CCP to initiate proceedings against two hotels


ISLAMABAD: The Competition Commission of Pakistan (CCP) has observed that deceptive marketing practices have a direct impact on the public at large and proceedings may be initiated against two hotels in Abbottabad and Faisalabad involved in fraudulent use of similar and identical trademarks of a leading hotel chain.

It is learnt that the CCP has issued an enquiry report against two hotels involved in “fraudulent use of another’s trademark” that amounts to violation of section 10 (1) read with sub-section 2(d) of the Competition Act.

The complainant is public limited company listed with Pakistan Stock Exchange (PSX). It was principally engaged in the hotel business.

The CCP order said the deceptive marketing practices have a direct impact on the public at large. A leading hotel chain (Complainant), through its counsels filed a complaint before the CCP u/s 37(2) of the Competition Act, 2010 (the ‘Act’) against certain entities.

It was alleged in the complaint that the Respondents (owners and operators of hotels in Abbottabad and Faisalabad) were fraudulently using the Complainant’s registered trademark/trade name and logo for branding of their hotels with the same style and design, without any authorization from the Complainant. It was further alleged that such conduct of the Respondents is capable of harming the business interest and goodwill of the Complainant, which amounts to, prima facie, violation of Section 10 of the Act, i.e. Deceptive Marketing Practices.

Keeping in view of the above, the Commission initiated an enquiry in accordance with sub-section (2) of section 37 of the Act by appointing Faiz-ur-Rehman, Assistant Director (OFT), Riaz Hussain, Assistant Director (OFT) and Fatima Shah, Management Executive (OFT) as the enquiry officers (the ‘Enquiry Committee’). The Enquiry Committee was directed to conduct the enquiry on the issues raised in the complaint and submit the enquiry report by giving their findings and recommendations. It can be concluded that the Complainant has a strong standing in the market and has invested significantly in its goodwill and reputation. For this reason, it is also recognized as a brand of quality amongst the relevant market for providing quality services. Furthermore, it has also fulfilled legal requirements for protection of its intellectual property by registering its trade/service mark.

The Respondents by using similar and identical trademarks as that of the Complainant’s are clearly trying to free ride on the goodwill and the reputation of the Complainant as due to such stark similarities, the consumers are bound to develop an association between the Complainant’s and the Respondents’ services. Therefore, the conduct of the Respondent No. 2 and Respondent No. 4, prima facie, amounts to violation of section 10 (1) read with sub-section 2(d) of the Act which prohibits “fraudulent use of another’s trademark”.

By fraudulently using the Complainant’s trademark, the said hotels are implying that they provide the same quality of services as that of the Complainant’s, the services provided by them comprise upon the similar properties and characteristics in terms of facilities provided by them and they belong to same place of production, i.e. chain of service providers which the remaining authentic hotels belong to. This conduct of Respondent No. 2 and Respondent No. 4 falls under, prima facie, violation of Section 10(1), read with sub-section 2(b) of the Act which forbids “distribution of false [and] misleading information to consumers, including the distribution of information lacking a reasonable basis, related to the character, place of production, properties, and quality of services.

Furthermore, it is only natural that the consumers, due to such acts of deception on behalf of the Respondents, will opt for the Respondents’ services in case they are looking for the same quality of services as those provided by the Complainant at its original franchises. As a result, such fraudulent conduct of the Respondents is not only capable of harming the business interests of other undertakings in the same line of business but also capable of harming the business interests of the Complainant. Reason being that a negative experience at the Respondents’ hotels may negatively impact the reputation of the Complainant, and hence, may result in loss of business in the future, at its existing franchises.

Therefore, it can be clearly concluded that even if there is no proof of actual harm incurred upon the business interests of the Complainant, the unauthorized capitalization on the Complainant’s registered trade mark and the potential to harm to the Complainant’s goodwill amounts to, prima facie, violation of Section 10(1) of the Act, read with sub-section 2(a) of the Act, the CCP maintained.

Therefore, in light of the abovementioned findings, it is recommended that the Commission may initiate proceedings against owners and operators of Hotel in Abbottabad, and owners and operators of Hotel, Faisalabad, under Section 30 of the Act.