Unfair Trade Practices

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There is no universally accepted definition of “Unfair Trade Practice”. Many scholars, economists, lawmakers gave many definitions of this term. However, in general terms, the term Unfair Trade Practice broadly refers to any fraudulent, deceptive or dishonest trade practice; or business misrepresentation of the products or services that are being sold; which is prohibited by a statute or has been recognised as actionable under law by a judgement of the court.

General unfair trade practices may include

  1. unfairly refusing a transaction
  2. discriminating against a transacting party
  3. unfairly excluding competitors
  4. unfairly soliciting and coercing customers
  5. trading with a transacting party by unfairly taking advantage of one’s bargaining position,
  6. trading under terms and conditions which unfairly restrict business activities of a transacting party
  7. disrupting business activities of another enterprise
  8. having an unfair provision of capital, assets, manpower, etc

In 1969, the Monopolies and Restrictive Trade Practices Act has enacted that controlled monopolies and restrictive trade practices in India. It was the foremost legislation to deal with unfair trade practices in India. Later, this act was repealed and succeeded by the Competition Act and all the cases that were then transferred to the Competition Commission of India. But there is no express provision for preventing unfair practices in the Competition Act and hence, are dealt under the provisions of Consumer Protection Act, 1989. Section 2(1)(r) of COPRA defines unfair trade practice as: “a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice, including any of the following practices, namely:—

Making any statement, whether orally or in writing or by visible representation which:

    1. falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
    2. falsely represents that the services are of a particular standard, quality or grade;
    3. alsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
    4. represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
    5. represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
    6. makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
    7. gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof.

Since past few years, there has been an increase in the cases of unfair trade practices being performed by various Companies or marketers. India’s leading departmental store, Big Bazaar often comes up with different schemes and discounts for their customers. Recently, Big Bazaar declared a Mega sale on the event of Republic Day. A lot of customers came to get the benefit of this Mega sale and this resulted in a huge rush that was unmanageable by the storekeepers.

So to prevent any rush and damage to the customers or to the department, the storekeepers started charging Rs. 50 per person as entry coupon. The government of Gujarat filed a complaint regarding this before the district forum alleging that Big Bazaar had adopted unfair and restrictive trade practices by collecting a huge sum of Rs. 1,95,000 from sale of 3,900 coupons. The issue before the forum was that whether charging an entry fee amounts unfair trade practice? The forum held that the store, by charging entry fee is in some way restricting customers to enter their store. In its defence, the store contended that the purpose of charging entry fee was only to regulate the crowd and no unfair trade practice has been adopted by them.

This issue further went to the National Commission which held that Big Bazaar did not indulge in any unfair or restrictive trade practice. Charging of entry fee did not manipulate any prices of goods or services. It was imposed only to regulate the customer crowd. The practice is prevalent worldwide, and is permissible.

Another case reported regarding the same issue is of Spice Jet Ltd. In this case, the company prevented a family from boarding the plane in spite of the fact that they had confirmed tickets. Also, Spice Jet made the members of family travel on two different flights. This case was filed in the Consumer Dispute Redressal Forum that held that it was cruelty on the part of the company to firstly, prevent them from boarding the flight and secondly, splitting the family into two different flights. The company was held liable for being involved in unfair trade practices.

Unfair Trade Practices

In re Glaxo Ltd and Capsulation Services Ltd., the allegation upon Glaxo was that it marketed a drug named ‘phexin’, manufactured by capsulation, showing a logo of Glaxo prominently on the packing strip and name of Capsulation written in small print, thereby giving the impression that Phexin is being manufactured by Glaxo. In the course of the inquiry it was found:

  1. the said drug was manufactured and packed by Capsulation on the basis of technical know-how supplied by Glaxo and under its supervision as per its quality control standard and therefore, the said product was not an inferior product.

  2. 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, even though the impugned practice may fall under one or more clauses of Section 36 A of the Act, it is not an unfair trade practice.

In re Bombay Tyres International Limited, the respondent company was supplying tyres to TELCO under the brand name ‘modistones’. But these were manufactured by Modi Rubber and not by the respondent company. It was alleged that it was an unfair trade practice attracting clause (i) of Section 36A(1). It was held by the Commission that the respondent company was involved in no unfair trade practices. Its decision was based on the following observation-:

“As regards unfair trade practices, U/S 36A(1)(i) it would be objectionable only if for the purpose of promoting sale, use or supply of goods the respondent company falsely represents that the goods are of a particular standard, quality, grade, composition, styles or model. Section 36 A of the Act does not inhibit procuring of particular goods from another manufacturer so long as the quality or the standard which the said goods represented to possess are not allowed to deteriorate in any way.”

In this case, R.S. Chauhan, the consumer bought a Spice mobile phone, having one year warranty from a local vendor on March 24, 2015. The warranty was against any technical problem that arises in the phone during one year from the date of purchase, in the phone. The mobile phone encountered glitches in its memory card slot within few months of purchase. The consumer took the phone to Shaeen technology, a company’s authorised service centre on the advice of the local vendor. The phone was kept at the service centre for three days and during that, the phone’s touch screen developed some problems. The service centre asked Mr. Chauhan for another 15 days for repair and also asked him to pay Rs 1390 as repair charges despite phone being under warranty period.

Chauhan went to Dehradun district consumer complaint redressal forum seeking for compensation. The Dehradun district consumer complaint redressal forum has held Spice mobile retail and its Dehradun-based dealer of “unfair trade practices” for failing to provide adequate after-sales service within a one year warranty period.

Godfrey Phillips India Ltd V. Ajay Kumar

Unfair Trade Practice – whether the impugned advertisement amounted to – the respondent filed a complaint in respect of an advertisement given by the appellant, alleging unfair trade practices. The advertisement was issued in newspapers and magazines in 1999 for the cigarettes manufactured and sold by it under the brand name of “Red & White” in respect of which the directions have been issued – the impugned advertisement apart from showing the packet of cigarettes with the aforesaid brand name stated “Red & White smokers are one of a kind”.

The advertisement also shows the smiling face of actor Akshay Kumar holding a cigarette. It also contains the statutory warning “Cigarette smoking is injurious to health” as well as price of the pack. The complaint was dismissed by the District Forum as the complainant had also filed a suit in relation to the impugned advertisement in the Civil Court. It was therefore held by the District Forum that parallel proceedings in the District Forum by way of Public Interest Litigation could not be entertained. In appeal, the State Commission affirmed the order of the District Forum. Thereafter, complainant withdrew the suit, but filed Revision Petition before the National Commission.

The National Commission held that the slogan in the advertisement that “Red & White smokers are one of a kind” showing the image of Akshay Kumar indicated that ” smokers of Red & White cigarettes could be super actor performing all the film stunts without duplicates”. According to the appellant, no evidence was led in the case by the complainant either with regard to the ability of film star Akshay Kumar to carry out stunts without duplicate or with regard to the alleged impression created by the impugned advertisement upon the complainant – according to the National Commission was sufficient to hold that the impugned advertisement Amounted the unfair trade practices – there was no allegation or finding of loss or injury caused to the respondent on account of the advertisement issued in 1999.

The complainant himself had stated that he was smoking cigarettes for the last two Decades — it is not understandable as to how the National Commission even proceeded to deal with the complaint. It also noted that the complainant had not moved any application or obtained any permission under Section 13(6) of the Act and/or no such permission was granted — the orders of the National Commission are indefensible and are set aside. The appeals are allowed with no order as to costs.

WAYS TO PREVENT UNFAIR TRADE PRACTICES

  1. tries to propagate through the advertisement about the information, rights, which remedies and authorities are available in district level for the protection of consumer rights through newspaper, TV program, and electronic media.
  2. To make the compulsory subject about consumer protection and UTP in primary education.
  3. As a large no of person cheated by the well-trained traders are belongs to village site so for creating awareness among that people government should establish local committees in that villages for the protection of the consumer.
  4. Awareness camp should be arranged in schools and villages around UTP.
  5. To make obligatory on legal authority for the purpose of,
  6. Speedy dispose of cases
  7. Give free legal aid
Post written by-
Divyansh Jaipuriar
Gujarat National Law University
BBA LLB

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