No Investigation

LETTERS TO THE EDITOR

The report MRTPC panel to decide on HLL-Tomco merger review (February 19), gives the impression that a new investigation has begun. This is not the case. The amalgamation of Tomco with Hindustan Lever Limited, with effect from April 1, 1993, was announced on March 19, 1993. The amalgamation was accomplished at the close of business on December 28, 1994.

Essentially, the employees uni-ons had appealed in 1994 to the MRTPC, alleging that the amalgamation violated the provisions of the MRTP Act in that it would lead to a monopoly and would therefore be against consumer and public interest. But the MRTPC and both the Bombay HC and the SC successively said that the amalgamation did not violate any law. They underscored that the Act had been amended and such amalgamations had been taken out of its ambit.

In the Tomco-HLL merger case, the commission declined on September 19, 1994, to grant an interim injunction, saying that it would come into the picture only if the merged corporation adopted any monopolistic or restrictive trade practice. The unions subsequently filed an appeal to the SC, which also was dismissed.

The unions' 1994 plea pending before the commission will clearly need to be dismissed, bearing in mind the unequivocal pronouncement of the SC that size per se is not against public or consumer interest. The regulatory authorities in general and the MRTPC in particular can monitor the conduct of post-merger HLL to see if its actions can be termed to be against public interest. If they come across any such instance, a new notice of inquiry will have to be issued and the matter will have to be fully investigated. This has not happened.

On whether the merger would lead to any monopoly, the SC in its October 24, 1994, order said: "An argument was also made that as a result of the amalgamation a large share of the market will be captured by HLL. But there is nothing unlawful or illegal about this ... A company may, on its own, grow up to capture a large share of the market."

It emphasised that the merger was not against public interest. The court further said that if the amalgamation was not sanctioned, the consequences for Tomco may be serious, with shareholders, employees and creditors all eventually suffering. The imperatives before HLL, therefore, were to turn around the Tomco business, simultaneously protecting consumer interests. The company has met both objectives.

In its October 24, 1994 order, the SC did say: As a result of the amalgamation, if it is found that the working of the company is being conduc-ted in a way which brings it within the mischief of the MRTP Act, it would be open to the authority und-er the MRTP Act to go into it and decide the controversy as it thinks fit." If the MRTPC were to today start a fresh investigation, it would find a turnaround in the Tomco brands, increasing competition and choice in the market and offering better value to customers.

The report had confined itself to the MRTPCs decision to meet collectively to decide if the merger required their mediation post-facto. That HLL feels MRTPC will decide in the negative, is its assumption.