Monopolies and Restrictive Trade Practices Commission
Alkali Manufacturers Association Of ... vs American Natural Soda Ash Corporation ... on 10 June, 1997
Equivalent citations: (1998)3COMPLJ152(MRTPC)
ORDER
Dr. S. Chakravarthy, (Member)
1. Very often the expressions "consumer interest" and "public interest" are used synonymously, little realising that there is a distinction. In some circumstances, consumer and public interest may lose their separate identities and may be in harmony but in some, the differentiation between them may assume important proportions and disharmony and such a differentiation can constitute a germane dimension for adjudication. This case is an instance in hand for the propounding of the differentiation and allowing it to be used as a dimension in the adjudicatory effort. A little later we will address the distinction between "consumer interest" and "public interest". Before we segment the controversy, we propose to summarise the pleadings.
2. The Alkali Manufacturers Association of India ("AMAI" for brief), has moved this Commission with a complaint under Section 10(a)(i)/10(a)(iv) and Section 36B(a)/36B(d) and Section 31 of the Monopolies and Restrictive Trade Practices Act, 1969 ("Act" in brief), charging the respondents named above with having indulged in certain restrictive, unfair and monopolistic trade practices attracting the provisions of Sections 2(o), 33(1), 36A, 40 and 2(i) of the Act. The complainant-AMAI is an association of Alkali Manufacturers of India registered under Section 25 of the Companies Act, 1956, having its office in Delhi. In India, soda ash or sodium carbonate is manufactured by six companies who are all members of the AMAI. Soda ash is a white powder and is a raw material for glass making, detergents, paper and metallurgy. It is produced in India from brine and lime stone by synthetic process.
3. According to the complainant, the installed capacity of the soda ash manufacturers in India is more than the soda ash demand in the country. They are, therefore, "operating their factories below their installed capacities". The demand for soda ash in India is being fully met by the domestic manufacturers. The demand for soda ash for the year 1995-96 (April, 1995, Eo March, 1996) was approximately 1.6 million metric tonnes, whereas the installed capacity as on March, 1996, was 1.865 million metric tonnes.
4. Soda ash is being marketed by the Indian manufacturers to the Indian consumers at a price between Rs. 8,190 and Rs. 8,320 per metric tonne net of excise. (The price is also described as net of modvat),
5. Soda ash produced in the U.S.A. is of natural origin. It is produced by refining trona ore (a mixture of sodium carbonate and sodium bi-carbo-nate) found principally in certain parts of that country. It is contended by the complainant that mining and processing of soda ash which occurs in its natural form in the U.S.A. is considerably cheaper than the cost of production of synthetic soda ash.
6. According to the AMAI, there are six producers of natural soda ash in the U.S.A. These six producers joined together to form an export cartel known as the American Natural Soda Ash Corporation ("ANSAC" for brief). The ANSAC came into existence reportedly through a membership agreement of December, 1983, between the said six producers of soda ash in that country, "in order not to compete with each other" and in order that "all export sales by them or by any of their subsidiaries will be made through the ANSAC". In short, the ANSAC is the international marketing-arm for the USA's six soda ash manufacturers. The complainant has specifically averred as follows :
"The ANSAC has an autonomous management and absolute authority to decide what to ship, to whom and at what price. Prior to formation of the ANSAC, the said six American producers had to do their own planning of export business and compete with each other in the export market. The formation of the ANSAC export cartel has enabled the said six American producers to co-ordinate stocks, deliveries, freight as well as prices and sell soda ash in the export market at very low prices. This constitution and functioning of the ANSAC has been noticed by the Commission of European Communities in their decision dated December 19, 1990, relating to the ANSAC."
7. According to the complainant, the ANSAC operating as a cartel has been dumping large quantities of soda ash in different countries "thereby suppressing, restricting, distorting and preventing competition" leading to closure of factories producing soda ash in those countries.
8. The Commission of the European Communities has held that the ANSAC membership agreement and related arrangements constitute an infringement of Article 85(1) of the EEC Treaty which prohibits agreements and concerted practices which may affect trade between member States and which affect competition within the common market.
9. The Commission of the European Communities in its decision dated April 10, 1995, imposed anti-dumping duty on the imports of soda ash into EEC countries originating from the USA.
10. Consequent on the opening of the Indian market and reduction in the level of import duty on soda ash to 30 per cent., the ANSAC has been "looking to the Indian market" for selling soda ash.
11. The ANSAC sent a fax communication on July 30, 1996, to Larsen Services and Trading Company, Calcutta, offering bulk supply of soda ash at a price of around 160 US dollars per metric tonne CIF, F.O. to Haldia or an alternate port on the East Coast of India (F.O. means that the receiver is responsible for discharge costs and demurrage risk). In reply Larsen Services and Trading Company requested for a price of 132 US dollars per metric tonne CIF at which price the ANSAC is reported to have sold soda ash for discharge at Kandla port.
12. The complainant has alleged that the ANSAC has sold American soda ash to Indian consumers at the "unrealistically low price" of 132 US dollars per metric tonne CIF and further that it has adopted the marketing strategy in terms of which it is selling the product to the Indian consumers "through the front of G. Premjee", the second respondent. Letters of credit were opened by Indian purchasers on G. Premjee to make it appear as though the sale is by G. Premjee and not by the ANSAC. The whole transaction has been camouflaged and the sale is sought to be shown as a sale by G. Premjee from Singapore, "whereas effectively all transactions have taken place on G. Premjee at their office in India", G. Premjee opened a single letter of credit on the ANSAC, which in turn is effecting shipments through split bills of lading. The Indian purchasers have opened letters of credit in favour of G. Premjee at its Singapore office and the clearing of the cargo has been undertaken by G. Premjee at Bombay.
13. The complainant has alleged that the shipment of bulk soda ash is a sale of soda ash to Indian consumers by the ANSAC, a cartel of American producers. Thus, the sale is a subterfuge on the part of the ANSAC "to do something indirectly which cannot be done directly". It is further contended by the complainant that the price of 132 US dollars per metric tonne is much below the cost which would be incurred by the ANSAC members in the sale of soda ash to consumers in India. This is likely to "completely wipe out ihe local producers of synthetic soda ash" in India.
14. The complainant has apprehended that the Indian producers of soda ash will not be able to compete with the ANSAC in view of the price differential involved. For example, the basic price of the Indian manufacturers is between Rs. 8,190 and Rs. 8,320 per metric tonne whereas the supply price of ANSAC is Rs. 7,245 per metric tonne arrived at by adding to the basic price of 132 US dollars per metric tonne, the customs duty, bagging, clearing and forwarding charges. This deliberate attempt to undercut prices and capture the market on (he part of the ANSAC is to the detriment of the Indian producers and constitutes both restrictive and unfair trade practices. Consequently, competition is restricted, distorted and prevented. Furthermore, the installed capacity of the domestic manufacturers is more than the domestic demand. Entry of the ANSAC cartel in the Indian market "would lead to fall in local production and ultimate closure of factories and large scale unemployment. This would be detrimental to the interest of the consumers and would also be against national public interest".
15. In view of Section 14 of the Monopolies and Restrictive Trade Practices Act, 19G9, the complainant prays that the American producers of soda ash 'should not be allowed to directly or indirectly carry on monopolistic, restrictive or unfair trade practices in India by selling their production through their cartel the ANSAC. While stating that the complaint has been filed in the interest of the Indian consumers and the Indian soda ash producers who are its members, the AMAI has prayed that an enquiry may be instituted against the respondents for indulging in restrictive, unfair and monopolistic trade practices attracting the provisions of Sections 2(o), 33(1), 36A, 40 and 2(i) of the Monopolies and Restrictive Trade Practices Act, 1969.
16. The complainant has also filed an application under Section 12A of the Act praying that an injunction may be issued by the Commission restraining the ANSAC from directly or indirectly operating, marketing, selling or otherwise making available for sale natural soda ash of American origin to consumers in India through G. Premjee or any other party or agency. The injunction application more or less traces the same averments as in the main complaint application.
17. After perusing the complaint application and the injunction application and after giving a hearing to Shri Shanti Bhushan, senior counsel for the complainant, the Commission passed an order on September 9, 1996*. the operative portion whereof is as follows (at pages 884-85 of 87 Comp Cas) :
"... we are of the prima facie view that the respondents are indulging in the alleged restrictive trade practices of cartelisation which attract the provisions of the Monopolies and Restrictive Trade Practices Act, 1969. In our prima facie view, this is a fit case to be enquired into in order to protect the interest of the public at large and the interest of domestic industries of this country. We also note that there are allegations of monopolistic and unfair trade practices in addition to the restrictive trade practices of predatory pricing and cartelisation. According to annexures "I", "J" and "K" (pages 85, 86 and 87 of the complaint petition), a letter of credit has been opened on an Indian bank by an Indian party (respondent No. 3) for import of soda ash. Senior counsel states that the import is from the ANSAC into India and that the first shipment is expected in the first fortnight of September, 1996. Thus, a part of the trade practice is carried on in India attracting Section 14 of the Monopolies and Restrictive Trade Practices Act, 1969. In the premises, we direct that a notice of enquiry shall issue under Section 33(l)(j), Section 2(6), Section 36A and Section 2(i) read with Section 37, Section 36D and Section 31(1) of the Monopolies and Restrictive Trade Practices Act, 19G9, returnable on December 2, 1996.
We have also heard Shri Shanti Bhushan, senior counsel on the application of the complainant under Section 12A. Since we have already taken the prima facie view that the respondents are indulging in the alleged objectionable trade practices, namely, restrictive, unfair and monopolistic trade practices, there is no harm in passing a limited order that respondent No. 1, namely, the ANSAC, shall not indulge in the practice of cartelisation by exporting soda ash to India in the form of cartel, directly or indirectly. However, this order is without prejudice to the final outcome of this enquiry as well as the rights of the importers or exporters in their individual capacity."
18. The above extract from the injunction order dated September 9, 1996*, enjoins in brief the following :
1. Issuance of a notice of enquiry on the basis of a prima facie case that the respondents are indulging in the alleged restrictive, unfair and monopolistic trade practices, including cartelisation and predatory pricing.
2. Restraint on the ANSAC from indulging in the practice of cartelisation by exporting soda ash to India in the form of cartel, directly or indirectly.
19. The ANSAC submitted an application for vacating the injunction order dated September 9, 1996, seeking, inter alia, the discharge of the notice of enquiry. The application of ANSAC is in the nature of a detailed reply to the main complaint petition of the AMAI with a specific prayer for vacating the interim injunction order. On October 22, 1996, liberty was given to the ANSAC for treating the application as one under Section 12A(2) of the Acti
20. The longevity of the ANSAC's reply running to 144 pages is forbidding to record a facile summary of the same in this narration. However, the following constitutes a summary of the salient features of the defence presented by the ANSAC :
1. The ANSAC is an export trading company organised with the encouragement of the USA Government to promote the sale of the USA produced soda ash overseas and serves as the exclusive export outlet for its six producer members, none of whom has ever sold soda ash to India.
2. In early 1996, at the request of several glass manufacturers and consumers of soda ash in India, respondent No. 2, namely, G. Premjee Trading Pvt. Ltd., made a shipment of American soda ash purchased from the ANSAC for the purpose of export to India.
Jurisdiction :
3. The Monopolies and Restrictive Trade Practices Commission has no jurisdiction under the Act to make any order against the ANSAC.
4. In terms of Section 14 of the Act only those practices, which are carried on in India physically, will fall under the Act. The ANSAC has no place of business in India, no agent in India and no legal representative in India.
5. The sale of soda ash was made FOB USA port to respondent No. 2. Respondent No. 2's corporate office is in Bangkok and its financial offices in Singapore. The sale contract was, therefore, outside India and the price too, thus rendering this enquiry outside the pale of the Monopolies and Restrictive Trade Practices Act.
6. Being an FOB sale, the property in the soda ash sold by the ANSAC to respondent No. 2 passed when the goods were loaded on board the ship at the port of Portland, USA.
7. Respondent No. 2 on its own account entered into several contracts for the sale of soda ash to consumers in India including respondent No. 3. These contracts between respondent No. 2 and the consumers were on GIF basis.
8. No trade practice of any kind relating to the alleged cartelisation "was, or is, being carried on in India". The Monopolies and Restrictive Trade Practices Commission has no jurisdiction to entertain this enquiry.
9.'The ANSAC's fax message to Larsen Servicing and Trading Co. of August 5, 1996 (annexure "J", page 86 of the complaint application), does not suggest, much less prove, that any trade practice was being carried on by the ANSAC in India.
Inapplicability of Section 33 of the Act :
10. Section 33 of the Act is not attracted as there is no agreement among the members of the ANSAC which relates to production, storage, supply or distribution in India. None of the members of the ANSAC carries on business in soda ash in India.
11. The creation and existence of the ANSAC has no connection with India and rests entirely outside India.
12. None of the categories of agreements enumerated in Section 33 of the Act is applicable to the present enquiry.
Inapplicability of Section 2(o) of the Act :
13. The alleged trade practice does not and cannot impose on the Indian consumers of soda ash any unjustified costs or restrictions and therefore Section 2(o)(ii) does not apply.
14. Indian consumers, on the contrary, stand to benefit by the competitive prices that respondent No. 2 has offered to them.
Lack of material particulars :
15. The complaint is defective for failure to give adequate particulars of the alleged restrictive trade practices. Specifically no sub-clause of Section 33(1) of the Act has been cited.
16. The complainant, the AMAI, is not a consumer of soda ash. The real consumers are glass, detergent and other manufacturers who use soda ash as a raw material. The complaint fails to state how the alleged trade practices will impose unjustified costs or restrictions on the real consumers. On the other hand, the consumers stand to benefit from the competitive prices offered to them by respondent No. 2,
17. Entitlement for an injunction must he preceded by a strong prima facie case, that the ANSAC has been carrying on or is about to carry on some prohibited trade practice, Full particulars in this regard must be given which has not been done by the complainant. A vague reference to Sections 2(o) and 33(1) of the Act is insufficient for the grant of an injunction.
Wrong forum :
18. The charges of dumping cannot be pressed in this Commission, being an abuse of process, The Government of India is the authority to deal with the charges.
19. India is a party to the GATT, one of the main objectives of which, is to free all restrictions on international trade. Parliament has authorised the progressive reduction of import duty on soda ash which has, over the years, come down from 100 per cent. plus per kg, to 30 per cent. plus per kg. of soda ash. The complainant, by challenging the legislative wisdom of Parliament, is abusing the due process of law.
Lack of evidence and suppression of material facts :
20. Any claim of predatory pricing requires convincing evidence particularly that the practice has the intent to drive competitors out of business. The complainant has failed to prove any mala fide intent on the part of the ANSAC.
21. Many material facts have been suppressed which would demonstrate that the complainant has no case of predatory pricing at all.
Defence on merits :
22. The complainant's allegations are highly suspect and the law requires a convincing demonstration to support an injunction forbidding competition. The ANSAC "has not eliminated any competition in India".
23. The injunction order dated September 9, 1996*, deprives soda ash consumers in India of the benefits of competition.
24. The AMAI's complaint is an attempt by the local Indian soda ash producers to exclude competition and preserve their monopoly profits. As the result of their tariff-protected monopoly position, domestic soda ash prices charged to the Indian consumers have regularly been increased "at a rate significantly outpacing the rate of inflation". The increase in prices put into effect after the Commission passed the injunction order under challenge guarantees that the domestic producers will maintain their monopoly power.
25. The ANSAC has not acted with any intent to harm the complainant. Its soda ash export sale has been priced "in good faith to compete fairly in the market place".
26. Respondent No. 2 was selected as "an independent intermediary" and not "as part of some subterfuge" as the complainant has falsely alleged. Respondent No. 2 has been selected to perform "legitimate independent functions of shipping and local discharge and delivery" which the ANSAC has not been able to perform in India because of the commercial risk involved.
27. The complainant has deliberately withheld from the Commission certain information relating to (a) the request of Gujarat Heavy Chemicals Ltd. for exclusive distributorship, (b) the request of Gujarat Heavy Chemicals Ltd. for supply of soda ash, (c) the fixation of price when the customs duty was 40 per cent. whereas subsequently, the duty was reduced to 30 per cent., (d) the fact that the sale of soda ash by the ANSAC to respondent No. 2 involves significant financing costs not present in the sales that the Indian producers make, (e) the significance of annexure ")" enclosed to the complaint petition as evidence of good faith on the part of the ANSAC, and (f) the fact that members of the ANSAC were selling soda ash at much lower prices during the relevant period than the basic price of the Indian manufacturers between Rs. 8,190 and Rs. 8,320 per metric tonne.
28. There was no predatory pricing as the ANSAC has not sold soda ash below its cost. The complainant has not offered any evidence in support of its allegation that the ANSAC has been selling below cost. The allegation is wrongly predicated on the presumption that the ANSAC's price is less than the ANSAC's price in the USA domestic market.
29. There is no case for an injunction at all as the ANSAC has not sold soda ash below the price at which the Indian domestic producers have sold the commodity.
30. The injunction needs to be vacated as the complainant has failed to establish any prima facie case. The balance of convenience favours the ANSAC and warrants vacating the injunction.
31. The complainant has not demonstrated that the consumers of soda ash will suffer any loss much less an irreparable loss. Nor has the complainant established that it might suffer any loss.
32. The ANSAC has been alleged to be an illegal cartel which is baseless and is denied.
33. The ANSAC was formed in April, 1982, for the purpose of promoting export trade and its 1983 membership agreement was entered into in order to promote the export of American soda ash and to improve its ability to compete. Further, the objective is to distribute soda ash "in the most efficient manner possible" and to "live up to its export sales commitments to overseas customers as a reliable and efficient supplier."
34. No current ANSAC member has ever sold soda ash in India nor can any member sell in India "without the economics and sales marketing efficiencies the ANSAC provides and which are shared with the ANSAC's customers."
35. The Treaty of Rome does not apply to India and the law of India is different in significant respects and, therefore, the orders of the Commission of European Communities cited by the complainant are irrelevant and not valid.
36. It is not true that the ANSAC made "any attempt to invade the Indian market or to undercut the Indian producers."
37. The ANSAC sold soda ash not to any Indian consumer but to respondent No. 2 "on an arm's length basis by a contract free on board Portland, Oregon, USA."
38. The ANSAC does not admit that respondent No. 2 has an office or is carrying on business in India. The ANSAC understands that Indian consumers purchased soda ash from respondent No. 2 on GIF Kandla basis.
39. The ANSAC denies that it sold soda ash to Indian consumers through respondent No. 2 at a GIF price of 132 US dollars per metric tonne. The goods were actually sold and delivered by the ANSAC to respondent No. 2 in Portland, Oregon on a FOB basis at that port for 89.50 US dollars per metric tonne. All other arrangements for resale and delivery of soda ash were the responsibility of respondent No. 2 and/or the ultimate consumers.
40. Without the ANSAC, no individual ANSAC member will be able to sell soda ash destined for export to India. As a result of the ANSAC, there will be no price collusion or suppression of competition because without the ANSAC, there will be no prices and no sales.
41. The ANSAC is not carrying on any monopolistic, restrictive or unfair trade practices in India to attract Section 14 of the Act.
42. The ANSAC is entitled to one or more of the gateways available under Section 38 of the Monopolies and Restrictive Trade Practices ALL In -particular, the gateway enunciated in Section 38(l)(h) of the Act read conjointly with the balancing clause will be an available relief for the ANSAC vis-a-vis the allegations of AMAI.
21. The ANSAC has prayed that the ex parte ad-interim order passed by the Commission on September 9, 1996, be vacated and the notice of enquiry discharged.
22. The rontroversy between the AMAI and the ANSAC became deeper and deeper, as the hearings went on. A lot of paper and documents have been exchanged between the parties. Most of the pleadings require to be examined and adjudicated upon with reference to the evidence that will be led by the parties. It will be our endeavour in this order, to deal essentially with the prayer of the ANSAC to vacate the interim injunction order of the Commission dated September 9, 1996. What has been summarised above from the pleadings of the parties constitutes essentially those that are relevant to this adjudicatory effort in dealing with the prayer of the ANSAC for vacating the injunction.
23. We gave a hearing to Shri F. S. Nariman, senior counsel, Shri H.D. Pithawalla, Shri Dara P. Mehta and Shri Sharad D. Abhayankar, advocates for the ANSAC, and Shri R. K. Jain, senior counsel, Shri O. P. Dua, Ms. Pallavi Shroff and Ms. Gopika Pant, advocates for the AMAI. We gave a hearing to Dr. V. K. Aggarwal, advocate for respondent No. 2, also. Most of the arguments were complex with details in minutiae. We have, therefore, decided to compartmentalise the arguments under the following broad categories in dealing with the injunction application,
1. Jurisdiction
2. Cartel
3. Predatory pricing
4. Orders of the Commission of European Communities
5. Gateways
24. The aforesaid dimensions are dealt with in the following paragraphs in the same order in which they appear above, For facility of discussion, we have formulated a poser for each dimension, followed by a summary of the contentions of both the sides and followed by our analysis and conclusions.
1. JURISDICTION :
Poser :
Does the Monopolies and Restrictive Trade Practices Commission have jurisdiction under Section 14 of the Monopolies and Restrictive Trade Practices Act to entertain the complaint and pass the impugned injunction order ?
ANSAC's stand :
Section 14 of the Act states that if any party to an agreement relating to a trade practice does not carry on business in India, an order may be made under the Act "with respect to that part of the practice which is carried on in India". In the instant case, the ANSAC is not a cartel. Even the agreement between the members of the ANSAC was not entered into in India. Thus the alleged trade practice of cartelisation, if any, was carried on outside India. Section 14 of the Act is not attracted.
The ANSAC had sold soda ash to respondent No. 2 by shipping it under a bill of lading and the shipment itself was at the port of Portland, Oregon, USA. The price quoted therein is 89.50 US dollars per metric tonne, free on board Portland, Oregon. Thus, as soon as soda ash was delivered across the ship's side in Portland, Oregon, the sale had taken place and the property in the goods passed to respondent No. 2. The AMAI's contention that respondent No. 2 was a front for the ANSAC has no substance. Respondent No. 2 itself has filed its reply to the complaint petition of the AMAI, where it has submitted that the ANSAC sold the goods outside India to it, who in turn had entered into contracts of sale with Indian consumers.
In view of the above, the Monopolies and Restrictive Trade Practices Commission has no jurisdiction to entertain the complaint.
AMAI's stand :
The ANSAC has sold its soda ash directly to Indian consumers and respondent No. 2 is nothing more than an agent of the ANSAC for this purpose. The sale of soda ash by the ANSAC to respondent No. 2 is not a sale on a principal to principal basis but on a principal to agent basis.
In terms of Section 14 of the Act, even if the party (ANSAC) against whom action is proposed, docs not carry on business in India, the Commission has jurisdiction to deal with any complaint in regard to the practice within Indian soil which substantially falls within any prohibited trade practice relating to production, storage, supply, distribution or control of goods or the provision of any services. (Ballarpur Industries Ltd, v. Sinarmas [ 1996] 87 Comp Cas 159 (MRTPC) and Surlax Diagnostics Lid. v. Advanced Medical Systems (India) Pot. Ltd. [1993] 1 CTJ 146 (MRTPC)). Furthermore, if the effects of a restrictive trade practice are visible in India, the trade practice must be taken to be carried on within India (Jugaldas Damodar Mody Company, In re [1983] 3 Comp LJ 221 (MRTPC)).
A letter of credit has been opened on an Indian bank by an Indian party for import of soda ash. Thus a part of the trade practice is carried on in India attracting Section 14 of the Act.
The bill of lading (page 98 of the reply of the ANSAC) clearly indicates that the ultimate destination is India.
The ANSAC's contention that its transaction with respondent No. 2 has broken the linkage of goods with the ANSAC is untenable and is nothing more than an attempt to circumvent the provisions of the Act. It is axiomatic that what cannot be done directly cannot be done indirectly. The sale of soda ash to the Indian consumers is a sale by the ANSAC, as respondent No. 2 is only used as a front for routing the entire transaction. A closer examination of the transactions is called for, which will reveal that the ANSAC's sale to respondent No. 2 is an attempt to escape the rigours of the Act. Applying the mischief rule in Heydon's case [1584] 3 Co. Rep 7a, the adjudicators are enjoined to make such construction as shall suppress the mischief and advance the remedy and suppress subtle inventions and evasions for continuance of the mischief and pro privato commodo and to add force and life to the cure and remedy according to true intent of the makers of the Act, pro bono publico.
The veil has to be pierced to ascertain the actual transaction. In the instant case, the title to the goods cannot be said to have passed on the high seas. The title passes only when the requisite documents reach the Indian consumers. Thus territorial connection with India is established for the purpose of Section 14 of the Act.
Our analysis and conclusion :
The allegations of the AMAI relate to monopolistic, unfair and restrictive trade practices. Operating as a cartel is a restrictive trade practice.
The expression "cartel" does not find mention anywhere in the Monopolies and Restrictive Trade Practices Act, 1969, but it falls under at least two sections, namely, Section 33(l)(d) and Section 2(o) of the Act. The notice of enquiry directed to be issued by the Commission charges the respondents with having indulged in all the three kinds of prohibited trade practices namely monopolistic, restrictive and unfair. Section 14 of the Act frowns upon any monopolistic, restrictive and unfair trade practice relating to the production, storage, supply, distribution or control of goods of any description or the provision of any services with respect to that part of the, practice which is carried on in India, even if the charged party does not carry on its business in India.
The ANSAC with its office in the USA may not be carrying on its business in India. The relevant question is whether any part of the trade practice of selling soda ash is carried on in India. If the answer to this question is in the affirmative, then Section 14 gets attracted.
In Jugaldas Damodar Mody's case [1983] 3 Comp LJ 221, 225 this Commission observed as follows :
"... learned counsel for the respondents questioned the Commission's jurisdiction to go into the matter and referred to Article 245 of the Constitution. He pointed out that the whole gamut of transactions involved in this enquiry had taken place in Oman and the main party was the Sultan of Oman who represented the sovereign state and the law applicable was that of Oman. It was his contention that Section 14 of the Monopolies and Restrictive Trade Practices Act did not apply because the contract was made in Oman ; and according to him, the Commission was flogging a dead horse. According to him the word 'cartel' could not be used in the present connection and could be definitely taken as a misnomer. He pointed out that this could not be called an exclusive contract because the Sultan had assumed his right to sell to other customers. . . . The first contention of learned counsel for the respondent was that since the agreement was made in Muscat and one party to the agreement was the Sultan of Oman himself, the Commission had no jurisdiction. This contention overlooks Section 14 of the Act which provides that where any practice substantially falls within monopolistic or restrictive trade practice or both, -relating to the production, supply, distribution or control of goods of any description or the provision of any services and any party to such practice does not carry on business in India, an order may be made under this Act with respect to that part of the practice which is carried out in India. The mere fact that the contract was executed in Muscat and the Sultan of Oman was a party to that agreement did not preclude the Commission from exercising its jurisdiction with respect to that part of the practice which is carried on in India. The definition of 'restrictive trade practice' clearly goes to show that it is an effect oriented or result based definition. It goes on to say that restrictive trade practice means a trade practice which has or may have, the effect of preventing, distorting or restricting competition in any manner and in particular,--
(i) which tends to obstruct the flow of capital or resources into the stream of production, or
(ii) which tends to bring about manipulation of prices or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions.
If any of these effects is visible in India, the trade practice must be taken to be carried on in India."
The ratio in Jugaldas Damodar Mody's case [1983] 3 Comp LJ 221 applies on all fours to the instant case. In that case, the cartelisation contract was in Muscat and here the alleged cartelisation agreement is in the USA. But what is relevant is whether any part of the trade practice has been in India. The mere fact that the alleged ANSAC agreement has been outside the country cannot be construed in vacuum, as its visible effects in India will have to be seen, in order to ascertain whether any part of the trade practice has been on Indian soil.
The letter of credit details given in annexure "K" to the complaint petition (page 87) indicates that it has been opened by respondent No. 3 on the Punjab and Sind Bank, Scindia House, New Delhi. The rate quoted is 132 US dollars per metric ton. The letter of credit was opened by Haryana Sheet Glass Limited (respondent No. 3). The correspondence between some of the Indian consumers like Float Glass India Ltd. and Gujarat Guardian Limited addressed to the ANSAC of date October 15, 1996, clearly establishes a nexus between the said Indian consumers and the ANSAC (pages 122 and 123 of ANSAC's reply annexures 19.1 and 19.2). In respect of the letter of credit opened by respondent No. 3 with the purchase price of 132 US dollars per metric ton, GIF, the first respondent namely the ANSAC has the following to say (para. I4(f), page 47 of ANSAC's reply) :
"The ANSAC is not aware of the specifics of the letters of credit opened in favour of Premjee to purchase diverse quantities of the soda ash, bul believes that although the face amount of those instruments is 132 US dollars CIF Kandla, there are significant additiomil undisclosed financial and transportation costs charged to them by Premjee, by the banks and by others". Very strikingly the price of 132 US dollars per metric tonne CIF occurs in ANSAC's fax dated August 5, 1996, addressed to Larsen Servicing and Trading Company (page 86 of the complaint annexure "J"). If indeed there were to be 'significant additional undisclosed financial and transportation costs charged to the Indian consumers by respondent No. 2 by the banks and by others,' the letter of credit opened by Haryana Sheet Glass Ltd. (respondent No. 3) on Punjab and Sind Bank, New Delhi, with the price at 132 US dollars per metric ton clearly gives a contra indication. In that letter of credit, G. Premjee Trading Pvt. Ltd. (respondent No. 2) is the beneficiary. Without evidence to the contrary, it is difficult to doubt, prima facie, the veracity of the AMAI's contention in this regard. There is, therefore, in our view, some part of the trade practice visible in India which will attract Section 14 of the Act in terms of the ratio of Jugaldas Damodar Mody's case [1983] 3 Comp LJ 221 (MRTPC).
We would also like to draw support from the mischief rule in Heydon's case [1584] 3 Co. Rep 7a that the adjudicator has to construct and pursue that meaning which advances the remedy and suppresses subtle inventions and evasions for continuance of the mischief. The veil needs to be pierced to comprehend the true transaction constituting its veneer. Prima facie, however, we are of the view that there is a distinct possibility and probability that respondent No. 2 (Premjee) is a front of respondent No. 1 (ANSAC) and that the ANSAC is attempting to sell soda ash directly to India by ship even though routed through Premjee. We have already noted that the bill of lading also indicates the ultimate destination as India in bold print (page 98 of ANSAC's reply--annexure "7"). If the port of loading as indicated in the said bill of lading is Portland, USA and the port of discharge is Kandla (India), there is a clear nexus between the Indian consumer and the ANSAC thereby inviting the application of Section 14 of the Act. Bearing the Heydon's case [1584] 3 Co. Rep 7a, mischief rule, we, therefore, conclude that the Monopolies and Restrictive Trade Practices Commission has jurisdiction to entertain the complaint.
2. CARTEL :
Poser :
Is the ANSAC a cartel and has it indulged in the alleged restrictive trade practice of cartelisation ?
ANSAC's stand :
The ANSAC is not a cartel. The complainant's argument that the ANSAC's agreement falls within the scope of Section 33(l)(d) of the Act suffers from the fallacy of petitio princidpii which means begging the question. This is so because all cartels are not illegal. There could be benign cartels and malignant cartels. Their legality will depend upon their purpose and activities. The ANSAC is a legitimate and lawful export trade joint venture formed under the Webb-Pomerene Act, 1918, of the USA. The ANSAC's membership agreement was essentially to promote the export of USA produced soda ash and to improve its ability to compete.
The practice of cartelisation must include in it the element of a conspiracy to create a monopoly and thus to eliminate competition. The AMAI has not offered any evidence and has not established any mala fide intent on the part of ANSAC to create a conspiracy, to monopolise the market in India and to eliminate competition.
Members of the ANSAC cannot sell soda ash to Indian consumers in their individual capacity. Among the reasons why export sales by the ANSAC are more advantageous than export sales by individual members are (a) access to larger supplies of soda ash, (b) ability to offer uninterrupted supply to overseas consumers, (c) ability to pool risks, (d) the flexibility of a single dedicated export staff with expertise in the area of exports, (e) the capability of minimising distribution costs and (f) improved access to Government assistance, where available. Members of the ANSAC have never sold soda ash individually in the Indian market.
AMAI's stand :
The ANSAC is a cartel. Cartels are bad per se and there is no distinction between a benign and a malignant cartel. Cartels impose unreasonable restraints on free trade and distort competition and thus have a pernicious effect on both trade and competition. They are against public interest.
The ANSAC is the only outlet for export of USA produced soda ash. The ANSAC's agreement prohibits individual members from exporting. The ANSAC inhibits competition between its members, as it determines how much to sell, to whom and at what price.The power of the ANSAC, which claims that its reserves of soda ash are enough to take care of the world demand for 1,300 years (page 24 annexed to the complaint appli cation) can choke supply lines, create artificial scarcity and result in hiking of prices at will. The decision of the Commission of European Communities dated December 19, 1990, indicts the ANSAC as a "vehicle for eliminating competition between its members". In the same order, the said Commission has also concluded that the members of the ANSAC are capable of acting independently within the common market. The ANSAC members are unable to export individually, without the ANSAC, because their agreement binds them not to.
The ANSAC's track record shows that its export of soda ash to some countries has led to the closure of soda ash plants in those countries, The ANSAC's intention in India is to eliminate competition and cripple the Indian soda ash manufacturing industry. The ANSAC has been using strong arm tactics to force an inroad into the Indian soda ash market as evidenced by the ANSAC's statement to the US Government that "if their Government wants the American Government to grant them aid, then we have the right to ask that they get their priorities in the right places" (Additional affidavit of date November 28, 1996, of Shri Y. R. Singh, executive director, of the complainant, page 14).
Our analysis and conclusion :
It is true that a cartel is not defined in the Monopolies and Restrictive Trade Practices Act. However, the Supreme Court of India which interprets and fashions the law in the country has the following to say, in describing a cartel (Union of India v. Hindustan Development Corporation [1993] 3 SCC 499, 529).
"The cartel, therefore, is an association of producers who by agreement among themselves attempt to control production, sale and prices of the product to obtain a monopoly in any particular industry or commodity. Analysing the object of formation of a cartel in other words, it amounts to an unfair trade practice which is not in the public interest. The intention to acquire monopoly power can be spelt out from formation of such a cartel by some of the producers. However, the determination whether such agreement unreasonably restrains the trade depends on the nature of agreement and on the surrounding circumstances that give rise to an inference that the parties intended to restrain the trade and monopolise the same."
It has to be stated at this juncture that with the issuance of the notice of enquiry, the enquiry into the facts and circumstances of the case has been pressed into commencement and that until evidence is taken and the matter is adjudicated upon, the final word cannot be regarded as having been said whether the ANSAC is a cartel. This question will be addressed by the Commission during the pending enquiry. In presenti, the only relevant question for the purpose of the injunction or for that matter for the purpose of vacating the injunction, is whether there is a prima facie existence of a cartel in the form of the ANSAC, a part of whose trade practices is carried on in India. We have already noted in our analysis of the first dimension relating to "jurisdiction" that, prima facie, a part of the alleged trade practice is carried on in India thus attracting Section 14 of the Act. The limited question, therefore, is whether the alleged trade practice of cartelisation is indulged in by the alleged cartel the ANSAC.
The membership agreement of the ANSAC has not been placed before us yet. For the present, it should not matter, as an agreement in terms of Section 2(a) of the Act includes even an arrangement or an understanding, whether or not it is enforceable by legal proceedings. If the intent and/ or a meeting of the minds of the members of the ANSAC is, prima facie, present, from the pleadings placed before us, it should be sufficient to arrive at a tentative conclusion that ANSAC is a cartel indulging in cartelisation.
It is admitted by ANSAC that its members cannot sell soda ash to Indian consumers in their individual capacity, Shri Pithawalla, advocate for the ANSAC made a categorical statement at the Bar, that members of the ANSAC cannot sell soda ash except through and by ANSAC. The reasons given (supra) in support of this statement, are not conclusive evidence that members of the ANSAC cannot export in their individual capacity. May be, their competitive edge had they exported individually without the ANSAC may be less. But then the whole element of competition, in its economic logic, loses its sheen because of the anti-competitiveness that exports through the ANSAC engender. A true and free market must have the full play of competition and any impairment of competition brought about by the arrangement of exporting through ANSAC distorts such a market. Cartels and free markets are essentially antithetical to each other, are strange bed-fellows and cannot co-exist. While a free market engenders competition, a cartel endangers competition.
By its own admission and statement that the ANSAC is an instrument for promoting export sales of soda ash produced in the USA and its concomitant statement that its individual members cannot export soda ash to India, there is a prima facie conclusion, that stares one in the face that the ANSAC is a cartel. The observation of the Supreme Court in Union of India v. Hindustan Development Corporation [1993] 3 SCC 499 that formation of a cartel is not in public interest, constitutes a postulate, on the touch stone of which, this Commission, during the course of this enquiry will adjudicate on the pejorative consequences of the alleged cartelisation by the ANSAC on public interest. At this juncture, however, we are clearly of the prima facie view, that ANSAC as the "international marketing arm for America's six soda ash manufacturers" (page 22 annexed to the complaint application) is a cartel formed for the export of soda ash produced in the USA.
Much has been said in the pleadings and much has been argued at the time of the oral presentations by both the sides that the intent of the ANSAC (to eliminate competition) is important to be established for deciding, if the alleged trade practice of cartelisation has been perpetrated by the ANSAC. We have already referred to the extract of a statement of ANSAC submitted to the US Government to the effect that if the Indian Government wants the US Government to grant them aid, then the latter has the right to ask to get the former's priorities right (page 14 of the additional affidavit of Shri Y. R. Singh referred to supra). This may or may not clinch the intent, but there is more. Pages 21 and 22 annexed to the complaint application have the following descriptions of ANSAC.
The "ANSAC sole international marketer for this product, sets world standards for quality delivery, reliable supply, competitive pricing and customer service".
"We are devoted to pricing our product competitively in the international market".
The "ANSAC is the only soda ash supplier dealing exclusively in export markets".
The "ANSAC. is the international marketing arm for America's six soda ash manufacturers." (emphasis* added).
The above extracts give a prima facie indication that the ANSAC is a cartel indulging in the alleged trade practice of cartelisation, in so far as soda ash exports are concerned. All that is important is that there should be such a prima facie conclusion warranting the issuance of the impugned interim injunction order already directed on September 9, 1996. We conclude accordingly.
3. PREDATORY PRICING :
Poser :
Has the ANSAC indulged in the alleged trade practice of predatory pricing ?
ANSAC's stand :
The complainant, the AMAI has not established the charge of predation. It has failed even to allege, much less prove, any mala fide intent on the part of ANSAC. There is no evidence that ANSAC will raise or-is likely to raise its prices at a later date in order to recoup any alleged losses suffered by it. An essential ingredient of cartelisation is a conspiracy to indulge in predatory pricing.
AMAl's siand :
At the time of oral arguments, Shri R. K. Jain, senior counsel for the complainant, observed that the injunction order of the Commission is limited to the trade practice of cartelisation. He added that the complainant would not press for the extension of the said order to cover predatory pricing. However, he emphasised the complainant's contention that the average export price of soda ash between June and December, 1995, was about 125 US dollars per metric ton and that between January and June, 1996, was about 131 US dollars per metric ton, whereas for India, ANSAC exported soda ash at a price of 89.50 US dollars per metric ton, free on board. He styled this as predatory pricing with the intent to wipe out the local producers of soda ash in India.
Our analysis and conclusion ;
There are various charges of the complainant against the ANSAC and the other two respondents relating to monopolistic, unfair and restrictive trade practices. The operative portion of the injunction order essentially mentions the trade practice of cartelisation. As we have issued the notice of enquiry covering many prohibited trade practices in the Monopolies and Restrictive Trade Practices Act including cartelisation, we have not, at the time of the ex parte injunction order, dealt with all the charges in any detail, as all that was required was a prima facie satisfaction that one or some or all prohibited trade practices had been indulged in. We, therefore, pegged our satisfaction on the alleged trade practice of cartelisation which we could prima facie spy in the pleadings and documents placed before us.
Some pronouncements of the Supreme Court and this Commission were cited at the time of arguments but we will deal with them, if relevant, during the main enquiry and adjudication of the charges of predatory pricing against the ANSAC.
We, however, would like to look at this dimension on the touchstone of eliminating or affecting competition. Philip X. Chapman, director of sales of the ANSAC in his affidavit dated October 16, 1996, has furnished free on board sale prices of soda ash to different countries, (page 105 of the ANSAC's reply). Therein, the price at sales point is given for the period April to August, 1996. The price ranges between 89.50 US dollars and 153 US dollars per metric ton, with the minimum in the range indicating price for exports to India. This raises a possible inference in support of the AMAI's allegation. What's more, the data is from the ANSAC's document,
4. ORDERS OF THE COMMISSION OP THE EUROPEAN COMMUNITIES :
Poser :
Do the orders of the Commission of European Communities have persuasive effect in the instant case ?
ANSAC's stand :
Article 85 of the Treaty of Rome is the law on which the order dated December 19, 1990, of the Commission of the European Communities is based. The said article has provisions entirely different from the corresponding provisions of the Monopolies and Restrictive Trade Practices Act. The scheme of the two statutes being completely different, the decision of the Commission of European Communities cannot be treated even as a persuasive, much less, binding, precedent. In any case, there are distinctions between the facts of the case before that Commission and the case in this Commission. For example, in the former, two members of the ANSAC have their own distribution facilities in the United Kingdom and have been competing with each other, competing with other members of the ANSAC and competing with other soda ash manufacturers in Europe, whereas in the latter, namely, the instant case, none of the members of the ANSAC has ever individually sold soda ash to India and none of them has established a place of business in India.
AMAI's stand :
The Commission of the European Communities has concluded that the ANSAC is a joint sales organisation and is a vehicle for eliminating competition between its members. Section 33(1)(d) of the Monopolies and Restrictive Trade Practices Act is in pari materia with Article 85 of the Treaty of Rome. The decision of the Commission of European Communities is not only persuasive for this case but can be regarded as even binding because of the similarity in the two statutes.
Our analysis and conclusion :
We would like to state at the very outset that Indian law, namely, the Monopolies and Restrictive Trade Practices Act, is enacted by the sovereign Parliament of this country and thus no order of the Commission of European Communities under the Treaty of Rome can ever be regarded as binding on this Commission. But, with respect, we can always draw support from any such decision, if, on persuasive basis, we find it apposite to apply the same to the facts and circumstances of a case if similarities exist between the cases' and the applying statutes. There are in our view similarities between the case decided under the Treaty of Rome and the facts in the instant case. There are, of course, many distinguishing features but yet the gravamen of the charges in the two cases essentially relates to restriction on and impairment of competition. The order dated December 19, 1990, of the Commission of European Communities has made a legal assessment that the ANSAC "must, therefore, be seen as the vehicle for eliminating competition between its members", that the ANSAC membership agreement "has as its object and likely effect a restriction of competition within the common market with respect to prices and quantities" and that the agreement "obliges the members to sell soda ash for export exclusively through the ANSAC and prevents them from selling individually" (page 33 annexed to the complaint application). We are here examining if ANSAC is a cartel and this is exactly what the Commission of the European Communities also examined. We do stand persuaded by the decision of that Commission and that is why we had recorded its purport very briefly in the impugned injunction order for the prima facie view which we have taken. This disposes of the poser relating to this dimension.
5. GATEWAYS :
Poser :
Can gateways be pleaded during the consideration of the injunction application ?
ANSAC's stand :
Even in an enquiry under Section 12A of the Act which deals with injunctions, it is necessary for the Commission to consider and examine every aspect of the matter including the applicability of the gateways under Section 38(1) of the Act. The wording of Sections 12A, 37 and 38 of the Act makes it amply clear that once the enquiry has commenced, ANSAC is entitled to lawfully plead all or any of the applicable gateways under Section 38(1) of the Act. The ANSAC pleads gateways under Section 38(l)(b) and Section 38(l)(h) of the Act. The Commission has to balance the needs and requirements of Indian manufacturers of soda ash with those of the consumers of soda ash. The restraint imposed on the ANSAC in terms of the impugned order will prejudicially affect the Indian glass manufacturers who are consumers of soda ash. Such prejudice will outweigh the interests, if any, of the soda ash manufacturers. On this argument, the gateway under Section 38(1)(b) is available to the ANSAC.
Furthermore, the sale of American soda ash to India will neither directly nor indirectly restrict nor discourage competition to any material degree in the soda ash industry. On this count the gateway under Section 38(l)(h) is satisfied and is available to the ANSAC.
AMAI's stand :
Gateways under Section 38(1) of the Act cannot be pleaded at an interim stage since such pleading amounts to an admission of the existence of the restrictive trade practices. If, for argument's sake, gateways can be pleaded even at the interim stage, the ANSAC has not submitted any evidence to avail of the benefit of gateways. The plea of gateways cannot be made available to the ANSAC unless it admits that it is a cartel. In any case, the benefits under gateways available under Sections 38(l)(b) and 38(l)(h) of the Act need to be long-term and not short-term. Even if, for some reason, the said gateways are available to the ANSAC, the Commission has to be satisfied that the prohibited trade practices are not unreasonable having regard to the balance between the circumstances and any detriment to the public resulting from such practices.
Our analysis and conclusion :
Both Shri R. K. Jain, senior counsel for the complainant, and Shri F. S. Nariman, senior counsel for the ANSAC, referred to the judgment of the Supreme Court of India in Voltas Ltd. v. Union of India [1995] 83 Comp Cas 228 ; AIR 1995 SC 1881, and pointed out passages therein in support of their respective stands. It is not necessary to deal with the arguments in this regard of both learned counsel, as our enquiry will not be confined only to the restrictive trade practices under Section 33(1) of the Act but will cover also restrictive trade practices under Section 2(o), unfair trade practices under Section 36A(1) and monopolistic trade practices under Section 2(i) of the Act. The Supreme Court's decision and observations in Voltas Ltd. v. Union of India [1995] 83 Comp Cas 228 ; AIR 1995 SC 1881, are directly related to only restrictive trade practices falling under Section 33(1) of the Act. As in the instant case, the charges have a larger sweep covering restrictive trade practices falling under Section 2(o) of the Act besides unfair and monopolistic trade practices, the said judgment of the Supreme Court is not directly applicable. What was emphasised by the Supreme Court was that in respect of agreements falling under Section 33(1) of the Act, the Commission needs to examine in depth, the question whether the objectionable clauses in the agreements constituting restrictive trade practices falling under Section 33(1) of the Act are prejudicial to public interest. In other words, the Supreme Court has mandated the Commission to adjudicate on the issue of public interest to allow or not allow the gateways after giving an opportunity for evidence to be let in by the charged party.
25. In this view of the matter, as we are still at the threshold of the enquiry, we hold that gateways may be pleaded and that the respondents will be allowed ample opportunity in this regard at the appropriate stage of the enquiry. In the present order, we are adjudicating on the injunction with reference to the prayer of the ANSAC to vacate the same. As we have yet to reach the evidence stage and as no evidence has been adduced so far, it will be inappropriate to make any formal comments or indicate our conclusions on the availability of gateways for the ANSAC under Section 38(1)(b) and Section 38(l)(h) of the Act. The poser in this dimension stands disposed of accordingly.
26. Having outlined the different dimensions of the arguments advanced before us and given our. analysis as aforesaid, we now turn to the key question as to whether the interim injunction dated September 9, 1996, should be confirmed or vacated.
27. A simple and a straight-forward reading of our impugned injunction order makes it amply manifest that it is very limited in its sweep and consequences. The operative portion of the said injunction order runs as follows :
"Respondent No. 1, namely, ANSAC, shall not indulge in the practice of cartelisation by exporting soda ash to India in the form of cartel, directly or indirectly. However, this order is without prejudice to the final outcome of this enquiry as well as the rights of the importers or exporters in their individual capacity".
28. We emphasise for clarity, that we have placed an embargo on the ANSAC only if it chooses to indulge in exporting of soda ash in India in the form of a cartel directly or indirectly. We have also protected the rights of exporters of soda ash in (heir individual capacity. Thus it follows, that if the members of the ANSAC export soda ash to India in their individual capacity and distance themselves from the act or practice of cartelisation, the impugned injunction order will not stand in their way,
29. Here a conundrum arises, for the reason, that the ANSAC has gone on record that its members cannot export soda ash to India individually. While we would not like to advise members of the ANSAC that they should make an attempt to export soda ash in their individual capacity, even if they do not wish to, we cannot but take note of the following observation in the order dated December 19, 1990, of the Commission of European Communities.
30. "The overall size of the United States producers, their low production costs (compensating largely for higher transport costs) and the fact that some of them have sold regularly on an individual basis show, however, that they could compete effectively among themselves and with the European producers. . . . They are, therefore, capable of acting independently within the common market". (Page 33 of the complaint application).
31. If the members of the ANSAC do not desire to act independently and do not desire to export soda ash to India in their individual capacity, it is and will be their decision for reasons best known to them. The various reasons which the ANSAC has offered as to why its members cannot export in their individual capacity outlined in the section dealing with the dimension "cartel" supra, merely declare that they lead to a better advantage, if the export is conjointly done through ANSAC rather than in the individual capacity of the members. Even if the ANSAC feels that exports to India through the ANSAC are more beneficial to the members than exports in their individual capacity, that by itself does not detract from the merits of the main argument of the AMAI, that acting as a cartel is against consumer interest. We have, therefore, no hesitation to hold that our impugned order is a limited one merely restraining ANSAC to export soda ash to India in the form of a cartel, directly or indirectly. There are no shackles in our order against the members of the ANSAC exporting soda ash to India in their individual capacity. .
32. Theoretically speaking, one could argue that if the arrangement is allowed to continue (anterior to the date of injunction), the ANSAC as an alleged cartel and indulging in the alleged trade practice of cartelisation, may provide to the Indian consumers, soda ash at a lower price or a more economical price than what the Indian producers are able to provide. In other words, the argument could run, it is in the consumer interest that the pre-injunction arrangement may be allowed to operate by vacating the injunction- But this is fraught with possible prejudice to public interest.
33. At the beginning of this order, we had referred to the possible distinction between consumer interest and public interest.
34. The consumer is a member of a broad class of people who purchase, use, maintain and dispose of products and services. Consumer interest is affected by pricing policies, financing practices, quality of goods and services and various trade practices. They have to be distinguished from manufacturers who produce goods and wholesalers or retailers who sell goods.
35. Public interest on the other hand is something in which the public or the community at large has some pecuniary interest or some interest by which their legal rights or liabilities are affected. The expression "public" thus pertains to and concerns a multitude of people. The expression "right" means a well-founded claim, an interest, concern, advantage or benefit. Public interest does not mean anything so narrow as mere curiosity or as the interests of a particular locality or a small section of citizens. The circumstances which clothe a particular kind of business with "public interest" as to be subject to regulations, must be such as to create a peculiarly close relation between the public and those engaged in business and raise implications of an affirmative obligation on their part to be reasonable in dealing with the public. (Russell v. Wheeler, 165 Colo, 296, 439 P. 2d. 43).
36. Public interest is an elusive abstraction meaning general social welfare or regard for social good. Predicating interest of the general public in matters where regard for the social good is of the first moment. In the words of justice Felix Frankfurter of the United States Supreme Court, "the idea of public interest is a vague, impalpable but all-controlling consideration" (quoted in Ramaiya A.-Guide to the Companies Act, Wadhwa and Company, Agra, 1992, page 1660). It is distinguishable from the self-interest or individual, sectional, class or group interest. Banfield describes the difference between sectional interest and public interest as follows :
"A decision is said to serve special interests if it furthers the ends of some part of the public at the expense of the ends of the larger public.
It is said to be in public interest if it serves the ends of the whole public rather than those of some sector of the public" (Banfield, Edward C. and Martin Meyerson--Politics, Planning and the Public Interest-The Free Press, New York 1955, page 322).
37. The concept of public interest is closely related to the universal consensus necessary for the operation of a democratic society. Raymond Marks and others describe not a consensus of interests but a balancing of interests, when they say that the public interest is "policy resulting from the sum total of all interests in the community--possibly all of them actually private interests--which are balanced for the common good" (Marks Raymond E. et al-The Lawyer, The Public and Professional Responsibility-American Bar Association, Chicago, 1972, page 51).
38. While the impugned trade practice of cartelisation may be, in a particular theoretical sense, regarded as being in consumer interest because of the lower prices in the short term, there are a large number of public interest issues which arise as a consequence of the trade practice, which have to be kept in view in deciding the question of vacating the injunction order. For instance, the interest of the Indian domestic manufacturers who are reported to be having capacity in excess of the demand for soda ash in the country is one. The impairment of competition is the main refrain of the AMAI which, we have briefly looked at, earlier in this order. Shri R. K. Jain, senior counsel for the AMAI mentioned about the possibility of the Indian soda ash manufacturers being rendered sick if the ANSAC is allowed to operate as a cartel and export soda ash on that basis to India. He added that something like 1,45 lakhs people are employed in the industry in the primary, secondary and tertiary sectors. In para. 19 of its complaint application, the AMAI has lamented : "Entry of the ANSAC cartel in the Indian market would lead to a fall in local production and ultimate closure of factories and large scale unemployment",
39. The Monopolies and Restrictive Trade Practices Act provides surveillance over factors that lead to prevention, distortion and restriction of competition. The Commission has to balance public interest against consumer interest and arrive at an adjudication as to which will have primacy in given circumstances. It is not that public interest always has primacy in its battle against consumer interest. Nor the vice versa. Each case with its attendant facts and circumstances will give the clue as to which of the two interests should have the last word. In the instant case, as evidence has yet to be let in, we reserve our comments and judgment on this question.
40. Prima facie, however, we are of the view, that there are a number of public interest dimensions inherent in this case and that itself constitutes a very strong case as to why we cannot take a narrow and stringent consumer interest bias to warrant vacating our impugned injunction order.
41. We have recorded our conclusion against the five dimensions discussed. Briefly, they are :
1. Jurisdiction : The Monopolies and Restrictive Trade Practices Commission has jurisdiction to entertain the complaint of the AMAI as Section 14 of the Act is attracted.
2. Cartel: Prima facie the ANSAC is a cartel indulging in the alleged trade practice of cartelisation in so far as the soda ash exports are concerned.
3. Predatory pricing : The affidavit dated October 16, 1996, of Philip X. Chapman, Director of Sales of the ANSAC, gives an inference of predatory pricing alleged by the AMAI.
4. Orders of the Commission of European Communities : The orders of the Commission of the European Communities have a persuasive effect in the instant case.
5. Gateways : As the allegations in the complaint application cover not only restrictive trade practices under Section 33(1) of the Act but also restrictive trade practices under Section 2(o), unfair trade practices under Section 36A and monopolistic trade practices under Section 2(i) of the Act, gateways may be pleaded at the appropriate stage of the enquiry.
42. In addition to the above conclusions, as there are public interest dimensions and consumer interest dimensions inherent in the facts and circumstances of the case, we see. no reason to vacate our limited impugned injunction order.
43. In sum, we confirm our interim injunction order dated September 9, 1996, and dismiss the prayer of respondent No. 1 to vacate the injunction order.
44. We would like to record our sincere appreciation of the substantial assistance rendered to us by various counsel appearing on behalf of the parties and in particular, Shri F. S. Narimari, Shri Dara P. Mehta, Shri H. D. Pithawalla, Shri R. K. Jain, Shri O. P. Dua and Dr. V. K. Aggarwal.