News: MRTPC slams Reebok India

(PTI 02/04/2006) New Delhi - The monopolies & restrictive trade practices commission (MRTPC) has slammed the Indian arm of US sports major Reebok for adopting restrictive trade practice against its retailers.

Reebok India, having a chain of showrooms through its retailers, was paying commission to them ranging between 5% and 23%.

However, some of its smaller retailers alleged that this became discriminatory as the company paid more commission to its bigger retailers, which put them at a disadvantage.

On their complaint, the commission forwarded the case to its investigative arm, DGIR (director general of investigation and registration), which in its PIR (preliminary investigation report) confirmed there were elements of ‘restrictive trade practices’.

“Such a restrictive trade practice by its inherent nature impairs competition and is prejudicial to the public interest,” the DGIR said in its report. It also pointed out that the commission varied according to the percentage of the maximum retail price. Hence, disproportionately lower rates of commission in the same location would tantamount to “distorting competition” as far as the consumers were concerned.

However, the sports major has denied adopting such practices and contended that such differential commission is not sales oriented. It also does not affect the consumers because its products are available at one price throughout the country.

The commission, however, rejected Reebok’s arguments saying that it will distort competition.

“The payment of different rates of commission within such a wide range for the retailers (5-23%) in the same city distorts competition thereby indulging in restrictive trade practice,” said the MRTPC bench.

It also directed Reebok to “cease and desist” from indulging in such practices with “immediate effect”.