(..14..)
UNFAIR TRADE PRACTICE
QUESTION BANK
Q.1. Explain fully- āUnfair Trade Practicesā.
Q. 2. Define āunfair trade practicesā. Explain its different components.
SHORT NOTES
1. Misleading and false advertising.
2. Falsification of trademark.
3. Unsafe and hazardous products-
SYNOPSIS
I. DEFINITION OF 'UNFAIR TRADE PRACTICE' (Section 2(47))-
(1) False or Misleading Representation and Advertisements
Explanation for Clause (1):
Disparaging Competitors [Clause (x)]
Business Ethics and Business Self-Regulation-
(2) Bait Advertising and Bargain Price
Explanation for Clause (2):
(3) Deceptive Offers of Gifts, Prizes, and Promotional Contests
(4) Supply of Unsafe and Hazardous Products-
(5) Hoarding or Destruction of Goods
(6) Manufacturing or offering for sale of spurious goods-
(7) Non-issuing of bill, etc.
(8) Refusing to take back defective goods-
(9) Disclosing personal information-
I. DEFINITION OF 'UNFAIR TRADE PRACTICE' (Section 2(47))-
Unless the context otherwise requires, an "Unfair Trade Practice" means a trade practice which,-
-for the purpose of promoting the sale, use, or supply of any goods, or
-for the promotion of any services,
-adopts one or more of the following practices and
-thereby causes loss or injury to the consumers of such goods or services,
-whether by eliminating or restricting competition or otherwise, namely:
(1) False or Misleading Representation and Advertisements
The practice of making any statement, whether orally, in writing, or by visible representation, which:
i. Falsely represents that the goods are of a particular standard, quality, 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 sponsorship, approval, performance, characteristics, accessories, uses, or benefits which they do not possess;
v. Represents that the seller or the supplier has a sponsorship, approval, or affiliation which they do not have;
vi. Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
vii. Gives to the public any warranty or guarantee of the performance, efficacy, or length of life of a product or of any goods that is not based on an adequate or proper test thereof.
Provided that where a defence is raised to the effect that such warranty or guarantee is based on an adequate or proper test, the burden of proof shall lie entirely on the person raising such a defence;
viii. Makes a representation to the public in a form that purports to be:-
a. A warranty or guarantee of a product, goods, or services; or
b. A promise to replace, maintain, or repair an article (or part thereof) or to repeat or continue a service until it has achieved a specified result, if such purported warranty, or guarantee, or promise is materially misleading, or if there is no reasonable prospect that it will be carried out;
ix. Materially misleads the public concerning the price at which a product, goods, or services have been, or are ordinarily sold or provided. A representation as to price shall be deemed to refer to the market price generally unless it is explicitly specified to be the specific price offered by the representor;
x. Gives false or misleading facts disparaging the goods, services, or trade of another person.
Explanation for Clause (1):
A statement shall be deemed to be a statement made to the public by (and only by) the person who caused it to be expressed, made, or contained if it is:
(a) Expressed on an article offered or displayed for sale, or on its wrapper/container;or
(b) Expressed on anything attached to, inserted in, or accompanying an article offered for sale; or
(c) Contained in or on anything that is sold, sent, delivered, transmitted, or made available to a member of the public shall be deemed to be a statement made to the public by, and only by, the person who had caused the statement to be so expressed, made or contained;
In M/s Cox and Kings Pvt. Ltd. v. Joseph A. Fernandes
Facts: The travel company advertised a "Star Cruise" package for pleasure. The cruise lasted only one and a half days. To manipulate the dates, the company deliberately timed the departure of the cruise at 11:59 PM (just one minute short of midnight) and counted that single minute as one full day of the itinerary.
Held: The National Commission held that this was not merely a case of misrepresentation through misleading advertisement but directly amounted to an unfair trade practice.
Disparaging Competitors [Clause (x)]
Sub-clause (x) prohibits making statements that state false or misleading facts disparaging the goods, services, or trade of another person. "Disparagement" involves casting derogatory remarks on the quality, safety, or characteristics of a competitor's goods or services to boost one's own sales.
In Hindustan Unilever Ltd. v. Colgate Palmolive India Ltd.
Facts: Colgate was a prominent manufacturer of dental cream. The appellant (HUL), manufacturer of "New Pepsodent" toothpaste, launched a media campaign claiming that its toothpaste was "102% better than the leading toothpaste". Colgate contended that this commercial scheme adopted an unfair and deceptive practice by making misleading claims that indirectly disparaged Colgate's market-leading product.
Held: The court ruled that target-oriented claims that deceptively cross the line into demeaning a competitor's product amount to an "unfair trade practice" which the law strictly prohibits.
Business Ethics and Business Self-Regulation-
When evaluating advertisements, a critical legal question arises: Is truthful comparative advertising desirable?
1. The Critical View: Some business entities consider comparative advertising inherently unethical because it risks damaging the reputation of an entire industry or allows an underdog brand to unfairly capitalize on the established goodwill of a market leader.
2. The Favorable View: Conversely, comparative advertising can be seen as a healthy mechanism that enables businesses to challenge and deflate the exaggerated claims of their competitors, thereby informing the consumer.
The Problem: Advertisers frequently cross ethical bounds by projecting their products in a manner that implies a competitor's goods are utterly useless. Therefore, business self-regulation is necessary. Many trade bodies maintain codes of conduct that bar disparaging advertisements, substituting aggressive marketing with ethical self-regulation.
(2) Bait Advertising and Bargain Price
This involves the publication of an advertisement (in newspapers or otherwise) offering goods or services for sale at a bargain price when they are not actually intended to be offered at that price, or in quantities and for a duration that are reasonable looking at the market size, nature of the business, and advertisement reach.
Explanation for Clause (2):
A "bargain price" refers to:
(a) A price explicitly stated in an advertisement to be a bargain price by reference to an ordinary price; or
(b) A price that a reasonable consumer reading or seeing the advertisement would understand to be a bargain price relative to the ordinary market price of similar products.
In Re: Snow White Clothiers
Facts: The respondent retail store advertised a massive discount of "up to 50%" to attract foot traffic. However, an inquiry revealed that the company had artificially manipulated the base prices beforehand by adding a high markup onto the original cost price, making the discount illusory.
Held: This practice was held to be a deceptive and unfair trade practice designed to bait consumers.
(3) Deceptive Offers of Gifts, Prizes, and Promotional Contests
This clause prohibits:
(a) Offering gifts, prizes, or other free items with the intention of not providing them as offered, or creating a false impression that an item is free when its cost is fully or partially recovered through the overall transaction charges.
(b) Conducting any contest, lottery, or game of chance/skill to directly or indirectly promote the sale, use, or supply of any product or business interest.
(c) withholding from the participants of any scheme offering gifts, prizes or other items free of charge on its closure, the information about the final results of the scheme.
Explanation.āFor the purpose of this sub-clause, the participants of a scheme shall be deemed to have been informed of the final results of the scheme where such results are
within a reasonable time, published prominently in the same newspaper in which the scheme was originally advertised;
M/s Colgate Palmolive (India) Ltd. v. Director General (MRTP)
Facts: The company launched a promotional contest announcing mega prizes via lucky draws. It was alleged that the company simultaneously raised the cost of its toothbrushes by 10 paise to fund the contest, meaning the lottery was not truly "free" and contained anti-consumer features.
Held: The court held that hiding promotional costs inside consumer prices under the guise of lucky contests constitutes an unfair trade practice.
(4) Supply of Unsafe and Hazardous Products-
This involves the sale or supply of goods to consumers while knowing (or having reason to believe) that the goods do not comply with safety standards prescribed by competent authorities (such as BIS, ISI, etc.). This includes non-compliance with standards governing performance, composition, design, construction, finishing, or packaging necessary to mitigate risk of bodily injury.
Every consumer has an inherent right to safety. To ensure product safety, regulatory watchdogs set stringent benchmarks to prevent injury risks.
Consumer Education and Research Centre (CERC) v. Shri L.L.S. Centre
Facts: The respondents ran advertisements making lofty claims about a medical treatment program that drastically reduced body weight. Upon investigation, it was discovered that they were administering dangerous drugs (like amphetamines) to suppress appetite, which posed severe health hazards to patients.
Held: Marketing hazardous health treatments under false pretences was held to be a serious unfair trade practice.
(5) Hoarding or Destruction of Goods
This encompasses the deliberate hoarding or destruction of goods, or the refusal to sell goods/render services, if such action raises, tends to raise, or is intended to artificially inflate the cost of those or similar goods/services in the market.
(6) Manufacturing or offering for sale of spurious goods-
Manufacturing of spurious goods or offering such goods for sale or adopting deceptive practices in the provision of services.
(7) Non-issuing of bill, etc.
Not issuing a bill, cash memo or receipt for the goods sold or services rendered in such manner as may be prescribed.
(8) Refusing to take back defective goods-
Refusing, after selling goods or rendering services, to take back or withdraw defective goods or to withdraw or discontinue deficient services and to refund the consideration thereof, if paid, within the period stipulated in the bill or cash memo or receipt or in the absence of such stipulation, within a period of thirty days;
(9) Disclosing personal information-
Disclosing to any other person any personal information given in confidence by the consumer unless such disclosure is made in accordance with the provisions of any law for the time being in force.
The last three components were added by the 2019 Act.
II. Remedy and Enforcement for Unfair Trade Practice: [Discussed in detail at appropriate place]
The 2019 Act established a powerful central regulatory authority: the Central Consumer Protection Authority (CCPA).
Powers of the CCPA: The CCPA can act proactively (suo motu) or based on a complaint. It has the power to investigate violations of consumer rights, recall unsafe goods, order the discontinuation of unfair trade practices, and impose hefty penalties on manufacturers, endorsers, and publishers for misleading advertisements.
Consumer Commissions: A consumer can also file a formal complaint before the District, State, or National Consumer Disputes Redressal Commissions seeking compensation, removal of defects, or a direction to cease the unfair trade practice.
*****
Notes-
Falsification of Trademarks and Consumer Protection
Part I: Meaning and Definitions of Trademark-
A. Meaning of a Trade Mark [Section 2(1)(zb) of the Trade Marks Act, 1999]
A "Trade Mark" means a mark-
-capable of being represented graphically and
-which is capable of distinguishing the goods or services of one person from those of others.
-It may include the shape of goods, their packaging, and combinations of colors.
Judicial Interpretation:
Legally, it establishes a commercial nexus between the goods/services and the proprietor who holds the exclusive right to use the mark. It acts as an identifier of source, standard, and quality (e.g., "Reliance", "Pepsi", "Tata" etc).
B. The CPA 2019 Hook: "Spurious Goods" & "Unfair Trade Practice" (UTP)
When a trademark is falsified, the offence immediately transitions from a private Intellectual Property dispute to a public consumer wrong under CPA 2019:
1. āSpurious Goodsā [Section 2(43), CPA 2019]:
āSpurious Goodsā is defined as "such goods which are falsely claimed to be genuine." Goods bearing a falsified trademark are, by definition, spurious goods.
2. Unfair Trade Practice [Section 2(47), CPA 2019]:
Falsifying a mark directly violates sub-clause (i) by making false representations regarding the standard, quality, sponsorship, or approval of goods/services, and sub-clause (h) by manufacturing or offering spurious goods for sale.
Part II: Statutory Punishments under the Trade Marks Act, 1999-
1. Falsifying and Falsely Applying Trade Marks (Section 102)-
Falsifying a Mark: A person falsifies a trademark if they make that trademark (or a deceptively similar one) without the assent of the true proprietor, or if they alter, add to, or efface a genuine trademark.
Falsely Applying a Mark: A person falsely applies a trademark if, without the assent of the proprietor, they apply the mark (or a deceptively similar one) to goods, services, or packages, or use genuine packages of a proprietor to pack/wrap counterfeit goods.
2. Penalty for Applying False Trade Marks & Descriptions (Section 103)-
Any person who falsifies a trademark, falsely applies it, makes/possesses instruments (dies, blocks, machines) for falsifying a mark, or applies false geographical indications/manufacturer addresses shall face:
Minimum Punishment: Imprisonment for 6 months and a fine of ā¹50,000.
Maximum Punishment: Imprisonment extending up to 3 years and a fine up to ā¹2,00,000.
Statutory Exception: The court may impose a lesser sentence only if the accused proves they acted without intent to defraud, and the court records special reasons in the judgment.
3. Penalty for Selling Goods with False Marks (Section 104).
Anyone who sells, exposes for sale, or possesses for sale/services any goods bearing a false trademark or false trade description is liable for the same punishment detailed under Section 103 (6 months to 3 years imprisonment, and ā¹50,000 to ā¹2,00,000 fine).
Statutory Defense: The accused can escape liability under Section 104 if they prove:
(a) They took all reasonable precautions against committing an offense.
(b) On demand by the prosecutor/police, they gave all information in their power with respect to the persons from whom they obtained the goods.
(c) They otherwise acted innocently.
4. Enhanced Penalty on Subsequent Conviction (Section 105)-
Whoever is convicted of a second or subsequent offense under Section 103 or 104 shall face:
Imprisonment: Not less than 1 year, extending up to 3 years.
Fine: Not less than ā¹1,00,000, extending up to ā¹2,00,000.
5. Penalty for Removing/Selling Piece Goods without Mark (Section 106).
If any person removes or attempts to remove piece goods, cotton yarn, or cotton threads from a premises without stamping the origin, length, or width markings in accordance with statutory regulations, the goods shall be forfeited to the Government, and the person shall be penalized with a fine extending up to ā¹1,000.
6. Falsely Representing a Trade Mark as Registered (Section 107)
Correction applied to your draft: A person who falsely represents an unregistered trademark as "Registered" (e.g., using the Ā® symbol unlawfully or stating the mark is registered when it is not) shall be punishable with imprisonment for a term extending up to 3 months, or a fine, or both.
7. Improperly Describing a Place of Business as Connected with the Trade Marks Office (Section 108)-
Correction applied to your draft: If a person words their business signage, letterheads, or advertisements to deceptively lead the public to believe that their place of business is officially connected with the Government Trade Marks Registry, they shall be punished with imprisonment for a term extending up to 1 year, or a fine, or both.
Part III: Cognizance by Central Consumer Protection Authority-
If a consumer or the Central Consumer Protection Authority (CCPA) takes cognizance of trademark falsification, the liability shifts from standard Intellectual Property fines to severe criminal penalties under consumer protection laws.
1. Severe Criminal Liability for Spurious Goods (Section 91, CPA 2019)-
Where the falsification of a trademark results in the manufacture, sale, or distribution of spurious goods, the penal consequences are drastically tiered based on the real-world impact on the consumer:
Scenario / Result of Falsified Spurious Goods | Imprisonment Term | Fine Amount |
No injury caused to the consumer | Up to 1 year | Up to ā¹3 Lakhs |
Causes injury not amounting to grievous hurt | Up to 1 year | Up to ā¹3 Lakhs |
Causes grievous hurt to the consumer | Up to 7 years | Up to ā¹5 Lakhs |
Results in the death of the consumer | Minimum 7 years (extensible to Life Imprisonment) | Not less than ā¹10 Lakhs |
2. Statutory Suspension/Cancellation of Licenses [Section 91(2)]
Upon a first conviction for selling falsified/spurious goods under the CPA, the court may suspend any license issued to the person (e.g., trade license, drug license, manufacturing license) for a period up to 2 years. On a second or subsequent conviction, the court can cancel the license permanently.
3. Liability of responsible persons in a company or firm-
Section 114 (Trade Marks Act) and Section 85 (CPA 2019): Both statutes mandate that if the offense of trademark falsification or selling spurious goods is committed by a company/partnership firm, every person who at the time the offense was committed was in charge of, and responsible to, the company for the conduct of its business, shall be deemed guilty of the offense and liable to be proceeded against and punished.
Part IV: Procedural Powers and Overlapping Remedies-
1. Cognizance and Search Powers (Section 115, TM Act):
An offense under Section 103, 104, or 105 is cognizable. Any police officer, not below the rank of Deputy Superintendent of Police (DySP) or equivalent, can search and seize without a warrant any goods, dies, blocks, or instruments involved in the falsification, provided they obtain the prior opinion of the Registrar of Trade Marks.
2. Power of the Central Consumer Protection Authority (CCPA) to suo moto investigate (Section 18, CPA 2019):
While a brand proprietor files a civil suit for infringement under the TM Act, the CCPA can simultaneously initiate a suo motu investigation against retail chains or e-commerce platforms selling these falsified goods, ordering a total product recall, reimbursement of prices to consumers, and withdrawal of the deceptive advertisements.
*****
References-
1. 1.THE CONSUMER PROTECTION ACT, 2019
https://ncdrc.nic.in/bare_acts/CPA2019.pdf
2, Trademark Infringement and Consumer Protection: How the CPA strengthens IP enforcement.
3. Section 2(47) in Consumer Protection Act, 2019 https://indiankanoon.org/doc/117738049/
4. Internal Journal on Consumer Law and Practice
https://repository.nls.ac.in/ijclp/
5. UNFAIR TRADE PRACTICES
https://digital.nios.ac.in/content/338en/338_Introduction_To_Law_Eng_L29.pdf
6. Trademark and Unfair Competition Law: Interrelations and Differences
https://thelegalschool.in/blog/trademark-and-unfair-competition-law
7. Unfair Trade Practices under Consumer Protection Act, 2019
https://lawbhoomi.com/unfair-trade-practices-under-consumer-protection-act-2019/