Dr.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

Law of Torts: II and Consumer Protection

Topic:
UNFAIR TRADE PRACTICES AND COPRA

Submitted to:

Submitted By:

Miss. Kirti Singh

Sunidhi Verma

Asst. Professor

Roll No.: 139

Law of Torts - II and Consumer Protection

Semester: IV

TABLE OF CONTENTS:

Introduction
Background to Unfair Trade Practices
Unfair Trade Practices
Categories of Unfair Trade Practices
Misleading actions and Omissions
Aggressive practices
The blacklist
Unfair Trade Practices under COPRA
Case laws on UTPS
Sanctions and remedies
Conclusion

Acknowledgement:
I would like to express my special thanks of gratitude to my professor Miss. Kirti Singh who
gave me the golden opportunity to do this wonderful project on the topic Unfair Trade
Practices and COPRA, which also helped me in doing a lot of Research and I came to know
about so many new research areas.

Secondly I would also like to thank my parents and friends who helped me a lot in finalizing
this project within the limited time frame.

INTRODUCTION
The term Unfair Trade Practice (UTP) broadly refers to any fraudulent, deceptive or
dishonest trade practice; or business misrepresentation of the products or services that are
being sold; which is prohibited by a statute or has been recognised as actionable under law by
a judgement of the court. However, the term does not have a universal standard definition.
Unfair trade practices encompass a broad array of torts, all of which involve economic injury
brought on by deceptive or wrongful conduct. The legal theories that can be asserted include
claims such as trade secret misappropriation, unfair competition, false advertising. 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. There
is always been confusion regarding the correct definition for unfair and restrictive trade
practices, also the about which practices to be considered as unfair. The general prohibition
simply states that unfair commercial practices are prohibited. The wording is deliberately
wide to catch any unfair practices that may be developed in the future.
A practice is unfair if it fails to meet the standard of "professional diligence" (the standard of
skill and care that would reasonably be expected of a trader in its field of activity) and it
materially impairs an average consumer's ability to make an informed decision, causing him
to make a decision he would not otherwise have made.
In most cases, the average consumer will be taken to be reasonably well-informed,
reasonably observant and circumspect. But where a trading practice is specifically targeted at
a particular consumer group, the average consumer will be the average member of that group.
And if a clearly identifiable group of consumers is particularly vulnerable to a trading
practice (because of age, infirmity or credulity) in a way a trader could reasonably be
expected to foresee, and the practice is likely materially to distort decisions made only by that
group, the benchmark will be the average member of that group.
For example, the hard of hearing might be particularly vulnerable to a trader's advertisement
claiming that a telephone is "hearing aid compatible".

Background to Unfair Trade Practice:

The concept of Unfair Trade Practice draws a parallel from the previously applicable
Monopoly Restrictive Trade Practice (MRTP) Act, 1969 which has now been replaced by the
Competition Act, 2002. Section 36A of the erstwhile Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP Act), where 'unfair trade practice' was defined 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.1

UNFAIR TRADE PRACTICE:

In this Part, unless the context otherwise requires "unfair trade practice" means a trade
practice which, for the purpose of promoting the sale, use or supply of any goods or for the
provisions of any services, 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, (i) falsely represents that the goods are of a particular standard, quality, quantity, grade,
composition, style or model;
(ii) falsely represents that the services are of a particular standard, quality or grade;
(iii) falsely represents any re-built, second-hand, renovated, reconditioned or old goods as
new goods;
(iv) represents that the goods or services have sponsorships, approval, performance,
characteristics, accessories, uses or benefits which such goods or services do not have

(2) 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 of the advertisement.
1 Section 36A Monopoly Restrictive Trade Practice (MRTP) Act, 1969

Explanation: For the purpose of clause (2), "bargain price" means(a) a price that is stated in any advertisement to be a bargain price, by reference to an ordinary
price or otherwise, or
(b) 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
(a) 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.
(b) 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;
(4) permits the sale or supply of goods intended to be used, or are of a kind likely to be used
by consumers, knowing or having reason to believe that the goods do not comply with the
standards prescribed by competent authority relating to performance, composition, contents,
design, constructions, finishing or packaging as are necessary to prevent or reduce the risk of
injury to the person using the goods;
(5) permits the hoarding or destruction of goods, or refuses to sell the goods or to make them
available for sale, or to provide any service, if such hoarding or destruction or refusal raises
or tends to raise or is intended to raise, the cost of those or other similar goods or services.

CATEGORIES OF UNFAIR TRADE PRACTICES:

1) Misleading actions and omissions
Misleading acts and omissions are unfair commercial practices. In each case, the action or
omission must cause or be likely to cause the average consumer to take a different decision.
A misleading action contains false information or in some way deceives (or is likely to
deceive) the average customer. Examples include:

providing misleading information about the main characteristics, availability or origin

of a product, or false information about the trader himself (e.g. qualifications or
awards);

marketing a product in such a way that creates confusion with a competitor's products
(e.g. by using a similar brand name or logo); and

agreeing to be bound by a code of practice that contains a firm commitment (e.g. that
its members will only use wood from sustainable sources), displaying the code logo,
but breaching that commitment.

Leading real estate firm Unitech Ltd has been held guilty of resorting to "unfair trade
practice" by a consumer forum here and directed to pay a customer Rs 6.6 lakh for
making "illegal demands" from him after he booked a flat with it and paid the booking
amount. The District Consumer Disputes Redressal Forum, in its order, observed that the
firm and its agent made "unjustified" demands from the customer and also threatened to
forfeit his deposited money.

Misleading omissions are made when a trader omits or hides material information, provides it
in an unclear, unintelligible, ambiguous or untimely manner, or fails to make it clear he has a
commercial intent. What is material will depend on the circumstances, but it is generally
defined as information the average consumer needs to make an informed decision.
Limitations of space or time and whether the trader has taken other steps to convey the
information (such as stating "terms and conditions apply" and where they can be found) will
be taken into account as part of the context.
When a trader makes an "invitation to purchase" (e.g. by including an order form in a press
advertisement, or a page on a website enabling consumers to place an order) the regulations
specify the material information that must be included unless that information is apparent
from the context.
2) Aggressive practices
A commercial practice is aggressive if it significantly impairs (or is likely to significantly
impair) the average consumer's freedom of choice by the use of harassment, coercion

(including physical force) or undue influence and so causes or is likely to cause him to take a
different decision.
Undue influence results from a trader exploiting a position of power, even without using or
threatening physical force.
3) The blacklist
Thirty-one practices are deemed to be unfair in all circumstances. A trader carrying out any
one of these will have breached the CPRs, whether or not it had any effect on the average
consumer.
In addition to pyramid promotion schemes, bogus sales and "doorstepping" consumers at
home, the blacklist includes:

"Bait advertising" - advertising products at a specified price without disclosing that

the trader has reasonable grounds to believe he may not be able to supply them or
their equivalent at that price for a reasonable period or in reasonable quantities.

"Bait and switch" inviting consumers to buy one product but then trying to persuade
them to buy a different one e.g. by refusing to show them the original item, or to
take orders or make delivery arrangements, or by showing a defective sample.

Falsely stating a product will only be available (or available on certain terms) for a
very limited time to persuade the consumer to make an immediate decision.

Using "advertorials" (editorial comment to promote a product) without making it clear

that the trader has paid for the promotion.

Passing on materially inaccurate market information to persuade the consumer to buy

on less favourable terms than normal market conditions.

Claiming to offer a competition or prize promotion without awarding the prizes

described or a reasonable equivalent.

Describing a product as "free", "without charge" or similar, if the consumer has to pay
anything other than the unavoidable cost of responding, collecting or paying for
delivery of the item. There has been some debate about whether this will affect
standard "buy one get one free" offers.

Making persistent and unwanted solicitations by telephone, fax, email or similar,

except in circumstances and to the extent justified to enforce a contractual obligation
(e.g. legitimate debt collection).

Requiring a consumer claiming on an insurance policy to produce irrelevant

documents, or deliberately failing to respond to correspondence to dissuade the
consumer from pursuing his contractual rights.

Including in an advertisement a direct encouragement to children to buy advertised

products or persuade their parents or other adults to buy advertised products for them.

UNFAIR TRADE PRACTICES UNDER CONSUMER PROTECTION ACT,1986:

According to the provisions of the Consumer Protection Act, 1986 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 the practice of making any statement, whether orally or in writing or by
visible representation which falsely represents that the goods are of a particular standard,
quality, quantity, grade, composition, style or model; falsely represents that the services are of
a particular standard, quality or grade; falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods; makes a false or misleading representation
concerning the need for, or the usefulness of, any goods or services etc. 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. Bargaining price has been defined as a price that is stated in any
advertisement to be a bargain price, by reference to an ordinary price or otherwise, or 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.

Are unfair trade practices only relevant to consumers?

Most certainly not. Businesses are also big losers when it comes to unfair trade practices.
Firstly responsible businesses will lose sales to disreputable businesses that engage in UTPs
because the disreputable firms: unfairly increase their sales to the detriment of responsible
businesses; and reduce their costs of purchase or manufacture. Secondly UTPs can damage
consumer confidence to the extent that overall growth in the market is affected. This can
happen when consumers get overly wary about trying new products/services or new
businesses.

CASE LAWS ON UNFAIR TRADE PRACTICES IN INDIA:

1) O. K. Gaur S/o Late B. R. Gaur vs Choithram Hospital and

Research Centre[2012]:
Appellant suffered from polycystic kidney disease. Respondents hospital was the
only authorized hospital in the State for transplantation surgeries. Various tests
were conducted and large amount of money was extorted from appellant for tests
by respondent. At last surgery was done and appellant was in hospital for 2
months. It was also alleged by appellant that at the time of discharge, the
discharge card was purposely not given. As such appellant could not take
treatment elsewhere, and had to repeatedly go for follow-ups. Thus, there was
gross negligence on the part of respondent . On complaint filed by appellant for
compensation State Commission dismissed the same. Hence, Appellant appealed
and contended that respondent acted in negligence and extracted money from
appellant by showing unfair trade practices. Whether complaint filed by appellant
before the State Commission was within time or the same was time barred.
Appellant was operated for kidney transplant on 25-8-2005, whereas complaint
before the State Commission was filed on 30-7-2008. Complaint filed was barred
by limitation and no application for condonation of delay was filed by appellant.
There was no force in the plea that there was delay in performing kidney
transplant. As per material available on record, letter given for permission to
respondent hospital was sent on 5-7-2005 and transplant was to be done within
one month. If there had been some procedural delay, it could not be said that delay
amounted to any negligence on the part of respondent .Operation for kidney

transplant was carried out successfully and there was no evidence that any
excessive amount was charged or unnecessary tests were done .Impugned order
was upheld. Hence, the appeal dismissed.

2) Lord Shiva Co-operative Group Housing Society vs Vishnu Bhagwan

Sharma S/o O. P. Sharma [2012]:
Respondent/complainant filed complaint against petitioner/opposite party alleging
that he was member of petitioner's Society which allotted him flat and he deposited
the entire amount against the allotment of flat. Petitioner demanded excess amount
which was opposed. It was alleged that petitioner had not provided basic amenities
such as water connection, electricity and parking facilities, which it was bound to
provide. Thus, petitioner was liable to pay Rs.50,000/- as damages. On complaint,
petitioner was set ex parte by District Forum and held that there was deficiency in
service on part of petitioner and complaint was allowed. Aggrieved by the order of
District Forum, petitioner filed an appeal along with delay condonation petition. State
Commission dismissed the application. Petitioner had no case even on merits since
evidence led by respondent had gone unrebutted and no fault could be found with the
decision of District Forum. Further, a valuable right accrued in favour of respondent
of which he could not be deprived of . Hence, the appeal was dismissed.

3)Life Insurance Corporation of India vs Sudesh [2012]:

Respondents husband (deceased) obtained a policy for life of Rs.5 lakhs from appellant
LIC of India. Deceased died 13 months later after taking the policy and the claim under
the policy was repudiated by appellant on the ground that the deceased had withheld
material information at the time of seeking the insurance cover. Respondent filed
complaint, which was allowed by State Commission. Appellant relied entirely on the
record of treatment for repudiation of the claim under a policy taken more than one year.
Appellant could not point to any other evidence produced before the State Commission,
which could show that the deceased suffered from any or all of those ailments at the time
when the proposal for insurance was made. Question of disentitlement under the

insurance policy, on the ground of concealment/suppression of information, would have

arisen in case only if there was evidence to show that the insured had undergone
hospitalization/treatment for any disease in near proximity of the time when insurance
policy was obtained and had chosen not to disclose it . Further, voluntary disclosure of
information relating to occasional drinking, as made in the proposal form by the
deceased, was not investigated further before appellant chose to issue the insurance policy
in favour of the deceased. Thus impugned order of State Commission was upheld and the
appeal was dismissed.

4) Acupressure Therapy Health Centre (1986):

The respondents in this case were manufacturing acupresslsre sandals which they
claimed were designed to improve blood circulation, and keeping the users healthy by
walking daily on the chappals for 8 minutes every morning and evening before meals.
The respondents also claimed that WHO has approved of this therapy, When the matter
was referred to the All India Institute of Medical Sciences, it was very clearly stated by
way of medical opinion that there was no proven evidence in modern medical literature
that acupressure helps treat any ailment. and that the science of acupressure was not
accepted even in developed countries. Even Consumer Protection Act - the WHO
disclaimed any approval having been granted to the use of such sandals. Bafk Fealur
Further, on the box containing the chappals, it was mentioned that the sandals were not to
be used for more than ten minutes and that heart and blood pressure patients should
consult the doctor before using them, but these facts were not mentioned in the
advertisement. The MRTP Commission held that the facts of acupressure thereby were
false and misleading. According, injection was issues restraining the respondent from
giving out advertisements containing misleading facts.

5) DG (I & R), New Delhi v. Principal, Kathiar Medical College, Patna

(1989):
Director General filed an application suo moto against Principal, Kathiar Medical
College, which was registered under the Societies Registration Act. It was alleged that

the respondent had been giving wrong impression in his publicity material that the college
was authorized and equipped to impart medical education leading to M.B.B.S. degree.
The college was actually neither recognized by the Medical Council of India nor affiliated
to any University. The Commission held it to be a case of misleading advertisement
amounting to unfair trade practice.

6) Snowhite Clothiers (1986):

The respondent issues advertisements promising discounts up to 50% upon stating in the
advertisements "Drop in for unbelievable bargain in men's, ladies and children wear". The
Commission ruled that the advertisements were misleading in that the normal price was
not shown, the bargain sale period was not indicated - 'till stocks last' was held a vague
term.

Sanctions and Remedies

Strong sanctions are vital if consumer protection is to be taken seriously by business. A wide
range of remedies will facilitate better immediate outcomes for aggrieved consumers as well
as enhance compliance in the long run. Sanctions and remedies for unfair trade practices
should aim to do more than just punish if they are expected to contribute to the suite of
objects referred to above:
reduce the incidence of UTPs
reduce the harm caused to consumers and responsible businesses cause by UTPs
shift some of the cost of defensive measures and victim harm back on to those engaging in
UTPs Cessation of the offending conduct, prevention and deterrence of future offending
conduct, undoing the harm caused and punishment are all possible with a wide suite of
sanctions and remedies.
These might include:
Fines and/or imprisonment
Injunctions (positive and negative)

Corrective advertising
Community service orders
Compensation
Corporate probation
Adverse publicity
Compulsory implementation of a comprehensive compliance program

Necessity for expansion of the term:

We have seen the changes that are proposed to be made to the term, but to what end will they
be effective. For this we need to look into the requirement for such a change and the need for
which can be understood through the case of Akhil Bhartiya Upbhokta Congress vs Aggarwal
Jewellers2where the respondent-jeweler issued cash memo which stated that in case of return
of any of the products, only 80% value of the price will be returned. This consumer raised an
objection to this condition, but the State Commission could not disallow the respondentjeweler from having such a condition as there was no law which restricted this. But according
to the proposed amendment, if the trader refuses or restricts the right to return the good or
stops the service within 30 days, he would be liable for carrying on an unfair trade practice.
Therefore, a requirement to improve the protection granted to consumers against unfair trade
practices is gauged herein, which may be achieved by providing a wider scope to the term as
proposed by the amendment.

Conclusion:
The Consumer Protection Act and the Bill are designed so as to prevent any kind of trade that
engage in unfair trade practices whether specified or not and more importantly provides for
protection for the consumers who are subject to this trade. This amendment is a step towards
the importance of recognition of the concept of unfair trade practice which shall not be
neglected at any cost, especially with the Consumer Protection Act being the sole defining
authority for it, where the term shall be given additional attention in its definition in order to
protect all the requisite rights of consumers in order to avoid any ambiguities. For example,
when we look into the right of return given to the consumers, we notice that this is only
possible if the goods remain unused or if the service is continuous in nature. Whereas, in
2 I(2006)CPJ32(NC)

situations when the goods or services are used only once and are extinguished, there is no
mention as to whether, on being unsatisfied, any facility or option for the money to be
returned to the consumer is available. Even though there are still such questions which
remain unanswered, we have to appreciate these changes being made in the Bill, as they bring
to our attention the safeguards that need to be provided to the consumers against unfair trade
practices.

BIBLIOGRAPHY:

http://www.cccindia.co/corecentre/Database/Docs/DocFiles/Consumer%20Protection

%20act%20Basics.pdf
http://articles.economictimes.indiatimes.com/2012-04-09/news/31313050_1_unfairtrade-practice-consumer-forum-booking
http://www.indiankanoon.org/search/?

formInput=unfair+trade+practice+under+consumer+protection+act