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UNFAIR TRADE PRACTICE

 
COMPETITION LAW
 
Competition Law and its Evolution
The Competition Act, 2002
The CCI
Inquiry process by CCI
Anti-Competitive Agreement
Abuse of Dominance
Unfair Trade Practice
Regulation of Combinations
FAQ on Competition Law in India
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Unfair trade practice as defined under Sec 2(1)(r) of the Consumer Protection Act, 1986 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.

 

Indian statutes dealing with Unfair Trade Practice are Competition Act 2002 and Consumer Protection Act, 1986 (COPRA).

 

Background

 

The concept of Unfair Trade Practice originated from the Monopolies and Restrictive Trade Practice (MRTP) Act, 1969 which has now been repealed and replaced by the Competition Act, 2002.

 

Section 36A of the previous Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), defined '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 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.

 

Section 36 A had five sub-sections that cover different issues such as:

36 A (1): False representation of products or services, including false description, guarantee, warranty or performance of a product or service.

36 A (2): Advertisement of false bargain price.

36 A (3): Contest, lotteries, game of chance or skill for promotion of sale.

36 A (4): Sale of goods not in conformity with safety standards provided by the law.

36 A (5): Hoarding or destruction of goods or refusal to sell goods.

 

Competition Act, 2002

 

However, the Competition Act, does not define unfair trade practices. Although the meaning of ‘unfair trade practice’ may be derived from some of the provisions of the said act such as Anti competitive agreements, Abuse of Dominant Position, False Representation, False Offer, Price Scheme, Non-Compliance of prescribed standard, Hoarding etc.

 

Section 3 deals with the Anti-competitive agreements.—

  1. No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

  2. Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.

  3. Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which—

    1. directly or indirectly determines purchase or sale prices;

    2. limits or controls production, supply, markets, technical development, investment or provision of services;

    3. shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;

    4. directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition: Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services. Explanation.—For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding.

  4. Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—

    1. tie-in arrangement;

    2. exclusive supply agreement;

    3. exclusive distribution agreement;

    4. refusal to deal;

    5. resale price maintenance, shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

  5. Nothing contained in this section shall restrict—

    1. the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under:

      1. the Copyright Act, 1957 (14 of 1957);

      2. the Patents Act, 1970 (39 of 1970);

      3. the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);

      4. the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);

      5. the Designs Act, 2000 (16 of 2000);

      6. the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

    2. the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.

Section 4 of Competition deals with Abuse of dominant position.—

  1. 1. No enterprise shall abuse its dominant position.

  2. 2. There shall be an abuse of dominant position under sub-section (1), if an enterprise,—

    1. a. directly or indirectly, imposes unfair or discriminatory—

      1. i. condition in purchase or sale of goods or services; or

      2. ii. price in purchase or sale (including predatory price) of goods or service;

    2. b. limits or restricts—

      1. i. production of goods or provision of services or market therefor; or

      2. ii. technical or scientific development relating to goods or services to the prejudice of consumers; or

    3. c. indulges in practice or practices resulting in denial of market access; or

    4. d. makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or

    5. e. uses its dominant position in one relevant market to enter into, or protect, other relevant market.

Consumer Protection Act provides clarification for the meaning of the term ‘unfair trade practice’ under Section 2(1)(r)

 

"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 any of the following practices, namely;—  

  1. the practice of 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. falsely represents any re-built, second-hand, reno¬vated, reconditioned or old goods as new goods;

    4. represents that the goods or services have sponsor¬ship, approval, performance, characteristics, accesso¬ries, uses or benefits which such goods or services do not have;

    5. represents that the seller or the supplier has a spon¬sorship or approval or affiliation which such seller or supplier does not have;

    6. makes a false or misleading representation concern¬ing 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;

      Provided that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;

    8. makes to the public a representation in a form that purports to be—

      1. a warranty or guarantee of a product or of any goods or services; or

      2. a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or prom-ise is materially misleading or if there is no reasonable prospect that such warranty, guaran¬tee or promise will be carried out;

      3. materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly specified to be the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;

    9. gives false or misleading facts disparaging the goods, services or trade of another person.

    Explanation. - For the purposes of clause (1), a statement that is—

    1. expressed on an article offered or displayed for sale, or on its wrapper or container; or

    2. expressed on anything attached to, inserted in, or accompanying, an article offered or displayed for sale, or on anything on which the article is mounted for display or sale; or

    3. contained in or on anything that is sold, sent, delivered, transmit¬ted or in any other manner whatsoever made available to a member of the public,

      shall be deemed to be a statement made to the public by, and only by, the person who had caused the statement to be so expressed, made or contained;

  2. permits the publication of any advertisement whether in any news¬paper 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), "bargaining price" means—

    1. a price that is stated in any advertisement to be a bargain price, by reference to an ordinary price or otherwise, or

    2. 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—

    1. the offering of gifts, prizes or other items with the intention of not providing them as offered or creating 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;

    2. 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;

Thus the said provision of the Consumer Protection Act covers False Representation, False Offer, Price Scheme etc.

 

Further the Section 6 provides the objects of the Central Council of which clause ( e) deals with “the right to seek redressal against unfair trade practices (or restrictive trade practices) or unscrupulous exploitation of consumers.

 

Civil Remedy

 

Under Section 14 if the district forum upon completion of the procedure is satisfied that the allegations contained in the complaint about the goods or services are proved , it shall issue an order to the opposite party directing him to:

 

 

(f) discontinue the unfair trade practice or the restrictive trade practice or not to repeat them;

 

 

An appeal from such an order passed by the District Forum would lie to State Commission and thereafter to the National Commission. Finally a person aggrieved from order of National Commission may prefer an appeal against the order to the Supreme Court.

 

For more information on Unfair Trade Practice, please write to us at info@ssrana.com

 

 
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