Monopolies and Restrictive Trade Practices Commission
Director General (Investigation And ... vs Hindustan Lever Limited on 13 July, 2001
ORDER
CM. Nayar, Chairman
1. This matter arises out of complaint that the respondent has made false or misleading representation regarding the quality, standard or characteristics of its product, which is an unfair trade practice under Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the Act). The preliminary investigation was conducted and the comments of the respondent were sought on the allegations of the complainant. The respondent is engaged in the business of manufacture and sale of clinic special anti-dandruff shampoo, besides many other products. It as claimed by the respondent that clinic anti-dandruff shampoo is made of "internationally proven formulation" that gently lifts out dandruff from the scalp. It was alleged that there was no formulation nor it has been scientifically and medically tested by any recognised or reputed Research Institute. The advertisement with regard to the product may be reproduced as below :
"Clinic Special ANTI-DANDRUFF SHAMPOO CONDITIONER ENRICHED 'For Dandruff-free, good looking hair -- New Clinic Special. Now with the latest international proven formulation that gently lifts out dandruff from the scalp. And a rich, creamy conditioner that keeps your hair soft, shiny and good looking. So you can use it regularly. This will keep dandruff away. And give you great looking hair ! Massage in, leave on for a minute, rinse well. Do not dilute shampoo.' MFD BY HINDUSTAN LEVER LTD.
165/166, BACKBAY RECLAMATION, BOMBAY-400020, MADE IN INDIA NETT VOL : 8 ml. C-983"
2. The Notice of Enquiry was issued against the respondent. The respondent addressed a communication dated 24th June, 1992 wherein the detailed explanation was given explaining the formulation of the product. The reply to the Notice of Enquiry was also filed wherein the following facts were specifically pleaded to reiterate that the respondent has made a true and correct claim namely, "internationally proven formulation" on the sachet of CLINIC SPECIAL ANTI DANDRUFF SHAMPOO manufactured and sold by it as will be demonstrated by the facts set out below :
"(1) Respondent states that they are inter alia engaged in the manufacture of soaps and cosmetics for the past several years. Some of the shampoos manufactured and sold by them under the popular brand names like Sunsilk and Clinic command enormous popularity amongst consumers as quality product.
(2) The respondent business philosophy has always been to constantly thrive and endeavour to produce and supply quality god to consumers in different market segments. Respondent have, therefore, a strong Research and Development (R&D) base which is actively involved in research work relating to product development on a regular and ongoing basis both with regard to existing brands as well as for formulation for future. For this purpose respondents have a Research Centre at Andheri Bombay which is considered to be a pioneer research institute in the private sector which employs over 250 employees exclusively for R&D work out of which more than 200 are qualified Scientists, Engineers and Technicians. In the Research Centre more than 65 Scientists held Doctorates and over 30 Scientists have international experience in their respective fields. Respondent incurs a cumulative capital expenditure of about Rs. 18 crores with revenue expenditure of about Rs. 5 to 7 crores p.a. R&D Centre was accorded recognition as in-house R&D unit by the Ministry of Science and Technology, Govt. of India, New Delhi. A copy of letter dated 28.3.1988 from the Government of India as a letter of recognition of in-house R&D unit is enclosed as Annexure-A. (3) The respondent Company is a subsidiary of an internationally renowned Company M/s. Unilever pic, U.K. which holds 51% of the paid up capital of the respondent Company. Unilever plc belongs to an Anglo Dutch-Business Conglomerate (M/s. Unilever plc abd Unilever NV) which is inter alia engaged in the manufacture and marketing of soaps, cosmetics, perfumes and personal care products in about 15 countries all over the world and are considered as highly reputed manufacturer of these products. The Unilever plc has a turnover of about 23 billion pounds in the year 1991 and a copy of the balance sheet of Unilever plc is enclosed as Annexure-B. Unilever has a strong R&D Centre of its own at Port Sunlight, U.K. where Scientists of international fame are employed and are engaged in carrying out scientific work in the area of concern to the Unilever worldwide. Being a subsidiary of Unilever plc, the respondent gets full access to the technical know-how as possessed by the Unilever and the same is available to respondent without having to pay any royalty for the same. There is a constant interaction of the Scientists of the respondent employed at R&D Centre, Bombay and the Unilever Scientists who are employed and engaged in scientific work at Unilever research, Port Sunlight Laboratory at U.K. There is, therefore, a constant sharing of information on an on-going basis between the two scientific communities which is used for mutual benefit for product formulation and improvement of the quality of product which the respondent manufactures and supplies to its consumers.
(4) The respondent states that its Scientists employed at R&D Centres, Andheri who are constantly engaged in the improvement of the existing product formulations and have developed new formulations, have large number of patented inventions to its credit. Such formulations and/ or innovations are subjected to intensive testing both in in-house laboratory and in the market place at the development stage as well as in its commercial form on all aspects such as product efficacy, toxicity, dermatological effect and so on before they are put to commercial use. Even the existing products which are in the market place are constantly subject to extensive tests and market research which enables respondent to constantly monitor product efficacy of the goods manufactured by the Company. Likewise Unilever has highly experienced Scientists who carry out product testing in Unilever Research, Port Sunlight, U.K. on products at its formulation stage and at a time before it is taken to the commercial stage with a view to ensure complete product safety from all aspects. There are however times when the product formulations are given for testing on various parameters to outside reputed Laboratories and Instruments and the information obtained from such tests is used by the Unilever and the respondents Research Centre.
(5) One of such reputed Research Centre where Unilever gives some of the products for testing is Life Science Research, Ltd. (LSR) U.K. is a deputed Research Institute of United Kingdom, established in 1972 and is located in the Town Eye in the County of Suffolk under the control of IMS International Inc. which is an international market research organisation. In 1987 IMS established a new corporation Applied Bioscience International Inc. which encompassed LSR and Bio/Dynamic Inc. and also CTC (now called Pharmaco, UK) providing clinical research facilities. LSR enjoys a leading position in the field of product safety evaluation and the fact that it is one of the only institutes which has twice received Queen Award to industry which is a prestigious honour conferred on any institute in the U.K., is a testimony of the prestigious position it holds in the U.K. A brochure giving details of the organisation structure, brief background of the scientific and technical staff employed at LSR is enclosed as Annexure 'C'.
(6) The Human Studies Unit of LSR called CTC International is doing pioneering work in the field of tests on range of products in the area of safety, efficacy and consumer acceptability and with regard to substantiation of marketing claims. A brochure giving background details of CTC International is enclosed as Annexure 'D'.
(7) The respondent says that it has been manufacturing and marketing Clinic range of shampoos for the past many years. In the year 1988 it adopted the Octopirox based formulation of Unilever, the technological know-how of which is available through M/s. Unilever plc as set out above, for manufacture and sale by the respondent as Clinic Special Anti Dandruff Shampoo. The respondent then launched Clinic Special Anti Dandruff Shampoo in the year 1989 in different markets of the country in bottles and sachets. In the sachet of Clinic Special Anti Dandruff Shampoo, the respondents have been making following declaration.
'For dandruff-free, good looking hair -- New Clinic Special. Now with the latest internationally proven formulation that gently lifts out dandruff from the scalp. And a rich, creamy conditioner that keeps your hair soft, shiny and good looking. So you can use it regularly. This will keep dandruff away. And give you great looking hair ! Massage in, leave on for a minute, rinse well. Do not dilute shampoo'."
3. The evidence by way of affidavit was filed on behalf of the respondent by Dr. Karuppa Chinna Gouden, reiterating the averments as made in the reply. The witness was at the relevant time working as the Research Scientist in the Personal Products Division of the respondent Company. He was cross-examined by the complainant wherein it was stated as below :
"I have been working with the respondent Company since June, 1977. The respondent introduced Clinic Shampoo in 1989 in the name of Clinic Special Shampoo. The respondent had claimed that the product in question has been made with internationally proven formulation which is based on the results obtained from independent Research Laboratories called Life Sciences Research Group and also by the parent Company M/s. Unilever PLC, UK. There is no relation between the above testing laboratory and our parent Company namely Unilever PLC, U.K. What we have claimed is not based on the claim made by 'Hoechest' Company. It is correct that we are using 'Octopirox' which is the basic drug manufactured by Hoechest Company. 'OCTOPIROX' is an anti-dandruff chemical. To the best of my knowledge we may be the only user of this product 'OCTOPIROX'. It is possible that other manufacturers of shampoo might have been using the above chemical OCTOPIROX. To my information, in India, there is no other manufacturer who may use OCTOPIROX in its product. We have compared our product with the product of other manufacturers of these products in India and in our view our product is superior in the sense that we are the only Company who is using OCTOPIROX. I have already stated that our claim of being superior is based on the report obtained from the international laboratories mentioned above.
4. We have heard learned Counsel for the parties. The main contention of the complainant that the words "internationally proven formula" gave impression to the public that perhaps only the Clinic Shampoo could be useful for removal of dandruff, whereas the basic drug used in the shampoo, i.e. octo pirox, is being used by other manufacturers as well. The advertisement, however, does not use the word only and the advertisement does not state anywhere that the Company is the only one who is using the formulation. The product is being marketed as admitted by both the parties since 1989. The present complaint was filed in the year 1992, that is after a delay of three years. This apart, there is no evidence to show that any consumer has been misled by the aforesaid advertisement. In this connection, we may refer paragraph 48 to the judgment of the Supreme Court reported at II (1999) CPJ 17 (SC)=VI (1999) SLT 602=1999 CTJ 297 (Supreme Court) (MRTP) in the matter of Colgate Palmolive (India) Ltd. v. Hindustan Lever Ltd., as below :
"As a matter of fact there is no evidence of a single consumer being misled and not a whisper as to what constitutes an unfair trade practice pertaining to "Suraksha Chakra". The Commission also thought it fit not to record any reason or justification for the grant of an interim order of injunction in spite of finding as above and before the matter is investigated and complaint is finally heard. This apart, the factum of non-availability of any explanation of more than 13 years delay has also not been delayed into by the Commission at all."
5. The Supreme Court in the judgment reported at VI (1998) SLT 621-1998 CTJ 249 (Supreme Court) (MRTP) in the matter of HMM Ltd. v. Director General, has held in paragraph 9, which may be reproduced as below :
Section 36A defines unfair trade practice. So far as is relevant it reads :
"In this part, unless the context otherwise requires, 'unfair trade practice' means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any services, adopts one or more of the following practices and thereby causes loss or injury to the consumers of such goods or services whether by eliminating or restricting competition or otherwise, namely :
xxx xxx xxx (3) permits-- '
(a) The offering of gifts, prizes or other items with the intention of not providing them as offered or creating the impression that something is being given or offered free of charge when it is fully or partly covered by the amount charged in the transaction as a whole.
(b) The conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest."
For holding a trade practice to be an unfair trade practice, therefore, it must be found that it causes loss or injury to the consumer. Insofar as prizes are concerned, there has to be the intention of not providing them as offered or creating the impression that they are being given or are being offered free of charge when in fact they are fully or partly covered by the amount charged in the transaction as a whole. The conduct of a lottery for the purpose of promoting the sale, use or supply of a product is an unfair trade practice. It is difficult to see clear, sustainable findings on these aspects in the judgment under appeal."
6. In absence of any evidence placed on record it cannot be categorically held that the respondent is guilty of unfair trade practice by the advertisement which is the subject matter of present proceedings and it does not attract the provisions of Section 36A of the Act. Furthermore, in view of the pre-amended provisions of Section 36A the complainant has to clearly prove loss and injury which will require interference under the provisions of the Act. The respondent on the other hand has placed on record detailed information to justify that Notice of Enquiry deserved to be discharged.
7. Their Lordships of Supreme Court in their guidelines given in the case of Lakhanpal National Ltd. v. MRTP Commission & Anr. have clearly observed that "it is, therefore, necessary to examine whether the representation, complained of, contains the element of misleading the buyer. Does a reasonable man on reading the advertisement form a belief different from what the truth is ? The position will have to be viewed with objectivity, in an impersonal manner. It is stated in Halsbury's Laws of England (Fourth Edition, paragraphs 1044 to 1045) that a representation will be deemed to be false if it is false in substance and in absence and in fact; and the test by which the representation is to be judged is to see whether the discrepancy between the fact as represented and the actual fact is such as would be considered material by a reasonable representee. "Another way of stating the rule is to say that substantial falsity is, on the one hand, necessary, and, on the other, adequate, to establish a misrepresentation" and "that where the entire representation is a faithful picture or transcript of the essential facts, no falsity is established, even though there may have been any number of inaccuracies in unimportant details. Conversely, if the general impression conveyed is false, the most punctilious and scrupulous accuracy in immaterial minutiae will not render the representation true/"
The essential elements having been not satisfied, the Notice of Enquiry deserves and is directed to be discharged. No order as to costs.