TERM PAPER

on

FALSE AND MISLEADING

REPRESENTATIONS OCCURING IN
CONNECTION WITH THE PROMOTION OF
GOODS AND SERVICES: AS A SPECIFIC
CATEOGORY OF UNFAIR TRADE
PRACTICE

Subject:YLM-205-COMPETITION AND
CONSUMER PROTECTION LAW

Name: SHARIQ ANSARI

Roll No. 50683

Class: 1ST yr, 2 yrs course

 FALSE AND MISLEADING
REPRESENTATIONS OCCURING IN
CONNECTION WITH THE PROMOTION OF
GOODS AND SERVICES: AS A SPECIFIC
CATEOGORY OF UNFAIR TRADE
PRACTICE

INTRODUCTION:

Throughout the world there has been growing awareness about need for
curbing unfair trade practice, promoting healthy competition in market
as also for promoting consumers from the vices of unfair trade practice
and unhealthy competition. Therefore, progressive, developed and
democratic countries to the likes of United States and United Kingdom
had adopted specific legislative measures to check unfair trade practices
for bolstering law related to restrictive trade practice.

However, in India, the MRTP as it originally stood did not contain any
provision for protection of consumers against misleading or false
advertisement, unhealthy promotion activities and other similar unfair
trade practices. The act basically dealt with monopolistic and restrictive
trade practices amongst other things. Earlier, the belief was that healthy
competition in the market would in itself lead to better protection of
customers as a necessary positive effect of competition by providing the
consumers fair and better deal. However, soon it was learnt that the
consumers were needed to be protected not only by restrictive trade
practices but also by the false and misleading advertisements and other
soliciting information aimed at cheating and befooling the consumers.
The cynosure now was detection and remedying of frauds committed
against the consumers. The business class could not be permitted to
mislead the consumers and solicit them to buy goods which either is not
of required quality or is not a happy bargain as advertised, thus creating
a safe heaven for consumers. Hence positive steps were required to
identify such unfair trade practices, codify them and give adequate
remedy against the wrongdoers. This was also the recommendation of
Sachchar Committee.

Therefore, under section 2(1)(r) of the Consumer Protection Act, unfair

trade practice has been defined. What is to be noted that the definition is
inclusive in nature. Firstly, it tells what unfair trade practice is in general
and then it gives certain specific instances of unfair trade practice. To
wit:

“unfair trade practice means a trade practice which, for the purpose of
promoting the sale, use or supply of any goods or for the provision of
any service, adopts any unfair method or unfair or deceptive practice
including 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 sponsorship, 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 defence
is raised to the effect that such warranty or guarantee is based on
adequate or proper test, the burden of proof of such defence shall lie on
the person raising such defence;

(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 misleads 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 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.
 (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” 1

MEANING OF ‘FALSE’ OR ‘MISLEADING’:

Simply put, false means something which is not true. The expression
‘falsely represents’ denote that the representation does not meet the
actual facts. According to Halsbury’s Law of England, a representation
will be deemed as false, “if it is false in substance and in fact, and 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 representee” 2. Thus, we
can say that substantial falsity is both quintessential and suffice to bring
the case within misrepresentation. Conversely, if the representation on
the whole presents truthful picture, it will not be termed as
misrepresentation though there may be any number of minor
discrepancies.3

The term ‘misleading’ denotes something which has a potential of

leading into error. It is the bounden duty of the seller to speak truth
about its product or services. Truth signifies real truth and hence even

1
See Section 2(1)(r), Consumer Protection Act’1986
2
(4th edition), para 1044 & 1045.
3
Lakhanpal National Ltd. Vs. MRTP commission (1989) 66 Comp. Cas. 519 (SC)
half-truths is not permitted. What is to be seen is how the message of the
advertiser will be received. It may be that the statement is true in its
literal sense and yet it may be misleading. Omission of necessary facts
may also make an advertisement misleading as also the reason that it is
purposefully crafted in a manner likely to mislead. 4 It is no defence to
the seller that statements were made in good faith. This is departure
from the principle of ‘caveat emptor’. The factum of falsity and
misrepresentation has to be decided by the consumer forums or the
MRTP Commission as the case may be and the burden of proof is on the
person making the statement to establish its truthfulness and the rule
seems quite logical.

In Lakhanpal national Ltd. Vs. MRTP Commission5, the appellant

company was engaged in the business of producing ‘novino’ batteries.
The Appellant company advertised that it has a collaboration with
‘National’ and ‘Panasonic’, though in reality, the Appellant company
did not have collaboration with either of them but with a company
known by the name of ‘Mitushita Ltd’ and ‘National’ and ‘Panasonic’
were the brand names of the ‘Mitushita Ltd’. The Supreme court held
that it is only a case of erroneous description and the same does not fall
within Section 36A of the MRTP Act, the reason being that the brand
names with which the Appellant Company advertised itself to be
associated with, were of the same Company with which it has real
collaboration. However, the court cautioned that it would be proper to
give accurate description.

In Hindustan Lever Ltd. Vs. Colgate plamolive (I) Ltd., the first
respondent that is Colgate plamolive (I) Ltd was the manufacturer
‘Colgate dental cream’ whilst on the other hand the Appellant was the
manufacture of a toothpaste by the name and description of ‘new
Pepsodent’, The said appellant claimed that their tooth paste is 102
4
Sachchar committee Reprt, 1978, pp 263-263
5
ibid
percent better than that of the leading brand which had clear implication
to Colgate. Hence, the said Respondent filed a complaint under MRTP
Act under for unfair trade practice of making ‘false representation’ and
‘disparaging’ the goods of the respondent under section 36a(1)(viii) and
section 36a(1)(x) respectively. The commission observed that as far as
the claim of 102 percent better bacterial superiority is concerned, such
claim require highly technical assessment and any opinion of the
commission on the issue, be it prima facie even, it would be dangerous.
Further, the commission also opined that any such claim was not only
hinting at superiority of the appellant’s product but also makes the
product of the Respondent to appear inferior to the extent of 102
percent.

Therefore, the Commission felt apposite to grant interim injunction

against the Appellant restraining the appellant both from making any
reference to the product of the Respondent as also making any such
claim of specific quantity of anti bacterial superiority. In the instant
Appeal, the Supreme Court denied any interference calling it the
discretion of the commission and an ad-interim order.

FORMS OF MISLEADING REPRESENTAION:

i. Falsely represents that the goods are of a particular standard,

quality, quantity, grade, composition, style or model

This provision includes such case where the goods are represented to
be of certain quality, quantity, grade, etc, etc. whilst in reality they
are not so. Any false claim regarding composition ingredient, etc,
would also fall in this sub clause. Further, it also includes the false
claim that the product, say car, belong to a particular model or that it
is the latest model but it is not so.

ii. Falsely represents that the services are of a particular

standard, quality or grade
 Thus as the clause one deals with the goods, the clause second deals
with the service. It covers any false claim or misrepresentation that
the services are of a particular quality or grade. Thus if a private
schools represents to parents that they are going to provide certain
services but actually fails to do so, then the case would be covered
by this sub clause. Any arbitrary increase in fee contrary to original
advertisement or charging fee for facilities which don’t exist would
be cover by this sub clause.

In a case6, the Respondent was having a clinic and it claimed through

different advertising mediums successful stories of treatment of a
particular disease by the said medicine. The claims were later found
to be exaggerated and hence liable under this section.

iii. Falsely represent second hands, any rebuilt, renovated,

reconditioned or old goods as new goods

This clause seeks to protect consumers from being misled by sellers

so as to believe old, reconditioned, rebuilt or renovated goods as new
goods. However it may be noted that the word ‘new’ carries different
meanings at different places and hence, it is to be seen in a particular
context what connotation did new carried. It may be that ‘new’
meant the latest model though it may be an old car. Conversely,
‘new’ may imply that the car is in a new one and unused condition
irrespective of the model. Thus if the context and facts run contrary,
it will be considered as unfair trade practice.

iv. Represents that the goods or services have sponsorship,

approval, performance, characteristic, accessories or uses or
benefit which the do not have

By virtue of this section any false representation that the goods or

services have approval or sponsorship which it did not have would
6
(1988) 63 Comp. Cas. 171 (MRTPC)
make it unfair trade practice. For Example representation that a
particular electronic equipment has an approval of a State electricity
board which it did not have; misrepresentation that the fire
extinguisher has an approval of the fire commissioner. Further, the
Section talks about performance and characteristic also, therefore, if
a product is advertised as purest protein, than it may be assumed that
the protein in issue is an isolated one and therefore if it turns out to
be concentrated protein, then the case would fall under this clause.
Similarly, if bodybuilding supplements are advertised as a cure for
medical sickness, the case will be covered by this subsection for the
product would not have the use or benefit it claims to have.

v. Represents that the seller or supplier has a sponsorship or

approval or affiliation which seller or suppler does not have

Thus this provision is a follow up of the last provision in that while

last sub clause deal with the approval or affiliation of the product or
service, this provision deals with the approval or affiliation of the
seller, for example, a false claim by a company that it has a ‘FSSI’ or
‘ISO-9001’ certification. It may be seen that there may be some
overlapping between the last clause and this clause. For example, a
seller who claims to have FSSI certification, then the product of the
seller may also be presumed to have certain features due to its
affiliation with FSSI.

vi. Makes a false or misleading representation concerning the

need for, or the usefulness of any goods or services

This being a beneficial legislation, it is therefore submitted that the

words in this section be given wide import that the same it deserve.
Thus, usefulness or need of a product should also include any
solicitation which creates desirability or prefer ability of a product
over others. This provision aims at curbing those practices which
 aims at making the consumers believe that they need something
which is in fact not needed or is un-useful, for example, a claim that
a product needs to be serviced whilst it does not require to be
serviced yet or Soliciting a woman that a particular type of diet
maintenance would lead to birth of a male child, the same being
contrary to science. Similarly, in a case7, where a false claim by an
association that a degree from the said association would enable a
person to do medical practice in India, while it turned out to be a
paper certificate, not having any professional use, the solicitation
was held as unfair trade practice.

vii. Gives to the public any warranty or guarantee not based on

adequate or proper test

The sub-clause makes it incumbent upon the seller to base his

warranty or guarantee on a proper test, be it a guarantee related to
“performance, efficacy or length of life of a product”. If not, then it
will be an unfair trade practice under this clause. However, the Act
itself provides no guidelines as to what shall constitute a proper test.
If a dispute is raised regarding such warrantee or guarantee, the
burden of proof would be on the person giving the warrantee or
guarantee to establish that the same is based on a proper test 8. Thus if
a seller warrants that the usage of his product or service would led to
reduction of weight or increase in height without any proper test, the
same would be considered as an unfair trade practice under this sub-
clause.

viii. Makes to the public a representation in a form that purports to

be a warrantee or guarantee; or a promise to replace etc,
which is misleading

7
The director General(I & R) v. Ravi foundation, Bombay, UPTE 93 of 1986
8
Proviso to sub clause
The sub-clause covers a case of misrepresentation of guarantee or
warranty given by the seller of a product or service itself as
distinguished from its performance or efficacy which is covered by
sub-clause (vii). Further, it also includes any false promise to repair,
remove defect, or continue service, etc, when there are no reasonable
prospects of honoring such promises or that the warranty or
guarantee or promise shall be misleading. It may be noted that the
clause vii the warranty or guarantee shall be based on a proper test
whilst in the instant clause there should be reasonable prospects for
honoring the claim or promises. Another distinction between the two
sub-clauses is that while the previous sub-clause deals only with
goods, the instant clause deals with services as well.

ix. False or misleading claim with respect to the price of goods or

services

This sub-clause prohibits the claims which in material terms mislead

the public as to the price of the product or services. It protects the
consumers from falling into the trap of seller that they are getting
more worth for money while in reality they are not getting so. Thus,
when a seller makes a general representation as to ‘price’ it is taken
in comparison to general price in the market, that is the price of the
competitor. But, this section will also apply where the seller claims
that the product or services is being offered at a lesser price as
compared to the seller’s own price. Thus, any claim that the product
worth 1000 is being sold for 500 would be considered as misleading
if no such deduction is made. Further, this section also covers the
dishonorable practice of keeping the increased price for a nominal
time period so as to solicit the consumers by making discounts soon
thereafter. So, artificial discounts will be covered by this sub-section.
However, when there is bona-fide increase in price for a substantial
period of time, and then the discount is given, this would not be an
unfair trade practice under this sub-clause. When an ambiguity
prevails regarding price comparison, as to whether the higher price
pertains to the price of the seller himself or the general market price,
then in that case, it would be considered an unfair trade practice in
either case when the price is misleading while comparing either with
seller’s own price or general market price.

x. False or misleading facts disparaging the goods, services or

trade of another person

It may be noted that this sub-clause while prohibiting the practice of

disparaging of goods or services or trade of another person, includes
only the case of false disparaging. Thus in the Colgate-Pepsodent
dispute mentioned supra if the Appellant Company were successful
in establishing its claim of 102% of ante-bacterial superiority
through proper scientific test, then the case would not have been
covered by this sub-clause. When we talk about ‘disparement’ it
involves the practice of raising doubts on the quality, characteristic,
etc of goods or services while in other types of false or misleading
advertising, the seller only tries to establish its own superiority. But,
these may not be mutually exclusive. For example in the ‘New
Pepsondent’ case, it was held that the claim of the Appellant
Company not only sought to establish its own superiority but also
made the product of competitor to appear inferior at the same time.