Unfair Trade Practices and Restrictive Trade Practices

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Unfair Trade Practices and Restrictive Trade Practices

What is Unfair Trade Practice?

An unfair trade practice refers to that malpractice of a trader that is unethical or fraudulent. These practices cause an inconvenience or grievance to consumers.

An unfair trade practice is defined under Section 2(1)(r) of the Consumer Protection Act, 1986. According to this definition, it is a trade practice carried out for the promotion of sale. It is the distribution or utilisation of any good or service by adopting a deceptive method or practice.

The following practices fall under unfair trade practice:

1. An oral or written statement or visible representation that:

– Falsely represents a good or service to be of a particular standard, quality, grade and so on.

– Falsely represents any re-built, second-hand, reconditioned, renovated or old goods as new.

– Represents that a good or service has sponsorship, approval, uses, benefits and so on which they do not have. The same could apply to the seller or service provider.

– Makes a misleading or false representation regarding the need and usefulness of any good or service. 

– Provides to the public any warranty or guarantee of the performance of the length of the life of the product. A service can be continued till deemed satisfactory.

– Gives a misleading image of the good, service or trade like the price of the product.

For the above clauses, any statement made via expression by sellers on the wrapper or container of the item can qualify for unfair trade practice. The information of the product is also placed inside the item, attached to the product, or accompanying it.

2. An advertisement published in any newspaper or other means of communication to the general public may also result in unfair trade practice if the price communicated is misleading or a bargain price. This means that an unfair trade practice would be when a rational individual on reading, hearing or seeing the advertisement would think to be a bargain price as compared to the product’s ordinary sale price.

3. Wrongful or deceitful permissions or expressions like:

– Offering gifts, prizes and so on without any intention of actually fulfilling the expression.

– Putting across a product as free of charge when it is actually not as the cost is being covered partly or wholly in the transaction amount.

– Conducting games of chance or skill like the lottery in order to promote a particular product directly or indirectly.

– Not granting participants of a scheme their prize by closing the information about the final results of the scheme.

4. Allowing the sale of products, having the knowledge or reason to believe that the product is not up to the standards of a competent authority. This could be in terms of design, contents, packaging, etc.

5. Permitting the hoarding or destruction of products with the intention of raising the prices of the goods.

Illustrations of Unfair Trade Practices:

  • A dress has been used for 2 months and is now being sold by a seller as a new dress.
  • The battery of a mobile phone is guaranteed to work well for one year but wears away in a month.
  • A geyser that is not ISI approved has an ISI mark.
  • A table of Rs. 500 is sold online with Rs. 600 delivery charge, but the good is claimed by the seller to be free of cost.

Case Laws:

Deficiency of service and unfair trade practices often come hand in hand, as seen in Cosmopolitan Hospitals and Another. vs Vasantha P. Nair[1]. Other prominent cases include N.R.Swaminathan vs Union of India[2] and Pooja Menghani vs Sebi[3].

What is Restrictive Trade Practice?

A restrictive trade practice is defined under Section 2(1)(nnn) of the Consumer Protection Act, 1986. The section covers all the price related deceit that the traders may indulge in to maximise their profits.

Restrictive trade practices are targeted at the consumers who are burdened with restriction and unjustified costs through the practices of the trader. The trader manipulates the price or the conditions of delivery of the product which results in restrictive trade practice. This affects the supply of goods and services in the market and includes:

– A likely or definite rise in the price of a commodity due to the delay of the trader to provide the good or service.

– A compulsion to purchase, hire or avail any good or service in order to obtain any other good or service.

Illustrations of Restrictive Trade Practices:

  • A trader accumulates his stock of food grains in order to increase the price of the grains in the market so that he can sell it at a higher price.
  • In order to buy a television from trader X, one needs to buy a table first.

Case Laws

Amongst a plethora of cases, certain significant cases of Restrictive Trade Practices include Sikka Gas Agency vs Satyendra Prasad[4] and Dlf Limited vs Mridul Estate (Pvt.) Ltd[5]

Difference Between Unfair Trade Practice and Restrictive Trade Practice:

An unfair trade practice is the deceitful and misleading representation of goods and services which portrays a false image of the product. Information regarding utility, quality and standard, style etc of goods and services may be twisted under this practice.

Restrictive Trade Practice, however, is when traders try to change the flow of money in the market in order to maximize their profits and to gain an upper hand in the market competition.Here, independent sellershike their collective profits by limiting supply by controlling selling prices or the prices of purchased inputs.This is the primary difference in unfair trade practice and restrictive trade practice.

An unfair trade practice is defined under Section 2(1)(r) of the Consumer Protection Act, 1986, whereas, Restrictive trade practice is defined under Section 2(1)(nnn).

This is the fundamental difference between the two, unfair trade practices being a broader concept.

Frequently Asked Questions (FAQs)

  1. What is an everyday example of an unfair practice?

Often, the advertisements shown on the television show a wrong representation of products. This may result in unfair trade practice.

  1. What is the significance of unfair and restrictive trade practice regulations today?

With an increase in sellers in the market, each seller tries to enhance his goods and services in order to surpass competitors and maximise profits. This cut-throat competition may result in the focus of satisfaction of consumers being forgotten. The exploitation of consumers is curbed through these regulations.

  1. What is the role of government certification in the sale of goods?

The government issues marks of certification on goods that match the prescribed or predetermined standards of the goods. Thus, the consumer can judge the quality of a product through these marks.

  1. Why is the ambit of unfair trade practice-wide as according to the Consumer Protection Act, 1986?

The consumers’ interests need to be safeguarded at all costs, in every possible circumstance. With the surge of complaints of consumers, the section of unfair trade practices has been widened in order to promote the well-being of the consumers.

[References]

[1]1992 CPJ NC 302

[2]W.P.No. 18635 of 1994

[3]Civil Appeal No. 2595 OF 2013

[4]First Appeal No.44 of 2017

[5]Revision Petition No. 412 OF 2011

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