UNFAIR TRADE PRACTICE

INTRODUCTION

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. Let us first define
the term and the practices to be included.

DEFINITION

"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;

(v) represents that the seller or the supplier has a sponsorship or

approval or affiliation which such seller or supplier does 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 defense is raised to the effect that such

warranty or guarantee is based on adequate or proper test, the burden
of proof of such defense shall lie on the person raising such defense;

(viii) makes to the public a representation in a form that purports to

be -

(i) a warranty or guarantee of a product or of any goods or services; or

(ii) a promise to replace, maintain or repair an article or any 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 such warranty,
guarantee or promise will be carried out;

(ix) materially misleading the public concerning the price at which a

product or like products or goods or services, have been, or are,
Ordinarily sold or provided, and, for this purpose, a representation as
to price shall be deemed to refer to the price at which the product or
goods or services has or have been sold by sellers or provided by
suppliers generally in the relevant market unless it is clearly specified
to be the price at which the product has been sold or services have
been provided by the person by whom or on whose behalf the
representation is made;

(x) gives false or misleading facts disparaging the goods, services or

trade of another person.

Explanation : For the purposes of clause (1), a statement that is -

(a) expressed on an article offered or displayed for sale, or on its

wrapper or container; or

(b) expressed on anything attached to, inserted in, or accompanying, an

article offered or displayed for sale, or on anything on which the
article is mounted for display or sale; or

(c) contained in or on anything that is sold, sent, delivered,

transmitted or in any other manner whatsoever 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;

(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.
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.
1. FALSE REPRESENTATION

The practice of making any oral or written statement or

representation which:

• Falsely suggests that the goods are of a particular standard

quality, quantity, grade, composition, style or model;

• Falsely suggests that the services are of a particular standard,

quantity or grade;

• Falsely suggests any re-built, second-hand renovated,

reconditioned or old goods as new goods;

• Represents that the goods or services have sponsorship,

approval, performance, characteristics, accessories, uses or
benefits which they do not have;

• Represents that the seller or the supplier has a sponsorship or

approval or affiliation which he does not have;

• Makes a false or misleading representation concerning the need

for, or the usefulness of, any goods or services;

• Gives any warranty or guarantee of the performance, efficacy or

length of life of the goods, that is not based on an adequate or
proper test;

• Makes to the public a representation in the form that purports

to be-
a. a warranty or guarantee of the goods or services,
b. a promise to replace, maintain or repair the goods until it
has achieved a specified result,
 If such representation is materially misleading or there is no
reasonable prospect that such warranty, guarantee or promise
will be fulfilled

• Materially misleads about the prices at which such goods or

services are available in the market; or

• Gives false or misleading facts disparaging the goods, services or

trade of another person.

2. FALSE OFFER OF BARGAIN PRICE-

Where an advertisement is published in a newspaper or otherwise,

whereby goods or services are offered at a bargain price when in fact
there is no intention that the same may be offered at that price, for a
reasonable period or reasonable quantity, it shall amount to an unfair
trade practice.

The ‘bargain price’, for this purpose means-

a. the price stated in the advertisement in such manner as

suggests that it is lesser than the ordinary price, or
b. The price which any person coming across the advertisement
would believe to be better than the price at which such goods
are ordinarily sold.

FREE GIFTS OFFER AND PRIZE SCHEMES

The unfair trade practices under this category are:

• Offering any gifts, prizes or other items along with the goods
when the real intention is different, or

• Creating impression that something is being offered free along

with the goods, when in fact the price is wholly or partly covered
by the price of the article sold, or
 • Offering some prizes to the buyers by the conduct of any
contest, lottery or game of chance or skill, with real intention to
promote sales or business.

4. NON-COMPLIANCE OF PRESCRIBED STANDARDS

Any sale or supply of goods, for use by consumers, knowing or having

reason to believe that the goods do not comply with the standards
prescribed by some competent authority, in relation to their
performance, composition, contents, design, construction, finishing or
packing, as are necessary to prevent or reduce the risk of injury to
the person using such goods, shall amount to an unfair trade practice.

5. HOARDING, DESTRUCTION, ETC.

Any practice that permits the hoarding or destruction of goods, or

refusal to sell the goods or provide any services, with an intention to
raise the cost of those or other similar goods or services, shall be an
unfair trade practice.

GUIDANCE NOTE

Consumer Protection from Unfair Trading Regulations 2008

Here's another example of how regulation of online business is getting

tighter and tougher.
The UK has recently introduced laws which provide increased
protection for consumers from 'unfair trading.'
The Consumer Protection from Unfair Trading Regulations 2008 (the
"Regulations") came into force (on 26 May). The Regulations
implement in the UK the EU's Unfair Commercial Practices Directive.

The aims of this Directive are:

 to strengthen consumer protection by introducing a general

prohibition on traders against treating
consumers unfairly; and
 to harmonise unfair trading laws protecting consumers in all EU
member states.
The Regulations replace previous consumer protection legislation
(which was a bit patchy and piecemeal), such as the majority of the
Trade Descriptions Act 1968

What the Regulations Cover

The Regulations prohibit "unfair commercial practices." These are

grouped into 3 categories:
1. Misleading actions
2. Misleading omissions
3. Aggressive practices

The Regulations also include a Schedule setting out a "blacklist" of 31

commercial practices which are considered unfair in all circumstances.

1- Misleading actions refer to, amongst other things, false information

or deceptive presentation as to the nature, characteristics, price,
sponsorship, or approval of the product, or the motives for the
commercial practice. In addition, in order to constitute a misleading
(and therefore unfair) commercial practice, it must cause or be likely
to cause the average consumer to take a transactional decision he
would not have taken otherwise.
2- Misleading omissions refer to the concealment or omission of
material information (such information as the average consumer needs,
according to the context, to take an informed transactional decision),
or the provision of material information in a manner which is unclear,
unintelligible, ambiguous or untimely. As above, such misleading
omission is an unfair commercial practice if it causes or is likely to
cause the average consumer to take a transactional decision he would
not have taken otherwise.

3- Aggressive practices are where, in the factual context, taking

account of all circumstances, the average consumer's freedom of
choice or conduct in relation to the product concerned is significantly
impaired (or likely to be significantly impaired) through the use of
harassment, coercion or undue influence. As above, this constitutes an
unfair commercial practice if it causes or is likely to cause the average
consumer to take a transactional decision he would not have taken
otherwise.

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.