Unfair & Restrictive Trade Practices

Slide2- Customer A customer is the most important visitor on our premises, he is not dependent on us. We are dependent on him. He is not an interruption in our work. He is the purpose of it. He is not an outsider in our business. He is part of it. We are not doing him a favor by serving him. He is doing us a favor by giving us an opportunity to do so. Slide 3- Unfair Trade Practices Slide 4- Meaning 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 Slide 5- Why needed With the liberalisation and globalisation of the Indian economy, as could be expected, firms have been aggressively and vigorously promoting their products and services. In a competitive environment, every representation of a product or service, is about what others are not.

In the new corporate and business world today where there is cut throat competition the business persons daringly use unfair trade practices to edge over the other. This may give them advantage for short term but in long run it affects the organization and eventually the entire industry.

Slide 6- Types of Unfair Trade Practice 1. False representation or statements 2. Misleading Advertisement 3. Offer of gift or prize 4. Offer of contest 5. Sale of sub standard goods 6. Hoarding or destruction of goods Slide 7- 1)False representation or statements Adopting misrepresentation of facts to promote sale, use or supply of goods or services, e.g. Misleading buyers about anothers 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 Slide 8- 2) Misleading Advertisements
Be it for a zero cholesterol snack or a baby oil that leads to strong bones, or tonics that help a child grow faster, misleading advertisements are drawing unsuspecting consumers into buying products that offer minimal or no health benefits . Taking note of the scores of misleading advertisements that seek to woo mothers, children and adults, the government is planning to come out with a policy to curb the advertisement that are aired on different channels or printed in newspapers and magazines across the country every day.

Expressing concern over the trend, Consumer Affairs Minister KV Thomas on Saturday said: The government will soon come out with a policy to curb the practice of misleading ads in print and TV media that distort competition and violate the basic rights of the consumers. Regarding such advertisements that go on air or are published with impunity, especially for health oils and tonics or nutritional supplements, Thomas said the government is very serious about checking this menace. The minister said: The influence of ads on consumer choice is undeniable. We have noticed that a lot of misleading ads especially on health tonics and oils are coming in print and TV media and this is a disturbing trend. Thomas made the observations in an address at a consumer awareness seminar organised by the consumer affairs ministry. Misleading advertisements distort competition and violate the basic rights of consumers. We are in talks with stakeholders like corporates and media to come out with a policy mechanism to tackle this, he said. Similar thoughts were expressed by Consumers Affairs Secretary Pankaj Agarwal who said that the ministry, through different awareness programmes, was trying to sensitise consumers and business executives regarding consumer grievances and services. The government has drafted a number of legislations that have provisions to deal with misleading claims and ads like the Drugs and Cosmetics Act 1940, the Drugs and Magic Remedies Objectionable Advertisements Act 1955, Food Safety and Standards Act 2006, etc. According to Agarwal, through government data, the Food Safety Standards and Authority of India (FSSAI) had so far identified 38 food items with misleading claims. Manufacturer of these items had been served show-cause notices and their replies were being examined by the FSSAI. A three-member committee of the FSSAI had also recommended prosecution in case of 38 products; proceedings had been initiated against 19 products and their manufacturers, he said. In India, the content of advertisements is regulated by private bodies like the Advertising Standards Council of India and the News Broadcasting Association. About 30-40 countries have self-regulation on advertisement content. Other countries have an executive body or trade commission to monitor misleading advertisements.

Slide9- Case Law New 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 others disgruntled response, though muted,

clearly points cynically towards Colgate (especially as a background jingle similar to the one in Colgates 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.

Slide 10- 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 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 bands 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. Slide11- 3) Offer 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.

Slide 12- 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. Slide 134) Offer 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

Slide 14- 5) Sale 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 Slide 15- 6)Hoarding 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. Slide 16- Inquiries & Investigations by Commission Upon receiving a complaint of facts which constitutes such practice from any trace association or from any consumer or a registered consumers association, whether s uch 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.

Slide 17- Order of Commission

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 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 Slide 18- Restrictive Trade Practices Slide 19- Meaning 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 Slide 20- Restrictive Trade Practice- the three factors 1) 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 tot the sake of any goods or to the performance of any services although ostensibly relating to any other matter or thing. Slide 21, 22- 2) 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 goods do not exist at the time of contract of sale but subsequently come into existence. 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 a ctually issued, they are not goods; Slide 23- 3)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. Slide 24- 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. Slide 25- Filing of complaint under MRTP act Slide 26- continuation Slide 27- Regulation of MRTP Slide 28- regulation of RTP and UTP Slide 29 and 30- Concluion 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. The Restrictive Trade Practice, besides adversely affecting economic growth, blunted Indian companies ability to grow, consolidate and improve competitiveness. This has had a very dampening effect on their global competitiveness. The objective of the Restrictive and Unfair Trade Practice Act is to engender competition. The concept of public interest which includes consumer interest permeates the regulatory framework provided for the prohibition of monopolistic, restrictive and unfair trade practices in both the statutes.