The Competition Commission of India (“CCI”), vide its order dated 6th July, 2023 has opined that defrauding a consumer by supplying of spurious products is a consumer issue and does not raise any competition law concern and is not within the ambit of the Competition Act, 2002 as amended (“Act”).
An individual informant (“Informant”) had placed prepaid orders for two Geographical Indication (“GI”) tagged silk sarees, one being a Kanjeevaram silk saree and the other being a Paithani silk saree, on the website of M/s Karagiri Studio (“Karagiri” / “OP”), an e-commerce enterprise dealing in ethnic wears including silk sarees like Kanjeevaram/ Kancheepuram and Paithani bearing GI tag. However, the Informant alleged that he had received polyster and silk blended sarees instead of pure silk sarees. As per the test report of the Northern India Textile Research Association (linked to the Ministry of Textile, Government of India) submitted by the Informant, the sample of Kanjeevaram saree had a blend composition of polyester (72.87%) and silk (27.13%) and the sample of Paithani saree had a blend composition polyester (78.43%) and silk (21.57%).
The Informant thus filed the information with the CCI against the OP alleging that the OP had defrauded him by supplying spurious material blend composition of polyester and silk in place of pure silk. The Informant further alleged predatory pricing of goods being charged by the OP and alleged abuse of dominant position (Section 4 of the Act). Further, the Informant while referring to Section 3(5) of the Act, submitted that Section 40 of the Geographical Indication of Goods (Registration and Protection) Act, 1999 (‘GI Act’) envisages penalty for selling goods to which false GI is applied. The Informant prayed that the CCI to pass an order of inquiry into the working of the OP to ascertain whether it indulges in any unfair trade practice and impose a penalty on the OP for infringing the provisions of the Act and the GI Act. The Informant also prayed for seizure of spurious goods made by the OP and sought a compensation of INR 67,000/- towards the price of the sarees, lab test expenses and fee paid to the CCI for filing the information.
The CCI observed that the Informnat was primarily aggrieved by the conduct of the OP in supplying purportedly spurious sarees in response to his prepaid orders, which has been alleged as an unfair trade practice and abuse of dominant position as envisaged under the provisions of Section 4 of the Act. However, the CCI noted that apart from raising bare allegations of unfair trade practice and abuse of dominant position, the Informant had neither suggested any relevant market nor indicated any specific conduct of the OP that would fall under the contours of Section 4 of the Act. The Informant also did not substantiate the allegations of predatory pricing by the OP.
Based on the facts and the circumstances of the matter, the CCI observed that the matter primarily being a dispute between a consumer (being the Informant) and a seller/ supplier (being the OP) had been raised as a competition issue and was of the prima facie view that the supply of spurious products and defrauding a consumer is a consumer issue and that the matter did not raise any competition law concern and, therefore does not fall within the ambit of the Act. The CCI also observed that the reference to Section 3(5)(d) of the Act and provisions of GI Act was misplaced and the same does not warrant interference by the CCI. Accordingly, the matter was closed by the CCI in accordance with the provision of the Act.
By: Competition Team at Chitale & Chitale Partners
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