CCI dismissed allegations of resale price maintenance against Timex

On August 14, 2018, CCI dismissed information filed against the Timex Group India Limited (‘Timex’) filed by one of its non-exclusive online distributors, M/s Counfreedise (‘Informant’). The Informant is engaged in purchasing lifestyle products such as belts, wallets, sunglasses etc. and selling them on several e-commerce platforms such as Flipkart, Paytm Mall and Amazon (under the trade name ‘BUYMORE’).

The Informant alleged that Timex stopped doing business with it after it chose not to comply with Timex’s RPM ‘diktat’ – which was in contravention of Section 3(4)(e) of the Act. It was also alleged that by engaging with other online distributors that offered similar discounts, Timex discriminated against the Informant under Section 4 of the Act. It was also alleged that Timex had abused its dominant position by initiating sham litigation and allegedly failing to provide after-sale services to customers who purchased Timex wrist watches from the Informant in contravention of Sections 3 and 4 of the Act.

For the purpose of delineating the relevant market to examine allegations under Section 4 of the Act, CCI opined that consumers who were interested in durability, quality, established network for sales, after-sales and warranty services tended to prefer branded wrist watches over unbranded ones. CCI therefore believed this distinction separated the organized (where Timex was present) from the unorganized market for watches. On this basis, CCI defined the relevant market as the “market for manufacture and sale of wrist watches in the organized watch industry in India.” While CCI acknowledged that wrist watches may be further categorized into three segments based on price i.e., (a) mass-price segment for primarily unorganized manufacturers; (b) mid-segment (that included Titan, Citizen and Timex); and (c) premium segment which included international players like Rolex, Tagheuer, Rado etc.. However, CCI observed that as Timex (along with its competitors) existed in all three categories, competitive assessment would not undergo any material change, even if the market was not segregated under each of these segments.

On dominance, CCI observed that Titan admittedly held the largest market share at 60% and Timex could not thus be ‘dominant.’ Whilst CCI held that absent dominance, no case of abuse may be sustained against Timex, it nevertheless examined the allegations of abuse of dominance against Timex.

Against allegations of Timex having initiated sham litigation against the Informant by instituting (and obtaining an ex parte injunction in) a suit for trademark infringement, CCI observed that Timex had initiated similar suits against several others, including around the same time, and was able to seize thousands of counterfeit goods. As holders of intellectual property have the right to take reasonable actions to protect their right, such action cannot be said to violate the provisions of the Act.

In relation to allegations of RPM, CCI observed that an isolated email to the Informant by Timex asking to control discounts without any evidence of follow on adverse action (from the record CCI observed that Timex continued to supply to the Informant even after the said email) cannot qualify as an RPM. CCI also observed that for RPM to be effective, it has to be imposed on all online retailers. Admittedly, Timex supplied to other online platforms that offered greater discounts. CCI additionally noted that in order for RPM to be anti-competitive, it needed to result in an AAEC. To the extent that Timex did not have sufficient market, was just one of several watch manufacturers and did not enforce RPM across the distribution channel, it could not be said to have caused an AAEC. Accordingly, the allegation of RPM could not be sustained.

Placing reliance on Ashish Ahuja v.[1], CCI observed that market players have a right to deny after sale or warranty services to discourage counterfeit good- that cannot be termed anti competitive. CCI equally dismissed the charge that Timex’s refusal to deal with the Informant was an anti-competitive refusal to deal under Section 3(4) of the Act. CCI held that as (i) sales by Timex to the Informant was insignificant compared to Timex’s total sales and (ii) revenue derived by the Informant from selling Timex watches was not significant, any refusal to deal could not be said to result in an AAEC, particularly when, as in this case, there existed reasonable apprehension of brand dilution by the Informant.

[1] Case No. 55 of 2017

Published In:Inter Alia Special Edition Competition Law October 2018 [ English
Date: October 30, 2018