Director (Research) vs COMPUAGE ELECTRONICS PVT. LTD.

A Notice of Enquiry (NOE) was issued to the respondent, Compuage Electronics Private Ltd., under Section 36B(d) of the Monopolies and Restrictive Trade Practices Act, 1969 (for brief the Act), based on the Preliminary Investigation Report (PIR) submitted by Director (Research) of the Commission pursuant to a complaint received from Shri Shashank Upasani, New Delhi. The respondent was charged with indulgence in unfair trade practices attracting the provisions of Section 36A(3)(a) and 36A(3)(b) of the Act.

THE facts of the case as given in the PIR may be briefly summarized as follows : THE respondent Company is engaged in business of distribution and marketing of computer peripherals and floated a scheme of offering CD Gold Pack worth Rs. 1,500/- for the first 500 buyers and lucky draw prizes of Graphic blaster 3D and 5D AWE-64 on the purchase of 12X and 16X multi-media kits. THE duration of the scheme was from 1st August, 1997 to 30th August, 1997. According to the PIR, there was a suspicion that the respondent had raised the price of the multi-media kits either some time before the opening of the scheme or after the closure of the scheme to recover the cost of the prizes. THE respondent also furnished a list of 403 buyers who availed of the early-bird offers as against the promise of such offers to 500 buyers. THE above practices of the respondent, according to the PIR, attracted the provisions of Section 36A(3)(a) and Section 36A(3)(b) of the Act. A reply to the NOE was filed by the respondent. The respondent has taken the stand that the scheme was floated to commemorate the fiftieth year of India''s independence by offering additional benefits to the consumer of the products marketed by it. It has pointed out that the product life of computer peripherals is extremely short in view of the rapid advances and developments made in the industry. The maximum retail price of 12X kits in April, 1997 was Rs. 12,500/- which became Rs. 11,000/- in September, 1997. Similarly, the maximum retail price of 16X kit in July, 1997 when it was introduced in the Indian market was Rs. 12,071/- and in September, 1977 the price continued to be the same. In response to the early-bird offer only 403 buyers registered their names and all of them were given the gifts. The respondent carried out the lucky draw as advertised on 10th September, 1997 and announced the serial numbers of winners in the October, 1997 issue of "Dataquest" magazine. The respondent has pointed out that there has been no complaint whatsoever from any winner of the lucky-draw that the prize has not been given.

After the pleadings were complete, four issues were framed which included an issue "whether the charge under Section 36A(3)(b) needs to be dropped in the light of the Supreme Court decision in HMM case" and arguments on this issue were to be heard first. We gave a hearing to Mr. Badrinath Babu, Advocate for the Director (Research) and Mr. A.N. Haksar, Senior Advocate for the respondent on the question whether the charge against the respondent under Section 36A(3)(b) needed to be dropped in the light of Supreme Court decision in HMM case.

MR. C. Badrinath Babu, Advocate for Director (Research) argued that the facts in the present case would make the binding rule of the Hon''ble Supreme Court in the case of HMM Ltd. v. The DG, distinguishable. He pointed out that a lucky draw was involved in the present case and the respondent distributed only 403 early-bird prizes as against 500 offered. As against this MR. A.N. Haksar, Senior Advocate appearing for the respondent argued that the present case is on all fours with the case examined by the Hon''ble Supreme Court and in view of binding nature of the ruling of the Supreme Court the charge that the respondent indulged in restrictive trade practice falling within the meaning of Section 36A(3)(b) should be dropped. He particularly pointed out that the scheme was over long time back and all the promised prizes were distributed. He also stated that since there was no increase in the price of the product the charge falling within the ambit of Section 36A(3)(a) will also not survive and the NOE may be discharged. It may be quite proper to look at the scheme involved in the aforesaid binding ruling of the Hon''ble Supreme Court in the case of HMM Ltd. The scheme launched by HMM Ltd. in November, 1985 envisaged insertion of a coupon in some bottles of Horlicks and the prizes were indicated in the coupon which included 5 coloured T.Vs., 10 gift vouchers of Rs. 10,000/- each, and 1,400 cash prizes of Rs. 100/-, Rs. 50/- and Rs. 20/- each. While upturning the decision of the Commission that HMM Ltd. had indulged in unfair trade practice falling within the meaning of Section 36A(3)(b) of the Hon''ble Supreme Court held : "There is no material that indicates that there was a draw of lots or that a price was charged for participation in the draw. The fact that some bottles of Horlicks contained a slip of paper which entitled the buyer to a prize is not a lottery in the ordinary sense of the word."

IN the scheme involved in the present proceeding the consumers paid the price only for the product and there was no consideration for participation in the lucky draw. The purchasers of the product of the respondent got their money''s worth by purchasing the multi-media kits. IN addition, they got an opportunity to win prizes in the form of early-bird offers as well as other prizes if Dame Fortune smiled upon them. The Hon''ble Supreme Court has also held in the case of H. Anraj v. Government of Tamil Nadu, reported in (1986) 1 Supreme Court Cases at Pg. 414, that unless three essential elements namely, chance, consideration and price are present a scheme would not amount to lottery. As noted by us earlier the important element of the price to be paid for winning the prize is missing in the scheme of this proceeding. We are, therefore, of the view that the action of the respondent in launching the scheme would not fall within the meaning of Section 36A(3)(b) of the Act and therefore, the charge relating to this in the NOE is to be dropped. The respondent also has stated on affidavit in its reply to the NOE that the product life cycle of computer peripherals being extremely short there is no concept of prevailing price for such products for long periods. From the reply of the respondent it is clear that the price of its products was not raised in order to recover fully or partly the cost of the prizes from the consumers. Even the PIR the Director (Research) has only stated that there was a suspicion that the respondent had raised the price of the multi-media kits some time either before opening or after the closure of the scheme to recover the cost of prizes. The respondent floated the scheme during August, 1997 and has not floated a similar scheme thereafter. Since we are dropping the charge under Section 36A(3)(b) of the Act against the respondent for the reasons discussed earlier in this order, no useful purpose will be served in proceeding further with the enquiry in respect of the charge relating to Section 36A(3)(a) of the Act in the absence of specific evidence against the respondent relating to it. The Advocate for the Director (Research) also fairly agreed with this view. For the aforesaid reasons we direct that the Noe issued against the respondent be discharged. There is no order as to costs. N.O.E. discharged.