Dr. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW

Law of Torts: II and Consumer Protection

Topic:

UNFAIR TRADE PRACTICES AND COPRA

Submitted to: Submitted By:

Miss. Kirti Singh Sunidhi Verma

Asst. Professor Roll No.: 139

Law of Torts - II and Consumer Protection Semester: IV

TABLE OF CONTENTS:

Introduction

Background to Unfair Trade Practices

Unfair Trade Practices

Categories of Unfair Trade Practices

Misleading actions and Omissions

Aggressive practices

The blacklist

Unfair Trade Practices under COPRA

Case laws on UTPS

Sanctions and remedies

Conclusion

Acknowledgement:

I would like to express my special thanks of gratitude to my professor Miss. Kirti Singh who

gave me the golden opportunity to do this wonderful project on the topic “Unfair Trade

Practices and COPRA”, which also helped me in doing a lot of Research and I came to know

about so many new research areas.

Secondly I would also like to thank my parents and friends who helped me a lot in finalizing

this project within the limited time frame.

INTRODUCTION

The term Unfair Trade Practice (UTP) 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. However, the term does not have a universal standard definition.

Unfair trade practices encompass a broad array of torts, all of which involve economic injury

brought on by deceptive or wrongful conduct. The legal theories that can be asserted include

claims such as trade secret misappropriation, unfair competition, false advertising. In the new

corporate and business world today where there is cut throat competition the business persons

daringly use unfair trade practices to edge over the other. This may give them advantage for

short term but in long run it affects the organization and eventually the entire industry. There

is always been confusion regarding the correct definition for unfair and restrictive trade

practices, also the about which practices to be considered as unfair. The general prohibition

simply states that unfair commercial practices are prohibited. The wording is deliberately

wide to catch any unfair practices that may be developed in the future.

A practice is unfair if it fails to meet the standard of "professional diligence" (the standard of

skill and care that would reasonably be expected of a trader in its field of activity) and it

materially impairs an average consumer's ability to make an informed decision, causing him

to make a decision he would not otherwise have made.

In most cases, the average consumer will be taken to be reasonably well-informed,

reasonably observant and circumspect. But where a trading practice is specifically targeted at

a particular consumer group, the average consumer will be the average member of that group.

And if a clearly identifiable group of consumers is particularly vulnerable to a trading

practice (because of age, infirmity or credulity) in a way a trader could reasonably be

expected to foresee, and the practice is likely materially to distort decisions made only by that

group, the benchmark will be the average member of that group.

For example, the hard of hearing might be particularly vulnerable to a trader's advertisement

claiming that a telephone is "hearing aid compatible".

Background to Unfair Trade Practice:

The concept of Unfair Trade Practice draws a parallel from the previously applicable

Monopoly Restrictive Trade Practice (MRTP) Act, 1969 which has now been replaced by the

Competition Act, 2002. Section 36A of the erstwhile Monopolies and Restrictive Trade

Practices Act, 1969 (MRTP Act), where 'unfair trade practice' was defined as a trade

practice, which, for the purpose of promoting the sale, use or supply of any goods or for the

provision of any services adopts any unfair method or unfair or deceptive practice including

oral, written or visible misrepresentations regarding standard, quality, status, condition

usefulness and price of goods or services; false warranty, guarantee or promise regarding

goods or services; disparaging of goods and services of another person; and false

advertising and misrepresenting with regard to the gifts, prizes and offers in sale etc.1

UNFAIR TRADE PRACTICE:

In this Part, unless the context otherwise requires "unfair trade practice" means a trade

practice which, for the purpose of promoting the sale, use or supply of any goods or for the

provisions of any services, adopts any unfair method or unfair or deceptive practice including

any of the following practices, namely:-

(1) The practice of making any statement, whether orally or in writing or by visible

representation which, -

(i) falsely represents that the goods are of a particular standard, quality, quantity, grade,

composition, style or model;

(ii) falsely represents that the services are of a particular standard, quality or grade;

(iii) falsely represents any re-built, second-hand, renovated, reconditioned or old goods as

new goods;

1  Section 36A Monopoly Restrictive Trade Practice (MRTP) Act, 1969

(iv) represents that the goods or services have sponsorships, approval, performance,

characteristics, accessories, uses or benefits which such goods or services do not have

(2) permits the publication of any advertisement whether in any newspaper or otherwise, for

the sale or supply at a bargain price, of goods or services that are not intended to be offered

for sale or supply at the bargain price, or for a period that is, and in quantities that are,

reasonable, having regard to the nature of the market in which the business is carried on, the

nature and size of business, and the nature of the advertisement.

Explanation: For the purpose of clause (2), "bargain price" means-

(a) a price that is stated in any advertisement 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 advertisement, would reasonably

understand to be a bargain price having regard to the prices at which the product advertised or

like products are ordinarily sold

(3) permits –

(a) the offering of gifts, prizes or other items with the intention of not providing them as

offered or creating the impression that something is being given or offered free of charge

when it is fully or partly covered by the amount charged in the transaction as a whole.

(b) the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting,

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

(4) permits the sale or supply of goods intended to be used, or are of a kind likely to be used

by consumers, knowing or having reason to believe that the goods do not comply with the

standards prescribed by competent authority relating to performance, composition, contents,

design, constructions, finishing or packaging as are necessary to prevent or reduce the risk of

injury to the person using the goods;

(5) permits the hoarding or destruction of goods, or refuses to sell the goods or to make them

available for sale, or to provide any service, 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 services.

CATEGORIES OF UNFAIR TRADE PRACTICES:

1) Misleading actions and omissions

Misleading acts and omissions are unfair commercial practices. In each case, the action or

omission must cause or be likely to cause the average consumer to take a different decision. 

A misleading action contains false information or in some way deceives (or is likely to

deceive) the average customer. Examples include:

providing misleading information about the main characteristics, availability or origin

of a product, or false information about the trader himself (e.g. qualifications or

awards);

marketing a product in such a way that creates confusion with a competitor's products

(e.g. by using a similar brand name or logo); and

agreeing to be bound by a code of practice that contains a firm commitment (e.g. that

its members will only use wood from sustainable sources), displaying the code logo,

but breaching that commitment.

Leading real estate firm Unitech Ltd has been held guilty of resorting to "unfair trade

practice" by a consumer forum here and directed to pay a customer Rs 6.6 lakh for

making "illegal demands" from him after he booked a flat with it and paid the booking

amount. The District Consumer Disputes Redressal Forum, in its order, observed that the

firm and its agent made "unjustified" demands from the customer and also threatened to

forfeit his deposited money.

Misleading omissions are made when a trader omits or hides material information, provides it

in an unclear, unintelligible, ambiguous or untimely manner, or fails to make it clear he has a

commercial intent. What is material will depend on the circumstances, but it is generally

defined as information the average consumer needs to make an informed decision.

Limitations of space or time and whether the trader has taken other steps to convey the

information (such as stating "terms and conditions apply" and where they can be found) will

be taken into account as part of the context. 

When a trader makes an "invitation to purchase" (e.g. by including an order form in a press

advertisement, or a page on a website enabling consumers to place an order) the regulations

specify the material information that must be included unless that information is apparent

from the context. 

2) Aggressive practices

A commercial practice is aggressive if it significantly impairs (or is likely to significantly

impair) the average consumer's freedom of choice by the use of harassment, coercion

(including physical force) or undue influence and so causes or is likely to cause him to take a

different decision.

Undue influence results from a trader exploiting a position of power, even without using or

threatening physical force.

3) The blacklist

Thirty-one practices are deemed to be unfair in all circumstances. A trader carrying out any

one of these will have breached the CPRs, whether or not it had any effect on the average

consumer.

In addition to pyramid promotion schemes, bogus sales and "doorstepping" consumers at

home, the blacklist includes:

"Bait advertising" - advertising products at a specified price without disclosing that

the trader has reasonable grounds to believe he may not be able to supply them or

their equivalent at that price for a reasonable period or in reasonable quantities.

"Bait and switch" – inviting consumers to buy one product but then trying to persuade

them to buy a different one – e.g. by refusing to show them the original item, or to

take orders or make delivery arrangements, or by showing a defective sample.

Falsely stating a product will only be available (or available on certain terms) for a

very limited time to persuade the consumer to make an immediate decision.

Using "advertorials" (editorial comment to promote a product) without making it clear

that the trader has paid for the promotion.

Passing on materially inaccurate market information to persuade the consumer to buy

on less favourable terms than normal market conditions.

Claiming to offer a competition or prize promotion without awarding the prizes

described or a reasonable equivalent.

Describing a product as "free", "without charge" or similar, if the consumer has to pay

anything other than the unavoidable cost of responding, collecting or paying for

delivery of the item. There has been some debate about whether this will affect

standard "buy one get one free" offers.

Making persistent and unwanted solicitations by telephone, fax, email or similar,

except in circumstances and to the extent justified to enforce a contractual obligation

(e.g. legitimate debt collection).

Requiring a consumer claiming on an insurance policy to produce irrelevant

documents, or deliberately failing to respond to correspondence to dissuade the

consumer from pursuing his contractual rights.

Including in an advertisement a direct encouragement to children to buy advertised

products or persuade their parents or other adults to buy advertised products for them.

UNFAIR TRADE PRACTICES UNDER CONSUMER PROTECTION ACT,1986:

According to the provisions of the Consumer Protection Act, 1986 ‘unfair trade practice’

means 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 the practice of making any statement, whether orally or in writing or by

visible representation which falsely represents that the goods are of a particular standard,

quality, quantity, grade, composition, style or model; falsely represents that the services are

of a particular standard, quality or grade; falsely represents any re-built, second-hand, reno-

vated, reconditioned or old goods as new goods; makes a false or misleading representation

concerning the need for, or the usefulness of, any goods or services etc. permits the

publication of any advertisement whether in any newspaper or otherwise, for the sale or

supply at a bargain price, of goods or services that are not intended to be offered for sale or

supply at the bargain price. ‘Bargaining price’ has been defined as a price that is stated in any

advertisement to be a bargain price, by reference to an ordinary price or otherwise, or a price

that a person who reads, hears or sees the advertisement, would reasonably understand to be a

bargain price having regard to the prices at which the product advertised or like products are

ordinarily sold. 

Are unfair trade practices only relevant to consumers?

Most certainly not. Businesses are also big losers when it comes to unfair trade practices.

Firstly responsible businesses will lose sales to disreputable businesses that engage in UTPs

because the disreputable firms:• unfairly increase their sales to the detriment of responsible

businesses; and• reduce their costs of purchase or manufacture. Secondly UTPs can damage

consumer confidence to the extent that overall growth in the market is affected. This can

happen when consumers get overly wary about trying new products/services or new

businesses.

CASE LAWS ON UNFAIR TRADE PRACTICES IN INDIA:

1) O. K. Gaur S/o Late B. R. Gaur vs Choithram Hospital and

Research Centre[2012]:

Appellant suffered from polycystic kidney disease. Respondent’s hospital was the

only authorized hospital in the State for transplantation surgeries. Various tests

were conducted and large amount of money was extorted from appellant for tests

by respondent. At last surgery was done and appellant was in hospital for 2

months. It was also alleged by appellant that at the time of discharge, the

discharge card was purposely not given. As such appellant could not take

treatment elsewhere, and had to repeatedly go for follow-ups. Thus, there was

gross negligence on the part of respondent . On complaint filed by appellant for

compensation State Commission dismissed the same. Hence, Appellant appealed

and contended that respondent acted in negligence and extracted money from

appellant by showing unfair trade practices. Whether complaint filed by appellant

before the State Commission was within time or the same was time barred.

Appellant was operated for kidney transplant on 25-8-2005, whereas complaint

before the State Commission was filed on 30-7-2008. Complaint filed was barred

by limitation and no application for condonation of delay was filed by appellant.

There was no force in the plea that there was delay in performing kidney

transplant. As per material available on record, letter given for permission to

respondent hospital was sent on 5-7-2005 and transplant was to be done within

one month. If there had been some procedural delay, it could not be said that delay

amounted to any negligence on the part of respondent .Operation for kidney

transplant was carried out successfully and there was no evidence that any

excessive amount was charged or unnecessary tests were done .Impugned order

was upheld. Hence, the appeal dismissed.

2) Lord Shiva Co-operative Group Housing Society vs Vishnu Bhagwan

Sharma S/o O. P. Sharma [2012]:

Respondent/complainant filed complaint against petitioner/opposite party alleging

that he was member of petitioner's Society which allotted him flat and he deposited

the entire amount against the allotment of flat. Petitioner demanded excess amount

which was opposed. It was alleged that petitioner had not provided basic amenities

such as water connection, electricity and parking facilities, which it was bound to

provide. Thus, petitioner was liable to pay Rs.50,000/- as damages. On complaint,

petitioner was set ex parte by District Forum and held that there was deficiency in

service on part of petitioner and complaint was allowed. Aggrieved by the order of

District Forum, petitioner filed an appeal along with delay condonation petition. State

Commission dismissed the application. Petitioner had no case even on merits since

evidence led by respondent had gone unrebutted and no fault could be found with the

decision of District Forum. Further, a valuable right accrued in favour of respondent

of which he could not be deprived of . Hence, the appeal was dismissed.

3)Life Insurance Corporation of India vs Sudesh [2012]:

Respondent’s husband (deceased) obtained a policy for life of Rs.5 lakhs from appellant

LIC of India. Deceased died 13 months later after taking the policy and the claim under

the policy was repudiated by appellant on the ground that the deceased had withheld

material information at the time of seeking the insurance cover. Respondent filed

complaint, which was allowed by State Commission. Appellant relied entirely on the

record of treatment for repudiation of the claim under a policy taken more than one year.

Appellant could not point to any other evidence produced before the State Commission,

which could show that the deceased suffered from any or all of those ailments at the time

when the proposal for insurance was made. Question of disentitlement under the

insurance policy, on the ground of concealment/suppression of information, would have

arisen in case only if there was evidence to show that the insured had undergone

hospitalization/treatment for any disease in near proximity of the time when insurance

policy was obtained and had chosen not to disclose it . Further, voluntary disclosure of

information relating to occasional drinking, as made in the proposal form by the

deceased, was not investigated further before appellant chose to issue the insurance policy

in favour of the deceased. Thus impugned order of State Commission was upheld and the

appeal was dismissed.

4) Acupressure Therapy Health Centre (1986):

The respondents in this case were manufacturing acupresslsre sandals which they

claimed were designed to improve blood circulation, and keeping the users healthy by

walking daily on the chappals for 8 minutes every morning and evening before meals.

The respondents also claimed that WHO has approved of this therapy, When the matter

was referred to the All India Institute of Medical Sciences, it was very clearly stated by

way of medical opinion that there was no proven evidence in modern medical literature

that acupressure helps treat any ailment. and that the science of acupressure was not

accepted even in developed countries. Even Consumer Protection Act - the WHO

disclaimed any approval having been granted to the use of such sandals. Bafk Fealur

Further, on the box containing the chappals, it was mentioned that the sandals were not to

be used for more than ten minutes and that heart and blood pressure patients should

consult the doctor before using them, but these facts were not mentioned in the

advertisement. The MRTP Commission held that the facts of acupressure thereby were

false and misleading. According, injection was issues restraining the respondent from

giving out advertisements containing misleading facts.

5) DG (I & R), New Delhi v. Principal, Kathiar Medical College, Patna

(1989):

Director General filed an application suo moto against Principal, Kathiar Medical

College, which was registered under the Societies Registration Act. It was alleged that

the respondent had been giving wrong impression in his publicity material that the college

was authorized and equipped to impart medical education leading to M.B.B.S. degree.

The college was actually neither recognized by the Medical Council of India nor affiliated

to any University. The Commission held it to be a case of misleading advertisement

amounting to unfair trade practice.

6) Snowhite Clothiers (1986):

The respondent issues advertisements promising discounts up to 50% upon stating in the

advertisements "Drop in for unbelievable bargain in men's, ladies and children wear". The

Commission ruled that the advertisements were misleading in that the normal price was

not shown, the bargain sale period was not indicated - 'till stocks last' was held a vague

term.

Sanctions and Remedies

Strong sanctions are vital if consumer protection is to be taken seriously by business. A wide

range of remedies will facilitate better immediate outcomes for aggrieved consumers as well

as enhance compliance in the long run. Sanctions and remedies for unfair trade practices

should aim to do more than just punish if they are expected to contribute to the suite of

objects referred to above:

• reduce the incidence of UTPs

• reduce the harm caused to consumers and responsible businesses cause by UTPs

• shift some of the cost of defensive measures and victim harm back on to those engaging in

UTPs Cessation of the offending conduct, prevention and deterrence of future offending

conduct, undoing the harm caused and punishment are all possible with a wide suite of

sanctions and remedies.

These might include:

Fines and/or imprisonment

Injunctions (positive and negative)

Corrective advertising

Community service orders

Compensation

Corporate probation

Adverse publicity

Compulsory implementation of a comprehensive compliance program

Necessity for expansion of the term:

We have seen the changes that are proposed to be made to the term, but to what end will they

be effective. For this we need to look into the requirement for such a change and the need for

which can be understood through the case of Akhil Bhartiya Upbhokta Congress vs Aggarwal

Jewellers2where the respondent-jeweler issued cash memo which stated that in case of return

of any of the products, only 80% value of the price will be returned. This consumer raised an

objection to this condition, but the State Commission could not disallow the respondent-

jeweler from having such a condition as there was no law which restricted this. But according

to the proposed amendment, if the trader refuses or restricts the right to return the good or

stops the service within 30 days, he would be liable for carrying on an unfair trade practice.

Therefore, a requirement to improve the protection granted to consumers against unfair trade

practices is gauged herein, which may be achieved by providing a wider scope to the term as

proposed by the amendment.

2 I(2006)CPJ32(NC)

Conclusion:

The Consumer Protection Act and the Bill are designed so as to prevent any kind of trade that

engage in unfair trade practices whether specified or not and more importantly provides for

protection for the consumers who are subject to this trade. This amendment is a step towards

the importance of recognition of the concept of unfair trade practice which shall not be

neglected at any cost, especially with the Consumer Protection Act being the sole defining

authority for it, where the term shall be given additional attention in its definition in order to

protect all the requisite rights of consumers in order to avoid any ambiguities. For example,

when we look into the right of return given to the consumers, we notice that this is only

possible if the goods remain unused or if the service is continuous in nature. Whereas, in

situations when the goods or services are used only once and are extinguished, there is no

mention as to whether, on being unsatisfied, any facility or option for the money to be

returned to the consumer is available. Even though there are still such questions which

remain unanswered, we have to appreciate these changes being made in the Bill, as they bring

to our attention the safeguards that need to be provided to the consumers against unfair trade

practices.

BIBLIOGRAPHY:

http://www.cccindia.co/corecentre/Database/Docs/DocFiles/Consumer%20Protection

%20act%20Basics.pdf

http://articles.economictimes.indiatimes.com/2012-04-09/news/31313050_1_unfair-

trade-practice-consumer-forum-booking

http://www.indiankanoon.org/search/?

formInput=unfair+trade+practice+under+consumer+protection+act