Unfair Trade Practice In India.docx

8/18/2019 Unfair Trade Practice In India.docx

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Unfair Trade Practice In IndiaThe Constitution of India, in its essay in building up a just society, has mandated the State to

direct its policy towards securing that end. Article s 38 and 3 of the Constitution of India, whichare part of the !irecti"e #rinciples of State #olicy, mandate the state to direct its policy towardssecuring$ that the ownership and control of material resources of the community are sodistributed as to best sub ser"e the common good% and that the operation of the economic systemdoes not result in concentration of wealth and means of production to the common detriment.

Accordingly, after independence, the Indian &o"ernment assumed increased responsibility for the o"erall de"elopment of the country. &o"ernment policies were framed with the aim of achie"ing a socialistic pattern of society that promoted e'uitable distribution of wealth andeconomic power. (owe"er, e"en as the economy grew o"er the years after independence, therewas little e"idence of the intended tric)le*down. Concerned with this, the &o"ernment appointed

a Committee on !istribution of Income and +e"els of +i"ing -ahalanobis Committee in/ctober 0 12. The Committee noted that big business houses were emerging because of theplanned economy4 model practised by the &o"ernment and recommended loo)ing at industrial

structure, and whether there was concentration. Subse'uently, the &o"ernment appointed the-onopolies In'uiry Commission -IC in April 0 15, which reported that there was highconcentration of economic power in o"er 86 percent of industrial items in India.

The -IC obser"ed that big businesses were at an ad"antage in securing industrial licences toopen or e7pand underta)ings. This intensified concentration, especially as the &o"ernment didnot ha"e ade'uate mechanisms to chec) it. Subse'uently, the #lanning Commission of India, in

uly 0 11, appointed the (a9ari Committee to re"iew the operation of the industrial licensing

system. The report echoed pre"ious concerns regarding s)ewed benefits of the licensing system.:ollowing this, the &o"ernment, in uly 0 1;, appointed the Industrial +icensing #olicy In'uiryCommittee, which felt that licensing was unable to chec) concentration, and suggested that the-onopolies and


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Specific types of @T#s prohibited in domestic law depend on the law of a particular country. The>orld =an) >= and the /rganisation for conomic Cooperation and !e"elopment / C!-odel +aw, for e7ample, lists the following trade practices to be unfair$

B distribution of false or misleading information that is capable of harming the business interests

of another firm%

B distribution of false or misleading information to consumers, including the distribution of information lac)ing a reasonable basis, related to the price, character, method or place of

production, properties, and suitability for use, or 'uality of goods% false or misleadingcomparison of goods in the process of ad"ertising%

B fraudulent use of another?s trade mar), firm name, or product labelling or pac)aging%

B unauthori9ed receipt, use or dissemination of confidential scientific, technical, production, business or trade information.

The dictionary meaning of unfair trade practice? is$ a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the pro"ision of any ser"ice, adopts anyunfair method or unfair or decepti"e.

2. Definition of Unfair Trade Practice Under ConsumerProtection Act, 1986

Section D 0 r ofConsumer #rotection Act, 0 81 also defines the term unfair trade practice?. Itreads$

Eunfair trade practiceE means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the pro"ision of any ser"ice, adopts any unfair method or unfair or decepti"e practice including any of the following practices, namely%F

0 the practice of ma)ing any statement, whether orally or in writing or by "isible representationwhich,F

i falsely represents that the goods are of a particular standard, 'uality, 'uantity, grade,composition, style or model%

ii falsely represents that the ser"ices are of a particular standard, 'uality or grade%

iii falsely represents any re*built, second*hand, reno"ated, reconditioned or old goods as newgoods%

i" represents that the goods or ser"ices ha"e sponsorship, appro"al, performance,characteristics, accessories, uses or benefits which such goods or ser"ices do not ha"e%

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" represents that the seller or the supplier has a sponsorship or appro"al or affiliation whichsuch seller or supplier does not ha"e%

"i ma)es a false or misleading representation concerning the need for, or the usefulness of, anygoods or ser"ices%

"ii gi"es to the public any warranty or guarantee of the performance, efficacy or length of lifeof a product or of any goods that is not based on an ade'uate or proper test thereof%

#ro"ided that where a defence is raised to the effect that such warranty or guarantee is based onade'uate or proper test, the burden of proof of such defence shall lie on the person raising suchdefence%

"iii ma)es to the public a representation in a form that purports to beF

i a warranty or guarantee of a product or of any goods or ser"ices% or

ii a promise to replace, maintain or repair an article or any part thereof or to repeat or continuea ser"ice until it has achie"ed a specified result, if such purported warranty or guarantee or prom*ise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or

promise will be carried out%

i7 materially misleads the public concerning the price at which a product or li)e products or goods or ser"ices, ha"e been or are, ordinarily sold or pro"ided, and, for this purpose, arepresentation as to price shall be deemed to refer to the price at which the product or goods or ser"ices has or ha"e been sold by sellers or pro"ided by suppliers generally in the rele"antmar)et unless it is clearly specified to be the price at which the product has been sold or ser"icesha"e been pro"ided by the person by whom or on whose behalf the representation is made%

7 gi"es false or misleading facts disparaging the goods, ser"ices or trade of another person.

7planation. * :or the purposes of clause 0 , a statement that isF

a e7pressed on an article offered or displayed for sale, or on its wrapper or container% or

b e7pressed on anything attached to, inserted in, or accompanying, an article offered or displayed for sale, or on anything on which the article is mounted for display or sale% or

c contained in or on anything that is sold, sent, deli"ered, transmitted or in any other manner whatsoe"er made a"ailable to a member of the public,

shall be deemed to be a statement made to the public by, and only by, the person who had causedthe statement to be so e7pressed, made or contained%

D permits the publication of any ad"ertisement whether in any newspaper or otherwise, for thesale or supply at a bargain price, of goods or ser"ices that are not intended to be offered for sale


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or supply at the bargain price, or for a period that is, and in 'uantities that are, reasonable, ha"ingregard to the nature of the mar)et in which the business is carried on, the nature and si9e of

business, and the nature of the ad"ertisement.

7planation .F:or the purpose of clause D , Ebargaining priceE meansF

a a price that is stated in any ad"ertisement to be a bargain price, by reference to an ordinary price or otherwise, or

b a price that a person who reads, hears or sees the ad"ertisement, would reasonably understandto be a bargain price ha"ing regard to the prices at which the product ad"ertised or li)e productsare ordinarily sold%

3 permitsF a the offering of gifts, pri9es or other items with the intention of not pro"iding them as offered

or creating impression that something is being gi"en or offered free of charge when it is fully or

partly co"ered by the amount charged in the transaction as a whole%b the conduct of any contest, lottery, game of chance or s)ill, for the purpose of promoting,

directly or indirectly, the sale, use or supply of any product or any business interest%

3A withholding from the participants of any scheme offering gifts, pri9es or other items free of charge, on its closure the information about final results of the scheme.

7planation F :or the purposes of this sub*clause, the participants of a scheme shall be deemedto ha"e been informed of the final results of the scheme where such results are within areasonable time, published, prominently in the same newspapers in which the scheme wasoriginally ad"ertised%

5 permits the sale or supply of goods intended to be used, or are of a )ind li)ely to be used, byconsumers, )nowing or ha"ing reason to belie"e that the goods do not comply with the standards

prescribed by competent authority relating to performance, composition, contents, design,constructions, finishing or pac)aging as are necessary to pre"ent or reduce the ris) of injury tothe person using the goods%

6 permits the hoarding or destruction of goods, or refuses to sell the goods or to ma)e thema"ailable for sale or to pro"ide any ser"ice, if such hoarding or destruction or refusal raises or tends to raise or is intended to raise, the cost of those or other similar goods or ser"ices.

1 manufacture of spurious goods or offering such goods for sale or adopts decepti"e practicesin the pro"ision of ser"ices.

D Any reference in this Act to any other Act or pro"ision thereof which is not in force in anyarea to which this Act applies shall be construed to ha"e a reference to the corresponding Act or

pro"ision thereof in force in such area.


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3. Evo ution of T!is Definition

As we analyse the definition of unfair trade practice? under consumer protection Act, 0 81 isinclusi"e in nature and is both general and specific and was substituted in 0 3 w.e.f. 08 une.The inclusi"e and general nature of the definition ma)es the Consumer #rotection Act, 0 81 self sufficient and complete in itself.

The specific part of the definition is inspired by Sec. 31A of -


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the -e, therefore, hold that the erroneous description of the manufacturing company in its ad"ertisements in 'uestion does not attract sec 31A of the Act,although we would hasten to add that it would be more proper for the appellant company to gi"ethe full facts by referring to -itsushita +td. by its correct name and further stating that its

products are )nown by the names national? and panasonic?.


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In re a o *td and Ca(su ation ervices *td. , the allegation was that &la7o mar)eted a drugphe7in?, manufactured by capsulation, showing logo of &la7o prominently on the pac)ing strip

and name of Capsulation written in small print, thereby gi"ing the impression that #he7in is being manufactured by &la7o. In the course of the in'uiry it was found$

0. the said drug was manufactured and pac)ed by Capsulation on the basis of technical )now*how supplied by &la7o and under its super"ision as per iits 'uality control standard andtherefore, the said product was not an inferior product.

D. The price of this drug compared well with similar products manufactured by other leading pharmaceutical manufacturers.

The commission held that the ingredient of loss or injury being absent, e"en though theimpugned practice may fall under one or more clauses of Section 31 A of the Act, it is not anunfair trade practice.

In re #om-a/ T/res Internationa *imited , the respondent company was supplying tyres tiT +C/ under the brand name modistones? which, howe"er, were not manufactured by it, but by-odi


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In ociet/ for Civic )i%!ts v. Co %ate Pa mo ive India4 *td . in a full bench of commission,the majority "iew held that the Jey #hase ? and thereby causes loss or injury to the consumersof such goods and ser"ices?? does not re'uire the causing of actual loss or injury to theconsumers.


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rules, and it has now reached a more detailed sense of both the definition and the limits of thesecriteria.02

Consumer in ur/

@njustified consumer injury is the primary focus of the :TC Act, and the most important of thethree SL( criteria. =y itself it can be sufficient to warrant a finding of unfairness. TheCommissionMs ability to rely on an independent criterion of consumer injury is consistent withthe intent of the statute, which was to ENma)eO the consumer who may be injured by an unfair trade practice of e'ual concern before the law with the merchant injured by the unfair methods of a dishonest competitor.E

The independent nature of the consumer injury criterion does not mean that e"ery consumer injury is legally Eunfair,E howe"er. To justify a finding of unfairness the injury must satisfy threetests. It must be substantial% it must not be outweighed by any counter"ailing benefits toconsumers or competition that the practice produces% and it must be an injury that consumersthemsel"es could not reasonably ha"e a"oided.

:irst of all, the injury must be substantial. The Commission is not concerned with tri"ial or merely speculati"e harms. In most cases a substantial injury in"ol"es monetary harm, as whensellers coerce consumers into purchasing unwanted goods or ser"ices or when consumers buydefecti"e goods or ser"ices on credit but are unable to assert against the creditor claims or defences arising from the transaction. @nwarranted health and safety ris)s may also support afinding of unfairness. motional impact and other more subjecti"e types of harm, on the other hand, will not ordinarily ma)e a practice unfair. Thus, for e7ample, the Commission will not see) to ban an ad"ertisement merely because it offends the tastes or social beliefs of some "iewers, ashas been suggested in some of the comments.

Second, the injury must not be outweighed by any offsetting consumer or competiti"e benefitsthat the sales practice also produces. -ost business practices entail a mi7ture of economic andother costs and benefits for purchasers. A sellerMs failure to present comple7 technical data on his

product may lessen a consumerMs ability to choose, for e7ample, but may also reduce the initial price he must pay for the article. The Commission is aware of these tradeoffs and will not findthat a practice unfairly injures consumers unless it is injurious in its net effects. The Commissionalso ta)es account of the "arious costs that a remedy would entail. These include not only thecosts to the parties directly before the agency, but also the burdens on society in general in theform of increased paperwor), increased regulatory burdens on the flow of information, reducedincenti"es to inno"ation and capital formation, and similar matters.

:inally, the injury must be one which consumers could not reasonably ha"e a"oided. Hormallywe e7pect the mar)etplace to be self*correcting, and we rely on consumer choice*the ability of indi"idual consumers to ma)e their own pri"ate purchasing decisions without regulatoryinter"ention**to go"ern the mar)et. >e anticipate that consumers will sur"ey the a"ailablealternati"es, choose those that are most desirable, and a"oid those that are inade'uate or unsatisfactory. (owe"er, it has long been recogni9ed that certain types of sales techni'ues may

pre"ent consumers from effecti"ely ma)ing their own decisions, and that correcti"e action may

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then become necessary. -ost of the CommissionMs unfairness matters are brought under thesecircumstances. They are brought, not to second*guess the wisdom of particular consumer decisions, but rather to halt some form of seller beha"iour that unreasonably creates or ta)esad"antage of an obstacle to the free e7ercise of consumer decision ma)ing.

Sellers may adopt a number of practices that unjustifiably hinder such free mar)et decisions.Some may withhold or fail to generate critical price or performance data, for e7ample, lea"ing buyers with insufficient information for informed comparisons. Some may engage in o"ertcoercion, as by dismantling a home appliance for EinspectionE and refusing to reassemble it untila ser"ice contract is signed. And some may e7ercise undue influence o"er highly susceptibleclasses of purchasers, as by promoting fraudulent EcuresE to seriously ill cancer patients. ach of these practices undermines an essential precondition to a free and informed consumer transaction, and, in turn, to a well*functioning mar)et. ach of them is therefore properly bannedas an unfair practice under the :TC Act.

7io ation of (u- ic (o ic/

The second SL( standard as)s whether the conduct "iolates public policy as it has beenestablished by statute, common law, industry practice, or otherwise. This criterion may beapplied in two different ways. It may be used to test the "alidity and strength of the e"idence of consumer injury, or, less often, it may be cited for a dispositi"e legislati"e or judicialdetermination that such injury is present.

Although public policy was listed by the SL( Court as a separate consideration, it is used mostfre'uently by the Commission as a means of pro"iding additional e"idence on the degree of consumer injury caused by specific practices. To be sure, most Commissi1n actions are broughtto redress relati"ely clear*cut injuries, and those determinations are based, in large part, onobjecti"e economic analysis. As we ha"e indicated before, the Commission belie"es thatconsiderable attention should be de"oted to the analysis of whether substantial net harm hasoccurred, not only because that is part of the unfairness test, but also because the focus on injuryis the best way to ensure that the Commission acts responsibly and uses its resources wisely.

Honetheless, the Commission wishes to emphasi9e the importance of e7amining outsidestatutory policies and established judicial principles for assistance in helping the agency ascertainwhether a particular form of conduct does in fact tend to harm consumers. Thus the agency hasreferred to :irst Amendment decisions upholding consumersM rights to recei"e information, for e7ample, to confirm that restrictions on ad"ertising tend unfairly to hinder the informed e7erciseof consumer choice.

Con"ersely, statutes or other sources of public policy may affirmati"ely allow for a practice thatthe Commission tentati"ely "iews as unfair. The e7istence of such policies will then gi"e theagency reason to reconsider its assessment of whether the practice is actually injurious in its neteffects. In other situations there may be no clearly established public policies, or the policies maye"en be in conflict. >hile that does not necessarily preclude the Commission from ta)ing actionif there is strong e"idence of net consumer injury, it does underscore the desirability of carefullye7amining public policies in all instances. In any e"ent, whene"er objecti"e e"idence of consumer injury is difficult to obtain, the need to identify and assess all rele"ant public policies


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assumes increased importance.

Sometimes public policy will independently support a Commission action. This occurs when the policy is so clear that it will entirely determine the 'uestion of consumer injury, so there is littleneed for separate analysis by the Commission. In these cases the legislature or court, in

announcing the policy, has already determined that such injury does e7ist and thus it need not bee7pressly pro"ed in each instance. An e7ample of this approach arose in a case in"ol"ing a mail*order firm. There the Commission was persuaded by an analogy to the due*process clause that itwas unfair for the firm to bring collection suits in a forum that was unreasonably difficult for thedefendants to reach. In a similar case the Commission applied the statutory policies of the@niform Commercial Code to re'uire that "arious automobile manufacturers and their distributors refund to their customers any surplus money that was reali9ed after they repossessedand resold their customerMs cars. The Commission acts on such a basis only where the public

policy is suitable for administrati"e enforcement by this agency, howe"er. Thus it turned down a petition for a rule to re'uire fuller disclosure of aerosol propellants, reasoning that the subject of fluorocarbon safety was currently under study by other scientific and legislati"e bodies with

more appropriate e7pertise or jurisdiction o"er the subject.To the e7tent that the Commission relies hea"ily on public policy to support a finding of unfairness, the policy should be clear and well*established. In other words, the policy should bedeclared or embodied in formal sources such as statutes, judicial decisions, or the Constitution asinterpreted by the courts, rather than being ascertained from the general sense of the national"alues. The policy should li)ewise be one that is widely shared, and not the isolated decision of asingle state or a single court. If these two tests are not met the policy cannot be considered as anEestablishedE public policy for purposes of the SL( criterion. The Commission would then actonly on the basis of con"incing independent e"idence that the practice was distorting theoperation of the mar)et and thereby causing unjustified consumer injury.

Unet!ica or unscru(u ous conduct

:inally, the third SL( standard as)s whether the conduct was immoral, unethical, oppressi"e, or unscrupulous. This test was presumably included in order to be sure of reaching all the purposesof the underlying statute, which forbids EunfairE acts or practices. It would therefore allow theCommission to reach conduct that "iolates generally recogni9ed standards of business ethics. Thetest has pro"en, howe"er, to be largely duplicati"e. Conduct that is truly unethical or unscrupulous will almost always injure consumers or "iolate public policy as well. TheCommission has therefore ne"er relied on the third element of SL( as an independent basis for afinding of unfairness, and it will act in the future only on the basis of the first two.

Dece(tive Acts and Practices

Assessin% !et!er an Act or Practice Is Dece(tive

A three*part test is used to determine whether a representation, omission, or practice isdecepti"e.?? :irst, the representation, omission, or practice must mislead or be li)ely to mislead

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the consumer. Second, the consumer?s interpretation of the representation, omission, or practicemust be reasonable under the circumstances. +astly, the misleading representation, omission, or

practice must be material. ach of these elements is discussed below in greater detail.

P There must be a representation, omission, or practice that misleads or is li)ely to mislead the

consumerFAn act or practice may be found to be decepti"e if there is a representation,omission, or practice that misleads or is li)ely to mislead the consumer. !eception is not limitedto situations in which a consumer has already been misled. Instead, an act or practice may befound to be decepti"e if it is li)ely to mislead consumers. A representation may be in the form of e7press or implied claims or promises and may be written or oral. /mission of information may

be decepti"e if disclosure of the omitted information is necessary to pre"ent a consumer from being misled. In determining whether an indi"idual statement, representation, or omission ismisleading, the statement, representation, or omission will not be e"aluated in isolation .Theagencies will e"aluate it in the conte7t of the entire ad"ertisement, transaction, or course of dealing to determine whether it constitutes deception. Acts or practices that ha"e the potential to

be decepti"e include ma)ing misleading cost or price claims% using bait*and*switch techni'ues%

offering to pro"ide a product or ser"ice that is not in fact a"ailable% omitting material limitationsor conditions from an offer% selling a product unfit for the purposes for which it is sold% andfailing to pro"ide promised ser"ices.

In >arner Q *am-ert Co. 7. &TC, &TC re'uired a mouthwash manufacturer to include in anyfuture ad"ertising, a statement that the product would not help pre"ent colds, sore throat or lessen their se"erity.

P The act or practice must be considered from the perspecti"e of the reasonable consumerFIndetermining whether an act or practice is misleading, the consumer?s interpretation of or reactionto the representation, omission, or practice must be reasonable under the circumstances. The testis whether the consumer?s e7pectations or interpretation are reasonable in light of the claimsmade. >hen representations or mar)eting practices are targeted to a specific audience, such asthe elderly or the financially unsophisticated, the standard is based upon the effects of the act or

practice on a reasonable member of that group. If a representation con"eys two or moremeanings to reasonable consumers and one meaning is misleading, the representation may bedecepti"e. -oreo"er, a consumer?s interpretation or reaction may indicate that an act or practiceis decepti"e under the circumstances, e"en if the consumer?s interpretation is not shared by amajority of the consumers in the rele"ant class, so long as a significant minority of suchconsumers is misled. In e"aluating whether a representation, omission, or practice is decepti"e,the agencies will loo) at the entire ad"ertisement, transaction, or course of dealing to determinehow a reasonable consumer would respond. >ritten disclosures may be insufficient to correct amisleading statement or representation, particularly where the consumer is directed away from'ualifying limitations in the te7t or is counselled that reading the disclosures is unnecessary.+i)ewise, oral disclosures or fine print may be insufficient to cure a misleading headline or

prominent written representation.

In &.T.C. v. C/-ers(ace.com the :TC found that sending consumer?s mail that appeared to be achec) for R3.62 to the consumer attached to an in"oice was decepti"e when cashing the chec) constituted an agreement to pay a monthly fee for internet access. The bac) of the chec), in fine


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print, disclosed the e7istence of this agreement to the consumer. The :TC concluded that the practice was misleading to reasonable consumers, especially since there was e"idence that lessthan one percent of the DD6,222 indi"iduals and businesses billed for the internet ser"ice actuallylogged on.

P The representation, omission, or practice must be materialFA representation, omission, or practice is material if it is li)ely to affect a consumer?s decision regarding a product or ser"ice. Ingeneral, information about costs, benefits, or restrictions on the use or a"ailability of a product or ser"ice is material. >hen e7press claims are made with respect to a financial product or ser"ice,the claims will be presumed to be material. Similarly, the materiality of an implied claim will be

presumed when it is demonstrated that the institution intended that the consumer draw certainconclusions based upon the claim. Claims made with the )nowledge that they are false will also

be presumed to be material. /missions will be presumed to be material when the financialinstitution )new or should ha"e )nown that the consumer needed the omitted information toe"aluate the product or ser"ice.

In re ate$a/ *earnin% Cor(. t!e &TC alleged that &ateway committed unfair and decepti"etrade practices by ma)ing retroacti"e changes to its pri"acy policy without informing customersand by "iolating its own pri"acy policy by selling customer information when it had said itwould not.O &ateway settled the complaint by entering into a consent decree with the :TC thatre'uired it to surrender some profits and placed restrictions upon &ateway for the following D2years.

6. Detai ed Ana /sis :f ection 2 14 )4 of ConsumerProtection Act, 1986

Clause 0 the practice of ma)ing any statement, whether orally or in writing or by "isiblerepresentation which, *

i :alsely represent that the goods are of a particular standard, 'uality, 'uantity, grade,composition, style or model%

In re -asterphone Industries #ri"ate +td., the respondent company, engaged in the manufactureof T.G. Sets, ga"e an ad"ertisement 022 imported with matsushita technology and san)yo% the

best entertainer?, claiming foreign collaboration for manufacturing T.G. sets. These assertion being false, it was held to be an unfair trade practice.

ii :alsely represent that the ser"ices are of a particular standard, 'uality or grade%

In re Institute of #ersonnel -anagement and Industrial


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goods%

In re =ennett Coleman L Co. +td., the respondent in its publication series Indrajal Comics? bought out two comics, which were "irtually copies of two comics published earlier under different titles. It was alleged that in doing so, the respondent has falsely gi"en the impression to

the readers that two new comics ha"e been published, whereas the so called new comics weremere repetition of the old ones. The commission, while holding that it was an unfair trade practice, disposed of the case on the basis of the following underta)ing gi"en by the respondent$

>e =ennett Coleman L Co. +td., the publishers of indrajal comics hereby underta)e thatwhene"er repeated editions of a particular comic which was published earlier is again broughtout, it will be printed in the co"er page that the edition is a repeated "ersion of the story

published on an earlier date under a particular name, specifying the date and particular name of the earlier publication4.

i"


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of a product or of any goods that is not based on an ade'uate or proper test thereof%

#ro"ided that where a defence is raised to the effect that such warranty or guarantee is based onade'uate or proper test, the burden of proof of such defence shall lie on the person raising suchdefence%

In re em India, t!e Commission held that ma)ing false claim regarding the 'uality of refrigerator as being free from manufacturing defects and further is not pro"iding satisfactoryser"ice by timely replacement in terms of the warranty is a breach of clause "ii . Also thatsubse'uent replacement of the machine after the complaint has been filed with the Commissionwas too late and did not wipe out the unfair trade practice indulged in by the respondent, as itdepri"ed the consumer of the use of the refrigerator for a long period. A cease and desist4 order was passed re'uiring the respondent to refrain from indulging in such unfair trade practiceamounting to breach of warranty on his part.

The pro"iso of this sub*clause en"isages the onus of proof on the person raising the defence that

the warranty or guarantee is based on ade'uate or proper tests."iii ma)es to the public a representation in a form that purports to beF

i a warranty or guarantee of a product or of any goods or ser"ices% or

ii a promise to replace, maintain or repair an article or any part thereof or to repeat or continuea ser"ice until it has achie"ed a specified result, if such purported warranty or guarantee or prom*ise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or

promise will be carried out%

In re C! oride India *td ., the respondent is the manufacturer of batteries, which was fitted on


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7 &i"es false or misleading facts disparaging the goods, ser"ices or trade of another person.

This sub*clause is intended to prohibit the practice of ma)ing any statement which gi"es false or misleading facts disparaging the goods, ser"ices or trade of another person. It may be direct

statement or it may indirectly or inferentially disparage the trade or business of another.!isparagement? generally in"ol"es casting aspersions on the 'uality or characteristics of goodsor ser"ices of another, whereas other types of false ad"ertising usually comprise assertions of superior attribute for the ad"ertiser?s own goods and ser"ices.

In re Tain$a a C!emica s = P astics India *td ., the respondent, who is a manufacturer of mos'uito repellant mats under the names of casper?, issued an ad"ertisement to promote the saleof its product, falsely disparaging its well )nown competing brand &//! JHI&(T?, statingthat it is not at all efficacious. A cease and desist? order was passed by the commission.

7planation. * :or the purposes of clause 0 , a statement that isF

a e7pressed on an article offered or displayed for sale, or on its wrapper or container% or

b e7pressed on anything attached to, inserted in, or accompanying, an article offered or displayed for sale, or on anything on which the article is mounted for display or sale% or

c contained in or on anything that is sold, sent, deli"ered, transmitted or in any other manner whatsoe"er made a"ailable to a member of the public,

shall be deemed to be a statement made to the public by, and only by, the person who had causedthe statement to be so e7pressed, made or contained%

E ce(tion to c ause 14 of 2 14 r4

It is noted that section D 0 r does not pro"ide any e7ception to clause 0 . Although somee7ceptions were recommended by the Sachar Committee, but it is not clear as to why they not

been incorporated in the Act. It is submitted that following e7ceptions should be incorporated$

1. T!e aforesaid (rovision s!a not a(( / if a (erson esta- is!es>a That the act or omission gi"ing rise to the offence was a result of a bonafide error.

b That he too) reasonable precaution and e7ercised due diligence to pre"ent the occurrence of

such error and that he too) reasonable measures forthwith, after the representation was made, to bring the error to the attention of the class of persons li)ely to ha"e been reached by therepresentation.

D. In a proceeding for contra"ention of any of the aforesaid pro"isions committed by the publication of an ad"ertisement, it would be a defence for a person who establishes that he is a person whose business it is to publish or arrange for the publication of ad"ertisement and that herecei"ed the ad"ertisement for publication in the ordinary course or business and did not )now


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and had no reason to suspect that its publication would amount to contra"ention of any such pro"ision.

D permits the publication of any ad"ertisement whether in any newspaper or otherwise, for thesale or supply at a bargain price, of goods or ser"ices that are not intended to be offered for sale

or supply at the bargain price, or for a period that is, and in 'uantities that are, reasonable, ha"ingregard to the nature of the mar)et in which the business is carried on, the nature and si9e of business, and the nature of the ad"ertisement.

E ( anation> &or t!e (ur(ose of c ause 24, ?-ar%ainin% (rice? meansa a price that is stated in any ad"ertisement to be a bargain price, by reference to an ordinary

price or otherwise, or

b a price that a person who reads, hears or sees the ad"ertisement, would reasonably understandto be a bargain price ha"ing regard to the prices at which the product ad"ertised or li)e productsare ordinarily sold%

@nder this clause it is an offence to ad"ertise a product at a bargain price if the supplier does notor cannot supply the product in reasonable 'uantities. This is also )nown as bait and switchselling. @sually, this practice is aimed at ad"ertising a product in limited supply at low pricessolely for the purpose of attracting customers to a retail location when there is little prospectusthat the customer can purchase the product ad"ertised. This clause would be applicable in caseswhere there is no intention to offer for sale the goods or ser"ices at the price or for a period thatis and 'uantities that are reasonable ha"ing regard to the nature of the mar)et in which the

business is carried on, the nature and si9e of the business and the nature of the ad"ertisement.

The e7planation to the section defines what bargain price would mean for this purpose. >herethe ad"ertisement does not state but any person who sees, reads or hears the ad"ertisement wouldreasonably understand the price ha"ing regard to the prices at which the product ad"ertised of li)e products are sold, to be the bargain price.

=ait ad"ertisement is an alluring but insincere offer to sell a product of ser"ices which thead"ertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buyingthe ad"ertised merchandise, in order to sell something else, usually at a higher price or on a basismore ad"antageous to the ad"ertiser. The primary aim of the bait ad"ertisement is to obtain leadsas to persons interested in buying merchandise of the type so ad"ertised. Ad"ertisement includesany form of public notice howe"er disseminated or utili9ed.

E ce(tion to c ause 24 of ection 2 14 r40It is to be noted that no e7ception has been pro"ided in the section but Sachar Committeerecommended some of the e7ceptions that can be adopted. These are$

he too) reasonable steps to obtain in ade'uate time a 'uantity of the product that would ha"e been reasonable ha"ing regard to the nature of the ad"ertisement, but was unable to obtain such'uantity by reason of e"ents beyond his control that he could not reasonably ha"e anticipated%


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he obtained a 'uantity of the product that was reasonable ha"ing regard to the nature of thead"ertisement, but was unable to meet the demand thereof, because that demand surpassed hisreasonable e7pectation%

after he became unable to supply the product in accordance with the ad"ertisement, heundertoo) too) to supply the same product or an e'ui"alent product of e'ual or better 'uality atthe bargain price applied and that he fulfilled the underta)ing.

In re Da/a ove ties , the respondent issued an ad"ertisement about organi9ing e7hibition*cum*sale, without mentioning the period of sale and 'uality of goods offered for discound sale. Thesale was actually organi9ed for the purpose of clearing old stoc)s. >hile accepting theunderta)ing and directing the respondents to abide by the underta)ing, the Commission directedthat the period of sale should be reasonable ha"ing regard to the nature of mar)et in which the

business is carried out, the nature and si9e of business, and the nature of the ad"ertisement? as setout in section 31A D .

3 #ermitsF a the offering of gifts, pri9es or other items with the intention of not pro"iding them as offered

or creating impression that something is being gi"en or offered free of charge when it is fully or partly co"ered by the amount charged in the transaction as a whole%

It co"ers cases where gifts, pri9es or other items are offered with an intention of not pro"idingthem or creating an impression that something is being offered free of charge when it is fully or

partly co"ered by the amount charged in the transaction as a whole.

In )e irma c!emica s or+s *td ., the scheme in"ol"ing pri9es worth


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B The conduct of lotteries, contests etc. tends to induce consumers to buy products onconsideration other than 'uality and price. >hen the essential consideration of 'uality and pricesare lost sight of, consumer and public interest suffers.

B The award of pri9es, benefits only a miniscule number of consumers. !iscriminatory benefits

of this )ind to a select few without any corresponding benefit to or, as often happens at thee7pense of the bul) of the consumers is ob"iously not in the o"erall interest of the consumers./n the other hand, the same amount, if utili9ed for the purpose of reducing prices or pro"iding

better ser"ices to the consumers, in general will enhance consumer satisfaction.

B The practice of offering pri9es by lottery tends to encourage the gambling instinct leading tounnecessary, a"oidable and e7cessi"e purchases by consumers for the purpose of gaining entryinto the lottery. Such a"ailable and e7cessi"e purchases are the real loss to the consumers.Instead of protecting consumer?s interest, lotteries and contests therefore, clearly act in a

prejudicial manner in regard to consumer and public interest.

B It has deleterious impact on competition in as much as e7traneous considerations other than'uality and price tend to determine consumer preferences and purchases and thereby distortingcompetition. A better product tends to be obscured and inferior products gain preferences inconsumer choice merely because the opportunity the latter pro"ides to enter a contest. Interferingwith healthy competition, contests and lotteries ultimately result in loss to the consumer.

ac!ar Committee recommended t!e fo o$in% e ce(tions0

There is ade'uate and fair disclosure of the number and appro7imate "alue of the pri9es, of thearea or areas to which they relate and of any fact within the )nowledge of the ad"ertiser thataffects materially the chances of winning.

!istribution of the pri9es is not unduly delayed. Selection of participants or distribution of pri9es is made on the basis of scale or on random

basis in any area to which prices ha"e been allocated.

3A withholding from the participants of any scheme offering gifts, pri9es or other items free of charge, on its closure the information about final results of the scheme.

7planation F :or the purposes of this sub*clause, the participants of a scheme shall be deemedto ha"e been informed of the final results of the scheme where such results are within a

reasonable time, published, prominently in the same newspapers in which the scheme wasoriginally ad"ertised%

The abo"e pro"ision was added by D22D amendment and ma)es it mandatory to inform about thefinal results of any scheme offering pri9es, gifts or other items free of charge. The result of suchschemes may be published within a reasonable time in the newspapers in which the scheme wasoriginally ad"ertised. >ithholding of the information about the final results of the scheme willamount to an unfair trade practice within the ambit of the Consumer #rotection Act.

http://www.legalserviceindia.com/laws/consumer_laws.htmhttp://www.legalserviceindia.com/laws/consumer_laws.htm


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5 permits the sale or supply of goods intended to be used, or are of a )ind li)ely to be used, byconsumers, )nowing or ha"ing reason to belie"e that the goods do not comply with the standards

prescribed by competent authority relating to performance, composition, contents, design,constructions, finishing or pac)aging as are necessary to pre"ent or reduce the ris) of injury to

the person using the goods%

/ne of the most important right a"ailable to the consumers is to assure that the goods purchasedwill be reasonably safe in use. There is an urgent need for effecti"e action in the field of consumer product safety. Increasing affluence and the increasing range of comple7 nature of

product ha"e led to the pre"alent situation in which unsafe products mat cause death or seriousinjury. Sometimes the danger arises from defecti"e design, or sub*standard material or poor wor)manship. This clause also attracts cases where certain goods are )nowingly being sold ascomplying with standards prescribed by a competent authority. "en where a person does not)now, it is sufficient if he has reasons to )now that sales are being so made. :or instance,unauthori9ed use of I.S.I. mar) on the goods or any other mar) not permitted by State

&o"ernment would be hit by this clause.In re Gijay International #roducts the respondents were manufacturing and mar)eting sto"esunder the brand name nutan?, designed by Indian /il Corporation without competent authority?sinspection and clearance. The sto"es actually mar)eted were sub*standard without conforming tothe appro"ed specifications. The respondent ga"e an underta)ing not to manufacture or sell thesto"es designed by I/C without their permission.

6 #ermits the hoarding or destruction of goods, or refuses to sell the goods or to ma)e thema"ailable for sale or to pro"ide any ser"ice, if such hoarding or destruction or refusal raises or tends to raise or is intended to raise, the cost of those or other similar goods or ser"ices.

The practice of hoarding or destruction of goods with a "iew to create artificial scarcity and thusto force up prices are 'uiet common in our country. To control such practices, clause 6 of section D 0 r prohibits hoarding or destruction of goods, or refusal to sell the goods or to ma)ethem a"ailable for sale, or to pro"ide any ser"ice, if such hoarding, destruction or refusal raisesor tends to raise or is intended to raise, the cost of those or other similar goods or ser"ices.

1 -anufacture of spurious goods or offering such goods for sale or adopts decepti"e practicesin the pro"ision of ser"ices.

The Amendment Act, D22D inserted a new sub*clause 1 in section D 0 r of the Act to further enlarge the scope of the definition of unfair trade practice? to include manufacture of spuriousgoods or sales of spurious goods or adoption of decepti"e practices in the pro"ision of ser"ices.According to this pro"ision, manufacture of spurious goods or offering such goods for sale or adopting decepti"e practices in the pro"ision of ser"ices wills amount to an unfair trade

practices. Clause oo of Section D 0 of the Act defines spurious goods and ser"ices to meansuch goods and ser"ices which are claimed to be genuine but they are not actually so.

@. Conc usion0


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It is a recognised fact that consumers as buyers ha"e poor bargaining power. In early years whenwelfare legislations li)e the Consumer #rotection Act, 0 81 did now e7ist, it is the ma7im ca"eatemptor let the buyer beware which go"erned the mar)et and relations between consumers andtraders. How with the opening of global mar)ets, economies and progressi"e remo"al of restrictions on international trade, there is increasing completion among manufacturers which

has, though benefited the consumers in the form of impro"ement in 'uality of goods and ser"ices but as well as gi"en the way to many unfair methods or practices of trade to promote sale of thecommodities and it has widely affected the interests of the consumers. Therefore, we may saythat it?s an era when it can be propounded that the ma7im ca"eat emptor is to be replaced by letthe seller beware?.

In spite of "arious pro"isions pro"iding protection to the consumer in different enactments li)eC#C, 0 28, Indian Contract Act, 08;D, sale of &oods Act, 0 32, Specific e may, howe"er, point out that there are certain legislations apart from the Indian Contract Act,08;D and Sale of &oods Act, 0 32 which pre"ent to a contract from ta)ing undue or unfair ad"antage of the other. Instance of this type of legislation are the @surious +oans Act, 0 08,Industrial !isputes Act, 0 5;, Agricultural #roduces grading and mar)eting Act, 0 3;,#re"ention of :ood Adulteration Act, 0 65, Specific


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B CA*! of C, 0 ;;B 563 :.3d 00 1 :ederal Trade CommissionB &ateway decision and order, Sept D225, :TCB @T# n'uiry Ho. 020 0 81, order dated 08*00*0 8;B @T# n'uiry Ho. 060 0 8 , order !ated 5*D*0 0

B @T# n'uiry Ho. D 0 81, order !ated D6*8*0 81B @T# n'uiry Ho. 02 0 88, order !ated D8* *0 8B @T# n'uiry Ho. 383 0 88, order !ated D*6*0 8B @T# n'uiry Ho. 520 0 8;, order !ated 0;*00*0 88B @T# n'uiry Ho. 051 0 81, order !ated DD*5*0 0B @T# n'uiry Ho. 85 0 86, order !ated D6*8*0 88B @T# n'uiry Ho. 5 0 85, order !ated D *0*0 86B @T# n'uiry Ho. 61 0 8 , order !ated 01*0*0 2B Sachar Committee

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