Report on

Marketing Decisions Within the Legal Framework

Submitted By:

Contents
INTORDUCTION .................................................................................................................................. 3 LAWS AND MARKETING................................................................................................................... 3 CONSUMER RIGHTS IN INDIA ..................................................................................................... 3 LEGAL ASPECTS IN PRODUCT DEVELOPMENT ...................................................................... 4 MARKETING MIX AND LEGAL OBLIGATIONS ........................................................................ 5 TRANSACTION - A LEGAL RELATIONSHIP .............................................................................. 6 EQUAL ACCESS TO THE MARKET BY ALL COMPETITORS .................................................. 7 CASES: BUSINESS LEGISLATION .................................................................................................... 7 Case 1: Holding Business for Social Cost .......................................................................................... 7 Case2 : Consumer Protection .............................................................................................................. 8 Case 3: Protecting Social Interest ....................................................................................................... 8 CONCLUSION ....................................................................................................................................... 9 REFERENCES ....................................................................................................................................... 9

INTORDUCTION The present form of marketing, which is over the period of time emerged as a discipline, is evolution of an age-old exchange process. Today marketing has become a much more complex process than ever with the shifting of power from sellers to buyers, coupled with technological advancement, which has transformed the entire transaction process to take place without any time-place barrier. It has converged world market into a global village leading to wider choices to customers to pick up the products and services from anywhere at any time. In the free market economies of the countries across the world, the governments try to make the marketing exchange process simpler through the policies and legislation. However, to maintain the discipline in business operations, exercise control for healthy growth of industries and protect the customers from unscrupulous marketers, the governments continuously evolves the business legislation. Hence, it becomes necessary for the marketers to formulate the marketing strategies in 4Ps within the four boundaries of the law of the land, justifying the means to the goals attended. LAWS AND MARKETING The laws and regulations of the land affect the marketing activities many ways. In the society to satisfy the needs, wants and demands of the individuals the business transactions are taking place and which involves activities such as manufacturing, storage, sales, distribution and finance. To regulate these activities in industry, trade and commerce in the State, the set of laws are required. These laws are called as Business Laws. It includes laws relating to sale of goods, business contracts, company formation, unfair and restrictive trade practices, negotiable instruments, manufacturing, promotion and distribution etc. The business laws protect consumers, protect the businesses from each other and simultaneously protect the interest of the society. Even the free market economies like USA has the regulations to control the domestic and exports sales activities of the marketers in the interest of the consumes, society, industry and the country at large. The country may have laws for restricting the certain class of goods leaving or entering the national boundary. For example the Indian law absolutely prohibits selling nuclear arms and narcotic drugs in the market. For the imported goods, the countries across the world have passed the antidumping laws and restricted the imports through quota system. The legislation is enforced to maintain the competitive business environment. Certain laws are as given below. CONSUMER RIGHTS IN INDIA Every citizen in the country becomes a consumer in one way or the other while purchasing and using various goods and services. A consumer is anyone who buys or agrees to buy any goods or services for a price, which has been paid or promised to be paid, under any system of deferred payment. A consumer also includes any user of such goods other than the person who actually buys goods and such use is made with the approval of purchaser. However, a person is not a consumer if he purchases goods for commercial or resale purchase. There are four basic consumers right as the consumer consume the product and service as a part of the social; process and consequence and these rights are The right to be protected. The right to be informed. The right to choose.

The right to be heard. The right to redress The right to consumer education. The right to healthy environment. The right to satisfaction of basic needs. So the companies with mal-intentions use deceptive sales practices such as misrepresenting the product, misleading advertising, deceive in packaging, manufacture and supply unsafe products for human consumption and use, supply the material with diluted specifications as against the one promised etc. To curb such practices, regulations are enforced through the legislation. The business laws protect the consumer from getting cheated or deceived and provide maximum access to the market. LEGAL ASPECTS IN PRODUCT DEVELOPMENT In todays era of mega competition wherein technology plays a major role the most of the leading firms adopt the strategy of differentiation through new product development. Example: - INTELL and SONI wherein the major strategy focus is on new product development . The product life cycle is deliberately compressed and old product are killed and replaced with the new and innovative products. In todays context, the product must be competitive with the environment standards and should be harmless for usage and human consumption the key question include. Does the manufacturing process avoid pollution the environment? Do the packaging is not adding to waste generation and creating environmental problems? Do the product and its packaging after being used have recycling potential? Do the product approval by the appropriate agency and certified for usage? Do the product harmless for usage and consumption by human beings?

The government and the consumer group are the watchdog for the new product in the market. There is host of legislation for arresting the introduction of harmful products in the market. The classic example is government regulations banning the use of CFC (chlorofluorocarbons ) as refrigerant or as ingredient in aerosol containers. To look in to the setting of standard for product commodities, materials and process at national and international level Bureau of Indian Standard came in to force. Bureau of Indian Standard is a statutory organization established under the Bureau of Indian standard Act,1986. IPR An Intellectual Capital The term Intellectual Property Rights, cannot that there is a value attached to the intellectual contribution as a whole IPR is a mixture of industrial property and copyrights Indian IPR scenario Intellectual property in India is well established at all level statutory administration and Indicial and cover four key areas mentioned below.

1. Patent: India is progressively tightening the protection available to make its patent laws and is compatible with the Trade Related aspects of Intellectual Property and service(TRIPS) agreement under WTO by 2005 . Existing patent laws the patent Act of 1990. 2. Copyright: A new copyright Act of 1999 replaced the copyright Act of 1957 The Act vests copyright in the authors on creation of their works and require no registration. The Act covers computer programmes, satellite broadcasting and digital technology. 3. Design: On May 25, 2000 the new Design Act was publically notified. The international classification will now take effect and may now be claimed from application filled in World Trade Organisation and Paris Convention countries the Design registration in India is intended to protect designs which have an industrial or commercial use and protect only for the appearance of the article and not how it works. PRICING DECISIONS LEGAL ASPACTS The product pricing decisions are very sensitive in nature and the firms always want to keep secrecy about it. In todays competitive environment, for survival and growth they pricing tool to make volume sales, increase market share dispose of the accumulated out dates stocks or to click a deal with the customer. Former price comparison In a Bargaining Price the marketer offers relocation on the marketers earlier or former price of the product in this. The former price is actual price at which product was offer to the public on the regular basis. If the former price is genuine the bargain price advertised is true one. However, if former price is fictious the bargain price advertised is false and buyer is not getting usually low price as expected Price Discrimination : For same grade or quality of difference purchased or group of purchase if resulting in to lessening of the competition focus under the unfair trade practices In such cases law prohibits the price discrimination. Quantity Discount: This is commonly used for motivating customer to purchase is large quantity so that landed units price of the product for the buyer is reduced resulting into his economy. Functional Discount: Normally the functional discount structure evolved by the firm is based on the difference in the distribution functions of each of the channel member such as distributing retailer C&F agent, stockiest etc. MARKETING MIX AND LEGAL OBLIGATIONS The product may be in tangible or intangible form, which needs to satisfy the basic needs of the customer. The product has a price tag attached to it depending on its quality, utility, competitive positioning and affordability to the customer.

The product should have the place for access or availability to be picked up by the consumer i.e. time and place utility to the consumer and it is done through the distribution channel and logistics. The communication about the product is done through advertising media or through some promotional programme.

The fine-tuning to each of the above elements is given through its sub-mix as indicated in product mix figure. However, it is necessary that all these elements should be in harmony to achieve the desired marketing objectives. The degree of importance to each of these varies with the product, customer, marketing environment and the marketing strategy evolved. The planning of these elements and implementation of the marketing strategies needs to be done strictly within the framework of the legislation. The deceptive sales practices for short-term gains may put the seller in the legal trap. The seller has always to be very careful (not to involve in restrictive or unfair practices) in designing his offerings and implementing the marketing programmes to avoid legal trap and the penalties thereafter. Hence, as a good individual or corporate citizen of the country the seller has to discharge legal obligations during pre, post and during the transaction process. In addition he has to remain competitive not only for growth and survival also. Before formulating the marketing strategy the marketing manager has to identify the threats to avoid risk. Apart from the competition the other major threat may be the government regulations. While achieving the business objectives of profits and customer satisfaction, the marketing manager needs to consider the legal restrictions before implementing the marketing programme based on the corporate strategy to avoid the legal trap. TRANSACTION - A LEGAL RELATIONSHIP For the sales transaction to become a valid contract, The Contract Act 1872, lays down the following essential elements. 1. Proposal and acceptance. Quotation from seller and order from buyer for the product or services. 2. Consideration. It is a promise for promise in return. Buyer realizes product or service form supplier for price. Hence, Price is the consideration here.

3. Capacity of parties of contract. The contracting parties should be of age of the majority (18 years) and should have a sound mind (not insane or lunatic). 4. Free Consent. Both the buyer and seller have agreed upon on some terms and condition with regard to product quality, features, price, quantity, usage and output and terms of deliver and payments etc. 5. Documented. Any sales contract should be documented in writing and registered. The enquiry, quotation, order, order acknowledgements in writing and duly signed by buyer and seller are the documents of the sales contract between buyer and seller. 6. An agreement should not be void. An agreement should be enforceable by law. There may be agreement between the buyer and seller on the transaction, but this agreement cannot be called as contract unless it satisfies the above conditions. Hence all agreements are not contract but all contracts are agreement and are enforceable by law. Right from the production to the consumption of product or services there are numerous stages involved, wherein the transfer of ownership title of the product takes place from manufacturer to wholesaler to stockiest to retailer and finally to consumer. The buying and selling process put the buyer and seller in contract, entails consideration of legal rights, obligations and available remedies for breach. In case the product is not performing as specified, there is breach of condition of performance guarantee. In case the seller is not attending the faulty equipment within the warranty period, the supplier is at fault of deficiency in services and can be sued in court of law for not fulfilling his obligation. The legal provisions are available for conflict resolution through arbitration, conciliation or mediation. EQUAL ACCESS TO THE MARKET BY ALL COMPETITORS The free market economy allows the healthy competition amongst the manufacturers or marketers. The competition is the fundamental strength of market driven economy. In the market place some companies are stronger than other and can take more risk and compete in the better way than others. However, the smaller companies because of lack or paucity resources are unable to take more risk and cannot compete with the bigger and stronger players. This results into overpowering of smaller companies by the large firms to dominate the markets. The bigger companies may go in for restrictive trade practices like creating barriers for market entry to smaller firms and further resulting into market domination by them. Hence the business laws need to curb such unfair trade practices and prevent the smaller fish being swallowed by the bigger ones. The MRTP act gives the protection against unfair trade practices and monopolies. CASES: BUSINESS LEGISLATION Case 1: Holding Business for Social Cost Emission Norms for Motor Vehicles and Auto Fuel. The emission norms for the motor vehicles are specified in Rule 115 of Motor Vehicle Rules 1989. Emission regulation was introduced for petrol passenger cars in 1991 for the first time. For diesel passenger cars, it was introduced in 1992. However, for different categories of vehicles the norms were first revised in 1990 and subsequently revised in 1992, 1996 and 2000. Euro-I norms have been brought in force w.e.f. April 01, 2000 for all categories of motor vehicles running on petrol or diesel. The Bharat Stage II which is equivalent to Euro II (applicable to vehicles upto 3500

kgs GVW) has been brought into force only in metros. Euro II norms are applicable in Bangalore, Hyderabad and Ahmedabad from 2004 and the entire country from April 1, 2005. Euro-III equivalent emission norms shall be introduced in Delhi, Mumbai, Chennai, Kolkatta, Bangalore, Hyderabad and Ahmedabad from April 1, 2004 and extended to other parts of the country from 2010. This will be binding to Auto manufacturers or their products to be sold in the Indian market. As regards Auto Fuel Policy THE UNION Cabinet approved the recommendations made by the Experts Committee on which entails implementation of Bharat Stage II (Euro-II) vehicle. emission norms in the country by April 1, 2005, a move that would involve an investment of Rs. 17,000 Crores by the oil industry to upgrade their technology to produce fuel conforming to the Euro II norms. Case2 : Consumer Protection Consumer court fines Coca Cola:Naresh Thakkar v/s Hindustan Coca Cola Beverage Private Limited. Naresh Thakkar complained that the bottle of coke, sold to him by the companys agent, contained some thing more than he just drinks and that the foreign particle upset his stomach. The company rebuttle that Thakkar had not come with clear hands as he never had a proper receipt of the transaction. Though it would not be determined whether contents of the bottle were injurious to health as neither party went ahead with the test, the district forum noted that foreign parties were indeed present in the bottle , adding there was deficiency in service to that extent. Coca Cola further appealed before the state commission, which dismissed it saying there was a 133 days delay. It did not accept the ground sought for condemnation of delay that the clerk had lost the certified copy. The company then approached the National Commission which also turned down the petition saying that there was no ground to interfere with the order of the state commission. Coca Cola finally approached to National Consumer Dispute Redressal Commission which dismissed a revision fited by Hindustan coca cola Beverage Private Limited for not filing it within the stipulated time. Further, National Consumer Dispute Redressal Commission uphels a district forum order directing the company to pay the compensable amount of Rs 2500/- and litigation of Rs. 500/- to an aggrieved person for setting him a battle of soft drink containing foreign particles. Case 3: Protecting Social Interest Pollution is a civil wrong attracting exemplary damage. The Supreme Court held that pollution is a civil wrong committed against the community as a whole. As per Chapter VII of the Water (Prevention and Control of Pollution) Act, 1974, Section 15 of the Environment (Protection) Act, 1986 and Chapter VI of the Air (Prevention and Control of Pollution) Act, 1981, the Court could prosecute the person guilty of contravention of the above provisions, by imprisonment or fine or both. Hence the person or organization guilty of such action has to compensate for the damages to those who have suffered loss in addition to damages or compensation for restoration of environment and ecology. As per the Article 32, court can award damages in public interest litigation and a writ petition. M/s Span Motel interfered with the natural flow of river water, thereby disturbing the environment and ecology of the area. The Supreme Court directed it to show cause why pollution fine in addition to

compensation for restitution of environment and ecology should not be levied on it. M/s Span Motel contented that compensation could only be granted to victims whose fundamental rights were violated, victims of atrocious behaviour of public authorities or victims of an arbitrary action. It also contended that fine is a component of criminal jurisprudence and the same cannot be utilized in civil proceedings. Further fine could be imposed only if provided by a statute and that too after a fair trial. As against the above the Supreme Court has held that any disturbance of the basic environment elements namely air, water and soil, would be hazardous to life within the meaning of Article 21 of the Constitution. Any disturbance of these would make the victims of such pollution entitled to damages The Court directed to M/s Span Motel to pay exemplary damages to the community, which suffered due to pollution. CONCLUSION The marketing professionals cannot ignore the business regulations in the country. As with any illegal activity, ignorance of law is not adequate defence and marketing managers cannot plead a lack of understanding of the prevailing legislation, if their organization becomes the target of government investigation on unfair and restrictive trade practices on product, price, advertising or distribution fronts. For gaining a competitive edge, the organization may adopt the aggressive marketing strategy, which the marketing manager has to see that it is not infringing the three areas-protecting businesses organizations from each other, protecting the consumer and protecting the social interest. REFERENCES 1. Faiz, INDIAN LAWS IN MARKETING http://www.managementparadise.com/forums/marketing-management-rm-im/22847indian-laws-marketing.html, accessed on 28 -04-2012 2. V.V.Sople , Legal Aspects Of Marketing In India, New Age International (2007) 3. M.A. Sujan, Harish Sujan , Marketing and the laws, Wiley Eastern Limited,(1994)