AMAZON SELLER SERVICES PVT. LTD. VS. AMWAY INDIA ENTERPRISES
FAO (OS) 133/2019. DECIDED ON 31.01.2020
Six appeals were filed against the impugned common judgement dated 08.07.2019 passed by the Ld. Single Judge of Hon’ble Delhi High Court. By the said judgement the Ld. Single Judge had passed an injunction against Amazon and similarly situated Companies from selling the goods of Amway and other similarly situated companies who claimed to be Direct Selling Entities in terms of the Model Framework for Guidelines on Direct Selling dated 26.10.2016, on the Appellant’s e-commerce platforms.
Since the issues raised in each of the six appeals were identical they were disposed off by common order.
ISSUES:
The central issue highlighted in Amway’s Suit CS (OS) 480/2018 filed before Court was that sale of Amway’s products through channels of e-commerce/ online portals or mobile apps in the absence of written contract with Amway, is unauthorised both in terms of its “Code of Ethics” as well as clause 7 (6) of the DSGs. Amway claimed that it has not provided any written consent to any of its Direct Sellers to undertake or solicit sale, or offer its products through third party e-commerce websites/ mobile apps. Amway is unable to guarantee the authencity and quality of such products which are purchased from unauthorised sources and its product refund policy does not apply to such unauthorised purchases. Amway further alleged that unauthorised sellers registered on the e-commerce platforms/ shops were removing the unique code imprinted on Amway products to avoid the distributor channel from being identified or tracked.
HELD:
Preliminary observations:
- First, from the plaints and suits filed it was clear that none of them was filed as a commercial suit, since none of them was framed as a suit either for passing off or infringement in terms of the TM Act.
- Second factor noted by Court was that in none of the suits was there any prayer for a declaration that the DSGs are law that bind the Defendants and that, as such, they are enforceable.
- Third, there was again no prayer for a declaration that Amazon and Snapdeal were not ‘intermediaries’ within the meaning of Section 79 of the IT Act. The Court held that these factors attain significance in light of the fact that the Ld. Single Judge has returned specific finding, which clearly run contrary to the structure and frame of the suits themselves.
- The Court also took note of the fact that the 225 page judgement returns extensive findings, that such findings may be prima facie or tentative findings, limited for the purposed of granting interim relief. The issues framed in the impugned judgement travel far beyond the pleadings in the suits and in fact at a stage when the issues in the suit are yet to be framed.
Issue No.1 Are Direct Selling Guidelines law?
HELD: A perusal of the DSG notification dated 26.10.2016 issued by the Department of Consumer Affairs reveals that an Inter-Ministeral Committee was constituted by the Government of India constituting five ministries and departments and representatives from Government of Delhi, State of Andhra Pradesh and Kerala to look into “the matters concerning the direct selling industries.” The Court further went on to hold that the title of the enclosed document explains its nature: “Advisory to State Governments/ Union Territories: Model Framework for Guidelines on Direct Selling.” Consequentl it was held that the DSGs were not meant to be treated as law themselves, much less binding law. It was only a model framework and “advisory” in nature and it was for the State Governments to adopt it into law. In view of this Clause 7 (6) directly in issue before the Court (Clause 7 (6) states that “any person who sells or offers for sale, including e-commerce platform, any product or service of a Direct Selling Entity must have prior written consent from the respective Direct Selling Entity),”of the model guidelines was held to be purely advisory. The Court went on to hold that merely because DSGs are notified in the Gazette, they do not attain the status of “law” within the meaning of Article 13 of the Constitution. The source of power to frame such guidelines is traceable only to the Consumer Protection Act (CPA). With the CPA, 2019 itself not having been notified, the draft guidelines under it could not have attained the character of binding rules under the CPA, 2019 or for that matter, even under the CPA, 1986.
Issue NO.2: Trademark Issues:
HELD: The second issue before the Court was, that do the sale of Amway, Oriflame and Modicare products on e-commerce platforms amounted to infringement of trademark, passing off and misrepresentation etc.?
The Court was of the opinion that in the Suit filed by the Plaintiffs there was no dispute regarding ownership of trademark. In none of the Plaints the Plaintiffs had asserted or pleaded anything with respect to ownership of trademarks. The Ld. Single judge could not have decided on an issue not specifically pleaded before him. The Court observed that under Sec. 19 of the Sale of Goods Act, upon a sale for a specific property, the property and the goods are transferred to the buyer. The “Code of Ethics” framed by Amway itself states that once the sale takes place, the title in the product is transferred to the buyer i.e. the ABOs, on its first sale. Once the title passes to the buyer no condition could be further imposed upon the buyer. Clause 7(6) of the DSGs imposes one such condition on the buyer that the buyer cannot resell the product online. With such a condition not being an enforceable law vis-a-vis the third party, even if it were to be considered binding as such, by means of the contract between Amway and the ABO/buyer, Amway can at best seek to proceed against the ABO for breach of such condition. There is no privity of contract between Amway/Oriflame/ Modicare with the online platforms.