Lifetime guarantee- must be construed as guarantee for normal life of concerned product- it is desirable that upper limit must be stated in all advertisement and other means to attract consumers.

[CA DEV KUMAR KOTHARI]

General discussion:

Before discussing a recent judgment of the COMPETITION APPELLATE TRIBUNAL in the case of DG (I&R) v. Faber Heatkraft Industries Ltd reported at 2013 (12) TMI 51 - COMPETITION APPELLATE TRIBUNAL a general discussion about working life, normal life etc. of any durable product is made.

Life of any durable product is limited:

Life of any durable product is limited. The limitation may be in form of limited working hours, limited process cycles, limited days or limited years, limited out put etc. Generally these products have limited useful life, therefore, they are considered as depreciating assets, as per normal commercial and accounting norms as well as Accounting Standards (AS).

Examples of durable products having limited useful life:

Some products have limited useful as normal working life. In some cases there can be contingencies also even within such normal life (as in case of bulbs, tube lights, batteries, glassware etc). Some products have fairly long life, whereas some has very limited useful life.

Useful life should properly be in working hours:

Normal life should properly be described in normal working hours. For example a product may have life of say five years if it works single shift daily, in case the product is used in multiple shift, then naturally the working life, in terms of years will reduce. It is worth to mention that in accounting and taxation matters also working in single and multiple shifts is recognized so as to work out amount of depreciation based on life of durable product.

For example, a computer used by a CA daily for say about 10-12 hours daily will have longer life (in terms of years), then computer used in a BPO for 17-18 hours or say 24 hours daily.

Common sense approach:

A buyer of such product must also apply common sense approach in relation to guarantee or warrantee periods of product. Assuming that life time guarantee or warranty means that during his life the guarantee or warrantee shall be effective is against common sense for several reasons. Few reasons are as follows:

1. The life of an individual as a living purchaser of durable product is not only limited but is also uncertain. The life can come to an end any time naturally or due to other reasons like illness, accident, suicide, death sentence.. etc. Therefore, assuming life of any durable product to go along with the life of buyer of such product is against any logic.
2. Age at which an individual buy product will be different. Therefore, expected remaining life of the individual purchaser shall also be different. Suppose an individual (mother) purchased a chimney for her kitchen when she was say 45 years old. However, she purchases a chimney for kitchen for her daughter, at the time of her marriage when she is just say 25 years old. Expecting 65 years expected life in cases of both, we find that when mother purchased chimney her remaining life was just 20 years, whereas when another chimney is purchased for her daughter, the remaining expected life of her daughter ( who will use chimney) is 40 years. Assuming life time guaranty of chimney to run along the life of buyer or its user is thus not as per common sense reasoning.
3. The life of buyer cannot define life of product. Suppose a buyer of durable product unfortunately dies within short period after purchase. The guaranty or warranty cannot come to an end. The family members will use the product after death of buyer, and they will be eligible to claim benefits of guarantee and warranty.
4. In case of companies, the life is perpetual (subject to liquidation) therefore, it cannot be said that a durable product purchased by a company with a life time guarantee will also have unlimited life.

Lifetime guarantee or warranty of a product:

Lifetime guarantee or warranty of any durable product should therefore, be defined according to expected life of the product. The life span must be clearly stated in the advertisements also and not only in brochures. The advertisements attract customers based on guarantees and warranties, therefore, the fact that the guarantee or warrantee is valid during normal / expected working life of product must be mentioned in any advertisement and such life must be stated, and not in brochures only which are provided after purchase.

Advertisements- at least a declaration about truth is desired:

If we want that advertisements should be reliable and trust worthy, it is desirable that any advertisement should be true and correct. However, in case of advertisements there is not even a provision of declaration about truth of the content of the advertisement. There must be provision that any advertiser who put an advertisement of his products, services or even properties to let out or sell out, must give at least a declaration to the advertisement media company or organization (news paper, magazine, electronic media- websites, TV, radio etc.) that he is authorized to give such advertisement and that the contents of the advertisement are true to the best of his information and knowledge. There must be some penal provision to treat a wrong advertisement or any content in advertisement as an offence and there must be fine and prosecution provisions for the same.

Case of Faber Heatkraft Industries Ltd (supra.):

Faber Heatkraft Industries Ltd is manufacturer of chimneys for kitchen( an equipment having machines and system for sucking, filteration collection of dust from smoke and fumes and evacuation of smoke, gases and dust, ash etc.) Faber craft advertised it chimneys with head lines like 'Lifetime Faber Warranty'. In the advertisements any limit was not shown. However in users manual or brochures it was mentioned that life time means 12 years.

Therefore, complaint was made that the advertisement was misleading.

The facts of the case are discussed below:

Complainant is   an advocate who made complaint to the MRTP Commission complaining or suggesting that the Faber Craft Industries Ltd was engaging in unfair trade practice, under section 36A of MRRTP Act. (it is not clear whether the complainant was also a consumer of Chimney or not)

The complaint was in respect of advertisement of Faber craft kitchen chimneys.

The allegation was that in advertisement/pamphlets/brochures widely circulated in the public in all parts of the country, the respondent company had made some false claims by mentioning 'Lifetime Warranty Chimneys' and the seal bearing the words 'Lifetime Faber Warranty'. That there was a misleading impression given by the advertiser- Faber Craft Ind. for alluring the public to buy the respondent's products even beyond their requirement with the object that if the impugned chimneys were purchased from them, the said chimneys would be giving the performance for the whole life of the public till alive and life time of the buyers and the public, i.e. up to 100 years or beyond 100 years.

It was asserted that all this amounted to misrepresentation or deceptive and false representation, which created confusion in the minds of the buyers in general including the public that they may not purchase further the respondent's competitors goods, which may be better in quality.

In the preliminary investigation report, the DG concluded that the respondent had engaged in unfair trade practice, more particularly, described under section 36A.

During the investigation, the respondent produced a brochure where it described the lifetime warranty to be for 12 years. It was reiterated by the respondent that there was no advertisement issued and that the pamphlets and the brochures, which can be described as owners manual, could be seen and obtained from the shops, where there is a clear cut idea given about the said terminology 'Lifetime Warranty'.

The heading 'Lifetime Warranty', it was specifically reiterated that the life of chimney was for 12 years from the date of purchase.

The Director General very strongly suggested that this was a typical case of misrepresentation in as much as in the pamphlets only the words 'Lifetime Warranty' appear without indicating as to what is meant by lifetime warranty and without mentioning anything about the life span of the product.

The Director General suggested that the manual was available only after purchase and not otherwise and, therefore, the customer was misled into purchasing the product on the basis of the pamphlets, which declared that the product had attached to it a lifetime warranty.

Decision of the Competition Appellate Tribunal(CAT):

Analysis of observations and order:

The observations of CAT are analyzed herein below:

1. The matter is a typical example of much ado about nothing.
2. A complaint an advocate made complaint to the MRTP Commission suggesting that the respondent, M/s. Faber Heatkraft Industries Ltd., was engaging in unfair trade practice, more particularly, u/s 36A(i), (ii), (iv), (vi), (vii) and (ix) of the MRTP Act.
3. the complaint was in respect of a product or chimney which is manufactured and sold for the household use, known as kitchen chimneys. (author adds: complaint was in respect of advertisement and not the product itself)
4. advertisement/pamphlets/brochures widely given to the public in all parts of the country, the respondent company has made some false claims.
5.  the word 'booklets' is also mentioned in complaint.
6. The main complaint appears to be on the terminology of "Lifetime Warranty Chimneys" and the seal bearing the words "Lifetime Faber Warranty".
7. a misleading impression is given by the respondent for alluring the public to buy the respondent's products even beyond their requirement with the object that if the impugned chimneys are purchased from them, the said chimneys would be giving the performance for the whole life of the public till alive and life time of the buyers and the public, i.e. up to 100 years or beyond 100 years. ( pera author: there appears to be some vague and unverified statements in the complaint, because author do not remember any advertisement in which such statement is given).
8. It is asserted that the respondent company had deliberately left and remained silent to indicate the qualities/performance of its various brands of the chimneys available by way of concealing the test report of the competent authority, i.e. BIS, along with its prices and any guidelines.
9.  it is asserted that all this amounts to misrepresentation or deceptive and false representation, which creates confusion in the minds of the buyers in general including the pubic that they may not purchase further the respondent's competitors' goods, which may be better in quality.

10. the complainant has referred to a legal notice dated 24.2.2009. The complainant, therefore, had moved this Commission by the complaint dated 3.4.2009. The Commission issued a notice on 24.4.2009 which, in our considered opinion, was wholly unnecessary as the complaint deserves to be rejected on the face of it.

11. It is clear that it did not cover any of the ingredients of the unfair trade practice, much less clarified u/s 36A of the Act. Be that as it may, in pursuance of the direction of the DG, to enquire into the matter, it seems that the DG had gone ahead with the investigation and came up with a preliminary investigation report in which the DG has concluded that the respondent had engaged in unfair trade practice, more particularly, described u/s 36A(i), (ii), (vi) and (viii) of the MRTP Act. During this investigation, the respondent produced a brochure where it described the lifetime warranty to be for 12 years.

12. As per respondent there was no advertisement issued and that these pamphlets and the brochures, which can be described as owners' manual, could be seen and obtained from the shops, where there is a clear cut idea given about the said terminology "Lifetime Warranty".

13. under the heading 'Lifetime Warranty", it is specifically reiterated that the warranty of this chimney is for lifetime. The life of chimney is for 12 years from the date of purchase.

14. The learned counsel appearing for the Director General very strongly suggests that this was a typical case of misrepresentation in as much as in the pamphlets only the words "Lifetime Warranty" appear without indicating as to what is meant by lifetime warranty and without mentioning anything about the life span of the product.

15. The learned counsel goes on to suggest that this amounts to an active omission on the part of the respondent and thereby the respondent has falsely misrepresented and has made misleading statements in the advertisements.

16. The learned counsel appearing on behalf of the respondent, however, suggests that this does not amount to an advertisement at all.

17. It was not actually advertised in any newspaper or any media and that the pamphlets were available only if a customer visits a particular shop for the purpose of purchasing the chimneys.

18. the manual of the owner was also available and could have been seen by any customer on demand so as to know what was the correct meaning of the term "Lifetime Warranty".

19. The learned counsel for the DG suggests that this manual is available only after purchase and not otherwise and, therefore, the customer is misled into purchasing the product on the basis of the pamphlets, which declares that the product has attached to it a lifetime warranty.

20. the DG did not choose to lead any oral evidence either of the complainant or of any customer to suggest that the manual was not made available before the purchase to anybody.

21. On consideration of all the materials, CAT held that “we are of the clear opinion that this is no case at all for interference or any action on the basis of the complaint or even as the case may be the Preliminary Investigation Report.

 

22. We must consider the provisions relied upon by the DG. They are:- Section 36A(i) which is about the false representation that the goods are of a particular standard. We do not think that any falsehood is proved in any manner during the enquiry. Sub-section (ii) also relates to false representation that the services are of a particular standard, quality or grade. That also does not stand proved because the allegation of falsity has not been reiterated at all nor is it proved.

23. Sub-section (vi) is also about making of false or misleading representation for the need or for the usefulness of the goods or services. This paragraph clearly does not apply. Lastly, Sub-section (viii) is about the warranty or guarantee of a product or of any goods or services or if such purported guarantee or warranty is materially misleading or if there is no reasonable prospect that such guarantee, warranty or promise will be carried out.

24. No material has so far been brought to be on record by way of evidence that the company had no intention of honouring any warranty, guarantee or the promise.

25. Question is about the warranty to be misleading on account of its silence.

26. We do not think that any purchaser, who goes to the shop to purchase the domestic chimneys, will not enquire about the life of the chimney. That life is clearly indicated in owners manual.

27. We refuse to believe the claim that the owners' manual would be kept a secret till such time the sale is complete. If such a practice is adopted, that may amount to a separate unfair trade practice but that is also not a complaint that any customer has gone to a shop, demanded to see a manual and was refused by any shopkeeper or by the respondent company in any manner.

28. In short, this was certainly not a complaint which could have been referred to the Director General.

29. the DG has wasted its energy in investigating such frivolous matters and thereby spending public money.

30. Such complaints obviously should have been thrown out at the initial stage. Even on the question of investigation, the DG has remained very causal in not leading any evidence relating to any information or relevant facts. We do not see any merit in the complaint not in the investigation. The matter is dismissed.

1.  Notice of Enquiry was discharged by the CAT.

Observations of author:

This appears to be a case of indulging into litigation without a cause but to harass a manufacturer of durable appliance- domestic chimney . This was not a public interest litigation, to save public from frauds, cheating or malpractice etc. Therefore, how a complainant , without being a consumer and without being an affected party in any manner lodged complaint itself is serious indicator of ill motives of the complainant to harass the manufacturer may be for some ulterior motive like to get money in some or other manner.

However, it appears that honorable CAT has given its decision more on technical grounds and reasons and had not tried to make advertisements, publicity, or representations through various means in any manner more reliable and authenticate. At least CAT could have given an advice or some sort of warning to the manufacturer that in case of such advertisement , catalogue, pamphlet, etc. the words to indicate life of product should be added suitably. For example, the following expressions can be used:

             Warranty during normal life of chimney (12 years) or    Life warranty during normal life of Chimney – 12 years or  The warranty is during normal life of Chimeny (12 years).

MRTP : Where company manufacturing kitchen chimneys had specified in its owners manual that lifetime warranty meant life of 12 years, complaint against company for giving misleading impression was to be dismissed

DG (I&R) v. Faber Heatkraft Industries Ltd reported at 2013 (12) TMI 51 - COMPETITION APPELLATE TRIBUNAL