CONSUMER PROTECTION ACT, 1986

Consumer Protection Act has been enacted, inter alia, to provide for better protection of the
interests of consumers and for the redressal of grievances relating to defect in goods bought and
deficiency in services hired or availed of by consumers, by the Redressal Agencies set up under
the said Act. Under the said Act, as originally enacted in 1986, a complaint could be made about
any unfair trade practice, as defined in Section 36A of the MRTP Act, 1969, adopted by a trader,
other than owner of a MRTP Undertaking covered by Chapter III of the said Act, for redressal.
In other words, while the Consumer Redressal Forums were competent to deal with UTP cases of
non-MRTP business entities, the MRTP commission had the jurisdiction to deal with UTPs
indulged in by any business concern, whether or not covered by the MRTP Act. Section 2(r) of
the Consumer Protection Act which defined “Unfair Trade Practice” has been amended by the
Consumer Protection (Amendment) Act, 1993, and whereby the jurisdiction of the Consumer
Protection Act has been extended to cover any seller or supplier of goods or services. Thus, now
there was total overlapping of jurisdiction of the MRTP Commission and the Redressal Agencies
set up under the Consumer Protection Act in regard to curbing of Unfair Trade Practices, which
had been set out exactly in the same words in these two statutes, viz., the MRTP Act and the
Consumer Protection Act. An aggrieved consumer could, thus, approach the MRTP Commission
or the Consumer Redressal Agencies set up under the Consumer Protection Act. An aggrieved
consumer can, thus, approach the MRTP Commission or the Consumer Redressal Agencies set
up under the Consumer Protection Act, for redressal of his grievance. The scope of redressal of
grievances relating to defects in goods or deficiencies in services was, however, confined in the
manner and to the extent laid down in section 14(1) of the Consumer Protection Act.

In this context two basic distinctive features of these Enactments may, however, be noted; first,
that a complaint cannot lie under the Consumer Protection Act if the goods are obtained for
Commercial purposes and, secondly, Section 24A of the Consumer Protection Act lays down a
limitation period of 2 years for lodging the complaint.

The Ministry of Corporate Affairs, Government of India has issued a Notification dated 28 th
August 2009, whereby the most controversial the Monopolies and Restrictive Trade Practices
Act, 1969 (“the MRTP Act”) stands repealed and is replaced by the Competition Act, 2002, with
effect from September 1, 2009.

The following transitional provisions would apply as provided in Section 66 of the Competition
Act, 2002:-

All pending cases relating solely to unfair trade practices shall stand transferred to the National
Commission as constituted under the Consumer Protection Act, 1986, which may in turn transfer
such cases to a State Commission constituted under the said Act under circumstances it deems
appropriate. These cases will be dealt with by them in accordance with the provisions of the
Consumer Protection Act.

With effect from 1 September 2009, all pending investigations and proceedings by the Director
General relating to Unfair trade practices will be transferred to the National Commission under
the Consumer Protection) Act 1986.

LEGISLATIVE HISTORY

Sachar Committee

The committee provided the backdrop of the provisions on unfair trade practices in Chapter V-B
(Sections 36-A to 36-E), which have been introduced by the MRTP (Amendment) Act, 1984.
The Committee was of the view that the Act contained no provisions for the protection of
consumers against false or misleading advertisement or other similar unfair trade practices. It
emphasized that consumers needed to be protected not only from the effects of restrictive
practices but also from practices which are resorted to by the trade and industry to mislead or
dupe the consumers.
The objection taken is not to the advertisement of the product, which it may be necessary to do in
order to acquaint the public with the articles. What is, however, insisted on is that there is an
obligation on the seller, namely, that if he advertises, he must speak the truth. The obligation also
requires that the representation that is made to the consumer must not only contain an element of
truth but must also avoid half-truths so as to give deliberately different impression than is actual
fact. The object is only to avoid misleading advertisement.

It is often said that consumers need no special protection; all can be safely left to the market. But
the perfect market is an economist’s dream and consumers sovereignty a myth. In real life,
products are complex and of great variety, and consumers and retailers have imperfect
knowledge. Suppliers may often have a dominant buying position.

Fictitious bargain is another common form of deception. Many devices are used to lure buyers
into believing that they are getting something for nothing or at a nominal value for their money.
The test always is whether the consumer would, as an average purchaser, be misled.

All over the world, various legislations are seeking, in the words of justice Learned Hand, to
discover and make explicit those unexpressed standards of fair dealing which the consumer as a
community may progressively develop. In this connection, reference may be made to Australian
Trade Practices Act, 1974, and Canadian Combines Investigation Act and the legislations in rest
of Western Europe and elsewhere against monopoly and other unfair trade practices.

CHANGES MADE BY MRTP (AMENDMENT) ACT, 1991

This section as initially framed, inter alia, envisaged two necessary ingredients of an unfair trade
practice, viz.:

 The trade practice should fall within the ambit of one or more of the categories
enumerated in clause (1) to (5) of Section 36A, and
 The trade practice should cause loss or injury to the consumers of goods or services.
In the opening part of the section the words, “Adopts one or more of the following
practices, and thereby causes loss or injury to the consumers or such goods and services,
whether by eliminating or restricting competition or otherwise” have now been
 substituted by the words “adopts any unfair method or unfair or deceptive practice
including any of the following practices”.
The definition of unfair trade practice has, thus, been amplified on the lines of the
provisions contained in the U.S. Anti-Trust Law. Even if a trade practice is not of the
nature stated in clauses (1) to (5) to this section, it would non the less be reagarded as
unfair trade practice, if it is otherwise unfair or deceptive. By another amendment, the
scope of clause (1)(i) has been expanded by inclusion of the words “quantity”.

SCOPE
The unfair trade practices covered by section 36A are:
a. Misleading advertisements and false representations,
b. Bargain sale, bait and switch selling,
c. Offering gifts or prizes with the intention of not providing them and conducting
promotional contents,
d. Non-compliance of product safety standards, and
e. Hoarding and destruction of goods.

The per se approach recommended by the Sachar Committee, however, has undergone a variant,
in that the practices enumerated in the section would be subject to proscription by the
Commission only when, after the conduct of inquiry, the Commission is of the opinion that the
practice is prejudicial to the public interest or the interest of any consumer or consumers
generally. Also, the section does not enumerate any of the statutory defences that the Sachar
Committee had recommended. Since the definition of the term ‘trade’ in section 2(s) includes a
profession, it appears that the services rendered by professionals like Engineers, Architects,
Doctors, Chartered Accountants etc. would, in the event of their offending section 36A, be
subject to inquiry by the Commission under Section 36D.

The opening paragraph of this section originally provided that the adoption of the practices
mentioned in clauses (1) to (5) for the purpose of promoting the sale, use or supply of any goods,
or for the provision of any services, would amount to unfair trade practice, if thereby some loss
or injury to the consumers is caused, “whether by eliminating or restricting competition or
otherwise”. These words have since been deleted by MRTP (Amendment) Act, 1991.
The anti-competitive effects of unfair or deceptive practices have been duly taken care of even in
the Canadian and the U.S. laws. The Federal Trade Commission Act supplements the Sherman
and Clayton Acts in the latter’s endeavour to maintain and promote fair competition by curbing
in their very incipieny practices which when full blown would injure competition. Section 36A
makes this intention explicit in the very opening paragraph.

The object of section 36A of the MRTP Act is to bring honesty and truth in the relationship
between the provider of the services and the consumer, and when a problem arises as to whether
a particular act can be condemned as an unfair trade practice or not, the key to the solution would
be to examine whether it contains a false statement and is misleading and further what is the
effect of such representation on the common man. 1

In re Skypack Couriers2, the respondent, declared that

 There are no matters which are likely to affect operatin and finance of the company;
 There is no material development after the date of last balance sheet.

The Commission held that the failure to mention about the winding up petition and the suit
pending before the Bombay High Court in the prospectus was, prima facie, false and misleading
and it amounts to adoption of unfair method or unfair or deceptive practice.

In re Habitat India Agro Development (P.) Ltd., 3 the Commission observed that the maxim
‘Supressio Veri Suggestio false’ is applicable only where there is willful suppression of truth and
not otherwise. The impugned advertisement in this case, read as under: “Rs 2,25,000- For less
than the price of a handkerchief you can buy a square feet of land and cottage just 65 miles from
Bomaby AT GREEN ACRES, Contact Habitat India”. Although the advertisement was not by
itself misleading, it was held to be an unfair trade practice, as the promise to sell land was made
when the advertiser did not have a legal title and there was mere negotiation for purchase of land
from original land-owner at the relevant time.

LOSS INJURY
1
Mohd. Hasan v. Paradise Time Centre (UTPE No. 73/1990, decided on 20 th June, 1991)
2
UTP Enquiry No. 8/1993, Order dated 17-2-1993.
3
UTP Enquiry No. 368/1987, Order dated 12-12-1991.
It is not now an essential ingredient. The adoption of a trade practice may affect wholesalers,
retailers, etc., but unless, as a result thereof, loss or injury is caused to the consumers, it would
not amount to an unfair trade practice. However, where any trader or class of traders proves
before the Commission by affidavit or otherwise that any undertaking or person is carrying on an
unfair trade practice and his/ their interests are thereby likely to be affected, the Commission ha
spower to grant temporary injunction under Section 12A to prevent the adverse effects flowing
from such practice and, thereafter, issue ‘cease or desist’ order after full enquiry under Section
36D. The use of the term ‘public interest’ in section 36D subserves interests of the traders also.

Section 12B, provides for award of compensation to Central or State Government for the loss or
damage caused by an unfair trade practice indulged in by an undertaking or a person, it is not
explicit as to how such loss or damage may be caused, unless it means either loss of tax-revenue
or loss to Government as a user or buyer of such goods or services.

In Director General of Investigation and Registration v. Investwell Publishers (P.) Ltd., the
Commission observed that there are five necessary ingredients of an unfair trade practices as
defined in the Act. These are:

 There must be a ‘trade practice’ within the meaning of Section 2(u) of the Act;
 The trade practice must be employed for the purpose of promoting sale, use, supply of
any goods or the provision of any services;
 The trade practice should fall within the ambit of one or more of the categories
enumerated in clauses (1) to (5) of Section 36A;
 The trade practice should cause loss or injury to the consumers of goods or services; and

Additionally, to attract clause (1) of Section 36A, the trade practice should involve making a
statement whether orally or in writing or by visible representation.

In Social for Civic Rights v. Colgate Palmolive (India) Ltd., the full bench of the Commission
was of the view that the key phrase “and thereby causes loss or injury to the consumers of such
goods or services” does not require the causing of actual loss or injury to the consumer. for Civic
Rights v. Colgate Palmolive (India) Ltd., the full bench of the Commission was of the view that
the key phrase “and thereby causes loss or injury to the consumers of such goods or services”
does not require the causing of actual loss or injury to the consumer. for Civic Rights v. Colgate
Palmolive (India) Ltd., the full bench of the Commission was of the view that the key phrase
“and thereby causes loss or injury to the consumers of such goods or services” does not require
the causing of actual loss or injury to the consumer.

It may be noted that after amendment of this section by MRTP (Amendment) Act, 1991, it is no
more necessary to prove loss or injury to the consumer.

CLAUSE (1)- MISLEADING ADVERTISEMENTS AND FALSE REPRESENTATIONS

Any statement which is not true either because it suppresses facts which are material or suggests
falsehood would be false statement. Similarly, where a statement is couched in such a
phraseology or context that it may give rise to two meanings, one of which is false, would be
misleading. Both are sought to be covered under this clause.

Halsbury’s Law of England states that representation would be deemed to be false, if it is false in
substance and in fact and the test by which the representation is to be judged is to see whether
the discrepancy between the fact, as represented and the actual fact is such as would be
considered material by a reasonable person.

For the purpose of this clause, it is not material that the person making the statement knows that
the statement is false. Even where a person makes a statement bona fide, which later turns out to
be untrue, it would fall under clause (1). Such an interpretation would be in consonance with the
objective behind the provisions that a seller shall not make any statement about the truth of
which he is uncertain.

In re Kedia Electrical Industries Limited, where the allegation against the respondent was that
its proprietor at a press conference, made “fraudulent claims about the quality and price of
airconditioners manufactured and sold by the company, the Commission, while dismissing the
complaint, observed that a news item was in the nature of hearsay, secondary evidence unless
proved by evidence aliunde.

Mere ‘puffing’ or slight exaggeration, is not unlawful, but the line between permissible puffing
and unlawful representation is thin. But, claims as to virtues or qualities that products do not
possess go beyond permissible puffing and would constitute unfair trade practice. The fact that
the statements are literally true can be no defence if they have a tendency to mislead.
False and misleading representation of the types enumerated in sub-clause (i) to (x) may be made
by statements orally, in writing or by visible representation. The explanation to sub-clause (1)
provides that for the purposes of various sub-clauses in this clause, 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.

The Explanation, however, does not preclude statements contained in any advertisement
howsoever disseminated.

The ‘statement’ or ‘representation’ which is false or misleading must be of facts and not of law
or mere opinions. This is so even in the United States and Canada. ‘Visible’ or ‘written’
misrepresentations would include advertisement messages which have been or are being
publicized.4

CORRECTIVE ADVERTISEMENT

In the United States, the Federal Trade Commission Act, 1914 does not expressly empower the
Federal Trade Commission (FTC) to order any trader to issue corrective advertisement in
realtion to an advertisement found false or deceptive. The FTC, however, orders issue of
corrective advertisement when the accumulated impact of the past advertising necessitated
disclosure in future advertising.

In re IIT Continental Banking Co.,5 it was ordered that:

“Respondents-IIT Continental Banking Co., Inc., a corporation, and respondent Ted Bates &
Co., a corporation, either jointly or individually, shall forthwith cease and desist for a period of
one year from the date this order becomes final from disseminating or causing the dissemination
4
R V Steinberg’s (1976), 31 C.C.C (2d) 30.
5
Federal Reg. 18522 (1971)
of, any advertisement for any bread product designated by the trade name ‘PROFILR’, unless not
less than 25% of the expenditure for each media in each market be devoted to advertising in a
manner approved by the authorized representatives of FTC that PROFILE is not effective for
weight reduction, contrary to possible interpretation of prior advertising.”

Originally, there was no specific provision empowering the Commission to order issue of
corrective advertisements. Such a provision has since been made in Section 36 D(1)(c) by the
MRTP (Amendment) Act, 1991. In some cases, which came up before the Commission before
27-9-1991 when Section 36 D (1)(c) came into operation, the respondents, however, came
forward voluntarily to issue corrective advertisements. In re Parle Beverages Pvt. Ltd.6, the
Commission directed that respondent will have to issue corrective advertisement in as many
newspapers as in the impugned advertisement was issued so that the harm caused to the public be
removed. In D G v. Vaidya Sri Jwala Prasad 7, the respondent filed a draft of the advertisement
so that the trade practice is no longer prejudicial to public interest. It was made clear by the
Commission that the respondent will never mention in the future advertisements that it has been
approved by the Commission, otherwise the respondent will have to be penalized for this
prohibitory injunction.

CORRECTIVE ACTION

In re Desert Gold India Irrigation Ltd., the said respondent was held guilty of indulging in unfair
trade practices falling under Section 36 A (ii), (iv), and (viii). The respondent issued alluring
advertisements falsely indicating the benefits which may accrue to the investors in the scheme
known as ‘Desert Gold Teak Wood Scheme’ covered by its two brochures one under the caption
‘Desert Gold Teak Wood Sceme’, and whereunder it was asserted that an investment of Rs.
1,000/- for each prime teak wood sapling will give an estimated return of Rs. 51,000/- after 20
years. While passing the case and desist order, the respondent was directed to apprise afresh the
investors who had already made investments in the Scheme, about the risk factors involved and
to give them the option to withdraw from the scheme, if they desire. Such fresh representation
was required to be communicated by the respondent to all the investors individually and also to
6
UTP Enquiry No. 297/1987, Order dated 15-9-1989
7
UTP Enquiry No. 245/1987, Order dated 5-9-1989
be published in a couple of largely circulated newspapers; and if some of the investors withdrew
from the scheme, the respondents were required to refund to such investors the amounts
deposited by them with interest at the current bank rate.

SUB-CLAUSE (i)

False representation that goods are of a particular standard, quality, grade, composition, style or
model were initially covered by this sub-clause. By the Amendment Act of 1991, the word
“quantity” has also been added in this sub-clause. ‘False’ here connotes representations which
are untrue. Where there is a false representation that particular goods comply with ISI (Indian
Standard Institution) standard, it would come within the mischief of this sub-clause.

Sometimes the trade names turn out to be deceptive and the customers are led into believing that
they are assured of a certain quality or price. In FTC v. Royal Milling Co. the respondents
purchased flour which they mixed, blended and packaged into bags for sale. None of respondents
actually ground wheat into flour. All of them used a trade name containing the words “milling
company”, “mill” or “manufacturer of flour”, words which the Commission found were
commonly understood to indicate concerns which grind wheat into flour. Respondents also
issued circulars to the trade which gave the impression that their produce is composed of flour
manufactures by themselves from wheat. The Commission ordered respondents to cease to carry
on their business under a trade name including the word “milling company” or other words of
like import and from representing in any other way that they grind wheat into flour.

SUB-CLAUSE (ii)

This sub-clause covers false representation that services are of a particular standard, quality or
grade. Where a hotelier advertises that the services therein are of comparable standard, quality or
grade available in any 5-star hotel, it would be false representation, if in fact the service provided
do not match with those of 5-star hotels. Where a Health club advertises that it can help achieve
‘slimming’ in a month and thereby indicates that the services are of a particular quality and
standard, it would be false representation, if in fact, ‘slimming’ cannot be rendered in a month’s
time by the advertiser. The fact that the customers were nevertheless satisfied generally after a
one-month course is no palliative for the falsity. Where a travel agency advertises that its
package tours cover the cost of providing breakfast, lunch, snacks and dinner besides covering
the cost of entry fee at various tourist spots, it would be a false representation as to the grade of
services offered, if cost towards those items are recovered in any other manner or are not
provided at any or all points of time in a tour.

SUB-CLAUSE (iii)

This sub-clause covers false representation that any rebuilt, second-hand, renovated,
reconditioned or old goods are new goods are new goods. Where a motor-car is sold as new,
when in fact it is second-hand, or accidented and repaired and repainted one, or where a house is
sold as having been constructed only a year back, when in fact only some portions have been
newly constructed a year back, this sub-clause stands attracted. Similarly, when reconditioned
and renovated furniture is sold as new furniture, or when retreaded tyres are sold as new tyres,
this sub-clause would stand attracted.

The term ‘new’ suggests that the goods are of ‘recent origin’, ‘of mint condition’, ‘unused’. So
where the goods have been stored for a long time so that they might have deteriorated in quality,
if sold as ‘new’ goods, would attract this sub-clause. In R v Ford Motor Co. Ltd., it was held that
though it may be desirable that news cars should be faultless, it is a matter of common
knowledge that frequently they are not. The Court held that if the damage was superficial or
limited to certain defined parts of the vehicle which would simply be replaced by new parts,
then, provided that such damage was in practical terms perfectly repaired so that it could in truth
be said after repairs had been effected that the vehicle was as good as new, it would not be a
false description to describe the vehicle as new.

SUB-CLAUSE (iv)

This sub-clause covers cases where a seller or supplier represents that the goods or services have
sponsorship or approval, performance, characteristics, accessories, uses, or benefits which such
goods or services do not have. Where a seller or supplier of shock-absorbers represents that they
have been certified by the Indian Standards Institute, when in fact the certification is under
consideration, it is false representation as to approval and characteristics which such certification
normally carries. False representation as to durability of goods or as to efficacy of services would
be covered by the expression ‘performance/characteristics’.

In re Ford Motor Company, the Commission was of the view that a car could give the advertised
mileage despite disclaimers. In that case, the headline of the challenged that mileage varies
according to maintenance, equipment, total weight, driving habits, and so forth, and added that
no two drivers, or even cars, are exactly alike. Despite these disclaimers, the Commission found
an implied claim that the average driver would get the advertised mileage. The Commission
found this claim based solely on its own expertise, and without considering a survey conducted
by Ford.

SUB-CLAUSE (v)

This sub-clause covers representations that a seller or supplier has sponsorship or approval or
affiliation which he does not have. It is akin to sub-clause (iv), expect that the sponsorship,
approval, etc., is not with reference to goods or services, but with reference to seller himself. The
purpose of this clause is to prevent false trading, using goodwill of a reputed manufacturer or
seller. Where a Correspondence School claims that it is affiliated to say, University of
Pennsylvania and its M.B.A courses are, therefore, recognized, it would be false representation if
no such affiliation has been granted at the material point of time.

In re Enfield Electronics Ltd. And Raghvendra Enterprises, Trichy, the respondent circulated a
leaflet mentioning that television sets sold under the brand name “Enfield” were being made by
World famous Enfield company, in collaboration with the Janpan’s Toshiba company, whereas
no foreign collaboration had been allowed for the manufacture of TV sets in India as informed
by the Department of Electronics. Further, leaflet also stated that Enfield TV sets were brought
to the customers straight from Japan, creating an impression that the TV sets were imported
ones, and had been manufactured in Japan and brought to India. This was held to be an unfair
trade practice under clauses (v) and (vi) of Section 36A (1) of the Act and the Commission
passed ‘cease and desist’ order against both the respondents.

SUB-CLAUSE (vi)
False or misleading representations concerning the need for, or usefulness of any goods or
services come under this sub-clause. ‘Need’ here does not refer to ‘necessity’ in the pure
economic sense. A representation which gives rise to two meanings or interpretations one of
which is not true, is misleading representation. Ambiguous expression or innuendos would be
covered under this sub-clause where they are misleading. Where a dealer in motor vehicles
represents that the fitting of a particular device would save petrol, it would be false
representation as to the need for the use thereof, if no saving in petrol, in fact, is to result.

False representations as to uses or benefits, which the goods in question do not have, may come
to be condemned as deceptive and hence be considered as being attracted by this clause. The
case of Charles of the Ritz Distributors Cop. v. FTC. Is an important judgment by the United
States Court of Appeals wherein this principle was enunciated. In this case, there was a petition
to review a cease and desist order issued pursuant to a complaint charging the petitioner with
having violated section 5 of the FTC Act by falsely advertising its cosmetic preparation “Charles
of the Ritz Rajuvenescence Cream”. The advertisement typically referred to a “a vital organic
ingredient” and certain “essences and compounds” which the cream allegedly contained, and
stated that the preparation brings to the user’s skin quickly “the clear radiance…” The
Commission found that such advertising falsely represented that Rajuvenescence Cream will
rejuvenate and restore youth or the appearance to the skin, regardless of the condition of the skin
or the age of the user. It, therefore, ordered petitioner to cease and desist disseminating in
commerce any advertisement of Charles of the Ritz Rejuvenescenece Cream.

SUB-CLAUSE (vii)

This sub-clause covers statement given to the public relating to warranty or guarantee of
performance, efficacy or length of life of a product or of any goods that is not based on adequate
or proper test. The Explanation to clause (1) clarifies as to under what circumstances a statement
may be said to be made to the public. What is adequate or proper-test would depend upon the
facts and circumstances of each case. The opinion expressed by any laboratory established for
such testing and certification by, or at the instance of, the Government may be taken as authentic,
in case of the question arises whether a particular test is adequate or proper. Tests conducted in
inhouse laboratories may be considered adequate, where the product is being manufactured
under foreign collaboration and under the foreign collaboration agreement (approved by the
Central Government) and the product has to be tested in a particular manner in the laboratory,
before being cleared for consumption in the market.

In re Gem India, the Commission held that making false claim regarding the quality of
refrigerator as being free from manufacturing defects and further in not providing satisfactory
service by timely replacement in terms of the warranty is a breach of clause (vii) of Section 36 A
(1).

The proviso to this sub-clause envisages the onus of proof on the person raising the defence that
the warranty or guarantee is based on adequate or proper tests.

SUB-CLAUSE (vii)

This sub-clause covers materially misleading warrantees or guaranteed for a product or goods or
services as well as promise to replace, maintain or repair an article or any part thereof or to
repeat or continue a service until a specified result has been achieved. The word ‘materially’
denotes the degree to which the representation must be misleading. In the preceding clauses, the
word ‘materially’ has not been used.

Where a representation is not materially misleading, as opposed to misleading simpliciter, the

case cannot be brought under this clause. The word ‘promise’ is used in the second limb of this
sub-clause, which is more than mere ‘representation or statement’. ‘Warranty’ has to be
understood in the sense in which it is understood under the Sale of Goods Act, namely, breach of
a particular term of sale which gives rise to claim for damages and not avoidance of the contract
as a whole. The guarantee would be materially misleading if it does not disclose-

 In re Godrej Soaps Private Ltd., Statements creating the misleading impression that the
use of the soap called ‘Ganga’ was, in effect, a bath in the river Ganga, which had been
brought to the Consumer’s door –steps would amount to an unfair trade practice within
the meaning of section 36A (vi).
 What product or part of the product is guaranteed?
 What parts are excluded from the guarantee?
 What is the duration of the guarantee?
  What any person claiming under the guarantee should do?
 Identity of the guarantor, whether manufacturer, wholesaler or retailer.

In re Sunderpal Pathak and Escorts Ltd. The hydraulic pump attached to the tractor sold to the
complainant by respondent No. 1 was found to be defective from the very beginning, which was
not replaced by a new pump despite the warranty attached thereto. Failure to replace the
defective pump by a new pump was held to be an unfair trade practice attracting clause (viii).

SUB-CLAUSE (ix)

This sub-clause is aimed at prohibiting misleading representation of prices. The word

‘materially’ has been used in this sub-clause, also. The practice of announcing reduction from
‘former prices’ will come under this sub-clause. Sometimes, the ‘former price’ may be fictitious,
and not a bona fide one. However, since no sales were effected at the ‘former price’, it would not
become fictitious, if the advertiser has openly and actively offered the product for sale for a
reasonably substantial period of time in the regular course of business, honestly and in good
faith, without any intention of later on establishing a price to facilitate comparison.

The consumers normally believe that the price at which the goods are being sold to them is the
manufacturer’s list price or suggested retail price. Therefore, when any reduction from such price
is advertised, the presumption that the consumer has in mind is that he gets a good bargain. To
the extent that list price or suggested retail prices do not correspond in fact to the prices at which
a substantial number of sales of the article in question are made, the advertisement would be
materially misleading.

In re Indian Communications Network Ltd., the enquiry related to an advertisement announcing

that electronic typewriter was available at an irresistible price of Rs. 19, 995 inclusive of duties
and taxes. This gave the impression that the total cost of the typewriter with the essential parts
thereof, to enable it to be used, will not exceed the aforesaid amount. The respondent, however,
charged extra for installation and the standard accessories kit. Holding this to be an unfair trade
practice, on the basis of the undertaking given by the respondent that they would, in future
advertisement, where price is quoted, clearly state about the extra-charges payable by the buyer
of the typewriter, and also indicate that the charges for the training are optional, Commission
disposed of the enquiry by passing an order under Section 36D (2) of the MRTP Act.
SUB-CLAUSE (x)

Giving false or misleading facts disparaging the goods, services or trade of another person comes
under this sub-clause. The disparaging statement may be patent or a subtle play of semantics, i.e.,
an innuendo. Even statements which disparage indirectly will come under this clause. Whether
there is any disparagement or not would depend on the facts and circumstances of each case.

Disparaging statement may be made by the retailer, for instance, in order to promote the sale of
another brand for consideration of special commission promised by a manufacturer. As
consumer’s contact point is the retailer, his statements would considerably influence the buying
decision. This results in injury to not only fair competition, but also to the interest of the
consumers.

It is not necessary that there should be any direct reference about inferiority to constitute
disparagement. Any allusion or hint by expression, gesture, gimmicks or words on the basis of
any kind of comparison showing even indirectly the inferiority of the other product would be
sufficient to constitute disparagement for the purposes of section 36A (1)(x).

In re Competent Motors, the respondent was one of the dealers of Maruti Udyog Ltd., which
manufactures Maruti Cars, Vans and Jeeps. With a view to promote its bookings relating to the
sale of Maruti Cars, etc., in its advertisements issued, from time to time, a number of claims were
made. In the course of enquiry, it was brought out that

 Maruti Udyog does not allot cars proportionate to the number of bookings as claimed by
the respondent and there are no guidelines for such allotments,
 The facilities available with the respondent, are the minimum requisites for Maruti’s
dealership,
 Other dealers of Maruti have the same equipment or facilities, which the respondent
claims to be unique.

On the assumption that the trade practice indulged in is an unfair trade practice, the respondent
gave an undertaking to refrain from advertising in such objectionable manner, whereupon the
enquiry was disposed of under section 36D(2) of the Act, by the Commission.

EXPLANATION TO CLAUSE (1)

The explanation, by deeming provision, clarifies as to under what circumstances a statement may
be said to be made to the public. The Explanation is not exhaustive of the various forms in which
the statement may be expressed but provides that the statements in the manner said therein would
also be construed as having been made to the public. Advertisements by means of banners,
placards, cinema slides, hand-outs, hoardings, broadcast on the radio etc. would very much
amount to statements being made to the public. In as much as advertisements influence
significantly the buyer-behaviour by their exalted appeals, metaphorical phraseology, and
animated visuals, various sub-clauses of clause (1) would be applicable to all such
advertisements.

Defences

Clause (1) does not contain any statutory defences though the Sachar Committee in its
recommendations had included certain defences on the same lines as in the Canadian Law. This
does not mean that no defences are available to a respondent to an inquiry. The following
defences may be set up by the respondent, namely:-

 That the act of omission or commission was the result of honest or bona fide error or
mistake;
 That he took reasonable precautions and due diligence to prevent the occurrence of the
error and that he took reasonable measures forthwith after the representation was made,
to bring the error to the attention of the class of persons likely to have been reached by
the representation;
 That the representation was an unwarranted one which an employee had no authority to
make- the onus of proof is on the employer who should lead evidence that the employee
acted contrary to instructions;
 That the retailer had only faithfully passed on the information received from the
wholesaler or the manufacturer believing the information to be true (where the
respondent is a retailer); etc.

In re California Milk Producers Advisory Board the complainant challenged an advertising

slogan that “every body needs milk”. The Commission, in issuing the complaint, interpreted
the claim to mean that milk is essential for all individuals, even those who are allergic to
milk, and that it is beneficial in large and unlimited quantities. The administrative law judge
agreed with the interpretation of the ads, but concluded that since less than one per cent of
the population was allergic to milk, there was no public interest in proceeding.