Johnson & Johnson dealer asked to deposit sum on charges of profiteering

A complaint was made to the National Anti-Profiteering Authority about two products - J&J Baby Shampoo and J&J Baby Powder

The National Anti-Profiteering Authority (NAA) has ordered a dealer of Johnson & Johnson (J&J) to deposit Rs 501,646, along with an interest of 18 per cent, with the Consumer Welfare Fund after it raised the base price of two of its products to offset for the reduction in the goods and services tax (GST) from 28 per cent to 18 per cent. The GST Council had changed the rates with effect from November 15, 2017.

A complaint was made to the NAA about two products — J&J Baby Shampoo and J&J Baby Powder. However, the dealer submitted to the NAA that the billing was provided and fully controlled by J&J. Also, he couldn't make any modifications in the billing software, and sold the products on the MRPs uploaded in the software.

He supplied a copy of the 'distributor agreement' executed by him with J&J to the NAA. He submitted that according to the agreement, he was appointed as the retail distribution stockist (RDS) by J&J, and was bound by the terms of agreement under the software 'Wave'.

However, the NAA said there is no doubt the dealer had increased the base prices after the revision. He was required to not increase them to pass on the benefits of reduced tax rate to the customers, and hence indulged in profiteering.

Harpreet Singh, partner, KPMG, said, "What this order clearly establishes is that any inability to pass on the benefits of GST rate reduction by citing reasons such as ERP limitations, base price increase, contractual limitations, etc would not hold good, unless they're backed by substantial documentary evidence." 

NAA held the dealer has not produced any evidence to show he had made any correspondence with J&J to inform them he was bound to reduce the prices due to reduction in the tax rates, and J&J should either not increase the base prices, or compensate him for the benefit he was to pass on to his customers. 

Abhishek Jain, partner, EY, said the ruling makes it clear that the responsibility of compliance with anti-profiteering provision is on the seller of the products. "A retailer selling goods to the end customer cannot shift the accountability of his compliance to the original manufacturer of the goods," he said.