Director-General of Investigation and Registration v. Hindustan Lever Limited

Facts:

The respondent was engaged in the production of consumer goods as detergent cakes, bathing soaps, chemicals etc. The various brands produced by the respondent under the three broad categories namely toilet soaps, laundry soaps and detergents. It was alleged that the respondent has been indulging in certain unfair trade practices among which one was tie-up sales of soaps and detergents, manufactured by the company, which are in demand. The tie-up alleged is that of detergents like Surf, Rin and laundry soaps which are slow moving items with toilet soaps like Lux, Rexona and Liril.

The respondent had a vast net work of sales organisation of its own which can be, and is actually, used to control the transactions of the stockists through its vast and parallel network of sales organisation with TSIs (Territory Sales Incharge) as its field operators, the respondent can and does have a firm grip over the purchase and sales operations of its Stockists. Respondent could dictate to its stockist amounts of various products they will purchase and accept from the company.

Held:

Court relied upon United States v. Loew’s Inc. 371 U.S. 38, 83 S. Ct. 979 L.Ed. 2nd II (1962), wherein “block booking” whereby copyrighted movies were licensed to T.V. stations only in packages so that for example to get “Casablanca”, a station would also have to take Nancy Drew, Trouble shooter and others, was held to violate Section 1 of the Sherman Act. In this U.S case it was held that power to appreciably restrain competition is “presumed when the tying product is patented or copyrighted” and when there is no patent or copyright power can be shown by evidence of “the tying product’s desirability to consumers or from uniqueness in its attributes.” “The presence of any appreciable restraint on competition provides sufficient reason for invalidating the tie. Such appreciable restraint exists whenever the seller can exert some power over some of the buyers in the market, even if his power is not complete over them.

Court held the above mentioned case to be applicable in the present fact situations and consequently held that he restraint placed by tying arrangements on respondent’s stockist regulated the trade. Market power was used to dispose of products which did not have a genuine competitive edge over similar products manufactured by other industrialists and such a practice was bound to distort competition.

Tying up arrangements practised by the respondent under which the Stockists can be dictated to purchase such goods and in such combination as the respondent may decide are restrictive trade practices within the meaning of Section 2(o) of the Competition Act.

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United States v. Lowe’s Inc. – 371 U.S. 38 (1962)

Individual distributors of copyrighted feature motion picture films for television exhibition engaged in block booking such films to television broadcasting stations. i.e., conditioning the license or sale of the right to exhibit one or more feature films upon acceptance by each station of a package or block of films containing one or more unwanted or inferior films. The several defendants have each, from time to time and to the extent set forth in the specific findings of fact, licensed or offered to license one or more feature films to television stations on condition that the licensee also license one or more other such feature films, and have, from time to time and to the extent set forth in the specific findings of fact, refused, expressly or impliedly, to license feature films to television stations unless one or more other such feature films were accepted by the licensee.”

It was held that Section 1 of the Sherman Act was violated when individual distributors of copyrighted feature motion picture films for television exhibition engaged in block booking such films to television broadcasting stations even in the absence of any combination or conspiracy between the distributors and any monopolization or attempt to monopolize.

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