ORDER
S.D. Manchanda, Member
1. This enquiry has been instituted under Section 10(a)(iii) on the basis of an application made by the then Registrar of Restrictive Trade Agreements on January 20, 1984. It has been alleged in the notice of enquiry that :
(i) Respondent No. 1, M/s. Council of Traders Association, Bombay, is an apex body and acts as a co-ordinating body of respondents Nos. 2 to 14, which have a strength of about 35,000 retailers or dealers in Greater Bombay and Thane Distt.
(II) Respondent No. 3, M/s. Retail and Dispensing Chemists Association, Bombay, which was negotiating with M/s Food Specialities (India) Limited on behalf of its members, for the terms on which remuneration of the distributors on retail level should be fixed, demanded a minimum of 20% margin for retailers and 10% for wholesale stockists on the. products of M/s Food Specialities Limited, and threatened to boycott its products in case its demands were not met.
(iii) Respondent No. 3 with the support of the respondents, viz., respondents Nos. 1 and 2 and 4 to 17, actually boycotted the products of the said company in Greater Bombay and Thane Districts and thereby imposed unreasonable restrictions on the consumers by affecting the flow of supplies in the market of the said areas, and also imposed unjustified costs to consumers.
2. At the very start of the proceedings, respondents Nos. 8 and 11 were set ex parte as they chose to be absent on the date of hearing. The then Registrar of Restrictive Trade Agreements represented that the case, was not pressed against respondents Nos. 15, 16 and 17 as they were not members of respondent No. 1, the apex body. A common reply to the notice of enquiry was filed by respondents Nos. 1 to 7, 9, 10, 12, 13 and 14.
3. The following issues were settled for enquiry :
1. Whether the enquiry is not maintainable for the reasons given in para 1 of respondents’ reply to the notice of enquiry ?
2. Whether the respondents have been indulging in the trade practices as mentioned in the notice of enquiry dated February 29, 1984 ?
3. If the answer to issue No. 2 is in the affirmative, then whether the said trade practices are restrictive trade practices within the meaning of Section 2(o) pf the Monopolies and Restrictive Trade Practices Act ?
4. If the answer to issue No. 3 is in the affirmative, then whether the respondents are entitled to avail of the gateways provided under Section 38(1) of the Monopolies and Restrictive Trade Practices Act ?
5. To what reliefs are the parties entitled ?
4. The Additional Director-General examined two witnesses, namely, S/Shri S. Gupta, Deputy Director-General (Registration) and H.M. Fernandes, the all India sales manager of M/s. Food Specialities (India) Ltd. Documents produced by the Additional Director-General were marked as exhibits A-1 to A-9. The Commission examined two witnesses on behalf of the respondents, namely, S/Shri Som Nath Singh, on behalf of respondents Nos. 1 to 7, 9, 13 and 14 and Purshottam Shatye on behalf of respondent No. 12.
5. We have heard the arguments, perused the statements of the witnesses and examined the documents produced and proceed to discuss the issues involved.
6. The first issue covering the maintainability of the present enquiry was not pressed and is accordingly decided against the respondents.
7.
The second issue takes us to the evidence available on record. It is seen that the evidence consists of (i) copies of cyclostyled circular(s) issued by respondent(s) to its members urging them to boycott the products of M/s Food Specialities (India) Ltd., (ii) correspondence exchanged between the respondent(s) and M/s. Food Specialities (India) Ltd., (iii) copy of minutes of the meeting held by respondents, and (iv) press reports.
8. Shri Jagjeet Singh, learned counsel for the most of the respondents, has relied on the following arguments :
(i) The entire evidence brought on record has been produced by the complainant who is the interested party.
(ii) The evidence on record merely shows that there has been agitation for enhancement of margins and there has been no boycott.
(iii) The annexures which include circulars, etc., issued by one or more of the respondents, are unsigned and should not be relied upon.
(iv) No reliance should be placed on the press cuttings because according to many judicial pronouncements, reports in press are only second-hand and secondary evidence (Samani N. Balakrishna v. George Fernandez, AIR 1969 SC 1201).
(v) No evidence has been brought to show the impact of the boycott on sales of the products of the boycotted company.
9. We have examined the evidence available on record in the light of the arguments put forth by the learned counsel for the respondents. We are inclined to accept the proposition that there is no convincing evidence against respondents Nos. 1, 2 and 4 to 13 and 15 to 17, i.e., all the respondents with the exception of respondents Nos. 3 and 14. Respondent No. 1, it may be recalled, is the apex organisation of 16 trade associations who have been made respondents to this enquiry. The documentary evidence against the aforementioned respondents consists of three documents. The first one is a letter from the convenor of respondent No. 1, addressed to M/s. Food Specialities (India) Ltd., on October 24, 1983,
exhibit A-5/2. It refers to the issue of trade margins allowed by the company, as raised by respondent No. 3, and states that “if nothing is heard from your end in a week’s time, then we will be forced to take decision as may be deemed fit, in the interest of the trade”. In this very letter, there is a reference to a meeting held by the different trade associations on October 15, 1983, to constitute the apex body, i.e., respondent No. 1. A copy of the minutes of the aforesaid meeting is available on record, exhibit A-10, and is the second piece of documentary evidence against the respondents. In this meeting, besides other things, it was decided to write to Food Specialities (India) Limited “asking them to raise the retailers’ margin on their products to 20% and give them 7 days’ time to send their reply”. The worst interpretation that can be placed on the contents of the minutes of the meeting of the members of respondent No. 1, and of its letter addressed to M/s. Food Specialities Ltd., is that the respondent has held out a threat of unspelt out action against the company if it fails to increase margins. There is no evidence to show that this threat was followed by (i) holding of another meeting to formulate action to be taken against the company, (ii) issue of instructions by respondent No. 1 to its members about the action so formulated, and (iii) issue of directions by all member associations to their members in turn to boycott the products of Food Specialities Ltd.
10. The third document is a poster which a shopkeeper is required to display on its premises and which shows that the products of Food Specialities are not available from February 1, 1984, from the shop. The poster also shows that respondent No. 1, its president and honorary general secretary are the “co-helper”. Shri Shobh Nath Singh, the president of respondent No. 1, who deposed before the Commission, stated that he had come across the poster but “since in this poster only the support of the association was mentioned in this respect and not that it was on the instigation of the association, I did not raise any objection against it and denounce it publicly”. In this context, therefore, it cannot be said that the poster was issued by respondent No. 1.
11. The three documents, read together, merely show that respondent No. 1 and its member associations sympathised with the cause of traders, particularly chemists, in their confrontation with Food Specialities Ltd. for higher margins. There is nothing to show that these respondents took further action to convert these sympathies into boycott.
12. We may further add that the letters addressed by M/s. Food Specialities (India) Ltd. to the Commission, exhibits A-2 and A-5, talk of the “chemists’ boycott of our products in Bombay” and refer to the boycott directive of respondent No. 3. There is a lukewarm reference to a letter from respondent No. 1, exhibit A-5/2, referred to earlier but the company does not say that trade associations other than respondent No. 3 had boycotted its products. We also find that most of the member associations could not be treated as dealers in the products of Food Specialities. As many as six members are associations of grain dealers whereas one of the members is Bombay Bidi Tabacco Viyapari Sangh.
13. In view of what has been stated in the preceding paragraphs, we are inclined to the view that respondents Nos. 1, 2 and 4 to 13 and 15 to 17 did not indulge in the trade practice of boycott. The position in regard to respondent No. 3, namely, Retail and Dispensing Chemists Association (RDCA) and respondent No. 14, namely, Chemists Association, Thane Distt., Thane, is, however, different and is examined in the succeeding paragraphs.
14. There is evidence to show that chemists of Bombay and Thane have been agitating against Food Specialities Ltd. for higher margins on products under Nestle’s trade name. Respondent No. 3, the Retail and Dispensing Chemists Association (hereinafter called “the RDCA”) fired the first salvo in its endeavour to obtain higher margins from Food Specialities Ltd., which was previously known as ‘Nestle (India) Ltd.’ by despatching a letter dated September 5, 1983, exhibit A-2/1, in which a demand for a minimum of 20% margin for retailers and 10% for wholesalers/stockists was made. Another demand made in the aforesaid letter was for compensation through reimbursement of 100% of the value of goods in case of expiry, breakage, leakage, damage, etc. The letter ended with the threat that “if we do not hear anything favourable by the end of this week latest, then we shall be compelled to take all such appropriate steps as deemed fit in the interest of members”. This letter was duly replied to by the Food Specialities Ltd. The genuineness of this letter cannot be doubted ; it was produced by the party to whom it was addressed and who duly received it. It bears the signatures of the honorary general secretary of the respondent association.
15. We have also on record a circular No. 33 dated September 4, 1983, issued by the G North-South Zone, Bombay of RDCA, which covers areas of Elphinstone, Lower Parel, Worli, Dadar, Matunga and Mahim of Bombay. It refers to a special meeting of “all zonal leaders, active members and committee members of RDCA” which was held on August 30, 1983, at Dadar “in connection with non-co-operation movement against Nestle’s products which is supported by our zone”. It was stated in the circular that, according to an unanimous decision taken in the special meeting, the purchase of all products of Nestle’s would be stopped
immediately and the selling would be stopped from October 2, 1983. The circular exhorts the members “not to buy and sell Nestle’s products and also to contact your neighbouring other retailer brothers for their full support and take them with us for bright future prospects for all”. Another document on record is a circular letter dated September 6, 1983, issued by the RDCA and the Chemists Association, Thane District, Thane (respondent No. 14), to all the chemists of Bombay and Thane District in which the decisions of the meeting of the zonal leaders held on August 31, 1983, have been set out. The first decision was “that all the chemists should stop purchasing all products of Nestle’s and its sister concern, M/s. Food Specialities Ltd., from September 15, 1983, and “subsequently from October 2, 1983, all sales of Nestle’s products should be stopped”. The circular also refers to the demands made on Nestle’s “that in case nothing is heard from the company within the time limit given to them, then you need not wait for any other communication from us and make sure that you support the non-co-operation movement, i.e., stop purchasing all products of Nestle’s from 15th of this month.
16. M/s Food Specialities Ltd. has been the target of the so called non-cooperation movement launched by the RDCA and the Chemists Association Thane, as stated in their letter addressed to the Deputy Director, Office of the Registrar of Restrictive Trade Agreements on October 28, 1983, which confirmed “that the retail and dispensing chemists association (RDCA), Bombay, is spearheading the move to boycott our products in order to pressurise us to meet their demand for higher trade margins”. It has been again confirmed in their letter dated November 13, 1983, “that the boycott of our products by the chemists in Bombay has been enforced as proposed”. The following extract from the aforesaid letter shows the impact of the boycott :
“While the boycott directive of the RDCA has not received positive response from all chemists, the areas severely affected and where the large majority of chemists are no longer distributing our products are Ghatkopar, Chembur, Bhandup, Bandra, Santacruz and Vile Parle”.
17. In the same letter, names of some prominent chemists in these areas have been given.
18. The Additional Director-General has also relied on a news item appearing in the Financial Express, dated October 1, 1983, which states that “the Retail Dispensing Chemists Association (RDCA) has appealed to its members to boycott the sales of Nestle’s products from October 2”. This is annexed to exhibit A-1. The Additional Director-General has also brought on record a write-up from Indian Express, dated October 3, 1983, under the heading “Commission Wars : Unhealthy trend in distributive trade”. It is stated in the article that following the footsteps of All India Organisation of Chemists and Druggists…the Retail Druggists and Chemists Association, Bombay, has now declared a war of sorts against Food Specialities. It is further stated that “RDCA has given a directive to all the wholesalers and retailers to boycott Nestle’s products till its demands are invariably met by the company”. The two press cuttings, no doubt may be second-hand and secondary evidence, but we are taking note of them as their contents support the primary evidence referred to in paras 14 to 16.
19. To sum up our finding of facts in regard to the second issue, the evidence available on record shows that out of the 17 associations who are respondents to the present enquiry, only respondents Nos. 3 and 14 have boycotted the products of Food Specialities (India) Ltd.
20. The third issue is whether the trade practice of boycott indulged in by respondents Nos. 3 and 14, is a restrictive trade practice within the meaning of Section 2(o) of the Monopolies and Restrictive Trade Practices Act. We find that the same issue came up before the Commission in at least three cases in the recent past and the Commission held that boycott by a group of traders falls squarely within the ambit of restrictive trade practice as defined under Section 2(o). It is not a mere coincidence that in all these three cases, the respondents were associations of chemists and druggists. The first order of the Commission was pronounced on April 30, 1983, in RTP Enquiry No. 4 of 1981. The Retailand Dispensing Chemists Association (RDCA), respondent No. 3, in the present enquiry, was also one of the respondents besides other chemists and druggists associations in the aforesaid enquiry. In another order delivered on September 25, 1984, in RTP Enquiry No. 14 of 1982, the Commission came very close to the conclusion that group boycott of products is a restrictive trade practice per se. We reproduce below the following observations from the aforesaid order :
“We have examined the point urged by counsel for the Additional Director-General (Investigation and Registration) but we find that although the weight of judicial authority in the USA is in favour of per se approach to group boycott, several lower courts have distinguished those cases and refused to apply the per se rule in cases where the boycotting group has acted pursuant to some non-commercial motives. Thus, even in the USA, while the general rule applicable to group boycott is that they are per se unlawful, the precise scope of activities falling within this rule has not been firmly delineated”. (page 2 of Guide to Legislation on Restrictive Business Practices, volume IV, published by the Organisation for Economic Co-operation and Development, Paris). We also feel that it is not necessary for us to give a definite finding on this issue considering that in the context of the particular facts of the present case we have already shown how the boycott resorted to by the chemists of Rajasthan against the products of respondent No. 2 has adversely affected competition and the availability of the products to the consumer.”
21. It is worth mentioning that RDCA (respondent No. 3 in the present enquiry) is a member of the apex body (All India Organisation of Chemists and Druggists) which was implicated in the aforesaid enquiry. The Commission took the same stand in its order dated July 26, 1985, in RTP Enquiry No. 9 of 1983 to which the Rajasthan Chemists Association and RDCA, Bombay, were respondents. The RDCA was, however, let off because it was observed that it had not gone beyond holding a threat of boycott.
22. In view of what we have stated in the preceding paragraphs, we have no hesitation in coming to the conclusion that the boycott by respondents Nos. 3 and 14, of the products of Food Specialities (India) Ltd. is a restrictive trade practice within the meaning of Section 2(o) of the Monopolies and Restrictive Trade Practices Act.
23. Now, we take up the fourth issue, namely, availability to the respondents of the gateways provided under Section 38(1) of the Monopolies and Restrictive Trade Practices Act. The respondents have submitted that the “practice is not and cannot be deemed to be prejudicial to the public interest” on the following grounds :
(i) the restriction is necessary having regard to the costs of operations of the retailers/wholesalers and the adamant attitude adopted by respondent No. 18 in refusing to remunerate them reasonably ;
(ii) the removal of restriction would deny the retailers/wholesalers a reasonable remuneration for their labour and services.
(iii) the restriction is reasonably necessary to counteract the measures taken by respondent No. 18 with a view to coerce and compel the retailers/wholesalers to submit to their designs of exploiting them and to continue to profiteer with impunity ;
(iv) the restriction is reasonably necessary to enable the retailers/ wholesalers to negotiate with respondent No. 18, terms for supply of their services for sale and distribution to respondent No. 18 ;
(v) having regard to the conditions actually prevailing and which can be reasonably foreseen in the background of the ever-rising cost of operation of the dealers and in view of the adamant and wrongful attitude of respondent No. 18 in refusing to reasonably remunerate the dealers, the removal of the restriction would have a serious persistent adverse
effect on the general level of employment in the trade of retail/wholesale and distribution which eventually will have to close down ;
(vi) the restriction does not directly or indirectly restrict or discourage competition to any material degree in the trade of sale and distribution of the consumer products ;
(vii) the restriction is not unreasonable having regard to the balance between the alleged grievance of the applicant and/or respondent No. 18 and detriment to the dealers.
24. We are afraid that none of the grounds furnished by the respondents bring their case within any of the gateways provided under Section 38(1) of the Monopolies and Restrictive Trade Practices Act. The first two grounds merely talk of the increase in the cost of operation of the chemists as a factor justifying their demand for higher margins. Section 38 does not enjoin upon this Commission to sit in judgment over the disputes between parties, i.e., chemists and manufacturers of medicines in regard to the margins. Similarly, grounds 3, 4 and 5 are not covered by any of the Sub-clauses of Section 38(1). It is only grounds 6 and 7 that can be considered under Section 38(1), i.e., Sub-clause (h) and the balancing clause. But here also no attempt has been made to discharge the onus that lies squarely on the respondents to show that the impact of boycott on competition has been marginal or the balancing clause is in their favour. On the other hand, we find that respondents Nos. 3 and 14 cover practically the entire fraternity of chemists operating in Bombay and Thane Districts and we have no reason to doubt that their circulars to their members would have fallen on deaf ears particularly because chemists are so organised as traders and have been ever ready to resort to boycott to settle their disputes with the manufacturers. In making this observation, we have in mind the three aforementioned orders of this Commission in enquiries to which chemists associations were respondents. Thus, the impact of the chemists’ boycott on competition could by no stretch of imagination be considered negligible. We also fail to see how the boycott would be considered reasonable under the balancing clause. The boycott represents an attempt to deny the consumers certain products to which they are used and, therefore, the hardship to such consumers is patent. The fourth issue is, therefore, decided against respondents Nos. 3 and 14.
25. Having come to the conclusion that respondents Nos. 3 and 14 have indulged in the restrictive trade practice of boycott of the products of M/s. Food Specialities (India) Limited and that none of the gateways provided under Section 38(1) is available to them, we direct the respondents to “cease and desist” from the aforesaid restrictive trade practice. The respondents will circulate a copy of this order to all its constituents and an affidavit of compliance will be filed within two months from today.
26. We further direct that in the particular circumstances of the case, the two respondents shall pay costs of Rs. 5,000 to the Additional Director-General.