2013 (5) TMI 8 - Commission - Companies Law

Unfair trade practice - Application is filed u/s 19(1)(a) of the Competition Act, 2002 Franchisee agreement territorial exclusivity to the informant for a period of 3 years. - As per information a dispute arose between the informant and the OP when the informant came to know that the OP had initiated process of setting up its own Company-Run and Company-Operated (COCO) Saloon in breach of the territorial exclusivity given under the agreement. The informant initiated arbitration proceedings against the OP. During pendency of the arbitration proceedings the OP terminated the franchisee agreement. The informant has alleged that the action of OP to set up COCO Saloon in contravention to the terms of the agreement was an unfair trade practice and an abuse of its dominant position under the Franchisee Agreement. Thus, as per the informant the acts and conduct of the OP were in contravention of the provisions of sections 3 and 4 of the Act. Held that It is necessary to consider as to what will be the relevant market in this case and in this case would be the market of beauty and wellness services exclusive for women through saloon in the territory of Gurgaon as well as Delhi. The next issue to be considered is about dominance of OP in the relevant market. There are very few corporations in this market and these corporations cater to the need of only small category of customers and their presence is only by way of few saloons. One can find beauty saloons/parlours almost in every street/mohalla of Delhi. Some examples of such saloons and parlours running in Delhi and Gurgoan are Trends Beauty Point, Cure & Curve, Radiance, Shreyas Shanhnaz Husian Signature Salon etc. Many of these beauty saloons are one person show and many have employed several women beauticians to cater to the needs of their clients. Thus the question of abuse of dominance by Lakme would not arise. In view of the above discussion, there does not exist a prima facie case for investigation by the Commission. It is a fit case for closure under section 26(2) and is hereby closed.

Summary

Issues:
Alleged contravention of sections 3 and 4 of the Competition Act, 2002 by the Opposite Party (OP) against the informant regarding territorial exclusivity in a franchise agreement.

Analysis:
1. The informant, engaged in the beauty salon business, filed a complaint against the OP for violating sections 3 and 4 of the Act by breaching territorial exclusivity in their franchise agreement.

2. The OP, a beauty and wellness service provider, allegedly breached the agreement by initiating the setup of its own saloon in the territory assigned to the informant, leading to a dispute and termination of the franchise agreement.

3. The informant argued that the OP's actions constituted unfair trade practices and an abuse of dominance, preventing the informant from asserting contractual rights, thereby contravening the Act's provisions.

4. The Commission analyzed the relevant market for beauty and wellness services exclusively for women, determining the geographic market to be Gurgaon and Delhi, considering factors such as consumer preferences and market homogeneity.

5. Regarding the OP's dominance in the market, the Commission found the beauty services market to be highly fragmented and unorganized, with numerous players catering to different customer segments, concluding that the OP did not hold a dominant position in either Delhi or Gurgaon.

6. Consequently, the Commission ruled that there was no prima facie case for investigation, leading to the closure of the case under section 26(2) of the Act, directing the Secretary to inform the parties accordingly.