The Hindu Business Line : MRTPC pulls up Reebok for differential commission

Sporting goods major Reebok India has been pulled up by the Monopolises & Restrictive Trade Practices Commission (MRTPC) for indulging in restrictive trade practice.

The company has been under observance for payment of differential commission rates to its retailers. The Director General of Investigation and Registration (DGIR) undertook a search which revealed that Reebok's commission rates paid to its retailers varies from 5 to 23 per cent of MRP, which the Commission has deemed as indulging in `restrictive trade practices'. The DGIR said: "Such a restrictive trade practice by its (Reebok) inherent nature impairs competition and is prejudicial to the public interest."

The company on its part has stated that the different rates of the commission, which are fixed at the time of entering into the franchise agreements do not have any nexus with the higher net-sales and that consumers are not affected in any case as Reebok products are available at the same price throughout the country.

The Commission, outlining the concerned issues at hand said, "Based on the pleadings, the following issues were framed: Whether Reebok is or has been indulging in restrictive trade practices and whether the alleged restrictive trade practices are not prejudicial to public interest?"

The findings of MRTPC revealed that the rates of commission varied as percentage of the MRP and therefore, disproportionately lower rates of commission in the same location would "tantamount" to distorting competition as far as the consumers are concerned. Hence, the Commission concluded that: "the payment of different rates of commission within such a wide range for the retailers (i.e, 5 to 20 per cent) in the same city distorts competition thereby indulging in restrictive trade practice". MRTPC has in effect directed Reebok to "cease and desist" from indulging in such practices with "immediate effect".

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