UNFAIR TRADE PRACTICES

(MRTU/PULP)

BY:-ROHAN VISHWASRAO

The Monopolistic and Restrictive trade practices act, 1969

The Monopolistic and Restrictive Trade Practices Act, 1969, was enacted

To ensure that the operation of the economic system does not result in the concentration of economic power in hands of few,

To provide for the control of monopolies, and To prohibit monopolistic and restrictive trade

practices. The MRTP Act extends to the whole of India except Jammu and Kashmir.

Unfair Trade PracticeNeed

Liberalisation and globalisation leading to excess competition

Aggressive promotion of products and services. Questions about truthfulness and fairness of

representation of products and services. Adherence to rules of the gameNot only the consumers but even the firms need

adequate law against unfair trade practices to have some ‘rules of the game’ for competing among themselves. In a competitive environment, every representation of a product or service, is about what ‘others are not’.

Unfair Trade Practice u/s 36AMeaning

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 is an unfair trade practice

Trade means any trade, business, industry, profession or occupation relating to the production, supply, distribution or control of goods and includes the provisions of any services

False representation about the goods, services, warranty, uses, benefits, characteristics

Unfair Trade PracticeTypes of Unfair Trade Practice

False representation or statementsMisleading advertisements Offer of gift or prizeOffer of contestSale of sub standard goodsHoarding or destruction of goods

Unfair Trade Practice False representation or statementsAdopting misrepresentation of facts to promote

sale, use or supply of goods or services, e.g. Misleading buyers about another’s goods or

services. Eg. Pepsodent whitens teeth twice as effectively as Colgate.

Falsely claiming a sponsorship, approval or affiliation. Eg. Our software is tested & approved by Microsoft.

Offering misleading warranty or guarantee. Eg. A computer with 3 yrs warranty requires entering into an AMC from the beginning

Unfair Trade Practice Misleading Advertisements

A trade practice which 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 if the advertisement.

Case LawNew Pepsodent v/s Colgate Case

Pepsodent, which, in its advertisements, claimed, “New Pepsodent is 102% better than the leading toothpaste.”

The ad showed two boys being asked the name of the toothpaste brand that they used. One happily exclaims Pepsodent, while the other’s disgruntled response, though muted, clearly points cynically towards Colgate (especially as a background jingle similar to the one in Colgate’s ads is used quite appropriately).

At that time, Colgate toothpaste ruled the market with a massive 59% market share.

Expectedly, Colgate took HLL (which owns Pepsodent) to court under Unfair Trade Practice

HLL had to withdraw its ads.

Case Law Colgate Dental Cream- Double Protection Case

In June, 1998, Colgate introduced its toothpaste as Colgate Dental Cream- Double Protection. (CDC-DP). It gave wide publicity through print and television that the toothpaste was 2.5 times superior to any ordinary toothpaste in fighting germs. Hindustan Lever Ltd. moved the Monopolies Inquiry Commission alleging that the advertisements disparaged toothpastes manufactured by it under various brand names. It contended that a reference to ‘ordinary’ toothpaste was to all other brands than Colgate.

The Commission took the position that the claim of 2.5 times superiority of CDC-DP over any ordinary toothpaste did not refer to any identifiable product or any identifiable manufacturer. As a result, it could not be a case of disparagement of goods. It should be noted that ‘disparagement’ is not the only ground for an advertisement to be an unfair trade practice.

The same advertisement could still be contested as an unfair trade practice under Section 36A(1)(a) on the grounds of misrepresenting quality. But this would be a different issue.

As a matter of fact, the Commission took the view that there was nothing called an ‘ordinary’ toothpaste. Thus, a claim of 2.5 times superiority was misleading and ordered the advertisement to be stopped.

Unfair Trade PracticeOffer of gift or prize

A trade practice which permits 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. Offering, then with holding gifts/prizes. False claim of offering gifts/services when

cost is included partly in the price.

Case Law Horlicks Hidden Wealth Prize Offer

The HMM Ltd. manufactured and marketed Horlicks. In September 1985, it advertised a scheme called the ‘Hidden Wealth Prize Offer’ for the buyers in Delhi. A lucky purchaser of a bottle of Horlicks could find a coupon inside the bottle. The coupons indicated the prizes. The prizes were to be claimed by January 15, 1986. The advertisements stated that even if the buyers’ coupon did not carry a winning message, he/she had “several more chances to try

The Commission had held this to be an unfair trade practice as the system of getting coupon was nothing but a lottery. It was also of the view that such schemes did not benefit the general run of consumers as only a small fraction of the buyers of Horlicks got the benefit of the said scheme. The prizes were many times costlier than the price of a bottle of Horlicks.

The Commission gave its judgement in 1989. In the light of its own experiences, it was never an issue that schemes like this were not a ‘contest, lottery, game of chance’ for ‘direct or indirect’ promotion of sales. As the case was for a period prior to 1991 amendment, what was to be emphasized was that it caused loss or injury to the consumers. The Supreme Court, in its short judgement in 1998, commented that this was not a case of lottery as there was: no draw of lots or that a price was charged for participation in the draw. The fact that some bottles of Horlicks contained a slip of paper which entitled the buyer to a prize is not a lottery in the ordinary sense of the word.

Unfair Trade PracticeOffer of contest

A trade practice which permits 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.Examples : Shirt prices slashed by two third 50 % discount clearance sale Buy fans at 30% discount Motors at 40% discount

Unfair Trade PracticeSale of sub standard goods

A trade practice which permits the sale or supply or goods intended to be used by consumers, do not comply with the standards prescribed by complete authority relating to performance, compositions , content, designs, constructions, finishing or packaging. Examples :

Medicines not manufactured according to IP standards

Electrical items not manufactured as per standards Food purity not as required

Unfair Trade PracticeHoarding or destruction of goods

A trade practices which permits the

hoarding or destruction of goods, Or refuses to sell the goods or to make them available for sale, or to provide any services, if such hoarding or destruction or refusal raises or tends to raise or is intended to raises or tends to raise or is intended to raise, the cost of those or other similar goods or services.

Inquiries & Investigations by Commission u/s 36BUpon receiving a complaint of facts which

constitutes such practice from any trace association or from any consumer or a registered consumers’ association, whether such consumer is a member of that consumers’ association or not; or

Upon reference made to it by the Central Government or a State Government;

Upon an application made to it by the Director General; or

Upon its own knowledge or information.

Relief-Order of Commission u/s 36D If, after inquiry, Commission is of the opinion that

the practices is prejudicial to the public interest, or to the interest of any consumer or consumers generally, it may, by order direct that

The practices shall be discontinued or shall not be repeated;

Any agreement related to such unfair trade practices shall be treated as void

Any information or advertisement relating to such unfair trade practice shall be disclosed, issued or published in such manner as may be specified in the order. The company has to be given an opportunity to prove its case that it did not commit unfair trade practice

Monopolistic trade practiceA monopolistic trade practice is one, which has

or is likely to have the effect of:maintaining the prices at an unreasonable level; unreasonably preventing or lessening

competitionlimiting technical development or capital

investment deteriorating the quality of any goods

produced, supplied or distribute; and increasing unreasonably – cost, charges, prices

and profits

Inquiry into monopolistic trade practicesThe Commission may inquire into Any monopolistic trade practice, Upon a reference made to it by the

Central Government or Upon an application made to it by the

Director General or Upon it own knowledge or information

Relief availableCentral Government may pass such orders

as it thinks fit to remedy On an inquiry report of the Commission, the

Central Government may- Prohibit the owner(s) of the concerned

undertaking(s) from continuing to indulge in a monopolistic trade practice; or

Prohibit the owner of any class of undertakings or undertakings generally, from continuing to indulge in any monopolistic trade practice in relation to the goods or services.

Restrictive Trade PracticeMeaning

A restrictive trade practice means a trade practice which has or may have the effect of preventing, distorting or restricting competition in any manner and in particular-

Which tends to obstruct the flow of capital or resources into the stream of production; or

Which tends to bring about manipulation of process or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner or to impose on the consumer’s unjustified costs or restrictions?

A restrictive trade practice shall be deemed to be prejudicial to the public interest.

There are two parts to the definition of restrictive trade practice.

1.To carrying on of such trade practice which has or may have the effect of preventing, distorting or restricting competition in any manner

2.Carrying on of such trade practice which interalia has the effect on imposing unjustified costs or restrictions on consumers

Restrictive Trade Practice Price

Price in relation to sale of any goods or to the performance of any services includes every valuable consideration, whether direct or indirect and includes any consideration which in effect relates to the sake of any goods or to the performance of any services although ostensibly relating to any other matter or thing.

Restrictive Trade Practice Goods

Specific goods : Goods identified and agreed upon at the time of contract of sale is made.

Unascertained or generic goods are indicated by description and are not separately identified

Future goods : to be manufactured or purchased or acquired be the seller after the making of the contract of sale. These goodsdo not exist at the time of contract of sale but subsequently come into existence.

Restrictive Trade Practice Goods

The following are also included Products manufactured, processed or mined in India; Shares and stocks, including issue of shares before

allotment; Goods imported into India wherever reference is

made to goods supplied. Even things like goodwill, copyright, trademark,

patent etc. are all goods. Gas and electricity have also been held to be goods. Current, money is not goods. Real estate transactions are not covered by the meaning of the term ‘goods’. Till the shares are actually issued, they are not goods

Restrictive Trade Practice Service

Service means service which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, chit fund, real estate, transport, processing, supply of electrical or other energy, boarding or lodging or both, entertainment, amusement or the purveying of news or other information.

Service does not include the rendering of any service free of charge or under a contract of personal service.

Restrictive Trade Practice Registration of Agreements

Any agreement relating to production, storage, supply, distribution or control of goods or for performance of any services, which restricts seller or buyer of goods or services in any manner, is an agreement relating to restrictive trade practice.

Inquiry into restrictive trade practices

The Commission may inquire into any restrictive trade practice

Upon receiving a complaint from any trade association, consumer or a registered consumer association, or

Upon a reference made to it by the Central or State Government or

Upon its own knowledge or information

Restrictive Trade Practice Relief available

The commission shall if after making an inquiry it is of the opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it may direct that –

The practice shall be discontinued or shall not be repeated;

The agreement relating thereto shall be void in respect of such restrictive trade practice or shall stand modified.

The Commission may permit the party to any restrictive trade practice to take steps so that it is no longer prejudicial to the public interest

Conclusion

This is true that Unfair Trade Practice is an inseparable part of the business but it is not the fair part of business. It may give you benefits for short time period but in long run it has a notable impact on business.

It has a direct impact not only on that particular company but also on entire market.

The impact of Unfair Trade Practice can effect the reputation of industry, country and the employee working in that organization. Therefore companies should not concentrate on the shortcut ways and get involve in Unfair Trade Practice.

THANK YOU