Background Facts:

M/s. Dadex Eternit Limited filed a complaint against M/s. Qasim Iron Works alleging that the Respondent was engaged in the practices of Deceptive Marketing within the meaning of Section 10 of the Act as it was disseminating false, untrue and misleading information regarding the Complainant’s products through social media wherein the Respondent claimed that the quality of Complainant’s product was inferior in comparisons with the Respondent’s similar products, in terms of their quality, efficacy and fitness without providing any evidence to substantiate these claims, hampering the business interests of the Complainant.

Order:

The Commission agreed that the overall net general impression generated by the videos in question regarding the Respondent’s product Dura Sheet was that its product was superior to that of the Complainant’s product Dadex. The Commission also agreed that the dissemination of the videos in question had amounted to distribution of false and misleading information to the consumers without reasonable basis, which could harm the business interest of the Complainant. The Commission thus took the view that the distribution and dissemination of the said videos on various online platforms constituted deceptive marketing as defined in Section 10 of the Competition Act.

However, the Commission also noted that the business of the Respondent was divided and a new entity was created, SQI, through a Deed of Separation and which acted as the distributor of the Respondent. The infringing video was published from the platform of SQI. The record also revealed that upon receiving the legal notice of the Complainant, the Respondent conducted an internal investigation and removed the infringing video from its website and social media (Facebook) page. Subsequently, a letter was issued by the Respondent to its distributors prohibiting them from any such activity in the future.

The Commission stated that although the Respondent was not directly involved in the production and dissemination of the deceptive videos, it failed to keep a check on the activities of its distributor. the Respondent had a duty to remain vigilant regarding the activities of the distributors of its products, which were essentially acting on its behalf as its representatives and agents. The Respondent was clearly negligent on this account and only acted once the Complainant had served the legal notice The Respondent failed to ensure proper training and establish procedures for its distributors in order to make them aware of what may constitute violation of competition laws and to ensure that its distributors do not transgress the law.

The Commission however, also stated that it is cognizant that the Respondent had promptly acted after receiving the Complainant's legal notice and had initiated an internal inquiry and ensured removal of the deceptive videos from the platforms of SQI. The Respondent had also issued a notice to its distributors for restraining such practices in the future. Furthermore, the Respondent also submitted certain commitments before the Commission, which it had obtained from SQI wherein the Respondent had asserted its supervisory role as the principal party.

Considering the conduct of the Respondent, the Commission took a lenient view and does not impose any penalty on the Respondent as per section 38 of the Act. However, the Commission gave certain directions to the Respondent in terms of Section 31(2) (c) (i) of the Act and directed the Respondent to submit a compliance report in this regard before the Commission within 7 days of publishing the same.