Business: Holding the Ring

The Supreme Court gives Colgate its 'suraksha chakra' back but the MNC may need a stronger shield to win the MRTPC case against its arch rival Hindustan Lever.

Anybody who's grown up listening to the radio jingles of the '70s will recall the catchy Colgate toothpaste tune -- -- the one that promised to kill germs, stop bad breath and fight tooth decay.

These claims, metaphorised with the "suraksha chakra" or ring of protection around the family's health, drove the multinational Colgate-Palmolive's (sales: $9 billion or Rs 38,700 crore) market share to a dizzy 60-65 per cent. Until last year, when the US oral care giant's dominance in the Indian market came under attack from Hindustan Lever Limited (HLL), the Anglo-Dutch conglomerate with its Close Up and Pepsodent range of toothpastes. The Monopolies and Restrictive Trade Practices Commission (MRTPC), acting on a complaint from HLL, granted an interim injunction last year on the use of the customer-grabbing "suraksha chakra" theme in Colgate hoardings, TV commercials and print advertisements. Recently, Colgate regained, even if temporarily, its famous smile in India. It is because a two-judge bench of the Supreme Court has given it a breather by setting aside the injunction on the use of "suraksha chakra". The vacation of the injunction couldn't have been more timely for Colgate-Palmolive because, with its clinching advertising theme frozen under the MRTPC order, its monopoly status in the Indian marketplace, particularly the profitable urban market, came under attack. On the other hand, HLL's own toothpaste brands began biting off increasing shares of the market.

WHY THE GIANTS ARE FOAMING AT THE MOUTH

ť On October 15, 1997, Colgate files a complaint with the MRTPC against HLL, leading to an injunction directing HLL not to claim its toothpaste to be "102% superior" to the competition.

ť On October 22, 1997, HLL files a complaint against Colgate, for making misleading claims regarding its toothpaste.

ť On April 30, 1998, the MRTPC bench issues interim injunction on Colgate's "ring of safety" ad.

ť This month, after the injunction is vacated by the Supreme Court, the disputes go before a technical committee set up earlier by the MRTPC. After three years both sides are still waiting for the final word.

That, however, is a short break in India's most visible anti-trust war. With Colgate's appeal against the injunction upheld, the disputants go back to the MRTPC where they have locked horns with a series of claims of misrepresentation against each other. HLL disputes that Colgate is a germ fighter and charges that it cannot fight tooth decay. But Colgate-Palmolive counters that New Pepsodent's claim of being "102 per cent superior" to competition is misleading. The wranglings have gone on for two years with no solution in sight.

Though the Monopolies and Restrictive Trade Practices (MRTP) Act came into being in 1969, its use began picking up after the economic liberalisation in 1991. However, the commission is increasingly showing its inadequacy as an anti-trust authority. It is notorious for its tardiness -- over a hundred major cases are still unheard before it. Worse, its "injunctions", issued pending full hearings, are often being questioned by the Supreme Court for being too rash, if not flippant. Some time ago, the MRTPC gave a stay on some demolition order given by the Municipal Corporation of Delhi (MCD) on the ground that the MCD was misusing its "monopoly". The order was laughed out by the Supreme Court.

However, the Colgate-Palmolive vs HLL matter became a buzz in the corporate corridors for the sharpness with which the Supreme Court slammed the MRTPC. The court is "dismayed" by the fact that the panel gave an injunction "without any material on record". The judges wondered why no explanation was available for "more than 13 years" as to the reasonableness of Colgate's claim of its dental cream's "suraksha chakra" after the advertisement had began to appear in 1985. Under the MRTP Act, the commission is empowered to initiate action against unfair trade practices, a privilege which even the Federal Trade Commission (FTC), the all-powerful anti-trust authority in the US, does not enjoy. Yet it didn't wake up to the issue until HLL approached it in 1997 with the complaint that Colgate was making false and misleading claims.

MRTPC officials say they don't have the in-house expertise to ascertain misrepresentation. To play it safe, the commission has set up a technical committee consisting of three members -- one each from the rival camps and an American expert on bacterial pathogenesis, Michael Cole. The committee's report is still not final. Yet the MRTPC granted an injunction. Says Ashok Desai, senior counsel for Colgate-Palmolive: "The British practice is that an injunction is coupled with an undertaking that, if it is not confirmed, the injunction-seeker will compensate for the damages. Who'll pay for my client's business losses caused by an order that does not hold in the apex court?"

The commission was evidently swayed by HLL's strong presentation. The FMCG major had argued that Colgate-Palmolive was marketing in India with the "suraksha chakra" the same product on which the FTC had in 1959 banned the "shield of protection" advertisement. Says Irfan Khan, HLL general manager, corporate communications: "It is only in India that Colgate-Palmolive claims fighting tooth decay through a toothpaste that does not contain fluoride. In the 130 other countries where Colgate-Palmolive markets toothpaste, such claims are made only for fluoridated products."

The Supreme Court judgement vacating the injunction on "suraksha chakra" has wider ramifications. The apex court has in this case set some of the ground rules for the MRTPC, which are important when India is abuzz with brand wars and no-holds barred competition. The court has asked MRTPC not to lose its cool on overstatement: "Latitude is allowed in the event of there being an advertisement to gain a purchaser or two." Under the MRTP Act, "puffing" in advertisement is allowable but "misrepresentation" is not. In the famous case of 100% Ice Cream, the rather fanciful claim of its being made entirely of cream, with no incorporation of air, was accepted by the commission as allowable bluster. But it's not easy to draw the line. The court, while cautioning against being too rigid, has quoted Anson's Law of Contract, a law textbook, to say that it's not illegal, after all, to claim that a certain brand of aftershave lotion is "irresistibly attractive to the opposite sex".

The Supreme Court's judgement also underlines the importance of speedy disposal of court cases in fair-trade issues. To order an injunction and then let the proceedings drag is a typical Indian judicial reflex. It shows scant regard for the huge commercial stakes involved in the operations of large corporations which, however monopolistic or unfair, should not be stalled through injunctions. Says Harish Salve, senior counsel for HLL: "It takes three-four years to dispose of anti-monopoly cases when these should be finished in two-three months." Take a cue from the Americans. In the four-year-long antitrust battle between the US Government and Bill Gates' Microsoft, now coming to a close, there has not been a single injunction.