No More Scratching For Gifts

In todays increa-singly competitive market, where manufacturers of consumer products indulge in various schemes and contests to lure consumers, the Monopolies and Restrictive Trade Practices Commission (MRTPC) delivered a significant judgement on February 20, 1997. This judgement restrained Whirlpool India Ltd from advertising and continuing their Scratch a gift scheme which was meant for the benefit of the Whirlpool refrigerator and/or washing machine consumers.

This injunction granted by the MRTPC assumes considerable importance both for the consumers and the manufacturers who indulge in such schemes.

From January 28, 1997 onwards, Whirlpool floated an aggressive sales promotion scheme, Scratch a gift, scheduled to last till March 15, 1997. This scheme offered more than two lakh prizes to consumers purchasing Whirlpool refrigerators and/or washing machines. According to the scheme, gift cards with a strip of blank paper affixed at a particular place were put in a container. One card was drawn by the purchaser for each purchase made. The consumer had to remove this strip by scratching it to know the gift won by him. The gifts ranged from an apartment in Delhi to golden brace-lets, from an Ajanta wall clock to a kilo of Ariel washing powder.

 

Godrej-GE Appliances Ltd, rivals of Whirlpool, challenged this scheme as being an unfair and/or restrictive trade practice.

The MRTPC in a well-reasoned judgement restrained Whirlpool from advertising and implementing the said scheme. It also dwelled on how such schemes would constitute an unfair trade practice under Section 36A(3) of the Monopolies and Restrictive Trade Practices Act (MRTP Act), 1969.

Section 36A(3) of the MRTP Act provides that, the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest, constitutes an unfair trade practice.

Whirlpool in its defence before the MRTPC stated that a lottery involved loss of money for a consumer if he did not win a prize but in their scheme every one ended up with some prize or the other. Moreover, the gifts did not form a part of the cost structure of eith-er the refrigerator or the washing machine. Ins-tead, they were being offered to consumers without an increase in the price of these products.

However, the MRTPC observed that when a consumer goes to the market to purchase a good quality home appliance costing anything between Rs 7,000 to Rs 33,000, his choice can be affected on account of other considerations. Say, there are three brands of refrigerators in the market with prices almost at pa.r. A consumer might be inclined to choose a somewhat inferior quality of a refrigerator if he is offered a fantastic item like an apartment in Delhi as a gift (though he may get it only by sheer chance). And humans are known to have the gambling instinct that may override quality.

So, MRTPC maintained that the consumers decision was bound to be swayed by the gifts attached to the purchase of articles manufactured by Whirlpool. The company claimed in its plea that its annual turnover of refrigerators and washing mach-ines was to the tune of Rs 600 crore and the turnover targetted from the aforesaid scheme was to the tune of Rs 200 crore. The MRTPC held that Whirlpool wanted to achieve its one-third annual turnover in just 45 days by alluring gullible purchasers to try their luck in its Scratch a gift scheme. The MRTPC said that it was necessary in a consumers interest to have a free choice in their purchases, uninfluenced by any kind of allurement, inducement or temptation.

Does the above order mean that a manufacturer cannot offer free gifts/prizes or hold any contests?

The mere offering of free gifts/ prizes per se does not constitute an unfair trade practice. But, such offers should not have an element of chance, luck or even skill in it. Further, such contests should not directly or indirectly promote the sale of a product and the price of the free gift should not be partly or fully covered by the amount charged in the transaction.

There are many schemes violative of section 36A of the MRTP Act in the market today. A consumer or a registered consumer organisation can bring such instances to the notice of the Director-General of the MRTPC (Investigation and Registration), MRTP Commission, Bikaner House, New Delhi.

Free gifts or prize offers should not have an element of chance, luck or even skill in it