WELCOME

CRITICAL EVALUATION OF UNFAIR AND RESTRICTIVE TRADE PRACTICES

S.D.M. Law college for Post graduation studies Law

Seminar on critical view of unfair trade practices & restrictive trade practices
By
Mamatha Shetty, Final year LLM, Role Number 207,

Submitted to
Dr. B.K. Raveendra, Chairperson, K.S.L.U., Hubli S.D.M. College, Mangalore.

SYNOPSYS

Introduction
Article 19 (1)(g):guarantees to all citizens freedom to practice any profession, or to carry on any occupation, trade or business subject to the restriction under the same Article 19(6). Article 301 guarantees freedom of trade, commerce and intercourse throughout the territory of India subject to

restrictions envisaged under Part XIII (Articles 302-307). The need to regulate business in the interest of general public, is recognized in all countries is reflected in the directive principles of state policy of our Constitution (Articles 38,39,41,42 and 43).

With liberalization of the industrial policy in July, 1991, to attain the goal of globalization, the governmental control of private business seems to have considerably reduced. Despite this development, business activities always need to be regulated through independent regulators. The enactment of the Electricity Regulatory Commissions Act, 1998, the Insurance Regulatory and Development Authority Act, 1999, the Telecom Regulatory Authority of India Act, 1997. competition slowly increased between private sectors, thereby different types of trading system started such as unfair trade practices and restrictive trade practices,

and the consumers are deprived of their interest therefore the other similar legislations by Parliament are the legislative measures in the right direction which aim at protecting the consumers from various risks such as unfair trade practices, restrictive trade practices etc. Moreover, legislations such as the Consumer Protection Act, 1986 was in existent but defined unfair trade practice only after liberalization utill MRTP Act was dealing with it but sevices were not covered also certain new types of unfair trade practices were not covered therefore amendments to CP Act But slowly in the name of competition unfair trade practice started therefore once again to prevent abuse of dominance positions of the big companyies the Competition Act, 2002 enacted.

and are directly aimed at protecting the consumers by giving them rights and quick remedies by repealing MRTP Act. Examples of unfair trade practices includes, unfair competition, misbranding goods quality, origin, or durability; using false advertising; mislabeling to mislead consumer about product size; and advertising or selling rebuilt goods as new and deficiency in services etc

To criticize the unfair trade practices and restrictive trade practices at national level it is essential to look into 3 legislation.

1] MRTP ACT 2] Consumer Protection Act 3] Competition act and 4] an evolution of judicial decisisions.

What does 'unfair trade practices'

mean?
Unfair Trade Practices under MRTP Act, 1969 (UTPs) Essentially (UTPs) under Section 36A in the MRTP Act include : False representation and misleading advertisement of goods and services. Falsely representing second-hand goods as new. Misleading representation regarding usefulness, need, quality, standard, style etc of goods and services.

 False

claims or representation regarding price of goods and services. Giving false facts regarding sponsorship, affiliation etc. of goods and services. Giving false guarantee or warranty on goods and services without adequate tests.

 Unfair trade practice under CP Act

Somewhat similar to the definition of unfair

trade practice under the MRTP Act, clause (r) of sub-section (1) of Section (2) of the Consumer Protection Act defines the expression unfair trade practice. An unfair trade practice means a trade practice, which, for the purpose of promoting any sale, use or supply of any goods or services, adopts unfair method, or unfair or deceptive practice.

 Unfair practices may be categorized as

under: 1.FALSE REPRESENTATION 2.FALSE OFFER OF BARGAIN PRICE 3.FREE GIFTS OFFER AND PRIZE SCHEMES 4.NON-COMPLIANCE OF PRESCRIBED STANDARDS 5.HOARDING, DESTRUCTION, ETC.

 INQUIRY INTO UNFAIR TRADE PRACTICES

The Commission may inquire into

Any unfair trade practice Upon receiving a complaint from any trade

association, consumer or a registered consumer association, or Upon reference made to it by the Central Government or State Government Upon an application to it by the Director General or Upon its own knowledge or information.

 RELIEF AVAILABLE

After making an inquiry into the unfair trade practice if the Commission is of the opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it may direct that The practice shall be discontinued or shall not be repeated; The agreement relating thereto shall be void in respect of such unfair trade practice or shall stand modified. Any information, statement or advertisement relating to such unfair trade practice shall be disclosed, issued or published as may be specified

 The Commission may permit the party to carry on any trade

practice to take steps to ensure that it is no longer prejudicial to the public interest or to the interest of the consumer.
However no order shall be made in respect a trade practice

which is expressly authorized by any law in force. The Commission is empowered to direct publication of corrective advertisement and disclosure of additional information while passing orders relating to unfair trade practices.

Cases
1] M.O. Hasan Kuthoos Maricar v Joseph K Thomas [1991] II

CPJ 30 TN FACT: here money was deposited in advance for the supply of a car within two months and the car was actually supplied some time after two months,. Held: the retention of the money beyond the period was held to be an unfair trade practice entitling the party to 14% interest on the deposit for the period of delay. UTP applies both goods as well as to services: 2] Birla [1990]: failure to appoint dealers network for servicing the products as per warranty constituted an unfair trade practice according to the decission of MRTP Commission.

Patel Amritlal v. The manager, Mehsana Agro Auto Ltd., 1995

Delivery of a vehicle was withheld on the ground of non-

payment of handling and storage charges regarding which there was no provision in the contractual clause quite logically because the price quoted was ex-showroom and not ex-factory. This was clearly and obviously a case of gross unfair trade practice.

Buddhist Mission Dental College v. Students [2000]

The national commission it clear that education is a service

if consideration is paid and it was found guilty of unfair trade practice because of adoption of unfair method in alluring the students into admission to the college which had no clear status on recognition and affiliation.

Trade practice should be there to constitute unfair trade practice:

Morgan Standley MF v. Kartick Dass [1994 SCC (4) 225] it was

held that in share allotment and refund matters, the applicant is merely a prospective investor and not a consumer and as such no trading activity was involved at that stage that is to say that no trade practice was involved and accordingly the charge of unfair trade practice was not legally sustainable. Over ruled: (1998/CTJ/553/CP/SCDRC) of the Delhi State Commission which has decided that not issuing share certificates despite payment of all money constitutes deficiency in service and the consumers are entitled for compensation.

 held M/s Videocon International Limited for deficiency in

service and has directed them to pay compensation to thecomplainants Mrs Prakash Kaur and Mrs Habir Kaur. The complainants had applied for 100 shares each of M/s Videocon International Limited along with cheque of Rs 6000 each towards the allotment money. On receipt of allotment letter, they remitted the balance amount of Rs 6000 each. However the complainants later found that the latter cheques had been returned due to insufficient funds.

Both the share applicants once again remitted the money along with interest for late payment which was encashed by the company. When the share certificates were not forthcoming both of them filed a complaint in the District Forum claiming a compensation of Rs 50198. Though the District Forum refused to grant the compensation claimed, it found deficiency in the services of M/s Videocon International Limited, and directed it to pay Rs 5000 each on account of damages for the harassment caused to the complainants . M/a Videocon International Limited appealed against this order in the State Commission. The company argued that in view of the judgement in the case of Morgan Stanley Mutual Fund, share holders are not consumers and their complaints need to be dismissed as not maintainable.

 But the commission has taken a view that the fact of the

present case is quite different from that of the Morgon Stanley case and as such the contention of the company is misconceived. Here, the company has allotted the shares on the basis of the applications received and has also received the call money. But it has failed to dispatch the share certificates till the present complaint has been filed. The State Commission felt that since holders did not receive the share certificates in time, they could not off load the shares thereby leading to loss, harassment and mental agony. As a result they are eligible for compensation. The company has been directed to pay Mrs Prakash Kaur and Mrs Harbir Kaur Rs 2500 each as compensation.

 Shabina Motars v. Hero Honda [1993] Similarly, a mere failure

on the part of the company to fulfill a promise of granting dealership to complainant did not constitute any unfair trade practice.

 What does 'Restrictive trade practices' mean? Restrictive Trade Practices (RTPs) under MRTP Act, 1969 In the Monopolies and Restrictive Trade Practices (MRTP)

Act, 1969, restrictive trade practice has been defined as a trade practice which tends to prevent, distort or restrict competition. In particular, a practice, which tends to obstruct the flow of capital or resources into the stream of production, is an RTP. Likewise the acts which tend to bring about manipulation of prices, or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumer unjustified costs or restrictions are Restrictive Trade Practices. Certain common types of Restrictive Trade Practices enumerated in the MRTP Act are:

 i. Refusal to deal

ii. Tie up sales

iii. Full line forcing

iv. Exclusive dealings

v. Price discrimination

vi. Resale price maintenance

vii. Area restriction The traders, in order to maximize their profits and to gain power in the market, often indulge in activities that tend to block the flow of capital into production. Such traders also bring in conditions of delivery to affect the flow of supplies leading to unjustified costs.

RTP under CP Act

Sec. 2(1) (nn) means any trade practice which requires a

consumer to buy, hire or avail of any goods or, as the case may be, services as a condition precedent for buying, hiring or availing of other goods or services. Technically, this type of arrangement is called tie-up sales or tying arrangement. The effect of such an arrangement is that a purchaser is forced to buy some goods or services which he may not require along with the goods or services which he wants to buy. Thus where a buyer agrees to purchase product X upon a condition that he will also purchase product Y from the seller, the sale of product Y (tied product) is tied to the sale of product X (tying product). The buyer has to forego his free choice between competing products. This results in neutralizing healthy competition in the tied market.

 Example : A, a gas distributor insisted his customers to buy

gas stove as a condition to give gas connection. It was held that it was a restrictive trade practice - Re. Anand Gas RTPE 43/1983 (MRTPC). However, where there is no such precondition and the buyer is free to take either product, no tying arrangement could be alleged even though the seller may offer both the products as a single unit at a composite price. Example : A is a furniture dealer. He is selling Sofa at Rs. 20,000 and Bed at Rs. 15,000. He has an offer that whoever will buy Sofa and Bed both, he will charge Rs. 30,000 only. Here the choice is open to the customer to buy the products single or composite. This is not a restrictive trade practice.

 Note : The term restrictive trade practice has a very wide

meaning when read in context of the MRTP Act, 1969. However under Consumer Protection Act, 1986, it has been used in a narrower sense. Thus, compelling a consumer to buy insurance cover while purchasing a vehicle, or insisting on purchase of gasstove as a precondition to release gas connection shall be a restrictive trade practices.

difference between a restrictive trade practice and an unfair trade practice

"Unfair trade practice" as per Section 2(r) 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, while restrictive trade practice means a trade practice which tries to manipulate the price or conditions of delivery to affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumers unjustified costs or restrictions [as per section 2(nnn)].

 Metamorphosis from MRTP Act, 1969 to Competition

Act, 2002 In the context of the new economic policy paradigm, India has chosen to enact a new competition law called the Competition Act, 2002. The MRTP Act has metamorphosed into the new law, Competition Act, 2002. The new law is designed to repeal the extant MRTP Act. As of now, only a few provisions of the new law have been brought into force and the process of constituting the regulatory authority, namely, the Competition Commission of India under the new Act, is to an extent completed. Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India.

 The pending UTP cases in the MRTP Commission

are to be transferred to the concerned consumer Courts under the Consumer Protection Act, 1986. The pending MTP and RTP Cases in MRTP Commission are to be taken up for adjudication by the CCI from the stages they are in.

The provisions relating to unfair trade

practices not figured in the Indian Competition Act as they are presently covered by the Consumer Protection Act, 1986.

 Reason for repealing MRTP Act

Lacuna in MRTP Act: A perusal of the MRTP

Act will show that there is neither definition nor even a mention of certain offending trade practices, which are restrictive in character. Some illustrations of these are:

Abuse of Dominance; Cartels, Collusion and Price Fixing; Bid Rigging; and Predatory Pricing.

 Another dimension is the dynamic context of

international as well as the domestic trade and market. When the MRTP Act was drafted in 1969, the economic and trade milieu prevalent at that time constituted the premise for its various provisions. There has been subsequently a sea change in the environment, with considerable movement towards LPG. The law has to yield to the changed and changing scenario on the economic and trade front. Hence, the new law the Competition Act, 2002.

 The Act is therefore a new wine in a new bottle.

Wine gets better as it ages.

Difference B/W MRTP Act & Competition Act

S.No
1

MRTP Act, 1969

Based on the pre-reforms scenario Based on size as a factor

Competition Act, 2002

Based on the postreforms scenario Based on structure as a factor

2 3

Competition offences implicit Competition offences or not defined explicit and defined Complex in arrangement and language Simple in arrangement and language and easily comprehensible

14 per se offences 4 per se offences and all negating the principles of the rest subjected to rule natural justice of reason. Frowns upon dominance Frowns upon abuse of dominance Registration of agreements No requirement of compulsory registration of agreements

6 7

No combinations regulation Combinations regulated beyond a high threshold limit. Competition Commission Competition Commission appointed by the selected by a Collegium Government (search committee) Concept of Group Act had wider import and was Concept has been simplified

10

11

Very little administrative and financial autonomy for the Competition Commission

Relatively more autonomy for the Competition Commission

12

13

No competition advocacy role Competition Commission has for the Competition competition advocacy role Commission No penalties for offences Penalties for offences

14
15

Reactive and rigid

Unfair trade practices covered Does not vest MRTP Commission to inquire into cartels of foreign origin in a

Proactive and flexible

Unfair trade practices omitted (consumer fora will deal with them) Competition Law seeks to regulate them.

16

Critical Analysis of Unfair trade practices and Restrictive Trade Practice

Interpretation: The expression 'unfair trade

practice' is one which is elaborately defined in the Consumer Protection Act and the Monopolies and Restrictive Trade Practices Act. But the word Unfair is still under confusion. The Act only provides various types of practices which can be called as unfair practices but does not define what is unfair. It is left to the discretion of judiciary to construe based on the fact and circumstances.

 Due to this problem the word Unfair has

undergone various drastic changes by the judicial interpretations starting from the pre economic liberalization and till date. Therefore it is necessary to study certain judicial decisions to understand the evolution of the word Unfair and prevailing problems in the society due to its wider interpretation.

 The word Trade practice is not defined under CP

Act.
Section 2(1)(d) consumer means----but does not include a person

who avails of such services for any commercial purposes; Explanation. For the purposes of this clause, commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment; Act does not consider a person who buys goods for COMMERCIAL PURPOSE as consumer. Example: A person buying one truck or tempo or sewing machine or one computer will be considered as consumer for the purpose of this act. But if a person buys 2 typewriters, out of which one is used by a person employed by him, he will not be eligible under CPA as person is buying the goods for resale or commercial purposes is not a consumer Retailer is not considered as consumer. Therefore where does retailer should go for his claim if he finds he is affected by unfair trade practices.

Trader u/s2(1)(q) a person:A] who sells or distributes any goods for sale; and B] includes the manufacturer thereof; and C] where such goods are sold or distributed in package form, includes the packer thereof; Most of the trade is taking place through agencies. But agencies are not considered as trader under CP Act Case:kuldip singh Karla v. Roshan Lal Pal, II (1993) CPJ 170 [NC] Held: middlmen who buys and sells cannot be called as trader and made liable for defects in title when sold to the consumer. Same in the case of Restrictive Trade practices. What is justifiable and unjustifiable is again question and left to the discretion of the judiciary.

 Not releasing sanctioned loan by bank is unfair trade

practice Fact: Back-tracking from releasing the sanctioned loan to consumer by a bank, amounts to unfair trade practice, a consumer court has said while directing ICICI bank to pay a compensation of Rs 1.46 lakh to an Air Force personnel for resorting to such act. "The conduct of the bank makes out a case of unfair trade practice, mal-practice, arbitrariness and gross deficiency in service on its part who even during inquiry proceedings failed to place on record the decision of the competent authority that the loan sanctioned to the complainant was not to be released," the West Delhi District Consumer Forum said.

 This is the era of competition. But the Competition Act,

which is yet to be implemented in full, does not deal with UTP directly. The Competition Act does not define UTP itself, but only 'trade practice.' Cases: In Philips Medical Systems (Cleveland) Inc vs Indian MRI Diagnostic & Research Ltd. [1986][Judges were divided]
Fact: the Indian firm ordered a whole body CT scanner from

the manufacturer in the US. The Indian firm also moved the commission alleging 'restrictive trade practice' by the US firm pleading losses and seeking compensation. The commission held the US firm guilty of both unfair and restrictive trade practices and awarded compensation. Therefore, the US firm appealed to the Supreme Court where it succeeded in setting aside the commission's order.

 Though both the judges in the Supreme Court agreed on

quashing the commission's order, they could not agree on the interpretation of the UTP. How can there be a UTP when there was no supply of goods at all, one judge asked. KLM Royal Dutch Airlines vs. Director General,. [MRTP commission in the judgment] Some consignments of badges and crests sent for a tournament in New Orleans, US, did not reach before the event, raising a claim for damages for 'deficiency in service.'

 Controversy to define Unfair Trade Practices

in Competition Act
a lacuna in the Competition Act wherein the jurisdiction of

unfair trade practice has not been given to the competition commission BUT jurisdiction of RTP is given. It is given to the consumer courts. Experience has shown that both RTP (restrictive trade practices) and UTP have to exist together. Unfair trade practice as well as RTP is not defined under Competion Act. The MCA [ministry of consumer affairs ] has now taken up the matter with the anti-competitive practices U/S 3 watchdog and has asked it to explore the possibility of incorporating the definition of unfair trade practices in the competition legislation. But section 3 does not cover matters like misrepresentation of facts.

 Over Burden on Consumer Forum Consumer forum is dealing with the Disputes arising out of

insurance schemes, Banking sector, Medical Sector, TRAI etc.. Once again it is entrusted to deal with different types of unfair trade practices which are vast within it and leading to delay in the disposal of the cases also affecting the rights of the consumers as well as the partys right which will again have adverse impact on the market in total economy of the country. Though On December 16th 2011, The Government has introduced Consumer Protection (Amendment) Bill, 2011, in Lok Sabha so as to facilitate quicker disposal of cases and to widen and amplify the scope of some of the provisions of the Act not yet come into existence.

 Suggestion : competition Act should define unfair

trade practices and competition commission of India should take up the matter of UTP in its jurisdiction.

 No penal provision and ill doer are not punished or

fined. No penal provision to the ill doer and they are not punished under CP Act, only relief to consumers in the case of unfair trade practice and restrictive trade practice that the District Forum may order is to discontinue them, or not to repeat them. The District Consumer Disputes Redressal Fora / State Commission / National Commission may, as the case may be. order for following remedies against the consumer complaint made to it: to remove the defect pointed out by the appropriate laboratory from the goods in question; to replace the goods with new goods of similar description which shall be free from any defect;

 to return to the complainant the price, or, as the case may be,

the charges paid by the complainant; to pay such amount as may be awarded by it as compensation to the consumer for any loss or injury suffered by the consumer due to the negligence of the opposite party. to remove the defects in goods or deficiencies in the services in question; to discontinue the unfair trade practice or the restrictive trade practice or not to repeat it; not to offer the hazardous goods for sale; to withdraw the hazardous goods from being offered for sale; to cease manufacture of hazardous goods and to desist from offering services which are hazardous in nature; to pay such sum as may be determined by it if it is of the opinion that loss or injury has been suffered by a large number of consumers who are not identifiable conveniently:

 to cease manufacture of hazardous goods and to desist from

offering services which are hazardous in nature; to pay such sum as may be determined by it if it is of the opinion that loss or injury has been suffered by a large number of consumers who are not identifiable conveniently: to issue corrective advertisement to neutralize the effect of misleading advertisement at the cost of the opposite party responsible for issuing such misleading advertisement; to provide for adequate costs to parties. In case of unfair trade practice by Foreign country then Anti dumping measures are taken.

Remidies under International law

The United States and many of its trading partners have

established laws to remedy the unfair trade practices of other countries and foreign companies that cause injury to domestic industries. U.S. law authorizes the imposition of anti-dumping and countervailing (AD/CV) duties to remedy these unfair trade practices, namely dumping (i.e., sales at less than normal value) and foreign government subsidies. The U.S. AD/CV duty system is retrospective, in that importers pay estimated AD/CV duties at the time of importation, but the final amount of duties is not determined until later. By contrast, other major U.S. trading partners have AD/CV duty systems that, although different from one another, are fundamentally prospective in that AD/CV duties assessed at the time a product enters the country are essentially treated as final.

 Case Law on Misleading Advertisement and

False Representation amounting to unfair trade practices

Under MRTP as well as under consumer protection act.

 1] Acupressure Therapy Health Centre (1986): . The MRTP

Commission held that the facts of acupressure thereby were false and misleading. Accordingly, injunction was issued restraining the respondent from giving out advertisements containing misleading facts. (ii) 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 authorised 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

 iii) In 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 amounting to unfair trade practices and misleading the facts. iv) In Panama Textiles, Bombay (1987), the dealer was found to have conducted the bargain in the name and style 'ZAPATA' at YWCA, Ashoka Road, New Delhi and at NDMC Hall Punchkuin Road, New Delhi. In the impugned 'bargain sale', the said dealer was found to have sold spurious/substandard suiting, etc. falsely claiming that to be of wellknown brands manufactured by M/s Raymond Woollen Ltd., Grasim Industries Ltd., M/s Bombay Dyeing, etc. Held the dealer had indulged in an unfair trade practice

 COMPARATIVE ADVERTISING IN INDIA

The term comparative advertising refers to any form of

advertising in which a trademark owner attempts to enjoy pecuniary benefits from a comparison between his product, service, or brand and that of a competitor. Comparative claims may vary in nature. They may explicitly name a competitor or implicitly refer to him. They may either emphasize the similarities or the differences between the products. They may also state that the advertised product is better than or as good as the competitors. Comparative advertising generally possesses two components, puffery and denigration.

 Puffery is where the advertiser seeks to draw the consumers

attention by making superlative claims about his product that are assertions of opinion, rather than verifiable statements of fact. Often puffery crosses the limits of tolerance and seeks to portray the competing product in a negative light. The same is then said to amount to denigration, which the courts have strictly prohibited.

Thus, the material question that often arises is to what

extent comparative advertising may be restricted. The answer lies in developing a clear understanding of the conflicting interests of the various stakeholders involved, including the advertiser, the competitor and the consumer.

 The advertisers objective herein is to present his products in

a manner such that the consumer is most likely to purchase it. On the other hand the competitor would always try to prevent any advertising that aims at denigrating his product or makes false claims, or uses his product as a standard which the advertiser claims to exceed. The helpless consumer finds himself in the midst of a cacophony of claims, and has the right to be accurately informed about the quality or utility of the products available in the market.

 Any attempt at developing a mechanism to regulate

advertising has to be made with reference to the constitutional guarantee provided to the same under Article 19(1)(a) of the Constitution of India. Initially, advertising was excluded from the ambit of the provision, with the Supreme Court holding in Hamdard Dawakhana v. Union of India, AIR 1960 SC 554 that while advertisements were a form of speech, they were not constitutive of the concept of free speech. The reason for the same was that in seeking to promote trade and commerce they were guided by the object of commercial gain.

 The subsequent process of economic liberalization, however,

brought about certain substantive changes in the structure of the market for consumer goods. The advent of a wider range of products and services led to increased competition, with advertising acquiring a vital role in the determination of consumer demand and in influencing the dynamics of the market as a whole. The media too was increasingly reliant on advertising revenues, as were other forms of public entertainment such as sports and cultural events.

 A shift in the constitutional position was evidenced in the

case of Tata Press v. Mahanagar Telephone Nigam Ltd., (1995) 5 SCC 139. wherein advertising was observed to be beneficial to consumers as it facilitated the free dissemination of information, leading to greater public awareness in a free market economy. Further, it was held to be the life blood of the free media due to the substantial contributions it gave to print and electronic media organizations. In light of the same, the Court reversed the position as adopted in Hamdard Dawakhana, and held advertising to be constitutive of commercial speech, and therefore brought it within the ambit of constitutional protection conferred by Art. 19(1)(a).

 The onus of regulating advertising in India has been assumed by a

wide array of governmental authorities and tribunals, but presently there exists no dedicated statutory mechanism to regulate the dissemination of untruthful or disparaging material through such medium. Primarily, matters related to untrue and misleading advertising were adjudicated upon by the Monopolies and Restrictive Trade Practices (MRTP) Commission, constituted under the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). The Act defined an unfair trade practice under 36A to include any false representation of goods with regard to their quality, quantity or utility. The provision also incorporated the clause that a warranty or guarantee of performance or durability of the product, if not adequately substantiated, would amount to an unfair trade practice. Further, to advertise a false or misleading fact disparaging the goods, services or trade of another person too was brought within the ambit of the same. However, the MRTP Act was subsequently repealed by virtue of 66 of the Competition Act, 2002.

 Fortunately, the power to enquire into complaints of unfair

trade practices was vested with the consumer grievance forums established under the Consumer Protection Act, 1986 (CP Act)[section 9]. For such purpose, the definition of unfair trade practice as under 36A has been incorporated parimateria in 2(1)(r) of the CP Act. While the said provision has put in place an effective mechanism to address the grievances of the consumer, it fails to provide relief to a competing seller as the CP Act excludes manufacturers, sellers and service providers from its ambit [As observed in Colgate Palmolive (India) Ltd. v. Anchor Health and Beauty Care Private Ltd., 2009 (40) PTC 653.]

 Such parties are often compelled to take recourse to common

law remedies in the form of injunctive action or monetary damages, for the securing of their interests, with a significant proportion of complaints by competing manufacturers and sellers involving alleged violations of their intellectual property rights through the said advertisements.
Mainly there are two cases under which rulings have

referred to the interests of consumers, other than kiwi case and the Colgate Case is not in direct contradiction to prior decisions.

 Puffery

First indian case: Reckitt & Colman of India Ltd v. M.P.

Ramchandran&Anr., 1999 PTC (19) 741 : Fact: In the concerned matter, the plaintiff and defendant were manufacturers of clothing detergent brands Robin Blue and Ujala, respectively. It was contended by the plaintiff that the defendant, in its advertisement, had intentionally displayed a container that was similar to the one in which the plaintiffs product was sold, and in regard to which the plaintiff had a registered design. A further insinuation to the product of the plaintiff was in the fictitious product being priced at Rs. 10, which was known to be the price at which Robin Blue was sold.

 The advertisement went on to state that the said product

Blue was uneconomical, and depicted that the same was a product of obsolete technology and hence ineffective. There was also an implication that the product failed to dissolve effectively in water, and hence damaged clothes by leaving blue patches on them. It was argued by the defendant that the bottle depicted in the advertisement did not bear any resemblance to Robin Blue, and that the object of the portrayal had been merely to assert the technological superiority of Ujala over other competing products. Hence, it was denied that there was any specific disparagement of Robin Blue in the concerned advertisement. The Court herein relied upon the common law position as held in De Beers Abrasive v. International General Electric Co, 1975 (2) All ER 599. and enunciated the following principles to state the law on the subject:

 1. A tradesman is entitled to declare his goods to be best in

the words, even though the declaration is untrue. 2. He can also say that his goods are better than his competitors, even though such statement is untrue. 3. For the purpose of saying that his goods are the best in the world or his goods are better than his competitors he can even compare the advantages of his goods over the goods of others. 4. He, however, cannot while saying his goods are better than his competitors, say that his competitors goods are bad. If he says so, he really slanders the goods of his competitors. In other words he defames his competitors and their goods, which is not permissible.

 5. If there is no defamation to the goods or to the

manufacturer of such goods no action lies, but if there is such defamation an action lies and if an action lies for recovery of damages for defamation, then the Court is also competent to grant an order of injunction restraining the repetition of such defamation.
Therefore, the question to be determined by the Court was

whether the advertisement merely puffed the product of the advertiser, or in the garb of doing so, was denigrating the product of the plaintiff.

 It was observed herein that the assertions in the

advertisement were aimed at denigrating the product of the plaintiff by indicating to an existing and future customers that the product was both uneconomical and ineffective. Hence, the Court passed an order of injunction against the defendant, restraining him from broadcasting the said advertisement.

 Analysis:

A significant aspect of the manner in which puffery has been

interpreted in this case is the broadly liberal attitude adopted towards untrue and imprecise statements. The law as had evolved in England and found resonance in Ramchandran, considered it permissible to allow the advertiser to enhance the perceived utility of his product, even at the expense of factual accuracy. The emphasis of the Court in this regard was to prevent any loss or injury to the interests of the competing manufacturer or seller, with any active disparagement of a competing product being impermissible. The said approach, while protecting the rights of the competing parties, was woefully inadequate in addressing the concerns of the other significant market group, the consumers.

 The Ramchandran position on puffery was reconsidered to a

limited extent in the matter of Glaxo Smith Kline Consumer Health Care Limited v. Heinz India Private Limited and Ors [2007 (2) CHN 44]. Herein, the parties were manufacturers of the reputed nutritional drinks Horlicks and Complain respectively. In addition to allegations of implied disparagement, it was contended by the plaintiff that the advertisement had attributed certain qualities to the defendants product in an imprecise and untruthful manner.

 A significant evolution of the law on false and imprecise

puffery was seen in the case of Colgate Palmolive (India) Limited v. Anchor Health and Beauty Care Private Ltd[. 2009 (40) PTC 653.] The parties herein were manufacturers of dental care products including toothpastes, with the plaintiff seeking an injunction restraining the defendant from broadcasting the contentious advertisement. It was contended by the plaintiff that in the advertisement the defendant had stated that its product Anchor was the only one that contained three ingredients, namely calcium, fluoride and triclosan. Further, it was also claimed by the defendant that Anchor was the first toothpaste that could provide all round protection. The plaintiff objected to the first assertion as being false on the basis that even its products contained all of the three named ingredients.

 Having established itself as a pioneer in the market for dental

care products, it argued that an assertion on part of the defendant that Anchor was the first product to provide all round protection was an act of denigrating the competing product in an implied manner. Hence, it was argued that the defendants assertions were both false and disparaging, with the same exceeding the tolerable limits of puffery. The defendant replied to the same arguing that its use of the word only was intended to mean that its product was the only one containing the three ingredients within the specific range of white toothpastes. Further, with regard to the usage of the word first, it argued that it related to the adoption of the slogan all round protection, and not the utility of the brand.

 Held: The Court rejected the defendants argument and held

that the advertisement sent a message to a consumer of average intelligence that Anchor was in fact the only product containing the said ingredients, and that it was the first to provide optimal protection. A significant development seen in the reasoning of the Court was the introduction of the element of consumer protection in the law regulating puffery, with the Court observing that the consumer was as significant a stakeholder in the market as the competing manufacturers. With consumers being the often gullible targets of advertising campaigns, the protection of their interests was required while establishing a substantive mechanism to regulate comparative advertising. In an analysis of the judicial trend on the subject since Ramchandran, it observed that the law in India had failed to take account of the demands of consumer justice, despite the introduction of the Consumer Protection Act, 1986, and the subsequent broadening of the jurisprudence and policy relating to consumer protection.

 Finding fault with the traditional position in Ramchandran, the

Court noted that while the same had been arrived at on the basis of the English decision in De Beers, the law on the subject in England itself had undergone a significant change since then. The introduction of the Consumer Protection Act, 1987, and numerous other regulations such as the OFCOM (Office of Communications) had resulted in the statutory repudiation of the principles enunciated in De Beers. Hence, the Court considered the continued validation of the De Beers opinion by Indian courts to be contrary to the stated objectives of legislations such as the Consumer Protection Act, 1986. It observed that with the present regulatory norms in India, it may not be possible for manufacturers to make false, misleading and harmful claims in their advertisements. The Court herein referred to the concept of unfair trade practice as has been defined under 2(i)(r) of the Consumer Protection Act, 1986. Clause (x) of the same brought any statement giving false or misleading facts, or disparaging the goods of the competitor, within the ambit of the provision.

 Hence, the right that had been conferred on advertisers

to make untrue statements regarding the utility of the product was extinguished. With reference to the present matter, the Court accepted the defendants argument that there had been no active disparagement of the plaintiffs product. However, the use of the terms only and first in an untruthful and misleading manner was considered to be constitutive of an unfair trade practice. Hence, the Court admitted the prayer of the plaintiff to a limited extent and restrained the defendant from the usage of the words first and only in the said manner.

 RECENT JUDICIAL TRENDS: DIFFERENTIATING

SIMPLE PUFFERY FROM DENIGRATION The two fundamental facets of comparative advertising are puffery and denigration, with there being a need to comprehensively differentiate the nature of the two in order to develop any broad mechanism of regulation. An attempt may be made towards the same by way of an analysis of certain recent case law on the subject. An understanding of the judicial opinion herein might help in determining a uniform standard of tolerance to differentiate cases of simple puffery from those of actionable denigration.

 The case of Dabur India Ltd. v. M/S Colortek Meghalaya

Pvt. Ltd. 2010 (42) PTC 88. laid down certain principles to help ascertain the important of implied disparagement in comparative advertising. Herein, the appellant was a manufacturer of mosquito repellent creams, namely Odomos and Odomos Naturals. The respondent also manufactured a mosquito repellent cream under the brand name Good Knight Naturals. The respondent telecast the advertisement of Good Knight Naturals, with the appellant contending that the same disparraged its product. The question that arose before the Court was whether the telecast disparaged the product of the appellant in an implied manner, and if so, whether the appellant was entitled to an injunction against the telecast.

 The Court observed that a seller always has the scope to

represent his product in a manner that gains him additional purchasers than what he would have normally had. This latitude, however, in no way implies any permission for misrepresentation, but only a description of permissible assertion. To substantiate this argument, the Court also placed reliance on the principle of civil law, simplex commendatio non obligat, which means that simple commendation can only be regarded as a mere invitation to a customer, without any obligation as regards the quality of goods. Thus, each seller has the right to naturally try and affirm that his wares are good enough to be purchased, or of superlative quality.

 Although the Court held that commendatory expressions

should not to be treated as serious representations of fact, it further stated that such principle was by no means conclusive as the limits of permissible assertion are not always discernible. The Court thus laid down certain guiding principles wherein it observed that an advertisement is constitutive of commercial speech and is protected by Art. 19(1)(a) of the Constitution. While there would be some grey areas in the process of representation, any commendatory statements need not necessarily be taken as serious representations of fact, but only as glorifying the product, provided that the advertisement is not false, misleading, unfair or deceptive. Also while glorifying the product, an advertiser may not denigrate or disparage a rival product.

 A cause of action would arise when the subject of the

advertisement goes beyond mere commendatory statements to constitute untrue statements of fact about a rivals product [Pepsi Co. Inc. & Ors. v. Hindustan Coca Cola Ltd, 2003 (27) PTC 305 (Del.). See also Dabur India Ltd. v. Wipro Limited, Bangalore, 2006 (32) PTC 677, [It] is one thing to say that the defendants product is better than that of the plaintiff and it is another thing to say that the plaintiffs product is inferior to that of the defendant.]

 However, the possibility always remains that whenever an

advertiser promotes his product through puffed statements, there may be an assumption that he is implying at the inferiority of another product. Referring to the case of Pepsi Co. Inc. & Ors. v. Hindustan Coca Cola Ltd, the Court formulated certain tests to determine any cause of action for disparagement: 1. What is the intention behind the advertisement, as deciphered from the story line and the message ostensibly sought to be conveyed? 2. Is the manner of advertisement or comparison by and large truthful or does it falsely denigrates or disparages the rivals product? 3. Finally, does the ad have the overall effect of promoting the sellers product or showing the rival in poor light?

 The judgment delivered in Dabur India assumes significance in

the regulation of comparative advertising as it points out stark differences between tolerable amounts of puffery and what might amount to denigration. The Court rejected the argument of the appellant that it was the implied target of denigration since it had a dominant market share. The underlying rationale behind this argument would be that the appellant sought to create a monopoly in the market, or had wanted to entrench the monopoly it had already established. If such a thing were to happen, then no company in the market could advertise its product as doing so would necessarily mean that the appellants product was being targeted. The commercial in dispute merely enlisted the virtues of the advertised product rather than denigrating that of the competitor. The Court found no content in the commercial to suggest overt or even implied denigration. It was held to be natural to assume that while comparing its product with any other product, any advertiser would naturally highlight its positive points but this cannot be negatively construed to mean that there is a disparagement of a rival product.

 A further submission by the appellant was that the use of

expressions such as an apprehension of getting rashes and allergy with the use of mosquito repellent creams, or an allegation that other creams caused stickiness, amounted to disparagement of its product. The same was also rejected by the Court as there was no suggestion that any specific product caused rashes or allergies or was sticky. A general proposition had been advanced which suggested that if a mosquito repellent cream was applied on the skin, there may be an apprehension of rashes and allergy. Since the respondents were also promoting a mosquito repellent cream, there was no reasonable apprehension that they would denigrate all mosquito creams or of the fact that such creams caused rashes or allergies. The respondents were only suggesting that since their product contained certain exclusive ingredients, there is a lesser chance of the consumer suffering from any side effects. With regard to the point on stickiness, the Court observed that it was entirely dependent on the subjective opinion of the consumer, and thus ended all apprehension of denigration of the appellants product. [See also, S.C. Johnson & Son, Inc & Anr. v. Buchanan Group Pty Ltd., High Court of Delhi at New Delhi CS(OS) No. 2173/2009.

 The respondent allegedly disparaged the goods of the

petitioner by claiming that their product is of superior quality and while drawing this comparison depicted a container which had striking resemblance with the petitioners product. The respondents argument that the comparison was of a generic nature was turned down and the Court held that it was comparison and since such comparison showed the petitioners product in poor light, it was disparagement. It also seemed to recognize the impact of advertisement on sales figures.]

 An analysis of the law governing comparative advertising in

India reveals that in the absence of a dedicated legislative mechanism regulating the same, a largely makes shift approach has been followed, with diverse aspects of the same being determined with reference to inconsistent standards. Such an approach is insufficient on a sustainable basis, as the selective application of diverse laws leaves behind a trail of lacunae in any attempt to determine the question in a comprehensive manner. In order to arrive at a uniform standard or level of tolerance, the twin components of simple puffery and denigration have to be addressed keeping in mind the nature such representations. Herein, it is relevant to note that while the level of permissibility with regard to puffery has been varying, the position on denigration has been largely consistent. Further, it is essential to incorporate the interests of all the concerned stakeholders, including manufacturers, advertisers, competing parties and consumers.

 The Consumer Protection Act, 1986, though commonly

viewed as an effective mechanism to regulate the subject, has proved insufficient as it excludes from its purview competing manufacturers and sellers. On the other hand, the traditional view as had been adhered to by our courts for almost a decade fell short in terms of addressing the demands of consumer justice. The self regulatory process as has been established by the advertising industry has been relegated to a purely recommendatory function, with it having no enforcement mechanism to ensure compliance with its directives.

 A possible method to evolve a more comprehensive

scheme of regulation may be in allowing the advertising industry to suggest the broad structure for the same, while ensuring that the rights of both the competitor and consumer are safeguarded. This may be done by way of adopting the model as has evolved in Britain, with the norms as prescribed by the advertising body being legally enforceable. Such norms may be used to determine certain uniform standards with regard to both simple puffery and denigration, keeping in mind the demands of consumer justice and fair competition. While the necessity for introducing a more comprehensive regulatory regime cannot be overemphasized, it must be remembered that advertising disputes, being commercial in nature, should preferably be resolved within the market.

 The courts in this regard should not allow themselves to be

used as instruments for the settlement of market disputes, with their intervention being required only in case of any express violation of the law. Comparative advertising in Indiapuff under scrutiny The Madras High Court observed that: Recognizing the right of producers to puff their own products even with untrue claims, but without denigrating or slandering each others products, would be to derecognize the rights of the consumers guaranteed under the Consumer Protection Act 1986. The court also held that: To permit two rival traders to indulge in puffery, without denigrating each others products, would benefit both of them, but would leave the consumer helpless.

 If on the other hand, the falsity of the claim of a trader about

the quality and utility value of his product, is exposed by his rival, the consumer stands to benefit by the knowledge derived out of such exposure. After all, in a free market economy, the products will find their place, as water would find its level, provided the consumers are well informed. Consumer education, in a country with limited resources and a low literacy level, is possible only by allowing a free play for the trade rivals in the advertising arena, so that each exposes the other and the consumer thereby derives a fringe benefit. Therefore, it is only on the touchstone of public interest that such advertisements are to be tested.

 Based on these findings, the court crafted the following

principles: Publication of advertisements as free commercial speech is protected by Article 19(1)(a) of the Constitution; Restrictions contained in statutes such as the Monopolies and Restrictive Trade Practices Act and the Consumer Protection Act satisfy the test of reasonable restrictions allowed by Article 19(2) of the Constitution; If a case of disparaging advertising falls within the definition of the term unfair trade practice, an action may be brought before a consumer court or a civil court by a consumer, a group of consumers, a consumer association, the central or state governments, a manufacturer or marketer where the advertising contains a false representation as per Section

 2(1)(r) of the Consumer Protection Act;

Section 2(1)(r) of the Consumer Protection Act

categorizes four types of representations as actionable unfair trade practices, namely: false representations falling under subclauses (i), (ii) and (iii); representations which may not necessarily be false but are nevertheless incorrect under subclauses (iv) and (v); warranty orguarantee under sub-clauses (vii) and (viii); and false or misleading representations that fall under subclauses (vi), (ix) and (x).

 The court, observing the statutory basis of unfair trade

practices, noted that: It is doubtful if false claims by traders, about the superiority of their products, either simpliciter or in comparison with the products of their rivals, is permissible in law. In other words, the law as it stands today, does not appear to tolerate puffery anymore. Notably, the court found to be permissible advertisements which tend to enlighten the consumer, either by exposing the falsity or misleading nature of the claim made by the trade rival or by presenting a comparison of the merits (or demerits) of their respective products. Interpreting such advertisements to be in the public good, the court cited two instances as an exception to this namely, if an advertisement is motivated by malice, and if it is false.

 The court held that this sort of advertising would

benefit society because competitors are naturally better equipped to expose a rivals untrue claims. The court also held that the benefit to society from such an exposure would outweigh the loss of business for the person affected. This observation was based on the courts assumption that comparative advertising, even if it did not amount to a disparagement of other goods, could result in consumers being misled. The court held that it was ultimately to the benefit of consumers to allow truthful exposures and to restrain traders from making false representations, incorrect representations, misleading representations or issuing unintended warranties (as defined as unfair trade practice under the Consumer Protection Act).

 This balancing of trader interests with consumer

interests means that an advertisement which makes false claims, whether comparative or not, may be subject to an injunction or restraining orders from a court. Legal landscape far from settled. While the Madras High Court judgment is theoretically binding on concurrent courts in Madras and on lower courts within its jurisdiction, judges who disagree with the findings in a case have the option to offer a new opinion or refer the matter to a Division Bench (of two or more judges) for a definitive interpretation. This judgment is expected to be influential among high courts in other jurisdictions. However, it is likely that the law in this area will witness some inconsistency until the Supreme Court makes a definitive ruling.

 Conclusion To conclude the concept stated and the categories

enumerated in the act has high priority on those matters which relate to the basic necessities of life and to situations in which the impact of false and misleading advertising or other unfair or deceptive practice falls with cruelest impact upon those who are least able to resist, namely, the elderly and the poor.