rates offered to Kendriya Bhandar are the lowest and the firm will not supply their product to any organisation at lower price than offered to Kendriya Bhandar was taken from all the approved suppliers including the above firms." 8. These organisations allegedly operate on no profit no loss basis and do not have to incur costs associated with credit facility allowed to the retail traders. They are in a better position to pass on the same to the consumers. Supply of goods at comparatively cheaper rates helps in controlling the price line in the local market. This ultimately results in benefit to the consumers at large. What is relevant in the context is whether the discounts allowed at different rates ultimately result in discrimination to the consumers who have the option to buy from either these stores or from retailers in the market. The economics of this has not been worked out by the DG. In any case except for canteen stores public at large has a wider choice to buy either from these stores or from the market. The rationale behind the Canteen Stores Departments giving preferential treatment to a particular sect of society has been explained in the letter dated 16.8.1995 as under (Annexure-A) : "In respect of the Canteen Stores Department, this Ministry desire to bring certain relevant aspects to the notice of the Commission.
The Canteen Stores Department was set up to provide consumer items and household articles to the Defence personnel posted in the remote and far-flung area as mostly away from the civil population. The main objective is to making available these items to the troops at a price preferably cheaper than the civil market price. In the process, most of the State Governments have even exempted the supplies of the Defence personnel from the sales tax. The CSD being the largest single buyer in the country, purchase all the items from the manufacturers directly and since the marketing and other related costs are not applicable for the items sold in the bulk to the CSD, the purchase by CSD cannot be equated with the items sold in the civil market. Getting bulk discounts by the defence set up cannot be considered a restrictive trade practices. Any such decision of the authorities which may result in the increase in the cost of items to be purchased by the troops will have very severe repercussions and may affect the morale of the troops. This Ministry is of the firm opinion that no such step should be taken by the Government authorities which may affect the morale of the trops." No effective arguments have been advanced against the said objectives as explained in the said letter.
9. Similarly Ministry of Civil Supplies, Consumer Affairs and Public have also explained the basis of allowance of discounts concerned as under (Annexure C): "You are aware that stores like Kendriya Bhandar and Super Bazar have been set up as a bulwark of consumer protection. During the last few decades, these consumer stores have been selling a wide range of consumer goods at comparatively cheaper price than the local market. In fact, these stores have been set up with the assistance of the Government of India to control the price line and to have a deterrent effect on the private traders who more often than not resort to unfair trade practices like hoarding, black-marketing, adulteration, under-weighment, etc.
Super Bazar and Kendriya Bhandar, on public demand, have opened a network of branches in different parts of the national capital.
Super Bazar sells laboratory tested foods items to fulfil its avowed objective of consumer protection. Both Super Bazar and Kendriya Bhandar have been selling all their assorted items at a price which is visibly lower than the MRF and local market price. This has been possible among other things because of appreciating the philosophy of consumer co-operatives, leading producers of consumer goods have been allowing some extra discount to such consumer stores.
As these consumer stores are working in the best interest not only of their thousands of members but also the common man, the allegations against these companies for giving a little extra discount to the co-operative and other facilities like a few days credit, should not be treated as discriminatory trade practice.
Keeping in view the benefit that is accruing to the ultimate consumer, the case may be considered sympathetically and the minor benefits being given by the leading manufacturers to the consumer cooperatives, should not be interpreted as unfair trade practice which is in fact a practice in the public interest." 10. As the concessions/discounts allowed by the respondents are open to the public at large or to the specified section of the society which is to be treated differently, to our mind it would not be appropriate to apply the provisions of Section 33(1)(e) to the situation in hand. It is open to the Co-operative Stores, Super Bazar, Kendriya Bhandar, CSD, etc. to procure their requirements from the redistribution stockists at par with other retailers in case they find the discounts allowed to the redistribution stockists at higher rates.
11. As regards the sales promotion schemes to be made applicable to the Stores/ Kendriya Bhandar/Super Bazar, we find force in the arguments of the management that these are not only floated by the stockists, but in view of the legalistic and accounting issues, it may be difficult to enforce the scheme at their end though some of them are still made applicable as admitted by Super Bazar in its letter dated 15.7.1994 (Annexure X).
12. We also find that there is no force in the arguments that credit facilites extended to the parties should be at par, it may be stated that the same are made available depending on the terms and conditions of the agreement entered into by the respective parties. No attempt has been made on the part of the DG to show as to how the difference in the time schedule allowed for payment of dues tantamounts to manipulation of conditions of delivery or price as envisaged in Section 2(o) of the Act, we may also state that as held by Their Lordships of Hon'ble Supreme Court of India in the case of Smt. Parvati Devi v. Rajasthan Housing Board, reported in VII (2000) SLT 50=III (2000) CPJ 9 (SC)=2000 CTJ 165 Supreme Court (MRTP) it is necessary to prove that the impugned trade practices prevents, distorts or restricts the competition to impose unjustified cost on the consumer, which has not been shown in this case.
13. We further note that the said complaint pertains to the year 1993-94. In view of the vast changes in the market conditions and absence of fresh evidence regarding the continuance of the alleged trade practices, it would be inappropriate to pass cease and desist order at present. In our view we are supported by the decision of the Hon'ble Supreme Court in Civil Appeal No. 2230 of 1985 in the matter of Alkali Manufacturers' Association of India v. Registrar of Restrictive Trade Agreements and Anr.