CONSUMER PROTECTION FROM UNFAIR TRADING PRACTICES BY - HAREESH KUMAR C

CONSUMER PROTECTION FROM UNFAIR TRADING PRACTICES

AUTHORED BY - HAREESH KUMAR C

Abstract:

The term "unfair trade practise" (UTP) broadly refers to a trade practise that adopts any unfair method or unfair or deceptive practise that is prohibited by a statute or has been recognised as actionable under law or by a court judgement in order to promote the sale, use, supply of any goods or the provision of any service.

The purpose of this research paper is to explain why the concept of unfair commercial practises should be included in consumer laws rather than competition laws. By contrasting the provisions of the Competition and Consumer Laws enacted in response to the issue, the article also evaluates the idea of unfair business practises in India.This study examines how UTPs are positioned in India and the relationship between consumer and competition law. And also covers the issues that are currently being encountered as well as suggestions.

Keywords :

Unfair Trade Practices (UTPs), Incorporation of UTPs, Consumer Welfare, Overlapping Provisions.

Introduction:

Unfair trade practises: what are they?

An unfair trade practise is a trade practise that uses an unfair method, an unfair or deceptive practise, or both, to promote the sale, usage, or supply of any goods or services.

Unfair business practises can be categorised as :

1. False representation:

• Falsely claiming that the products are of a certain standard quality, quantity, grade, composition, style, or model in any written statement or representation is called misrepresentation.
• falsely implies that a certain level, amount, or degree of service is provided;
• falsely represents any reconstructed, previously owned renovated, refurbished, or used items as brand-new;
• falsely claims that a product or service has a certain sponsorship, approval, performance, quality, accessory, use, or benefit that it does not have.
• claims to have a sponsorship, permission, or association that the seller or provider does not have;
• falsely or intentionally misrepresents the necessity or value of any products or services;
• provides any performance, effectiveness, or length of life warranty or guarantee that is not supported by an acceptable or appropriate test for the product;
• misleading in a significant way regarding the costs at which such products or services are offered in the market;
• gives erroneous or deceptive information to disparage the products, services, or line of work of another person.

1. False offer of Bargain Price :

while a product or service is advertised in a newspaper or another medium at a very low price while, in reality, there is no purpose for it to be sold at that price, for a reasonable amount of time, it constitutes unfair commercial practises.

The price indicated in the advertisement in a way that suggests it is less than the usual price, or the price that any person seeing the advertisement would perceive to be better than the price at which such goods are typically sold, is what is meant by the term "bargain price" for this purpose.

1. Free Gifts Offer and Prize Schemes:

• while a product or service is advertised in a newspaper or another medium at a very low price while, in reality, there is no purpose for it to be sold at that price, for a reasonable amount of time, it constitutes unfair commercial practises.
• The price indicated in the advertisement in a way that suggests it is less than the usual price, or the price that any person seeing the advertisement would perceive to be better than the price at which such goods are typically sold, is what is meant by the term "bargain price" .

      4 .Non -Compliance of Prescribed Standards:

Unfair trade practises include the sale or supply of goods knowing or having reason to believe that they do not meet the requirements set forth by a competent authority with regard to their performance, composition, contents, design, construction, finishing, or packaging in order to prevent or reduce the risk of injury to the person using the goods.

     5 . Hoarding, Destruction, Etc:

Unfair trade practises include the sale or supply of goods knowing or having reason to believe that they do not meet the requirements set forth by a competent authority with regard to their performance, composition, contents, design, construction, finishing, or packaging in order to prevent or reduce the risk of injury to the person using the goods.

Effect of unfair trade practices:

The inability to move to another business partner and end the existing relationship (due to excessive switching costs or the lack of such a capability) is a fundamental component in the development of unfair trading practises. The weaker party frequently worries that, in the event of a complaint on its part, the business relationship would be dissolved. Such complaints are substantially less likely to emerge due to this "fear factor": 87% of suppliers do nothing more than talk to their customers; 65% refrain from taking any action because of concern for reprisals; and 50% have doubts about the efficacy of governmental solutions.

The harmful effects of unfair trading practices may take various forms:

• The ability of SMEs (small and medium-sized businesses) to compete in the market and make new financial investments in goods and technology may be impacted by unfair trading practises.
• Unfair trade practises can place the trading partner in a weaker bargaining position at risk of excessive costs or lower-than-expected revenues.
• Unexpected changes to contract terms could cause overproduction and pointless food waste.
• With their limited legal resources, SMEs are forced to deal with a difficult scenario surrounding unfair trading practises and available remedies due to the varied regulatory framework that tackles unfair trade practises at the national level.
• Some businesses, particularly SMEs, may be discouraged from entering new geographic markets or even from cross-border trade as a result of unfair trading practises.
• Unfair business practises may have an effect on consumers' welfare in terms of product availability and pricing.
• Unfair business practises may have an effect on consumers' welfare in terms of product availability and pricing.

Legal framework :

MRTP Act :

Monopolistic trade practises refer to market-dominating trade practises where a company or an oligopolistic corporation made up of three companies achieves a dominant position. They can then exert control over the market by stifling rivalry or setting limits on prices and production.

Regardless of market share, restrictive trade practises are carried out by a group of two or more organisations working together to avoid competition in the market. These actions are considered to be against the interests of the public.

The MRTP act was the first significant piece of law to regulate unrestricted and free commerce. This law aimed to distinguish between monopolistic and restrictive business practises.The government established the Sachar committee in 1977 to oversee the MRTP act's required review. In order to streamline its operations, the committee also made sure that certain proposals were required.

The following is a list of the MRTP Act's original goals:

• The law ensured that a small number of businesses did not end up with all the economic power.
• to ensure monopolies are controlled
• monopolistic and limiting commercial practises must be controlled.
• The fourth goal of the legislation, the regulation of unfair trade practises, was included in a 1984 modification.
• Following its final revision in 1991, the MRTP act's goals were as follows:
• MTP: Monopolistic Trade Practises Prohibited
• RTP - Restrictive Trade Practises are Prohibited
• UTP - Unfair Trade Practises Prohibited.

Elaboration on the Trade Practices that the MRTP Act Regulated

There are three types of trade practices regulated by the MRTP act:

Monopolistic Trade Practices - This refers to the abuse of one's position in the market to manipulate the creation and distribution of goods and services.

• eliminated or stopped a contest
• took advantage of their exclusivity by imposing irrationally high pricing on customers.
• decreased the calibre of goods
• minimal technological advancement
• adopted unethical business practises

Restrictive Trade Practices -

Traders frequently engaged in practises that obstructed the flow of money into production in order to consolidate their position in the market and increase their earnings. These traders also impacted supply by imposing delivery requirements, which in turn led to excessive expenses.

Unfair Trade Practices -  Unfair trade practices are comprised of:

• a misrepresentation of both new and used products.
• False representations of the products' standards, usefulness, style, need, etc.
• False representations or assertions regarding the cost of goods and services
• false assurances and warranties for products and services without conducting sufficient product testing.
• In regards to affiliation, sponsorship, etc., false information is provided.

MRT Commission:

To carry out this act, the government established the following:

• a commission with a minimum of two members and a maximum of eight.
• The head of this commission required to be qualified to sit on a state's supreme court or high court.
• Members of this commission have demonstrated their ability to handle matters relating to law, economics, commerce, industry, accountancy, or public affairs or have the necessary knowledge and expertise.
• The commission members' terms of office could not last longer than five years.
• The DG (Director General of Investigation and Registration) supported the commission during the investigation by conducting the investigation, keeping a registry of agreements, and carrying out the proceedings.

Consumer protection act:

The Indian government passed the Consumer Protection Act, 2019 to address issues connected to consumer rights violations, unfair business practises, deceptive advertising, and other situations that are detrimental to consumers' rights. Because of the advancement of technology and the dramatic rise in the purchase and sale of products and services online over the past several years, the Parliament intended the Act to include protections for e-consumers.

By establishing Consumer Protection Councils to resolve disputes should they occur and to give adequate compensation to consumers in the event that their rights have been violated, the Act aims to better protect the rights and interests of consumers.

Additionally, it offers quick and efficient handling of customer concerns through alternative dispute resolution procedures. The Act also encourages consumer education to inform consumers of their rights, obligations, and options for resolving complaints.

Objective of the Consumer Protection Act, 2019:

The Act's primary goals are to safeguard consumer interests and create a reliable, effective procedure for resolving consumer complaints. The Act intends to:

•  Prevent the marketing of goods that pose a risk to human life or property.
• To protect consumers from unfair business practises, provide information about the potency, amount, standard, purity, and pricing of the items.
• Create Consumer Protection Councils to safeguard customers' rights and interests.
• Whenever feasible, guarantee that customers may access a trusted source for affordable goods.
• Investigate and seek remedies for any unethical business practises or consumer exploitation.
• By selecting authorities for the prompt and adequate administration and resolution of consumer issues, you may defend consumers.
• Specify the punishments for violations of the Act.
• In the event that an issue or dispute emerges, listen to the consumer's welfare concerns and make sure they are taken into consideration in the proper forums.
• Give consumers consumer education so they can understand their rights.
• Offer quick and efficient handling of customer concerns through alternative dispute resolution procedures.

Consumer rights under Consumer Protection Act:

According to the 2019 Consumer Protection Act, consumers have six rights. In accordance with Section 2(9)[1] of the Act, consumers have the following rights:

• the right of a customer to be shielded from the promotion of products and services that are risky and harmful to property and life.
• the right of a consumer to be shielded from unfair business practises by being informed about the standard, price, potency, purity, and other characteristics of the goods, services, or products.
• the consumer's right to affordable access to a wide range of products, services, and goods.
• the right to complain about unfair and constrictive business practises in the appropriate forums.
• The right to receive adequate compensation or consideration from respective consumer forums in case they have been wronged by tlhe seller.
• The right to receive consumer education.

Unfair trade practices under Consumer Protection Act:

Unfair trade practises are defined in Section 2(47)[2] of the Consumer Protection Act, 2019 as things like producing fake goods or offering subpar services.

• not sending invoices or cash memos for the products bought or services provided.
• refusing to accept the products or services for return or withdrawal and refusing to reimburse the payment made for the goods or services.
• revealing the customer's private information.

Competition Act  2002:The "Competition Commission" idea was devised by the Vajpayee administration and published as the Competition Act, 2002. Competition and private enterprise were thought to need to be promoted, especially in light of India's economic liberalisation in 1991. The Competition Act of 2002, as amended by the Competition (Amendment) Act of 2007, serves as the foundation for contemporary competition laws. The Competition Act of 2002 was approved by the President in January 2003, following its enactment by Parliament in 2002. According to the criteria of the Amendment Act, the Competition Commission of India (CCI) and the Competition Appellate Tribunal have been established.

The Act prohibits anti-competitive agreements, corporate abuse of dominant positions, and mergers and acquisitions that have or are likely to have a materially negative impact on competition in India.

The Competition Act was passed in 2002 in order to not only stop harmful impacts on competition but also to maintain and develop pro-competitive behaviours. The Act also strives to protect any issues connected to or incidental to the freedom of trade as it is practised by all market participants in India.

The framework of the new law not only corrected the inadequate setup from its predecessor, but also made modifications and supplied tools for the time's economic climate. Extraterritorial jurisdiction, harmonisation with other laws pertaining to intellectual property rights and other matters, overlaps between the Competition Act, 2002 and sectoral regulatory laws, and competition advocacy were a few of the unique aspects of the Act of 2002 that, when taken together with the spirit of the entire globalisation phenomenon, were extraordinary for their time.

The Act prohibits three anti-competitive practises: misuse of dominant positions, mergers and acquisitions (combinations), and anti-competitive agreements. The fundamental rule for the management of anti-competitive action is that it shouldn't materially impair competition within India. Section 3 [3]of the Act provides a description of anti-competitive agreements and categorises them into two groups: horizontal agreements and vertical agreements. With a few exceptions described in Section 3(5), it states that all anti-competitive agreements that could materially harm competition in India must be void.

The Central Government formed the CCI with effect on October 14, 2003, with a view to achieving the objectives of the Act. The CCI's chairman and the other six members are chosen by the Central Government. It is the commission's duty to put a halt to actions that undermine competition, to promote and preserve it, to protect consumer interests, and to ensure trade freedom in Indian markets. Additionally, the commission is expected to advocate for competition, educate the public about competition-related issues, and give training on those issues in response to a recommendation from a governmental entity formed by any law.

In the technological era, in the face of digitization, commercialization, and the Internet of Things, the effectiveness of the Competition Act of 2002 must now be examined, questioned, and studied. India's antitrust regime is currently at a pivotal point and a crossroads. As the last remaining brick-and-mortar stores steadily disappear and internet behemoths graze the opulent savannah of the country's largely unregulated and greatly diverse economy, consideration of whether India urgently requires a long-term amendment to the Competition Act, 2002, is becoming more and more necessary.

Objective and scope of The Competition Act, 2002

The Competition Act of 2002 is a piece of legislation that seeks to promote and preserve market competition, protect consumer interests, and ensure the freedom of trade of other market participants. The new law has taken the place of the outdated Monopolies and Restrictive Trade Practises Act, 1969 (MRTP Act), which only previously pertained to India.

The National Competition Policy (NCP), the Competition Appellate Tribunal, and the Competition Commission of India (CCI) are the three primary parts of competition law upon which the Competition Act is based.

This regulation was passed primarily to ensure that market competition functions as intended and that consumers have access to a wider range of goods at fair prices.

Features of the Competion Act 2002:

Anti-competitive agreements :The competition law in India forbids any arrangement between two or more companies or people to maintain market competition and safeguard consumers' interests. These agreements could be vertical or horizontal. Vertical agreements are made between firms at different stages of the production process, as opposed to horizontal agreements, which are made between businesses at the same level of production.

Anti cartels: Any business that abuses its dominant position will face consequences

Anti-abuse of dominance:Any agreement between companies or people that reduces competition would be viewed as unlawful.

Combination regulations: The commission won't make a decision until it has determined that a merger or acquisition won't harm market competition.

Informative nature of this Act: To ensure openness and avoid any misunderstandings between firms or individuals, a company must inform CCI of its dealings that are likely to impair market competition prior to taking any action or signing any agreements.

Challenges faced by consumers in India:

Adulteration:

Adulteration Most of the time, despite paying a high price, consumers do not receive pure or high-quality goods. For the purpose of maximising profits, the organisation typically provides contaminated commodities.

Food adulteration is the deliberate degrading of the quality of food that is offered for sale, either by the addition or substitution of subpar ingredients or the removal of valuable ones. Food adulteration is becoming a more common practise nationwide every day. Shop owners in a rush fail to see that it is thriving. For the majority of the well-known brands on the market, a duplicate exists. Everything has a replica, from grain to edible oil to motor parts. Adulteration is a lucrative industry in India. One of the main objectives is food because it is simple to tamper with it and escape. To give turmeric powders a more vibrant appearance, synthetic pigments are added to them. Peppercorns with dried papaya seeds, salt with chalk powder, etc.

Several vegetables are tinted with dyes to make them look colourful, some of which are even carcinogenic, such as coriander powder with sawdust, tea leaves with colourful leaves, coffee seeds with tamarind seeds, and so on. Brick powder is combined with chilli powder. Food is not the only thing that is sold; drinking water, petrol, diesel, etc.

Lack of awareness:

A customer has the absolute right to accept or reject products without being taken advantage of. But to do all of this, consumers must be informed of their rights. However, the bulk of Indian customers are only moderately aware of their rights as consumers and use them to a lesser extent.

Exploitation:

Since the beginning of time, consumers have been exploited. In India, consumers are forced to pay outrageous rates for necessary goods and services by businesspeople, for whom profit-making is the only goal without considering the needs of the general public. People who work in business engage in unethical business practises, taking advantage of the circumstances to their benefit and profiting at the expense of customers. As a result, in the global complex economy, consumer interests are placed at the bottom of the priority list. Despite claims to the contrary in every commercial, consumers cannot get high-quality, pure goods on the market. The majority of the products are either subpar or deteriorated.

There hasn't been much progress in favour of consumers even after 34 years of the Consumer Protection Act (CP Act) 1986 and its subsequent revisions, including CP Bill 2018. By using all kinds of unethical practises, including adulteration, underweight of goods, selling of inferior quality or duplicate goods, imposing exorbitant prices, utilising deceptive advertisements in the media, engaging in cybercrimes, etc., the merchants and mediators completely exploit the situation to the complete detriment of consumers. Customers cannot be certain that the things they purchase will be of high quality, produced in clean facilities, and offered at markets at reasonable costs.

Every day, customers are defrauded in one way or another in all aspects, which is harmful to everyone's health because we are all consumers. Although consumers have the right to defend themselves against these wrongdoings, they calmly accept all of these wrongs without raising a fuss. Even the minority customers who are aware of their rights have a jaded outlook and rarely speak out against unethical corporate practises.

Recommendations and suggestions:

(i) Increasing the effectiveness of the current redressal procedure to provide justice more quickly. (ii) Add an active ADR Mechanism to the current redress system. (iii) Establishing a reliable mechanism for consumer advice and information. (iv) Integrate the Consumer Advice Centre and State Consumer Helplines to promote mediation. (v) Review the Consumer Protection Act of 1986 and take the necessary steps to close any gaps in order to shorten the process and expand the Act's application to new areas of consumer issues. National Consumer Protection Agency is number (vi). (vii) Tools in information technology for better service delivery Boost the effectiveness of the current redressal mechanism to provide justice more quickly.

It is suggested that the current "Strengthening of Consumer Fora" plan in the 12th Plan be kept up to include the other states/UTs. Add alternative dispute resolution (ADR) mechanisms to the current redressal system. The adage "justice delayed is justice denied" is true. In order for a legal system to be effective, results must be reached quickly in addition to being just. However, the Indian judicial system's current infrastructure is insufficient to resolve the escalating litigation in a timely manner. Consumer forums are gradually also starting to be affected by this problem.

Conclusion:

Despite the fact that there are numerous regulations designed to safeguard consumers from unfair business practises, deceptive and false advertising continues to take advantage of customers. If the hour demands stronger laws that are in step with the times, greater enforcement, and corrective advertising, better self-regulation by industry independent regulator to control health and children-related commercials, then so be it. Inadequate regulation of advertising is a result of outdated legislation and ineffective enforcement. Any future planning for a sustainable, healthy, and fulfilling existence for India's "tomorrow" consumers must take into account nature, women, the youth, and rural people.

The customer Protection Act's straightforward procedures and quick, affordable resolution of customer complaints are truly unique and have few counterparts anywhere in the world. The Act's implementation shows that consumer interests are now better safeguarded than before. The success of the consumer protection movement in the nation will depend largely on raising consumer awareness through consumer education and activities taken by the government, consumer activists, and associations. A special cell for consumer protection has been established in the Ministry of Food and Supplies, and TV programmes have started to explore the issues surrounding consumer protection and the consumer movement. The government should establish certain requirements for the quality assurance of both domestic and imported items. As a result, domestic products should be of excellent quality to garner the interest and trust of consumers.

References :

Lawyersclubindia

Investopedia

legal service India

https://blog.ipleaders.in/consumer-protection-act-2019-2/

https://www.insightsonindia.com/2022/07/12/the-new-guidelines-to-prevent-unfair-trade-practices/

[1] Sec 2(9): The right of a consumer to be protected from the marketing of goods and services that are hazardous and detrimental to life and property.

[2] Sec 2(47): Manufacturing spurious goods or providing defective services. Not issuing cash memos or bills for the goods purchased or services rendered.

[3] Sec 3 of competition act : Anti-competitive agreements