CASES ON MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT 1969

CASES ON MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT 1969 - Transcript

CASES ON MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT,
1969
A brief study on the following cases in purview of the MRTP Act, 1969
Colgate Palmolive Vs Hindustan Lever Limited
Hindustan Lever Vs Marico
Reckitt and Coleman India Vs Kiwi TTK
1
Rekha Ramaswamy (FT-125)
Sameer Ailawadi (FT-131)
Samuel Kumar (FT-132)
Tulika Sarkhel (FT-165)
Yogyta Yadav (FT-179)
TABLE OF CONTENTS
1. Introduction………………………………………………………………………………………………………………………… 3
2. Historical Development leading to the Enactment of the MRTP Act, 1969…………………………… 3
3. Objectives and Emphasis of the MRTP Act…………………………………………………………………………… 3
4. Restrictive Trade Practices…………………………………………………………………………………………………… 4
5. Unfair Trade Practices…………………………………………………………………………………………………………. 5
6. Monopolistic Trade Practices………………………………………………………………………………………………. 6
7. MRTP Commission………………………………………………………………………………………………………………. 7
8. Amendments to the MRTP Act and their Impact…………………………………………………………………. 9
9. Metamorphoses of MRTP Act, 1969 to Competition Act, 2002…………………………………………. 10
10. New Colgate and Palmolive Vs Hindustan Lever Limited Case……………………………………………. 12
11. Hindustan Lever Limited Vs Marico Case…………………………………………………………………………… 16
2
12. Reckitt and Coleman India Vs. Kiwi TTK Case……………………………………………………………………… 19
13. Reference………………………………………………………………………………………………………………………….. 23

Introduction
Since attaining Independence in 1947, India, for the better part of half a century thereafter,
adopted and followed policies comprising what are known as ‘Command-and-Control’ laws,
rules, regulations and executive orders. The competition law of India, namely, the MRTP Act
was one such. It was in 1991 that widespread economic reforms were undertaken and
consequently the march from ‘Command-and-Control economy to one based more on free
market principles commenced its stride. As is true of many countries, economic
liberalisation has taken root in India and the need for an effective competition regime has
also been recognised.
Historical Developments Leading to the Enactment of the MRTP Act
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The year 1969 saw the emergence of government regulations that strived to curb the
monopolies and other such practices that hampered the welfare of the consumers. By
enacting the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), the
Government played its role, that was assigned to it by Articles 38 and 39 of the Indian
Constitution which are the part of the Directive Principles of State Policy. These articles
mandate tha3t the Government will take necessary steps to promote welfare of the masses
and that the State shall direct its policies towards securing:
a. that the ownership and control of material resources of the community are so distributed
as best to subserve the common good;
b. that the operation of the economic system does not result in the concentration of wealth
and means of production to the common detriment.
Objectives and Emphasis
The Act was passed with a view to prevent concentration of economic power, control
monopolies, and prohibit monopolistic and restrictive trade practices. Through the
amendment of 1984, a provision regarding the consumer protection, namely Unfair trade
practices, was inserted in the Act. The term Unfair trade practices covered deception,
misleading claims and advertising. Unfair Trade Practices have been defined as trade
practices which for the purpose of promoting the sale, use or supply of any goods or for
provision of any services, adopt one or more of the practices mentioned therein and thereby
cause loss or injury to the consumers of such goods or services, whether by eliminating or
restricting competition or otherwise1.The principal objectives the MRTP Act sought to
achieve are:
i. prevention of concentration of economic power to the common detriment;
ii. control of monopolies;
iii. prohibition of Monopolistic Trade Practices 2(MTP);
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iv. prohibition of Restrictive Trade Practices (RTP);and
v. prohibition of Unfair Trade Practices (UTP).
Ambit and Coverage of MRTP Act
The Indian statute, as most competition laws in the world, encompasses within its ambit
essentially three types of prohibited trade practices, namely, Restrictive, Unfair and
Monopolistic. Very briefly, the contours of such practices are enumerated below.
RESTRICTIVE TRADE PRACTICES (RTPs)
In the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, restrictive trade
practice has been defined as a trade practice which tends to prevent, distort or restrict
competition. In particular, a practice, which tends to obstruct the flow of capital or resources
into the stream of production, is an RTP. Likewise the acts which tend to bring about
manipulation of prices, or conditions of delivery or to affect the flow of supplies in the
market relating to goods or services in such manner as to impose on the consumer
unjustified costs or restrictions are Restrictive Trade Practices. Certain common types of
Restrictive Trade Practices enumerated in the MRTP Act are:
i. Refusal to deal
ii. Tieup sales
iii.Full line forcing
iv. Exclusive dealings
v. Price discrimination
vi. Resale price maintenance
vii.Area restriction
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Onus is on the entity, body or undertaking charged with perpetration of the Restrictive Trace
Practice to plead for gateways provided in the MRTP Act itself to avoid being indicted.
UNFAIR TRADE PRACTICES (UTPs)
Prior to 1984, the MRTP Act contained no provision relating to the unfair trade practices. It
was through the recommendations of Sachchar Commitee in the year 1978, that a separate
Chapter was added to the MRTP Act defining various Unfair Trade Practices. The provision
was inserted with a view to enable the consumers, the manufacturers, the suppliers, the
traders and other persons in the market to conveniently identify such practices. A chapter
on the Unfair Trade Practices (UTPs) was inserted in the MRTP Act by through the
Amendment of 1984. Essentially (UTPs)4 in the MRTP Act include
i. Misleading advertisement and false representation.
ii. Bargain sale, bait and switch selling.
iii. Offering of gifts or prizes with the intention of not providing them and conducting
promotional contests.
iv. Product safety standards.
v. Hoarding or destruction of goods.
MONOPOLISTIC TRADE PRACTICES (MTPs)
The provision regarding MTPs in the Act was given shape by the Amendment of 1984. An
MTP is a trade practice which :
i. leads to charging of prices of goods and services unreasonably, by reducing or controlling
the production, supply or distribution of goods or supply of any services or in any other
manner;
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ii. unreasonably prevents or restricts competition in the supply or distribution of any goods
or services;
iii. limits technical development or capital investment to the detriment or allowing the
quality of any goods produced, supplied or any services rendered, in India, to deteriorate;
iv. unreasonably increases the cost of production of any goods or charges for the provision,
or maintenance, of any services;
v. unreasonably increases
a. sales price of goods, or the charges at which the services are provided or may be
provided;
b. the profits which are, or may be, derived by the production, supply or distribution
(including the sale or purchase of any goods) or in the provision or maintenance of
any goods or by the provision of any services;
vi. prevents or lessens competition in the production, supply or distribution of any goods or
in the provision or maintenance of any services by the adoption of unfair methods or
deceptive practices.
MRTP Commission
Under the MRTP Act, a Commission has been established, the Chairman of which is required
to be a person who is or has been or is qualified to be a judge of the Supreme Court or High
Court (of a State). The powers of the Commission include the powers vested in a civil court
and include further powers:
i)to direct an errant undertaking to discontinue a trade practice and not to repeat the same;
ii) to pass a ‘cease and desist’ order;
iii) to grant temporary injunction, restraining an errant undertaking from continuing an
alleged trade practice;
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iv) to award compensation for loss suffered or injury sustained on account of RTP, UTP or
MTP;
v) to direct parties to agreements containing restrictive clauses to modify the same;
vi) to direct parties to issue corrective advertisements; and Rs 100 crores (about US$25
million) to seek approval of government for setting up new undertakings, expansion of
existing undertakings, etc.
vii) to recommend to the Central Government, division of undertakings or severance of
inter-connection between undertakings, if their working is prejudicial to public interest or
has led or is leading to MTP or RTP.
Investigation and Enquiries
The MRTP Commission can be approached with a complaint/reference on Restrictive or
Monopolistic or Unfair Trade Practices by:
a) an individual consumer;
b) a registered association of consumers; or
c) a trade association.
The Commission can also be moved by an application from the DGIR or by a reference by the
Central or State Governments. The law provides for suo motu action on the part of the
Commission, if it receives information from any source or on its own knowledge.
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The law provides for a temporary injunction against the continuance of alleged
monopolistic, restrictive or unfair trade practices, pending enquiry by the Commission.
A salutary provision in the MRTP Act is the power of the Commission to award
compensation for loss or damage suffered by a consumer, trader, class of traders or
government as a result of any monopolistic/restrictive/ unfair trade practice indulged in by
any undertaking or person.
Economic Reforms and Impact on the MRTP Act
It was in 1991 that India took the initiative in favour of economic reforms consisting
essentially of liberalisation and de-regulation. In a manner of speaking, India embarked on
what may be described as the LPG regime, an acronym for liberalisation, privatisation, and
globalisation.
Amendments to the MRTP Act and their Impact
Major amendments were effected to the MRTP Act in 1991. Two of thefive objectives
mentioned earlier, namely: prevention of concentration of economic power to the common
detriment; and control of monopolies have been de-emphasised, after the 1991
amendments to the MRTP Act.
Prior to the 1991 amendments, the MRTP Act essentially was implemented in terms of
regulating the growth of big size companies, called the monopoly companies. In other
words, there were pre-entry restrictions therein requiring undertakings and companies with
assets of more than
Provisions relating to concentration of economic power and pre-entry restrictions with
regard to prior approval of the Central Government for establishing a new undertaking,
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expanding an existing undertaking, amalgamations, mergers and takeovers of undertakings,
were all deleted from the statute through the amendments.
Applicability of The MRTP Act
During the year 1991, a notification was issued by the Government that the MRTP Act shall
apply to SoEs, whether owned by the Government or by Government companies, statutory
corporations, and undertakings under the management of various controllers appointed
under any law, cooperative societies and financial institutions. Thus, there is no distinction,
post-91, between the SoEs and private sector companies in the matter of monopolistic,
restrictive and unfair trade practices.
Mergers and Amalgamation
Concentration of economic power may result from merger, amalgamation or take-over. The
MRTP Act does not prohibit merger, amalgamation or take-over, but seeks to ensure that the
arrangement sub serves public interest.
Metamorphosis from MRTP Act, 1969 to Competition Act, 2002
A perusal of the MRTP Act will show that there is neither definition nor even a mention of
certain offending trade practices, which are restrictive in character. Some illustrations of
these are:
• Abuse of Dominance;
• Cartels, Collusion and Price Fixing;
• Bid Rigging; and
• Predatory Pricing.
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Another dimension is the dynamic context of international as well as the domestic trade and
market. When the MRTP Act was drafted in 1969, the economic and trade milieu prevalent
at that time constituted the premise for its various provisions. There has been subsequently
a sea change in the environment, with considerable movement towards LPG. The law has to
yield to the changed and changing scenario on the economic and trade front. Hence, the
new law the Competition Act, 2002.
The rubric of the new law, Competition Act, 2002 (Act, for brief) has
essentially four compartments:
• Anti-Competitive Agreements;
• Abuse of Dominance;
• Combinations Regulation; and
• Competition Advocacy.
The differences between the old law (namely the MRTP Act, 1969) and the new law (the
Competition Act, 2002) may perhaps be best captured in the form of a table displayed
below:
MRTP ACT, 1969 COMPETITION ACT, 2002
1 Based on the pre-reforms scenario Based on the post-reforms scenario
2 Based on size as a factor Based on structure as a factor
3 Competition offences implicit or not defined Competition offences explicit and defined
4 Complex in arrangement and language Simple in arrangement and language and
easily comprehensible
5 14 per se offences negating the principles of 4 per se offences and all the rest subjected to
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natural justice rule of reason.
6 Frowns upon dominance Frowns upon abuse of dominance
7 Registration of agreements compulsory No requirement of registration of agreements
8 No combinations regulation Combinations regulated beyond a high
threshold limit.
9 Competition Commission appointed by the
Government
Competition Commission selected by a
Collegium (search committee)
10 Very little administrative and financial
autonomy for the Competition Commission
Relatively more autonomy for the
Competition Commission
11 No competition advocacy role for the
Competition Commission
Competition Commission has competition
advocacy role
12 No penalties for offences Penalties for offences
13 Reactive and rigid Proactive and flexible
14 Unfair trade practices covered Unfair trade practices omitted (consumer
forum will deal with them)
Case 1: New Pepsodent v Colgate case
A brief overview of the case
In the New Pepsodent v Colgate case , HLL advertised its toothpaste ‘New Pepsodent’ as
“102% better than the leading toothpaste”. In the television advertisement, samples of
saliva are taken from two boys, one who has brushed with the new Pepsodent while another
has brushed with “a leading toothpaste”. The saliva of “the leading toothpaste” shows larger
number of germs. While the sample was being taken from the boys, they were asked the
name of the toothpaste with which they had brushed in the morning. One boy said
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Pepsodent, the response of the second boy was muted, however, lip movement of the boy
would indicate that he was saying “Colgate”. Also, when the muting was done, there was a
sound of the jingle used in the Colgate advertisement.
Colgate Palmolive (India) Limited complainant No.1 (hereinafter referred to as 'Colgate') filed
a complaint along with complainant No. 2, claiming to be a consumer, before the
Monopolies and Restrictive Trade Practices Commission (hereinafter referred to as the
"Commission") against M/s. Hindustan Lever Limited complaining that the advertisement
campaign of the letter regarding its dental cream New pepsodent disparages the leading
toothpaste namely Colgate Dental Cream manufactured by complainant No.1. It was further
alleged that M/s. Hindustan Lever Limited was indulging in unfair trade practices.
Along with the complaint, an application under section 12A of the Monopo- lies and
Restrictive Trade Practices Act, 1969 (hereinafter referred to as the 'Act') was filed for
interim relief.
Analysis:
Colgate Palmolive (India) Limited, the complainant filed a complaint, before the Monopolies
and Restrictive Trade Practices Commission against M/s. Hindustan Lever Limited
complaining that the advertisement campaign of the latter regarding its dental cream New
pepsodent disparages the leading toothpaste namely Colgate Dental Cream. It was further
alleged that M/s. Hindustan Lever Limited was indulging in unfair trade practices.
The following points are against HLL:
1. In course of the advertisement when the child using the leading toothpaste is
questioned, the jingle used in the background which closely resembled that of
Colgate Palmolive India’s jingle.
2. In course of the advertisement when the child using the leading toothpaste is
questioned, he mouthed out the words Colgate which was clearly visible
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3. HLL claimed 102% anti-bacterial superiority over the leading brand; however their
advertisements gave an overall impression of being better than the leading brand in
dental care. Hence other factors like fighting germs, tooth decay could also be
verified.
4. The consumer was not interested in the intricate behavior of the toothpaste but was
only interested in the overall protection the toothpaste offered to teeth therefore
the proceeding could not be confined only to the ‘anti-bacterial’ statement made by
HLL.
The following points are in favour of HLL:
1. The term ‘leading brand’ need not refer to Colgate only even though at that time
Colgate was the leading brand in the market with 60% market share. This was
because it is not necessary for a consumer to be aware of who is the leading brand in
the market.
Colgate India along with the complaint filed for an interim relief under article 12A of the
MRTP act. The MRTP act is explained as below
Section 12A
POWER OF THE COMMISSION TO GRANT TEMPORARY INJUNCTIONS
(1) Where, during an inquiry before the Commission, it is proved, whether by the complainant,
Director General, any trader or class of traders or any other person, by affidavit or otherwise, that
any undertaking or any person is carrying on, or is about to carry on, any monopolistic or any
restrictive, or unfair, trade practice and such monopolistic or restrictive, or unfair, trade practice is
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likely to affect prejudicially the public interest or the interest of any trader, class of traders or traders
generally or of any consumer generally, the Commission may, for the purposes of staying or
preventing the undertaking or, as the case may be, such person from causing such prejudicial effect,
by order, grant a temporary injunction restraining such undertaking or person from carrying on any
monopolistic or restrictive, or unfair, trade practice until the conclusion of such inquiry or until
further orders.
(2) The Provisions of rules 2A to 5 (both inclusive) of Order XXXIX of the First Schedule to the Code of
Civil Procedure, 1908 (5 of 1908), shall, as far as may be, apply to a temporary injunction issued by
the Commission under this section, as they apply to a temporary injunction issued by a civil court,
and any reference in any such rule to a suit shall be construed as a reference to an inquiry before the
Commission.
Explanation 1: For the purposes of this section, an inquiry shall be deemed to have
commenced upon the receipt by the Commission of any complaint, reference, or, as the case
may be, application or upon its own knowledge or information reduced to writing by the
Commission.
Explanation II: For the removal of doubts, it is hereby declared that the power of the
Commission with respect to temporary injunction includes power to grant a temporary
injunction without giving notice to the opposite party.
The commission prima facie came to the conclusion that a case of unfair trade practices had been
made out against the respondent, and the reference in advertisements to famous toothpaste was to
Colgate Dental Cream.
Accordingly, an order of interim injunction was passed, retraining the respondent from “referring to
any Colgate toothpaste in any manner, either directly or indirectly, by means of any illusions, or hint,
in TV commercials, newspaper advertisements or hoardings...”
The commission had then appointed an expert panel to verify HLL's claim by consulting independent
experts.
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Observations:
HLL had intentionally used the Colgate jingle and also the mouthing of the words ‘Colgate’
by the child. Further they also projected their toothpaste to be superior to the leading brand
in overall dental care. This was misleading to the consumer since it wasn’t verified that
Pepsodent was better than other toothpastes in overall dental care. Colgate contented the
fact that since at the time of the advertisement, they were the leading brand in the market,
the term “better than the leading brand” used by Pepsodent in their advertisement referred
to Colgate. However, this could not be a pointed of contention since the consumer would
not know who the leading brand is.
Recommendations:
HLL was in infringement of the MRTP Act since their advertisement projected that their
toothpaste was superior in overall dental care and not only in anti-bacterial protection. This
is against the Unfair Trade Practices Act which defines an unfair practice as, “falsely
represents that the goods are of a particular standard, quality, quantity, grade,
composition, style or model”. Even though the verdict for this case did not come out, we
recommend that HLL was in violation of the MRTP Act, 1969 under Section 36A of unfair
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trade practices and the advertisement should be banned and suitable compensation to be
given to Colgate Palmolive India Ltd.
Case 2: HLL vs. Marico
Facts:
Approximately 55 per cent of the total market for hair oil products are with natural oil
brands, such as, Parachute, Shalimar, Cococare, Nihar, Anmol, etc. The balance is with
perfumed hair care products, which is further sub-classified as: heavy hair oil (Dabur
Jasmine, Bajaj Amla), light hair oil (Hair & Care, Dabur Special), cooling hair oil (Banphool,
Keshraj), hair tonics/creams (Clinic Active, Brylcreem) and coconut based oils (Clinic Plus,
Parachute Herbal).
Marico, one of the major players in the branded coconut hair oil segment, launched a three-
day mass media advertising warning consumers that a particular brand of hair oil (to be read
as Clinic Plus Hair Oil from Hindustan Lever Limited) was 'not pure coconut oil'. The ad copy
read: "When they say plus, they mean 42 per cent coconut oil plus 58 per cent paraffin"; and
"When we say Parachute, we mean 100 per cent coconut oil. When you use coconut oil,
don't buy diluted, buy 100% pure." The base line of the ad read: "100% coconut oil. 0%
Paraffin." This Plus in the sentence was an obvious indirect reference to Clinic Plus. Though
the competition was not named in the ad, it showed a bottle with a plus sign on it, bearing a
striking resemblance to Hindustan Lever's Clinic Plus. Marico did not know that this would
backfire. HLL complained to the Monopolies and Restrictive Trade Practices Commission
(MRTPC). The charge was not against the comparison, but the fact that the two products
were incomparable.

Analysis:
Hindustan Lever Limited had moved the MRTP, claiming that the advertisement was an
unfair trade practice.
The 1984 amendments to the MRTP Act brought Unfair Trade Practices under its purview. It
was done so that the consumer, manufacturer, suppliers, traders and others could
conveniently identify the practices, which were prohibited.
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The 1984 amendments to the act brought Unfair Trade Practices within its ambit. Essentially,
Unfair trade Practices fall under the following categories in the Indian Law:
1. Misleading advertisements and false representations.
2. Bargain sales, bait and switch selling.
3. Offering of gifts or prizes with the intention of not providing them and conducting
promotional contests.
4. Product safety standards.
5. Hoarding or destruction of goods.
Making false or misleading representation of facts, disparaging the goods, services or trade
of another person is also a prohibited trade practice under the Indian Law.
Under the Unfair Trade Practices Section 36A clause X, the advertisement propagated by
Marico for Parachute not only disparaged another product but was also a false
representation of the product. This was because:-
1. It did not mention that it was a hair oil. It qualified as cooking oil.
2. Marico was trying to portray paraffin as dilutant, though its own product Hair and
Care contained higher levels of paraffin than Clinic Plus.

Observations:
Parachute did not mention on its bottle that the product was for hair application. This was
done to put the product in a lower excise bracket. Thus, technically it qualified as cooking oil.
So Parachute and Clinic Plus could not be compared. Following this logic, if Marico did want
to compare then Clinic Plus could be compared to the company’s other product, i.e. Hair &
Care. This product incidentally contained 60% paraffin. HLL further argued that paraffin was
used to help dense oils flow well. So if Marico tried to portray paraffin as a dilatants, that
was unfair. The arguments were too strong and what Marico tried to depict as their product
superiority fell flat on its face. Within four days of filing a complaint, HLL obtained an exparte
interim stay order on the Marico campaign. The campaign had to be stopped by Marico
under the MRTP Act. And it issued a notice in public interest by the first week of August
with the head line: "Misleading advertising by Parachute Coconut Oil stopped by the
MRTP Commission."
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Recommendations:
The judgment was rightfully in favour of HLL. Under the section 36A, no false claims
regarding their products should be made by a company. Marico, in this case, is a well
established company which had already positioned Parachute in the minds of the
consumers. There was no need for Marico to malign another competitor’s product. Also,
their main point of contention was that Clinic Plus contained high levels of paraffin while
their own product Parachute Oil was a pure coconut based product. This comparison was
invalid because Parachute Oil did not qualify as hair oil. On the other hand, Marico’s own
product Hair and Care was found to contain even higher levels of the chemical. Marico’s
strategy failed miserably because it was not left with any lawful reason for defending its
product.
Case 3: Reckitt & Colman of India Ltd. v. Kiwi T.T.K. Ltd
Facts:
In Reckitt & Colman of India Ltd. v. Kiwi T.T.K. Ltd., the plaintiff company is engaged in
manufacture and sale of consumer products and one of the products of the plaintiff is liquid
shoe polish being manufactured and marketed by them under the name and style of Cherry
Blossom Premium Liquid Wax Polish. Defendant is also engaged in the manufacture of polish
and one of the brands being manufactured and marketed by the defendant is "KIWI" brand
of liquid polish. It is alleged that the liquid polish being marketed by the defendant and
some other manufacturers have much less wax contents and more acrylic contents as
compared to the liquid polish of the plaintiff. The acrylic base allegedly tends to form a film
on the footwear which over a period of time is liable to crack and thus damage the footwear.
It is, therefore, stated that the liquid polish of the plaintiff having wax rich formula is better
than the other polishes. The liquid polish of the plaintiff is sold and marketed in angle neck
bottles which are alleged to have easy application of the polish to the footwear. An imported
applicator is alleged fitted on to the bottle which is strengthened by chemical flocking on the
surface as also by riveting the sponge on to the plastic applicator base. The plaintiff has
claimed its product to be superior to the similar product of the other competitors in every
respect and it is stated that the plaintiff has 68% market share of the liquid shoe polish
whereas the defendant has only 20% of such share.
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The defendant with a view to promote its product is displaying an advertisement through
the electronic media. The advertisement of the defendant shows a bottle of "KIWI". From
which the word "KIWI" is written on white surface which does not drip as against another
bottle described as "OTHERS" which drips. The product shown to have been flowing from
the bottle of "OTHERS" is from a bottle marked "Brand X" and allegedly looks like the bottle
of the liquid shoe polish of the plaintiff for which the plaintiff allegedly has a designed
registration granted in 1993 under design No. 165756. The bottle of "OTHERS" marked
"Brand X" also has a red blob on its surface, which allegedly represents "CHERRY" which
appear on the bottle of the plaintiff’s product. Besides the advertisement in the electronic
media, defendant had also been circulating a "point of sale" poster material at shops and
marketing outlets selling similar products. It is alleged that in the said poster material
circulated by the defendant, the bottle shown, as "OTHERS" with a faulty applicator allegedly
resembles the applicator of the plaintiff.
The advertisement was regarded as comparative advertisement and can be defined as
advertising that compares one product or service with another or that states that one
product works with or is compatible with another. Five principles were laid down by the
Court to decide as to whether a party is entitled to an injunction were as under: -
1. A tradesman is entitled to declare his goods to be best in the words, even though the
declaration is untrue.
2. He can also say that my goods are better than his competitors', even though such
statement is untrue.
3. For the purpose of saying that his goods are the best in the world or his goods are better
than his competitors' he can even compare the advantages of his goods over the goods of
others.
4. He, however, cannot while saying his goods are better than his competitors', say that his
competitors' goods are bad. If he says so, he really slanders the goods of his competitors. In
other words he defames his competitors and their goods, which is not permissible.
5. If there is no defamation to the goods or to the manufacturer of such goods no action lies,
but if there is such defamation an action lies and if an action lies for recovery of damages for
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defamation, then the Court is also competent to grant an order of injunction restraining
repetition of such defamation.
It was held that a manufacturer is entitled to make a statement that his goods are the best
and also make some statements for puffing of his goods and the same will not give a cause
of action to other traders or manufacturers of similar goods to institute proceedings as there
is no disparagement or defamation to the goods of the manufacturer so doing. However, a
manufacturer is not entitled to say that his competitor's goods are bad so as to puff and
promote his goods.
Analysis:
The Monopolies and Restrictive Trade Practices, 1984 (MRTP Act) (amended in 1984 to
include unfair trade practices) and the Trade Marks Act, 1999 (TMA) work in tandem to
provide the basic structure that governs comparative advertising in India. The Trade Marks
Act had replaced a 1958 law, and it was seen as an attempt to balance the conflicting
interests of the rights of registered trade mark owners and a compelling consumer interest
in informative advertising. Statutory protection for trade mark owners was extended to
cover services and not just goods as was previously the case. However, s. 30(1) has provided
an escape route for what would otherwise have been an infringing act.
Section 30(1) of the Act read as: “Nothing in Section 29 shall be preventing the use of
registered trademarks by any person with the purposes of identifying goods or services as
those of the proprietor provided the use:
a) Is in accordance with the honest practices in industrial or commercial matters, and
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b) Is not such as to take unfair advantage of or to be detrimental to the distinctive character
or repute of the trade mark.”
This is subject to certain limitations, which are provided Section 29(8) of the Trade Marks
Act, which read as: A registered trademark is infringed by any advertising of that trade mark
if such advertising:-
a) Takes unfair advantage and is contrary to honest practices in industrial or commercial
matters; or
b) Is detrimental to its distinctive character; or
c)Is against the reputation of the trade mark.
To infringe, the use must (a) be otherwise than in accordance with honest practices in
industrial or commercial matters and (b) without due cause take unfair advantage of, or be
detrimental to, the distinctive character or repute of the mark.
Comparative advertising is also subject to certain other limitations contained in the
definition of ‘unfair trade practices’, under s. 36A of the Monopolies and Restrictive Trade
Practices, 1969.
The ambit of the provisions has increased to include unregistered trademarks. The
proprietor of an unregistered trade mark can institute an action of passing-off in case of
comparative advertising disputes. The aforesaid amendments in the Indian trademarks law
draw inspiration from Section 10(6) and 11(2) of the 1994 UK Trade Marks Act.
Conclusion
Government body MRTP too agreed that the bottle shown in the advertisement was that of
Cherry Blossom and the ad was ruled a case of disparagement. Subsequently, Kiwi was asked
to discontinue the same.
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The vast majority of the viewer of the commercial advertisement on electronic media are
influenced by the visual advertisements as these have a far reaching influence on the psyche
of the people, therefore, discrediting the product of a competitor through commercial
would amount to disparagement as has been held by the High Courts and the Supreme
Court of India as well as the Law laid down by Courts in U.K. & U.S.A.
Whereas now the position of law in India in respect of disparaging advertisements of rival
products is well settled. Although a tradesman is entitled to make an untrue declaration that
his goods are the best, better than his competitors, and for that purpose can even compare
the advantages of his goods over the goods of the others; he cannot say that his
competitors’ goods are bad. Further, such use generally/specifically of a proprietor's product
for a comparison with the rival product of another proprietor violates the first proprietor's
intellectual property rights. But if a competitor makes the consumer aware of his mistaken
impression, the Plaintiff cannot be heard to complain of such action.
Recommendations
Kiwi was rightfully was asked to discontinue the advertisement in accordance with the five
principles laid down by the court that govern comparative advertising in India. According to
these principles, a tradesman can claim his product to be better than his competitors but he
cannot claim that his competitor’s product is bad. Kiwi tried to portray that Cherry Blossom’s
product is inferior to their and so was granted injunction.
References
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Secondary sources
http://www.indiankaanoon.com
http://www.legalserviceindia.com
http://www.idlo.int
Cuts Centre for Competition Investment and Economic Regulation
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