DIRECTOR GENERAL INVESTIGATION AND REGISTRATION Vs. ZANDU PHARMACEUTICAL WORKS LTD
LAWS(NR)-1994-2-2
MONO POLIES AND RESTRICTIVE TRADE PRACTICES COMMISSION
Decided on February 15,1994

Appellant
VERSUS
Respondents

JUDGEMENT

N.C. Gupta, Member - (1.) THE respondent, abovenamed, is engaged in the manufacture and marketing of drugs and pharmaceuticals under the ayurvedic system of medicine on a fairly large scale. It has appointed stockists all over the country under standard agreements executed between the parties. THE respondent issued a standard price list which contained particulars of the standard products marketed by the respondent and the retail prices thereof. THE relevant details thereof will appear in the later part of this order. However, in terms thereof, distributors were allowed concessions or rebates in the listed price of various products in the form of certain quantity or percentage as mentioned therein as free of charge to the distributors. THE Director-General (Investigation and Registration), after examining the said terms of distribution of these products, came to the prima facie view that the respondent had indulged in a restrictive trade practice in terms of Clause (e) of Section 33(1) of the Monopolies and Restrictive Trade Practices Act, 1969 (for short "the Act"). It was further opined by the Director-General that the absence of any clause in the price list which expressly authorised the distributors to further sell these products at prices lower than those mentioned in the list, it was violative of Clause (f) of Section 33(1) of the Act. Accordingly, the Director-General made an application under Section 10(a)(iii) of the Act with the request that an enquiry may be instituted against the respondent and appropriate orders may be passed against the respondent in terms of Section 37(1) of the Act.
(2.) A notice of enquiry was accordingly issued against the respondent on the basis of the allegations contained in the aforesaid complaint. The respondent has filed a detailed reply justifying the aforesaid terms of the distribution arrangement. It has been, inter alia, pleaded that the terms in question do not constitute restrictive trade practices in terms of the aforesaid legal provisions, that even if the impugned clauses of the agreement technically attract the aforesaid provisions of Section 33(1) of the Act yet the same cannot be said an objectionable trade practice to justify any order under Section 37(1) of the Act, that such discount/rebate is widely prevalent in the trade and even bigger companies well established in this trade are offering similar discounts, that the market share of the respondent is comparatively small and the discount/rebate as offered by the respondent does not and is not likely to have any effect on competition and that the price list in question has been revised subsequently and in any case there is no objection by the respondent to mention as a footnote thereto that "the prices mentioned in the list are prices at which the goods are sold by the respondent and distributors are at liberty to sell these goods at a price lower than those mentioned in the list." The respondent has also annexed the price list of its products as annexure I to the written reply. After the rejoinder was filed on behalf of the Director-General, the following issues were framed in this case : 1. Whether the respondent is indulging in the restrictive trade practice as alleged in the Director-General's application under Section 10(a)(iii) and the notice of enquiry issued pursuant thereto ? 2. Relief.
(3.) THE Director-General in this case has produced the detailed list of the discount scheme and the price list by way of evidence to show that ex facie the entries in these documents constitute restrictive trade practices in terms of Clauses (e) and (f) of Section 33(1) of the Act. THE respondent, on the other hand, has produced eight witnesses in support of the pleas taken in the written statement and various documents to show that the incentive/discount allowed to the retailers and distributors under the scheme are uniform in character without causing any prejudice to a particular person and that the in-built mechanism of the scheme ensures the benefits of discount percolating to the ultimate consumers. As already stated, the respondent has sought to avail of certain gateways in terms of Section 38 of the Act in case the scheme in question is otherwise held to be a restrictive trade practice. We will shortly advert to the testimony of the witnesses produced by the respondent and the documents on record to assess the validity of the respective pleas taken by the parties. THE respondent's counsel during the course of arguments has referred to the various decisions of the Commission in support of the plea that in any case the scheme cannot be said to be prejudicial to public interest and, therefore, no restraint order can be passed against the respondent. Before we embark upon the assessment of evidence in this behalf, it may be made clear that issue No. 1 as framed does not in terms refer to the gateways as pleaded on behalf of the respondent. It was, however, agreed that the same can be considered for the purpose of granting or refusing relief as prayed for on behalf of the Director-General without framing a specific issue on this point.;


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