Author: Devraj Sankla, Student at University College of Law, Osmania University.
Introduction:
Unfair trade practices refers to use of various unethical, dishonest, deceptive, fraudulent or dishonourable methods to promote the trade goods or services to gain profits. It includes misleading advertising of a goods or services, misrepresentation of the goods or services and as well as commercial deception of goods or services that are sold in the market. In India there are no separate Laws related to Unfair trade practices but there are some provisions for unfair trade practice in the Consumer Protection Act, 2019.
Definition of Unfair trade practice:
Unfair trade practice is defined under Clause (47) of Section 2 of the Consumer Protection Act, 2019. Clause (47) of Section 2 of the Consumer Protection Act, 2019 begins with the words: “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.”
Some Examples of Unfair trade practices:
1. False Advertisement: False advertising refers to any act of misleading advertisement or misleading claim which is published intentionally to promote the sale of goods or services to gain profits. An advertisement or claim can be referred as false advertising when the advertiser knowingly advertises false information and misleads the consumer. In India there are many laws which regulates advertisement. Punishment for False or Misleading Advertisement is given under Section 89 of Consumer Protection Act, 2019. According to the Section 89 of the act, any person who uses false or misleading advertisement to promote the sale of goods or services should be punished with imprisonment up to 5 years or the person can be fined up to ₹50 Lakhs or both. For example, in 2022 the Central Consumer Protection Authority (CCPA) had taken a Suo-moto action against Naaptol Online Shopping Ltd and it imposed a fine of Rs 10 lakh for failing to disclose that the advertisements on their 24×7 channel are pre-recorded advertisements and it is not live telecast. CCPA also slammed Naaptol Online Shopping Ltd for creating ‘artificial scarcity’ by claiming that a product is available only for a limited period of time.
2. Spurious Goods: Spurious goods are defined under Clause (43) of section 2 of the Consumer Protection Act, 2019 the term ‘spurious goods’ means such “goods which are falsely claimed to be genuine”. The goods which are claimed to be genuine but they are actually not and the claim made is false, such goods are referred as spurious goods. It is a kind of duplication of goods which are similar to some other original goods. The manufacturing or storing or trading or importing spurious goods comes under the unfair trade practice. The Punishment for it is given under Sub-Section (1) of Section 91 of the Consumer Protection Act, 2019. The punishment is proportionate to the nature of injury caused to the consumer by the spurious goods. In a joint report issued by Credit Rating Information Services of India Limited (CRISIL) and the Authentication Solution Providers Association (ASPA) in January 2024 highlighted that 25% to 30% of all products sold in India were spurious. For example, some shops trade First Copy watches at very low prices in market, the watch looks same as original but it is the copy of the original watch which is costlier than the first copy watch and manufacturing or trading of adulterated goods like spices or milk also comes under spurious goods.
3. Disclosure of Personal Information of Consumer: Disclosing of any personal information of the consumer including name, date of birth, address, Personal or Government Identity Card, Education, Profession, Occupation, mobile number or email is an unfair trade practice. The Clause [(47)(ix)] of Section 2 of Consumer Protection Act, 2019 it says — “disclosing to other person any personal information given in confidence by the consumer unless such disclosure is made in accordance with the provisions of any law for the time being in force”. Disclosing personal information without consent is considered an unfair trade practice. The Central Consumer Protection Authority (CCPA) can impose penalties, including fines to such practices. For example, A Hotel company selling their customers data including name, date of birth, address, Personal or Government Identity Card, Education, Profession, mobile number or email to different companies, this is a punishable offense.
4. Refusal to take back Defective Goods: The word defect is defined under Clause (10) of Section 2 of the Consumer Protection Act, 2019 it says “”defect” means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods or product and the expression “defective” shall be construed accordingly”. Clause [(47)(viii)] of section 2 of the Consumer Protection Act, 2019 is a new addition which was not existing in the old Consumer Protection 1986, Act. It provides that if the seller refuses to take back or withdraw defective goods or refuses to replace defective goods or discontinue deficient services and does not refund the full consideration within the period stipulated in the bill or cash memo or receipt or in the absence of such stipulation, within a period of thirty days; will fall within the ambit of unfair trade practice. The seller of defective goods or supplier of deficient services are under the obligation to take back or replace such defective goods or withdraw such goods or services from the consumer. Such a seller or supplier are under further obligation to refund the consideration, if paid by the consumer. For Example, if I purchase a new mobile and after purchasing, I found that the mobile is a defective, the mobile company should replace the defective mobile with a new mobile or refund the money which I paid for it.
Remedies available for consumers for addressing Unfair trade practices:
In India the consumers have remedies to address Unfair trade practices under the Consumer Protection Act, 2019. Some remedies are given:
1. Filing a Complaint: The consumer can approach the Consumer Dispute Redressal Commission and file a complaint against Unfair trade practices at district, state or national level depending upon the value of case. Nowadays the complaint can be registered online also.
2. Compensation: The consumer can ask for compensation if consumer had suffered any loss or injury due to Unfair trade practices. Based on the nature of loss or injury caused to consumer the Consumer Dispute Redressal Commission determines the amount of compensation.
3. Appeals: The consumer can appeal to a higher authority State commission or National Commission if the consumer is not satisfied with the decision of district commission.
4. Refund or Replacement: If there is a defect in goods or there is an deficiency in services the consumer has right to demand refund of consideration which is paid or replacement of the product. The consumer can also demand in case of false advertisement or misrepresentation.
Cases Related to Unfair trade practices:
Lakhanpal National Ltd. Vs. M.R.T.P. Commission [1989 AIR 1692 1989 SCR (2) 979 1989 SCC (3) 251 JT 1989 (2) 543]
This is the one of the important case of unfair trade practices and truthful advertising. The Monopolies and Restrictive Trade Practices (MRTP) Commission had issued a show- cause notice under the Clause B of Section 36 of the Monopolies and Restrictive Trade Practices Act, 1969 to the appellant company informing it that a proceeding had been instated for making an inquiry whether the Company was involved in unfair trade practices. It was alleged that, the appellant company was manufacturing ‘Novino’ batteries in collaboration with M/s Mitsushita Electric Industrial Co. Ltd, but appellant company was issuing advertisement announcing that ‘Novi-no’ batteries are manufactured in collaboration with National Panasonic of Japan and that the said representation was false and misleading in Indian context, where consumers might think that these brands directly with the Japanese company National Panasonic of Japan and thereby causing loss or injury to the consumers. The company said in reply to the notice that they had a legitimate collaboration with Mitsushita Electric Industrial Co. Ltd., which was known for its products under the brand names ‘National’ and ‘Panasonic’. They claimed that there was no intent to mislead the consumers. The Supreme Court of India had set aside the MRTP Commission’s decision, ruling that the advertisements of the appellant’s company were not capable of causing any loss or injury to consumers.
This case is significant as it highlights the importance of clear and truthful advertising, especially in collaborations and brand representations.
Omkar Realtors and Developers Pvt. Ltd. Vs. Kushalraj Land Developers Pvt. Ltd. & Anr.
[Civil Appeal No. 858 of 2023]
This is the most recent case of Unfair trade practice in the real estate sector. The dispute caused due to the double allotment of a flat in “Omkar 1971 Worli” project. Kushalraj Land Developers Pvt. Ltd (respondent) had booked a flat for residential use of one of its directors and his family members with the appellant in its project ‘Omkar 1973 Worli’ on payment of booking amount of Rs.51,00,000/-. Subsequently, respondent paid part consideration i.e., a total of Rs.6,79,97,071/- to appellant. When the respondent tried to arrange necessary finance through the financial institutions but failed. Then the respondent came to know that the flat allotted to him, is already allotted to Mr. Nakul Arya through the financial institutions. The respondent approached the National Consumer Disputes Redressal Commission (NCDRC) complaining about the deficiency in services and of adopting unfair trade practices with the prayer to refund the entire amount deposited by it with 18% interest. There were two points before the NCDRC. First, whether the complaint filed by the respondent, was maintainable as respondent was alleged not be a ‘consumer’ within the meaning of Section 2(7) of the Act. Secondly, the question was that if there was any deficiency in the service by the appellant or the appellant was justified in terminating the allotment of flat and forfeiting the deposit of the respondent. The NCDRC allowed the complaint as it was maintainable and said that the respondent is ‘consumer’ under Section 2 (7) of the Act, relying upon the decisions of the court in Crompton Greaves Limited and Others vs. Daimler Chrysler India Private Limited and Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers and Others. In the deficiency in service and unfair trade practice part NCDRC said that the appellant had created confusion by double allotment of flat. The NCDRC directed to refund a sum of Rs. 3,00,00,000 within two weeks and balance amount to be refunded by 31 December, 2024. Delay compensation of 6% per annum from dates of deposits till payment and Increased rate of interest to 9% per annum if refund not made on time.
Conclusion:
The Unfair trade practice are very common in India, the sellers try to sell their products using unfair methods which are prohibited by the Consumer Protection Act, 2019. The act clearly defines a ‘consumer’ and the different types of unfair trade practices which the sellers use to mislead consumers are mentioned in this act and there are provisions for punishment which includes imprisonment or fines or both for any act which misleads the consumer. Additionally, we have discussed about some cases related to Unfair trade practices, In the first case there was an advertisement which was allegedly misleading the consumers and the second case was about double allotment of flat. In the both cases the court/commission gave an judgement and explained the laws around Unfair trade practices.
Frequently Asked Questions (FAQ):
1. What is an Unfair trade practice?
A. Unfair trade practices refers to use of various unethical, dishonest, or fraudulent methods to promote the trade goods or services. It includes misleading advertising of a goods or services, misrepresentation of the goods or services and as well as commercial deception of goods or services that are sold in the market.
2. What are the examples of Unfair trade practices?
A. There are various types of Unfair trade practices some examples are: False and misleading advertisements, spurious goods, disclosure of personal information of consumer and disclosure of personal information of consumer.
3. Which laws in India govern Unfair trade practices?
A. In India the Consumer Protection Act, 2019 governs the Unfair trade practices.
4. What are the punishments given for Unfair trade practices in India and under which law?
A. The punishment for Unfair trade practices includes imprisonment or fine or both. The punishment is given under the Consumer Protection Act, 2019.
Sources: Consumer Protection Act 2019, Indian Kanoon for the Judgement and various news websites.
