Case No. 68 of 2013. Case: Ghanshyam Dass Vij Vs Bajaj Corp. Ltd. and Ors.. Competition Commision of India

Case NumberCase No. 68 of 2013
CounselFor Appellant: R.D. Makheeja, Advocate and Party-in-Person and For Respondents: Pawan Sharma and Anuj Shah, Advocates
JudgesAshok Chawla, Chairperson, S.L. Bunker, Augustine Peter and M.S. Sahoo, Members
IssueCompetition Act, 2002 - Sections 19(1)(a), 19(3), 19(3)(a), 26(1), 27, 3, 3(1), 3(2), 3(3), 3(3)(b), 3(4), 3(4)(b), 3(4)(c), 3(4)(d), 3(4)(e), 48
Judgement DateOctober 12, 2015
CourtCompetition Commision of India

Order:

Order under Section 27 of the Competition Act, 2002

  1. The present information has been filed under section 19(1)(a) of the Competition Act, 2002 ('the Act') by Shri Ghanshyam Dass Vij ('the Informant') against M/s. Bajaj Corp. Ltd., Mumbai, ('the Opposite Party No. 1'/Bajaj/OP-1), Area Sales Manager, M/s. Bajaj Corp. Ltd., New Delhi ('the Opposite Party No. 2'/OP-2), Branch Manager, M/s. Bajaj Corp. Ltd., Panchkula, Haryana ('the Opposite Party No. 3'/OP-3), Branch Manager, M/s. Bajaj Corp. Ltd., Ambala, Haryana ('the Opposite Party No. 4'/OP-4) and Sonipat Distributor (FMCG) Association (Regd.), Sonipat ('the Opposite Party No. 5'/SDA/OP-5), a member of Haryana Distributors (FMCG) Association alleging inter alia contravention of the provisions of section 3 of the Act.

    Facts

  2. Facts, as stated in the information, may be briefly noticed.

  3. The Informant is a Sole Proprietor of M/s. Durga Drugs & General Stores which is stated to be engaged in the business of sales and distribution of ayurvedic and general health products of various companies. The Informant has been working as a stockist/distributor of Bajaj since 1986 selling and distributing its products which include inter alia hair oils.

  4. The Opposite Party No. 1/Bajaj is a company formed and incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacture and sale of ayurvedic products and medicines. The Opposite Party No. 2 is Area Sales Manager of the Opposite Party No. 1 based at Delhi. The Opposite Party No. 3 is Branch Manager of the Opposite Party No. 1 and is based at Panchkula, Haryana. The Opposite Party No. 4 is also Branch Manager of the Opposite Party No. 1 and is based at Ambala.

  5. It is averred in the information that the orders for supply of goods of the Opposite Party No. 1 were required to be placed on the Opposite Party No. 3 and the supplies were made by him to the distributors. At present, the orders for supply of goods are required to be placed on the Opposite Party No. 4 and supplies are made by him. The Opposite Party No. 5 is an association of distributors and stockist etc. (FMCG) of Sonipat and surrounding areas.

  6. It is stated that the Informant placed an order with the Opposite Party No. 3 for supply of 36 cartons of "Almond Drops Hair Oil, 100 ml" on 06.09.2012. The Informant also paid a sum of Rs. 50,000/- (Rupees Fifty Thousand only) for this purpose through NEFT. However, no supply was made by the Opposite Party Nos. 1, 2 & 3 against the said order and payment. In fact, it is alleged that the Opposite Party No. 3 refused to accept the aforesaid order which was sent to him by Regd. Post with A.D. dated 06.09.2012. Thereafter, a reminder was sent by the Informant to the Opposite Party No. 3 dated 12.09.2012 by Regd. Post with A.D. requesting him to supply the goods against the order dated 06.09.2012. The aforesaid reminder letter dated 12.09.2012 was returned back by the Postal Authorities with the remark "Refused".

  7. It is further stated that the Opposite Party No. 5 is an association of distributors/stockists of drugs/products of various drugs and pharmaceutical manufacturing companies. Under the regulations of the association, it is mandatory for each distributor and retailer to become a member of the said association. No new stockist/distributor is appointed by drugs and pharmaceutical companies unless the person desirous of becoming a stockist/distributor becomes member of the said association and gets 'No Objection Certificate' (NOC) from the association. It is also incumbent for the manufacturing company to obtain an NOC from the association before appointing any distributor at Sonipat.

  8. It is the case of the Informant that the Opposite Party Nos. 1, 2, 3 & 4 had proposed to appoint another distributor in place of the Informant and the Sonipat Distributor (FMCG) Association sought NOC from the Informant stating inter alia that he had nothing to do with the company and that he would have no objection if any other member of the association takes the distributorship of the company.

  9. The Informant responded to the Opposite Parties stating that he had no objection to the appointment of another stockist; however, he should also be allowed to continue the business. As this was not acceptable to the Opposite Parties, the Informant refused to sign the NOC on the dotted lines. At this, the Informant was asked to resign from the membership of the association which the Informant did. As a result, the Opposite Parties refused to deal with the Informant and stopped the supply of goods.

  10. The Informant has alleged that non-supply of goods by the Opposite Parties and withholding the amount paid by the Informant caused an appreciable adverse effect on competition, apart from the fact that the business of the Informant suffered greatly. The refusal of the Opposite Party No. 1 to supply the goods to the Informant is anti-competitive in terms of clause (b) of Explanation to section 3(4) of the Act. This action is also violative of section 3(4)(c)of the Act as there is only one exclusive dealer in the Sonipat Area.

  11. The Informant avers that the Opposite Parties lodged a false complaint against it in connivance with M/s. Vinod Enterprises as it refused to give NOC alleging inter alia that the products of the Opposite Parties are being sold by the Informant outside the area allotted to it. It was further alleged that the Opposite Party Nos. 1, 2, 3 & 4 had decided to terminate the distributorship of the Informant. Accordingly, the Opposite Party Nos. 1, 2, 3 & 4 stopped the supply of goods to the Informant.

  12. The Informant has alleged that the conduct of the Opposite Parties in appointing exclusive dealer/stockist for Sonipat Area and refusal to deal with the Informant (who is stated to be one of the oldest dealer/distributor of the Opposite Parties) is anti-competitive in terms of the provisions contained in section 3(4)(b) of the Act.

  13. In view of the above, the Informant has alleged the following actions of the Opposite Parties as anti-competitive and violative of the provisions of the Act:

    1. Refusal to deal with the Informant and refusal to supply the goods to him while appointing a new stockist in Sonipat Area.

    2. Imposing condition on the stockist not to sell/supply their products outside the Area allotted to stockist.

    3. Entering into exclusive supply and/or distribution agreement with the new distributor to the detriment of the Informant.

  14. In addition to the above cited allegations, the Informant has alleged that various clauses of Bye-laws of Sonipat Distributor (FMCG) Association (Regd.) are also anti-competitive as these clauses cause appreciable adverse effect on competition in India.

  15. Based on the above allegations and averments, the Informant has filed the instant information before the Commission seeking inter alia an inquiry against the Opposite Parties besides praying for the remedies as provided under the Act.

    Directions to the DG

  16. The Commission after considering the entire material available on record vide its order dated 26.11.2013, passed under section 26(1) of the Act, directed the DG to cause an investigation to be made into the matter and submit a report. The DG, after receiving the directions from the Commission, investigated the matter and after seeking extensions submitted the investigation report on 05.02.2015.

    Investigation by the DG

  17. It was concluded by the DG that the members of SDA agreed to certain bye-laws which restricted freedom of trade and limited competition amongst the distributors of FMCG products in the area of Sonipat. The association also enforced geographical area restriction on the members. The association enforced the requirement of NOC on newly appointed distributors before starting business of distribution of the products of any company. This practice was found to be limiting and controlling the supply and distribution of FMCG products in the area of Sonipat. Thus, such conduct of SDA was noted as anti-competitive within the ambit of section 3(3)(b) of the Act.

  18. Further, the DG found that Bajaj indulged in the practice of allocating geographical area to its distributors and thus noted that it indulged in exclusive distribution agreement, which violates the provisions of section 3(4)(c) of the Act.

  19. The DG also found that Bajaj indulged in the practice of stopping supply of goods to any deviant distributor and also restricted its distributor from supplying Bajaj products to retailers who came from area outside the territory allocated to the distributor by the company. However, such refusal to supply was noted as an outcome of the area restriction and was considered another aspect of the same practice. Thus, it was also concluded that Bajaj has indulged in refusal to deal, which violates the provisions of section 3(4)(d) of the Act.

  20. Further, the DG also concluded that Bajaj has indulged in re-sale price maintenance which violates provisions of section 3(4)(e) of the Act.

  21. Lastly, the DG identified the officer bearers of SDA as well as the officials of Bajaj for the purposes of section 48 of the Act.

    Consideration of the DG report by the Commission

  22. The Commission in its ordinary meeting held on 19.02.2015 considered the investigation report submitted by the DG and decided to forward electronic copies thereof to the parties for filing their respective replies/objections thereto. The Commission also decided to forward an electronic copy of the investigation report to the persons identified by the DG for the purposes of section 48 of the Act i.e., the officials of OP-5 who, at the time of the contravention of the Act, were responsible for the conduct of the business of OP-5 for filing their respective replies/objections thereto. The Commission further directed such parties to appear for oral hearing on 08.04.2015 when the arguments of the counsel for OP-1 and the Informant were heard. It was pointed out by the counsel...

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