By:- Hrutvik Thakor
|Name of case: Vijay Gopal Vs Inox Leisure|
|Case No.: 29/2018|
|Plaintiff : Mr. Vijay Gopal|
|Defendant: Inox Leisure , Hindustan Coca cola Beverages|
|Acts/Constitution: Competition act, 2002|
|Important Section: Section 3(4)(a),3(4)(b),3(4) (c).|
When we visit a multiplex to watch a movie, we are not allowed to take any beverages or water bottle from outside to theatres and we need to buy products from the multiplex food stalls whose, rates are usually different or higher that the same products of outside. Its an very common and even critical questions. In this case same matter of high rate practice by multiplex was highlighted. Most of the food points are been adopted by third parties contractors in multiplex. They in an attempt to get back their large sums of invested money, set exorbitant rates to their products along with restricting the movie watchers to carry their food products, thereby impelling movie viewers to buy the expensive food kept at their outlets.
Informant Mr. Vijay gopal, who is an social activist, has filed a complaint against Inox Leisure Ltd. And Hindustan Coca cola Beverages Pvt. Ltd. Under section 3(4)(a),(b)&(c) of competition act, 2002 alleging that multiplex malls including INOX LEISURE collude to beverage companies like HINDUSTAN COCA-COLA BEVERAGES and sell beverage products and water bottle at higher price with special packing, different than the retail markets.
Mr. Vijay Gopal went to a multiplex mall of INOX LEISURE to watch a movie, were he was not allowed to take a water bottle inside the premises of Hindustan Coca-Cola Beverages and was forced to buy other bottle from inside of Hindustan Coca-cola beverages at higher price of original rate, water being an essential commodity, informant had to buy at the available rate.
He had purchased some beverages also, whose price were high than, original product price and the packaging and quality of the product had minute differences compared to products sold in markets.
The non-alcoholic beverages that were available for sale were only of Coca-cola and not of other beverages companies, as a result, informant didn’t had any others option and had to buy the products, provided by coca-cola.
Hence, the informant alleged that INOX LEISURE and HINDUSTAN COCA-COLA BEVERAGES were involved in anti-competitive activities in the market.
Facts of the Case:
Mr. Vijay Gopal went to Inox Mall to watch a movie. He purchased a water bottle from the ground floor of the mall. As he entered the multiplex, the security officer stope him and didn’t allowed him to carry the water bottle inside the theatre and asked, him to collect it during the time of exit. So, he contended that he had purchased the water bottle at Rs 50, where its original price in the market is Rs 20. After an argument, he was allowed to take the water bottle inside. He also contended that many multiplex and beverage companies collude to gather and sell beverage products and water bottle at a higher prices and filed a complaint to the Inox movies management but got no reply.
The opposite party contended that the security officer did not enter him with a water bottle due to safety purposes. People use to mix sodium and potassium in water to make explosives. That is the reason they did not allow anyone with outside foods. They also provide free purified water at the cinema hall in paper cups. Further, he contended that the purchase after knowing the price voluntarily purchased, There was no coercion or unfair trade practice imposed on him. The price was fixed taking into consideration its maintenance cost, ambience, capital investment, amenities provided in the mall.
Issues raised in the case:
Two major issues were dealt in this case:
- Whether Hindustan Coca-cola Beverages violated the Packaged Commodity Rules, 2011 which prohibits any seller from selling the same product at different rates through different channels?
- Whether Inox Leisure and Hindustan Coca-Cola Beverages were involved in anti-competitive agreements under Sections 3(4)(a), 3(4)(b) and 3(4)(c)?
Section-3(4) Competition Act,2002- Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade-in goods or provision of services, including-
(a) tie-in arrangement.
(b) exclusive supply agreement.
(c) exclusive distribution agreement.
(d) refusal to deal.
(e) resale price maintenance shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.
Explanation. —For this sub-section, –
(a) “tie-in arrangements” includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods.
(b) “exclusive supply agreement” includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person.
(c) “exclusive distribution agreement” includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods.
Arguments from Plaintiff side:
The Informant contended that Hindustan Coca-Cola Beverages used to sell his products in two different channels at two different prices which was specifically prohibited by the Packaged Commodity Rules, 2011. As a retail product in the general market, the prices charged were significantly less when compared to that charged in the premises of Inox Leisure. However, the packaging was only slightly different and was clearly intended to avoid any liability under the abovementioned rules.
Besides this, the Informant also contended that Inox Leisure and Hindustan Coca-Cola Beverages, operating in two different markets at two different levels, caused vertical restraints under Section 3(4) of the Act. Such agreement was extremely harmful to the consumers as the OPs were in a position to impose terms and conditions upon the customers.
Arguments from Defendant side:
the OPs contended that exclusive supply and distribution agreements are not anti-competitive. It must necessarily cause an Appreciable Adverse Effect on the Competition “AAEC” in the market, to incur liability. In the present case, there was no AAEC as the alleged agreement constituted only 0.3% of the market supply and thus, it could not hamper competition in the market.
Besides this, the contract drawn between Inox Leisure and Hindustan Coca-Cola Beverages was made on a short term basis which was to be renewed after every three years. The ‘exclusivity clause’ given in the first three-year contract was also removed for all the subsequent contracts. This clearly shows that Inox Leisure and Hindustan Coca-cola beverages continued to contract because of their commercial interest and requirement. The contract could also be terminated as and when a hardship might arise, after giving a 60 days’ notice.
tie-in arrangements was not created between inox leisure and Hindustan Coca-Cola beverages. Purchasing water bottles and beverages was not an essential function while availing the services of Inox . Water being a necessity, it was provided by Inox Leisure within its premises, free of cost.
Multiplex Association of India v. State of Jammu and Kashmir, on Aug 10, 2018, the Supreme Court stayed the order passed by Jammu and Kashmir High Court, which directed multiplexes not to restrain cinema viewers from carrying their food articles and water inside theatres.
In Rupasi Multiplex v. Mautusi Chaudri, the respondents were compelled to buy mineral water bottle priced more than its market price, by prohibiting them to take their water bottle inside the Multiplex. The NCDRC on Aug 8, 2015, observed that restriction to carry water bottle without providing free drinking water and making them buy highly-priced water bottle amounts to unfair trade practice and further slapped the multiplex to pay compensation of Rs 10,000 and cost of litigation of Rs 1,000 along with a direction to deposit Rs 5,000 as cost of an appeal.
In the case of Zaika Bazar v. Hemant Goel, the view taken is contradictory to the view in the above case. The complainant was charged Rs 34 for a mineral water bottle, the MRP of which is Rs 12, by the appellants. On Oct 9, 2006, the court dismissed the appeal and imposed Rs 50,000 as fine on the appellants. It further proclaimed that no commodity at any place can be sold at a price higher than its MRP.
Big Cinemas v. Manoj Kumar, the respondent was charged Rs 30 for a bottle of drinking water, the MRP of which is Rs 16. The NCDRC on Feb1, 2016, dismissed the revision petition filed by the multiplex, which challenged the orders of a District Forum and that of an SCDRC and affirmed the decision of the District Forum as well as SCDRC along with directing the multiplex to return excess money charged. It also slapped the multiplex with a fine of Rs 6,500 as compensation and also imposed further costs of Rs 5,00,000.
In Cine Prakashalu Viniyoga Darula Sangham v. Hindustan Coca-Cola Beverage Pvt. Ltd., the court recognized the principle that different sales of medium will have different and therefore report between prices of food.
Judgement by CCI:
After considering all the documents, agreements & other evidence, CCI decided the case in favour of Opposite parties. It relied on the cases of In Re M/s Cine Prekshakula Viniyoga Darula Singh v. Hindustan Coca-Cola Beverages Pvt. Ltd. and In Re: Consumers Guidance Society v. Hindustan Coca-Cola Pvt. Ltd. and Inox Leisure Pvt. Ltd. which had facts, similar to that of the current case.
It was noted that the purchase of beverages was not a prerequisite for watching movies at Inox, Coca-Cola’s market share was not significant enough to restrict competition and that Pepsi Co had also entered into similar agreements with a large number of multiplexes thereby ensuring intense competition between suppliers of non-alcoholic beverages, and finally that there were no exit barriers as the agreement could be terminated by either of the parties by giving a 60-day notice. the CCI observed that the agreement between the Defendant was made on a short term basis.
Moreover, there were other players who had a wider coverage of markets than that of Hindustan Coca-Cola beverages, under similar exclusive agreements. The current agreement in question constituted a negligible part of the actual relevant market of beverage sales in India. Thus, there was no potential threat to competition in the market as merely entering into exclusive agreements is not anti-competitive.
Conduct of multiplex malls in not allowing customers to carry their eatables and drinking water inside their theatres is not anti-competitive and there is no condition that consumers have to necessarily buy these goods to watch the movie. Thus, it cannot be said that there exists any tie-in arrangement because the provision of movie screening is independent of the provision of sale of beverages by Inox Leisure. Further, the Informant himself has submitted that people mostly visit Inox Leisure with purpose to watch cinema and not with the intention to buy these beverages.
Its not necessary to purchase the beverages to watch movies, the purpose to enter a multiplex is to watch movies and not to drink or eat. Its upon the owners of multiplex companies and beverage company, with whom they shall trade and not according to public choice, as it is necessary to check their budgets and than trade. For the purpose of safety of public the outside eatables must be restricted specially the liquid carrying bottles. But, the mineral water bottles should be sold at the market price and not higher than that as pure and health water is one of the necessary element. The quality of water from the coolers is not so good and many diseases and illness are been spread in the persons who has consumed them. Further, the contracts and bonding made between two companies is legal until it does not create an anti-competitive situation for other competators.
Keeping in view of the findings of previous judgements of the similar circumstances and facts of the case, CCI dismissed the complaint filed by Mr. Vijay Gopal and held that there was no Prima Facie case exist. With the issue concerning violation of competition, the CCI found that the OPs were not guilty of indulging into anti-competitive practices. Through this judgement, the CCI clearly laid down the distinction between anti-competitive according to the Act and what the public perceives to be anti-competitive. Big institutions or corporations must not be bullied for carrying out their business in a certain way. They have the choice, with whom they shall trade or carry their business, unless it raise the competition concern.