IN THE MATTER OF: TELEVISION AND COMPONENTS LIMITED vs State

THIS enquiry commenced with a complaint in the Commission addressed by the Assistant Director, Directorate of Revenue Intelligence, Jam Nagar charging the respondent M/s. Television and Components Limited, of having misled the consumers by making false and incorrect claims regarding the quality of its Video Cassette Recorder (VCR). The complaint was got investigated by the Director General of Investigation & Registration (DG) who submitted his Preliminary Investigation Report (PIR). The facts reported by the DG in his PIR are summarised herein below:

THE respondent is engaged in the manufacture and marketing of VCRs under the brand name "Crown". THE Assistant Director, Directorate of Revenue Intelligence, Jam Nagar has complained to the Commission that during the investigations conducted by the Directorate, it had come to notice that the respondent while defending the low price of its imported Tape Deck Mechanism (TDM) had contended that its declared low price was on account of the inferior quality of the TDMs. Contrary to the above contention, while advertising its product, namely VCR, the respondent made "tall claims as to the high quality" of its product. THE Assistant Director has added in his complaint letter that the claim of the respondent that the TDMs are of N.E.C. make is also "doubtful" as none of the import documents carry evidence that the TDM imported is of N.E.C. make. Nor do the TDMs bear any N.E.C. markings. THE Assistant Director has observed that the claims of the respondent referred to above are false and misleading the consumers. The DG while investigating into the complaint of the Assistant Director has noted that TDM is one of the major components of a Video Cassette Recorder and that the respondent introduced a new model Crown N9063E claiming that it contains TDM of N.E.C. make. The DG has observed that the respondent after having admitted before the Customs Authorities at Kandla that the TDM used in the VCR is of "very inferior quality", has made a tall claim about the quality of its product in its advertisement and also in the owner''s operation manual, which is false and misleading attracting the provisions of Section 36(A)(1)(i) of the MRTP Act, 1969. Furthermore, the claim of the respondent that the product in question namely the VCR is backed by N.E.C. technology and technical assistance from N.E.C. of Japan "is not supported by any documentary evidence and thus is false". The Managing Director of the respondent-Company in his statement under Section 108 of the Customs Act has admitted that the TDMs may not have been manufactured by N.E.C. of Japan. Thus the claim of the respondent is false and misleading attracting the provisions of Section 36A(1)(iv) & (v) of the MRTP Act.

Yet another charge made by the DG in his PIR, is that when the respondent has brought down the price of its VCR by Rs. 1,000/- from Rs. 15,300/- in 1989 to Rs. 14,300/- in 1990, its advertisement issued in October, 90 gives a wrong message to the consumers that if they visit the dealer''s shop, fill up the order form and make an advance payment, they can save Rs. 1,000/-. As the reduction or discount of Rs. 1,000/- is already available to them, the respondent''s advertisement is an unfair trade practice in terms of Section 36A(1)(ix) and Section 36A(2) of the Act.

BASED on the PIR submitted by the DG, a Notice of Enquiry was issued by the Commission on 11th May, 92 indicating the respondent of having indulged in unfair trade practices attracting Section 36A(1)(i), (iv), (v), (vi) and (ix) and Section 36A(2) of the MRTP Act. The respondent on receipt of the Notice of Enquiry (NOE) has made the following averments in its reply: 1. The DG did not make proper enquiry as to whether the respondent has indulged in any unfair trade practice but has "merely proceeded mechanically and without applying his mind". 2. The DG has not made any effort to collect evidence to substantiate his allegations. 3. The DG has not acted properly in conducting investigation into the matter relating to import of TDM by the respondent and in making comments on the same in the PIR, "when the matter is subjudice in High Court of Gujarat". 4. The VCR manufactured by the respondent is of a very high quality and gives to the consumers "full value of their money". 5. The respondent in making a statement before the Customs Authorities referred to the VCR model N9063E as inferior but that statement was made in a "certain context". The context is that the said model has "less number of features compared to model G30" and, that therefore, the model N9063E was styled as inferior. But the statement is not because it is inferior in quality or performance. 6. There is no compromise on quality in respect of any of its products and the price of a VCR model with less number of features than another model will have a lower price in comparison.

THE TDM used by the respondent in the manufacture of VCR was manufactured by N.E.C. of Japan, "a very reputed Company in the world". Tdms were imported by the respondent under a licence from the Government of India and in the full knowledge of the Reserve Bank of India. The question of using substandard components by the respondent does not arise. The VCR in question is fully backed by N.E.C. technology as the VCR model and the component parts used have been designed by N.E.C.

A "memorandum of understanding" for technical assistance between M/s. N.E.C. Corporation, Japan and the respondent is documentary proof of the technical assistance provided by the N.E.C. to the respondent. The respondent has never claimed in its advertisements that it had any collaboration with N.E.C. of Japan. The fact is that it has been receiving technical assistance from N.E.C. for manufacturing VCRs. The respondent has not misled the consumers.

THE respondent had reduced the sale price by Rs. 1,000/- per unit for those customers who were willing to book orders, the objective being to pass on to them "bona fide cost savings". THE discount scheme is for the benefit of the consumers who agreed to "planned purchasing". 7. THE respondent enclosed a copy of the "memorandum of understanding" between M/s. N.E.C. Corporation, Japan and the respondent-Company. On the basis of the pleadings, the following issues were framed: 1. Whether the respondent has indulged in an unfair trade practice as alleged? 2. Whether the said trade practice is prejudicial to public interest, interest of the Consumer, or consumers generally ? 3. Relief. 8. THE DG examined Shri H.H. Khokar, Assistant Director, Directorate of Revenue Intelligence, Jam Nagar, the complainant as his only witness. THE respondent did not choose to lead any oral evidence on its behalf. 9. We gave a hearing to Dr. K.S. Yadav, ADG for the DG and Shri Arun Sharma, Chartered Accountant on behalf of the respondent- Company. 10. THE main limb of the charges is that the respondent has made tall claims about the high quality of its VCR, despite making an admission before the Customs Appraiser, Kandla Port, Kandla on 21st Dec., ''89 that the Tape Deck Mechanism is "of very inferior quality". Thus the claim of the respondent regarding the high quality of its VCR is sought to be challenged on the basis of its own admission before the Customs Appraiser, Kandla. THE respondent in its reply has not denied its letter dated 21st Dec., ''89 addressed to the Customs Appraiser, Kandla nor the statement made therein that the TDM is of a very inferior quality. On the other hand, the respondent has contended that the said admission statement before the Customs Appraiser has been made in a particular context namely the relative quality between the model N9063E and model G30. 11. During the cross-examination of Shri Khokar, he stated that "it is correct that while comparing two TDMs the respondent has contended that since the other models such as National Model G30 has superior features, this Model No. N9063E is inferior as it has less number of features". He added that the respondent "had explained to the Department vide their letter dated 10.2.90 that the low price of the TDM was due to having less number of features and not because of its poor quality ". THE witness said that he has not personally used the VCR in question.

Thus the DG''s witness himself is appreciative of the fact that the admission statement of the respondent about the inferior quality of the TDMs was in the context of the comparative merit between the VCR model in question and another model. He also categorically admits that the respondent had explained to the Department that the lower price of its product was due to less number of features and "not because of its poor quality".

In the light of the deposition of Shri Khokar it does not appear to us appropriate to hold this limb of the charges against the respondent.

THE next limb of the charges is that the claim of the respondent that its VCR is backed by the N.E.C. technology is not supported by any documentary evidence. THE respondent has produced a copy of the "memorandum of understanding" between M/s. N.E.C. Corporation of Japan and the respondent. THE said memorandum categorically states that N.E.C. will provide technical assistance and technical information to the respondent to manufacture VCR/VCP and also advise on procurement of component parts necessary for commercial production. Even the advertisement of the respondent uses only the expression "with technical assistance from N.E.C., Japan". THE DG has challenged the "memorandum of understanding" on the grounds that it is not dated nor does it disclose the terms and conditions agreed between the parties for the import of TDM and other components. A further argument advanced by Dr. Yadav is that it does not bear the seal of the companies. A photo copy of the "memorandum of understanding" was filed by the respondent alongwith its reply but it was not rebutted or challenged through any rejoinder that could have been filed by the DG. In fact on 5th Jan., ''93, Sri C.P. Singh, ADG stated during the proceedings in this Commission, that no rejoinder was to be filed. THErefore, to question the "memorandum of understanding" at the time of arguments is not appropriate on the part of the DG. We see no reason not to accept the "memorandum of understanding" even though it is only a photocopy. We, therefore, hold that there has been no misrepresentation on the part of the respondent about any technical collaboration from N.E.C. N.E.C. provided technical assistance and this is exactly what the advertisement clearly conveys. On the last limb of the charges that the price of the VCR has been reduced by Rs. 1,000/- in the year 1990 but that its advertisement gives a wrong message that if a customer visits the dealer''s shop, fills up an order from and makes an advance payment, he/she will get a saving of Rs. l.000/-. We have gone through the advertisement of the respondent and note that it furnishes the old price of Rs. 15,300/- and also the reduced price of Rs. 14,300/- which exactly is what the DG has said in his PIR. In order to secure the reduced price, the respondent has devised a procedure, in terms of which, a customer is supposed to visit the dealer''s shop, fill up the order form and make the payment to enable him/her to secure the VCR within 7 days with a discount of Rs. l.000/-. The respondent in its reply has categorically stated that for those customers who follow the procedure, the sale price is Rs. 14,300/- and that for the others the sale price is Rs. 15,300/-. There is nothing infirm in this. The DG has not made out a case of unfair trade practices on the part of the respondent as alleged in the NOE. In the premises the NOE shall stand discharged. No costs. Enquiry discharged.