7. COMPETITION LAW AND IMPACT ON ADVERTISEMENTS

Transcription

1 CHAPTER VII 7. COMPETITION LAW AND IMPACT ON ADVERTISEMENTS 7.1. Monopolies and Restrictive Trade Practices Act The MRTP Act as originally framed did not confer any power on to the Commission to grant temporary injunction during the course of enquiry. The Sachhar Committee Report, however, recorded that power to issue temporary injunction order ought to be made available to the Commission in order to give effect and strengthen the jurisdiction and authority of the Commission and it is by reason there for the legislature thought it fit to incorporate Section 12-A in the body of the Act by MRTP Amendment Act, 1984 conferring such a power on the Commission. Section 12-A reads as below : "12-A. Power of the Commission to grant temporary injunctions. - (1) Where, during an enquiry 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 likely to affect prejudicially the public interest or the interest of any trader, class of traders or traders generally or of any consumer or consumers 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 enquiry or until further orders. P.G. Diploma in Media Laws 213

2 (2) The provisions of Rules 2-A 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 any enquiry before the Commission. Section 36-A defines unfair trade practices. In Colgate Palmolive(India) Ltd. v. Hindustan Lever Limited 302, the question before the court was unhealthy competition between two giant advertisers. The appellant herein had filed a complaint with the MRTP Commission that the Hindustan Lever Limited s advertisement of their product New Pepsodent, which claimed that it has 102% more germ fighting capability compared to the leading toothpaste. Colgate Palmolive alleged that the leading toothpaste being referred to in the advertisement is Colgate Dental Cream and the advertisement was aimed at disparagement of the appellant s product. The Commission upheld the complaint and granted an injunction against Hindustan Lever Limited. Following this, Hindustan Lever Limited filed a complaint to the MRTP against Colgate Palmolive alleging that the latter s toothpaste advertisement s claim of germ fighting, tooth decay fighting and bad breath stopping was highly misleading and amounted to an unfair trade practice. But the complainant could not furnish any kind of evidence. Therefore, the MRTP did not uphold the complaint as far as the above three claims were concerned. But it did prevent Colgate from using the shakti chakra symbol, which was not even prayed for by the complainant. They filed cross appeals before the Supreme Court, which held that the MRTP Commission was right in not granting injunction against the Colgate advertisement, since there was a lack of evidence and there was a delay in filing the complaint against Colgate. Also, the 302 AIR 1999 SC P.G. Diploma in Media Laws

3 Supreme Court held that a trade advertisement containing a simple recommendation of the quality of the goods by the seller to gain purchasers, unless intended to be a warranty, would not amount to an unfair trade practice Globalization & Raghavan Committee The Monopolies and Restrictive Trade Practices Act MRTP Act 1969 administered by an independent commission has in the recent past lost much of its powers. During the Licence Raj, its primary occupation was to avoid concentration of economic power through building large asset bases or dominance in the market place The Commission has powers to initiate action against established unfair trade practices, including claims with regard to quality, competition and prices. In view of the genuine fear that the patent system would lead to monopolies, the government proposed a Competition law. As the MRTP Act does not protect the consumer from the evils of monopoly, which may result from new IPR legislations. There are competition laws in several countries with strong patent systems in operation. It is, therefore clear, that the protection of intellectual property should be subservient to an effective Competition law. However the debate is going on as to whether the required results of fair and free competition can be achieved by appropriate amendments to strengthen the current MRTP Act or through new legislation. Notwithstanding the utmost respect for strong intellectual property protection systems through the instruments of patents, proprietary trade marks, copyrights, designs, registrations and trade secrets, the US and European Union countries have strict competition laws. They protect consumers from anti-competitive abuses which could result from monopolies granted under those legislations. P.G. Diploma in Media Laws 215

4 The new competition policy expects to regulate the anti- Competitive activities and thus, provide basis for the new Competition Law Purpose of Competition Act The purpose of the new Act should be to prevent abuse of economic power gained through innovation and ownership of technology, usually practiced by adopting one or more of the following methods, according to M. D. Nair, author of article Wanted an effective anti-competition law Imposing unfair purchase or selling prices or other unfair trading practices. 2. Entering into contracts with parties for sharing of a market, limiting production or fixing prices. 3. Manipulating the production and distribution to the prejudice of consumers; 4. Entering into contracts with parties for sharing of a market, limiting production or fixing prices; 5. Refusing licenses to third parties even for a reasonable royalty, particularly when the holder has no intention of producing the product and making it available. 6. Withholding important technical progress from public against public interest 7. Imposing unfair and discriminatory sales prices and conditions; 8. Forming cartels between competitors to gain monopolies in the market and fixing prices. 303 M. D. Nair, Wanted an Effective Anti-Competition law The Hindu, January 12, 2000, page P.G. Diploma in Media Laws

5 For the purposes of enforcing the principles of the policy for Competition law, an independent and effective competition authority is required to be established. When it is required to promote the adequate IPR protection, it is also essential to ensure, at the same time, that measures to enforce the patentee s rights do not themselves become roadblocks to fair and legitimate trade Impact on Advertisements of Professional Services Raghavan Committee on Competition Policy and Law made certain recommendations in this regard. In any competition environment, it is a question of survival of the fittest. One of the arguments of the domestic industrialists is that if a foreign professional comes to India to compete with local professionals, the latter should also be permitted to move to other countries to practice and compete. A professional practises according to the law of the land in which he comes into contact with his client. Hence the professionals must know the law of the land concerned, and it is presumed that they know it. Professional body in which he or she is a member, will impose a code of conduct and expects every member of that body to adhere to it. The licence issued by the body or the enrolment certificate allows him to practice and thus regulates the behaviour of that professional. At present neither the Medical Council of India nor the Bar Council of India allow the member-professionals to advertise and if they advertise the scope of their services, they are liable to disciplinary actions by the professional bodies. In the absence of such authority to advertise, the competition against foreign skilled professional in India will be uneven and not on a level playing field. It may be now imperative, if the foreign professionals are allowed to practice in India, for professional bodies of the country to amend their rules and permit the members to advertise so that they can reach the market after P.G. Diploma in Media Laws 217

6 creating due awareness among the people about the skills, talents, experience and knowledge as well as the scope of services expected from or offered by an individual professional. Then it will be up to the market to chose. If not the people have to be guided only by heavily popularized advertisements by brand names. The Raghavan Committee emphasises that India s competitiveness lies in services rather than in the manufacture sector. The quality of services rendered by Indians in various professional fields is now known world over and hence there should not be any restrictions on their movement or advertising options. The Committee Report evolved following suggestions on the Services aspect: 1. A profession enjoys monopoly rights of practice in its designated field and thebody administering the profession enjoys considerable autonomy in its administration. These monopoly rights and autonomy should be used for regulating the quality of theprofession, the standards of entry and discipline and accepted norms of performance. They should not be used to limit competition. 2. Professionals should not be denied normal opportunities of association and promotion and opportunities for growth and development. There should be no attempt to prevent the use of firm names on narrow technical considerations and to act in a manner which insulates them not only from global competition but also from the opportunity for global contact and interaction. 3. Professional bodies should not utilise their rights of autonomy tocounter the normal challenges of global integration. It is illogical tohave a totally protected profession in an environment of global industrial integration. 218 P.G. Diploma in Media Laws

7 7.5 The Competition Act, 2002 The Competition Act, 2002 provided for establishment of Competition Commission of India CCI and take over the regulatory authority from the MRT Commission, as the Competition Law replaces the MRTP Act 1969, according to Raghavan Committee report. Cases pending in respect of Monopolistic Trade Practices or Restrictive Trade Practices will be transferred to Competition Commission of India, [s 66(3)]. All cases of Unfair Trade Practices except those relating to disparaging of goods will be transferred to National Consumer Disputes Redressal Commission constituted under Consumer Protection Act. National Commission will transfer these cases to concerned state commissions. Cases in respect of disparaging goods of MRTP Act will be transferred to Competition Commission. Though the words Restrictive Trade Practice RTP is not used in Competition Act, the provisions in respect of anti-competitive agreements in Section 3 and Abuse of dominant position in Section 4 are similar provisions of Restrictive Trade Practices under MRTP Act. Hence, case law under MRTP will be relevant, though may not be binding on Competition Commission. 7.6 Anti-Competitive Agreements Void No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India (Section 3(1). Any agreement entered into in contravention of the provisions contained in Section 3(1) shall be void Section 2(2). If any enterprise in engaged in identical or similar trade of goods or provision of services, which a) directly or indirectly determines purchawe or sale prices, P.G. Diploma in Media Laws 219

8 b) limits or controls production, supply, markets, technical development, investment or provision of services, c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services or number of customers in the market or any other similar way, d) directly or indirectly results in bid rigging or collusive bidding shall be presumed to have an appreciable adverse effect on competition. 7.7 Abuse of Dominant Position Section 4(2) states that there shall be an abuse of dominant position under Section 4(1) if an enterprise follows any of the following practices. If any of the following practice is followed, it is abuse and no further proof of any damage or loss is required. a) unfair or discretionary conditions in purchase/sale. b) limiting or restricting production or development c) denial of market access d) supplementary obligations unconnected to main contract e) using dominant position to enter another market. Thus the new Competition Law which is assented to by the President in 2002 is not prescribing any advertising norms and do not deal with the unfair practices like misrepresentation and misleading promotion etc. Any deficiency or unfair practice including misleading advertisement can be questioned before the Consumer Forum if the rights of consumers are affected. 7.8 Overall scheme 220 P.G. Diploma in Media Laws

9 The Act is designed for following purposes - (a) Prohibition of anti-competitive agreements (b) Prohibition of abuse of dominant position and (c) Regulation of combinations. A quasi-judicial authority named Competition Commission of India is constituted. The Commission will consist of judicial as well as non-judicial persons to give Competition Commission of India (CCI) an overall perspective. On receipt of complaint or reference, CCI can issue order to Director General to investigate. His report will then be considered by CCI. The CCI will hear the concerned parties and then pass necessary orders. CCI will sit in benches. Each bench will consist of at least one judicial person of rank of Judge of High Court. CCI is empowered to recommend division of dominant enterprises. It can order de-merger in case of merger/ malgamation that adversely affects competition. Suitable powers are given to Commission and penalties are prescribed to ensure that orders of Commission are obeyed. Jurisdiction of Civil Court is barred and only appeal to Supreme Court only if substantial question of law are involved. P.G. Diploma in Media Laws 221