PRELIM 1 [GI]

2ND MNLU-N
NATIONAL COMMERCIAL
MEDIATION COMPETITION,
2024
18TH FEBRUARY 2024

ASSOCIATE PARTNER LAW FIRM PARTNER EFFORT PARTNER

KNOWLEDGE PARTNER SUPPORTING PARTNER MEDIA PARTNER

 Not So Spotless in Pristine City

Pristine City is a secular democratic nation. The population demography of

Pristine City lucidly manifests that the Vaucasian race makes up the majority of
the nation’s population. For decades, various Governments of Pristine City have
made efforts to combat racism and promote equality amongst the Vaucasian
majority and roughly 30 ethnic and racial groups that together constitute roughly
46% of the Country’s population.

‘Émethy’ is a multinational company from the United States of Bolvenia, dealing

in all kinds of beauty, skincare and cosmetic products, that began its operation in
the Republic of Pristine City (‘Pristine City’) in 2020. It is a globally well-known
brand with an enormous global reach owing to its nouveau products and
innovation-oriented attitude. Émethy understands beauty expectations and
varying needs, and has thus, built the richest portfolio of diverse and
complementary brands.

Market Share in Pristine

City (%)
Beauty and
S. No
Skincare Brands
2020-21 2021-22 2022-23

1. Nutricare 37 29 31

2. Onyxo 31 27.3 21.2

3. Amosté 17 16.5 11

4. Kamvery Beauty 7 11.2 14

5. Émethy 8 15 22.8

2ND MNLU NAGPUR NATIONAL COMMERCIAL MEDIATION COMPETITION, 2024 1

 PRELIMINARY ROUND - I (GENERAL INFORMATION)

The company offers a large choice of products at a wide range of prices, across
all categories: skincare, make-up, haircare, hair colour, fragrances and others,
including hygiene. The products are constantly reinvented to be perfectly attuned
to consumer preferences. The collection is enriched yearly to embrace new
segments and geographies and respond to new consumer demands.

‘iKnowHow’, a company from Pristine City, harnesses AI, Machine Learning, and
Natural Language Processing to analyse vast datasets that empower businesses
to make informed data-driven decisions and optimize operations. iKnowHow, by
way of its generative artificial intelligence-based trend detection tool known as
‘TrendSpotter’, assists cosmetic brands in Pristine City in the identification and
analysis of trends which in turn helps businesses understand the market dynamics,
ultimately improving financial performance.

TrendSpotter uses Natural Language Processing (“NLP’) where data resembling

human language is generated for the computer programs to process and analyse
real-world input. It is made to scan social media platforms including, but not
limited to, Pictogram and Glassbook to draw customer feedback analysis.
Primarily, TrendSpotter scans through new hashtags, reviews, posts, and
comments as written by the consumers. Subsequently, it picks up on the posts and
keywords related to beauty and self-care, draws an analysis and predicts future
trends in cosmetics, beauty and hair products by using NLP.

Additionally, iKnowHow provides cost-effective cloud-based infrastructure and

storage services to various brands of the beauty tech industry. Businesses often
store massive amounts of data derived from various sources, such as social media
platforms, in the cloud data warehouse.
Furthermore, the cloud computing service may include cloud analytics that helps
businesses in the creation and launch of new products in the market by
identifying patterns and trends.

2ND MNLU NAGPUR NATIONAL COMMERCIAL MEDIATION COMPETITION, 2024 2

 PRELIMINARY ROUND - I (GENERAL INFORMATION)

In September 2020, Émethy signed a contract with iKnowHow for the usage of its
TrendSpotter programme with the primary aim of decreasing its mounting
Customer Acquisition Cost in a diverse market like Pristine City. Émethy sought to
identify trends ahead of its competitors to react swiftly to customer demands. To
find the latest information, including “what's hot now and weak signals”, the
programme searches through over 3,500 internet sites, including social networks
like Glassbook, Pictogram, Strings, Z, ViewTube, and online magazines and
bloggers with a cosmetics niche. The software picks up bits of data in the form of
text and hashtags from posts, articles, and words embedded in online images and
videos.

Both parties entered into an agreement providing the nitty-gritty of the

arrangement concerning the limitations on the use of the software, on-site
training, cloud-based services, revenue sharing and other terms. The revenue
sharing clause reads: “Any revenue generated from the products or brands,
created or modified, based on the data collection and analysis by ‘TrendSpotter’,
shall be shared by Émethy and iKnowHow in the ratio of 9:1, respectively.”

In the initial phase of the use of TrendSpotter by Émethy, the data analysis results
were increasingly utilised in product enhancement and development. Émethy’s
revenue increased significantly in the third quarter of 2022-23. iKnowHow felt
that its data analysis played a pivotal role in the increase in sales and revenue for
Émethy. It was of the opinion that the revenue sharing ratio was inadequate
keeping in mind the fact that the data was collected and analysed, and its results
were provided to Émethy by iKnowHow thus, iKnowHow has the ownership rights
to such data and its analysis. As a result, iKnowHow wished to renegotiate the
‘revenue sharing clause’ and Émethy agreed to come to the virtual table. The
date was fixed as May 17, 2023.

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 PRELIMINARY ROUND - I (GENERAL INFORMATION)

However, before the parties came to renegotiate, Émethy flagged another issue.
Émethy alleged that Trendspotter has been generating distorted results by taking
in training data and inputs without addressing human biases and false reviews
about beauty standards that frequently have racial undertones, and preferences
that subsist on social media platforms.

Émethy claimed that iKnowhow does not review data sampling wherein the
training data may include over or underrepresented groups and thus, there is an
inadequate system of AI Governance for monitoring the data quality which raises
concern over the data analytics provided. Consequently, the company suffered in
terms of massive increases in product returns, and consumer dissatisfaction with
three product lines. Further, they have faced severe public backlash on social
media regarding alleged discrimination against people of colour through their
advertising and the range of products was deemed to merely be a “token” to
supposedly suitably cater to a wide range of skin tones.

iKnowHow represented by Ms Salita Roy, the CEO along with her counsel Mr.
Kulbhushan and Émethy represented by Mr Gunther Stofell along with his counsel
Mr. Alfred Smith.

2ND MNLU NAGPUR NATIONAL COMMERCIAL MEDIATION COMPETITION, 2024 4