Did you ever come across instances where the goods are described as of a particular standard or quality? Still, they turn out to be old/outdated goods or of some cheap/bad quality? Have you ever got attracted to fraudulent offers or gifts but later discovered that the cost of the gift was included in the goods purchased? These are tactics to attract potential customers. But are these tactics legal?
This article will discuss unfair trade practices, their types, and remedies against unfair trade practices in India.
What is Unfair Trade Practice?
The Consumer Protection Act (2019), has widened the scope of consumer rights to catch pace with the digitalized field of e-commerce, teleshopping, direct selling, and other types of marketing technology.
Section 2 (47), Consumer Protection Act, 2019 deals with Unfair trade practices. It provides that when a company embraces or follows any practice that is not fair or does not conform to the approved standard or any deceptive practice, it is called unfair trade practice to promote its sale, supply, or use of any goods or services.
Types of unfair trade practice
We will now discuss in detail the types of unfair trade practices.
Unfair trade practice can be categorized under the following types:
1. False Representation
When any statement is made orally or written, or any representation is made that false suggests or represents that:
- The goods or services are of a particular standard of quality, grade, composition, quantity, model, or style;
- Any second-hand, renovated, re-built, reconditioned, or old goods is a new product;
- The seller, supplier, or goods or services has a specific approval, sponsorship, affiliation, performance, character, benefits, or use which they do not have or have.
- Usefulness or need of any goods or services;
- Gives a guarantee or warranty of goods performance, usage, or efficacy without conducting any adequate test;
- Makes a materially misleading public representation that acts as
- A warranty or guarantee of goods or services, or
- A promise to replace, repair or maintain the goods until they achieve the desired or specified result.
- Makes any materially misleading statement without any intention to fulfil the guarantee or warranty.
- Disparaging or belittle the trade, goods, or services of another person.
2. False offer of Bargain Price
Publishing an advertisement stating that the goods or services are offered at a bargain price (i.e., less or better than actual price) for a particular period or in some quantity, without any intention to fulfil such offer at that price is also a type of unfair trade practice.
3. Free Gifts and Prize Scheme
Some examples of unfair trade practices under this category are:
a) Offering any prize, gifts, or other things along with the products, where the actual intention is different;
b) Creating any impression that something is offered free of cost with the goods purchased. However, the price of the free product is partially or wholly covered with the goods sold.
c) Offering prize schemes to attract customers to promote any sale of product or business by creating any contest, game of chance or skill, lottery,
d) Not disclosing the final result of the prize scheme to the customers on its closure.
The participant is deemed to be informed about the final result if the final result is declared in the prominent newspaper where the scheme was originally advertised.
4. Non-compliance with prescribed Standards
Knowingly or intentionally sell or supply goods for customers use, stating that the goods comply with the standards prescribed by the competent authority. Such representation can relate to the performance, contents, design, composition, finishing, packaging, or construction of the goods necessary to reduce or prevent the risk of injury to the person using such products or goods is called unfair trade practices.
5. Hoarding, destruction, or refusal to sell
The retailer or seller hoards, pile up, destructs the goods, or refuses to sell the goods or provide service, intending to raise the price of the goods or services or other similar products, constitute unfair trade practices.
6. Spurious goods
Manufacturing or offering spurious, bogus, counterfeit goods for sale or adopting deceptive practices in providing services.
7. No Bill or cash memo
The retailer refuses to issue a receipt, bill, or cash memo for services rendered or goods sold.
8. Not returning/ refund defective goods
Where the manufacturer refuses to return or take back any defective goods or discontinue any deficient service and refund the amount paid for such goods or services, within the period specified in the receipt or bill or within thirty days from the date of purchase.
9. Disclosing personal information
Disclosing confidential personal information to other people without the person’s permission making such disclosure unless such information is disclosed in compliance with the applicable law.
What is the essential ingredient of unfair trade practices?
To constitute an unfair trade practice, it must have the following criteria:
Injury or loss: the act should cause or is likely to cause injury or loss to the consumer.
Misrepresentation: the act should be a misleading or false statement on which the consumer acted upon.
Remedies against unfair trade practices
Monopolies and Restrictive Trade Practices Act, 1969 (MRTP) was enacted to prevent monopolies and restrictive trade practices in India. However, this act was repealed by Competition Act, 2002. As a result, all the pending cases under the MRTP were transferred to the Competition Commission of India (CCI) for adjudication. Nevertheless, the Competitive Act did not have any provisions to deal with the unfair trade practices. Therefore, provisions of the Consumer Protection Act, 2019, were used to resolve disputes and provide remedies against unfair trade practices.
When a consumer files a complaint, the District Commission / State Commission / National Commission, as the case may be, may order any of the following remedies to the consumer:
- To remove the defect from the product as may be put forth by the laboratory;
- To replace the goods with a new defect-free product;
- To return the price of the product or charges paid by the complainant;
- To pay compensation for the loss or injury suffered by the complainant due to the other party’s negligence;
- To remove the sale of hazardous goods;
- To remove defects in goods or services offered;
- To stop the manufacture of hazardous goods and providing hazardous services;
- To make advertisement nullify the effect of misleading advertisement at the cost of the person making such advertisement.
The time limit for filing compliant
Any District Commission / State Commission / National Commission shall not entertain any complaint if it is made after two years from the date of cause of action.
Punishment for non-compliance with the order
Every order passed by the District Commission/ State Commission / National Commission shall be final and binding on the parties if no appeal has been made.
Whoever does not comply with the order of the District Commission/ State Commission / National Commission shall be punished with imprisonment for a term not less than one month but which may extend to three years or with fine not less than twenty-five thousand rupees, but which may extend to one lakh rupees, or with both.
How to prevent unfair trade practices?
Unfair trade practices can be prevented by:
- Avoiding making false or misleading claims or statements about the product or services
- Avoiding making false statements about the price, description, quality, and standard of the goods or services.
- Avoid making false or misleading advertisements about the goods or services or
- Avoid making fraudulent gift offers without any intention to fulfil them.
Latest Case laws
Case 1: Big Bazaar (Future Retail Ltd.) Vs. Ashok Kumar, 2020 SCC OnLine NCDRC 495
In this case, Big Bazaar’s act of charging additional costs for providing carry bags was challenged before the National Consumer Disputes Redressal Commission (NCRDC).
The Commission held that the Big Bazaar’s act was highly arbitrary. It forced the customers to buy the carry bags at a fixed price without disclosing their features. Furthermore, such an act had caused harassment and embarrassment to the customers, forcing them to buy the carry bags at the time of payment of goods. Therefore, Commission had ordered the Big Bazaar to discontinue such unfair and deceptive trade practices.
Case 2: Horlicks Limited Vs. Zydus Wellness Products Limited, CS (Comm) 464 of 2019
In this case, Zydus company’s product (Complan) was advertised comparing Horlicks showing that a single glass of Complan is equivalent to double the glasses of Horlicks. This advertisement was challenged before the Delhi High Court on the ground that it is misleading and disparaging.
The High Court had observed that even if the advertisement contains a disclaimer, it was misleading and disparaging, and not explicit. Therefore, the Court had restrained the telecast of the advertisement and allowed the print media advertisement, as the telecast of the advertisement has a greater impact on the consumers, which would cause irreparable injury to Horlicks.
Unfair trade practice has been elaborately described under the Consumer Protection Act, 2019. Unfair trade practices include making a false representation, false offer or bargain price, gifts offer and prize schemes, non-compliance of prescribed standards, hoarding, destruction or refusal to sell, not providing bill or cash memo, etc. Suppose a consumer suffers any injury or loss due to such misrepresentation. In that case, they can file a complaint before a District Commission, State Commission, or National Commission. One can prevent unfair trade practices by not making any false representation, giving any misleading statement, or publishing fake advertisements about the goods or services.