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UNFAIR TRADE PRACTICE[1]
QUESTION BANK
Q.1. Explain fully- ‘Unfair Trade Practices’
SHORT NOTES
- Misleading and false advertising.
- Falsification of trademark.
- Unsafe and hazardous products-
SYNOPSIS
- DEFINITION OF ‘UNFAIR TRADE PRACTICE’ (S. 36-A).
(1) False or misleading representation/ advertisement-
Disparaging competitors (Clause x):-
Falsification of trade marks 🙁 Discussed in an end note)
Business ethics and business self-regulation:-
(2) Bait advertising and bargain price:-
(3) Offering gifts and prizes and promoting promotional contests:-
(4) Unsafe and hazardous products-
(5) Hoarding or Destruction of goods:-
NOTE
FALSIFICATION OF TRADEMARKS:-
(The topic “Falsification of trade Marks” is not prescribed for Shivaji University syllabus)
- a) Trade Mark:-
- b) Punishments provided by the Act, for falsification:-
- Falsifying and falsely applying trade marks (S.102):-
- Punishment for applying false trade marks, trade descriptions, etc-
- Penalty for selling goods or providing services to which false trade mark or false trade description is applied (S.104)-
- Enhanced penalty on a second or subsequent conviction
- Penalty for removing selling piece goods, etc, without mark
(S.106).
- Penalty for falsely representing a trademark as registered
(S.107):-
- Penalty for improperly describing a place of business as
connected with the Trade Marks Office (S.108)
I. DEFINITION OF ‘UNFAIR TRADE PRACTICE’ (S.2 (1) (r))-
In this part, unless the context otherwise requires. “Unfair trade practice” means a trade practice which, for the purpose of promoting the sale, use, or supply of any goods or for the promotion of any services, adopts one or more of the following practices and thereby causes loss or injury to the consumers of such goods or services, whether by eliminating or restricting competition or otherwise, namely-
(1) False or misleading representation/ advertisement-
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, 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 that such goods or services do not have;
(v) represents that the seller or the supplier has a sponsorship or approval or affiliation that 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 are 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 the 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, 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 have been sold by the seller 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.
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 or 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;
In M/s Cox and King Pvt. Ltd. V/s. Josepah A Fernandes
AIR 2006 (NOC) 637 (NCC) [2]
Facts—The company falsely advertised details about a ‘Star Cruise’ (Sailing on a ship for pleasure). The cruise lasted only one and a half days. The Cruise Company deliberately timed the departure of a cruise at 11.59 pm, i.e., one minute short of midnight, and counted that one minute as one full day. It amounts to one minute of service of 23.59 hrs.
Held- it is not the only case of misrepresentation through misleading advertisement but also unfair trade practice.
Disparaging competitors (Clause x)[3]:-
Sub-clause (x), mentioned above, intends to prohibit the practice of making any statement that gives false or misleading facts disparaging the goods, services, or trade of another person. ‘Disparagement’ generally involves casting derogatory remarks on the quality or characteristics of goods or services of another.
In Hindustan Lever Ltd. V/s. Colgate Palmolive Ltd[4]
Facts– Colgate Palmolive Ltd. was the ‘Colgate Dental Cream’ manufacturer. The appellant, the manufacturer of the ‘New Pepsodent’ toothpaste, had advertised in the print, visual, and hoarding media, claiming that its toothpaste ‘New Pepsodent was 102% better than the leading toothpaste’. It was contained that the appellant adopted, to promote sell, use, or supply of its goods, an unfair method or deceptive practice by making a representation and giving false and misleading facts ‘disparaging’ the appellant’s goods.
Held– it was an ‘unfair trade practice’ of a disparaging competitor, which the law prohibits.
Falsification of trademarks :-
( Discussed at the end)
Business ethics and business self-regulations:-
While advertising, the question comes whether truthful comparative advertising is desirable. Some business concerns consider it as basically unethical and unfair because it tends to damage the entire industry’s reputation, or an underdog may use it unfairly to capitalise on the goodwill of a well-established brand product to which it is not truly comparable. However, in another view, comparative advertising is a desirable practice that enables business concerns to challenge and deflate the excessive advertising claims of their competitors. However, there may be a problem in that advertisers generally project their products in such a way that the consumer is forced to believe that the competitors’ products are useless. So on the count of business ethics, the need for self-regulation is necessary. In many businesses, deflecting advertisements is not allowed as an ethical practice, thereby undertaking self-regulation.
Thus, the advertisement was considered unfair trade practice in the above case.
(2) Bait advertising and bargain price:-
-Permits the publication of any advertisement, whether in any newspaper or otherwise, for the sale or supply at a bargain price, 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, by reference to an ordinary price” or otherwise, or-
(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;
In Snow White Clothiers[5]
Facts– the respondent advertised that a discount of up to 50% would be available on sale. However, it was found that the company had manipulated the prices by adding a high markup on the cost price.
Held– it was unfair trade practice.
(3) Offering gifts and prizes and promoting promotional contests: –
-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 to promote, directly or indirectly, the sale, use, or supply of any product or any business interest;
In M/s Colgate Palmolive (India) Ltd,
Facts—The Company issued advertisements announcing offers or prizes based on lucky draws or contests. However, the petitioner alleged that the company had raised the cost of the toothbrush by 10 paise and that the content had many ‘anti-consumer features’.
Held– it was an unfair trade practice.
(4) Unsafe and hazardous products-
-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 (such as ISI, etc.) relating to performance, composition, contents, design, constructions, finishing or packing as are necessary to prevent or reduce the risk of injury to the person using the goods.
One of the most important rights available to the consumer is to assure that the goods purchased will be reasonably safe in use. Therefore, it is necessary to ensure consumer product safety. It is necessary to establish the Consumer Product Safety Commission to formulate the safety standards for all consumer products to prevent any risk of injury associated with such products.
In Consumer Education and Research Centre V/s. Shri L. L. S. Centre[6]
Facts– the respondents made tall claims about their treatment to reduce one’s weight. However, on inquiry, it was found that drugs like amphetamine administered to reduce the appetite were harmful to the patients.
Held– it was an unfair trade practice.
(5) Hoarding or Destruction of goods:-
-Permits the hoarding or destruction of goods, 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 constitution of those or other similar goods or services.
In other words, ‘unfair trade practice’ means a trade practice that has been adopted by the trader for the purpose of (a) promoting the sale, use, or supply of any goods or (b) for the promotion of any service with unfair method or unfair or deceptive practice. Besides, unfair trade practices include-
- the misrepresentation of the goods or services that mislead the consumers or
- proposed bargain price, or
- offers gifts, prizes, any contest, lottery, game chance or
- sale of substandard goods knowingly, or
- holding or destruction of goods.
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NOTE
FALSIFICATION OF TRADEMARKS[7]:-
(The topic “Falsification of trademarks” is not prescribed for the Shivaji University syllabus)
a) Trade Mark:-
‘Trade Mark’ is defined in S.2 (1) (zb) of the Trade Marks Act.1999 (herein after for this topic, i.e. falsification of trademarks, the Trade and Marks Act.1999 is called as ‘the Act’). It means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from others and may include the shape of goods, their packaging, and a combination of colour and –
(i) (in relation to Chapter XII (Other than S.107)), a registered trademark or a mark used in relation to goods or services to indicate or so as to indicate a connection in the course of trade between the goods or services, as the case may be, and some person having that right as proprietor to use the mark;
(ii) (in relation to other provisions of this Act), a mark used or proposed to be used in relation to goods or services or the purpose of indicating or so to indicate a connection in the course of trade between the goods or services, as of permitted user, to use the mark whether with or without any indication of the identity of that person and includes a certification trade mark or collectives mark;
In other words, the term ‘ trademark’ includes within itself a ‘trade name’ and ‘business name’ under which articles, goods, etc., are sold. It is the nexus between the mark used in relation to the goods and the person claiming a right to use the same. Thus, a ‘trademark’ is a symbol applied or attached to goods offered for sale in the market to distinguish them from similar goods and identify them with a particular trade or with his successor as the owner of a particular business. ‘Reliance’ and its mark, ‘PEPSI’ and its mark, and State Bank and its mark are some of the illustrations of the names and marks we may call a trademark.
b) Punishments provided by the Act for falsification:-
1. Falsifying and falsely applying trade marks (S.102):-
S.102 of the Trade Marks Act provides that-
(1) A person shall be deemed to falsify a trademark which, either-
(a) without the assent of the proprietor of the trademark makes that trademark or a deceptively similar mark or
(b) falsifies any genuine trade mark, whether by alteration, addition, effacement, or otherwise.
(2) A person shall be deemed to falsely apply to goods or services a trademark which, without the assent of the proprietor of the trademark-
(a) applies such trade mark or a deceptively similar mark to goods or services or any package containing goods;
(b) uses any package bearing a mark that is identical with or deceptively similar to the trademark of such proprietor to pack, fill, or wrap therein any goods other than the genuine goods of the proprietor of the trademark.
The trademark is the asset of that business; hence, its falsification is punishable.
2. Punishment for applying false trade marks, trade descriptions, etc.-
Any person who-
- falsifies any trademark or
- falsely applies to goods or services any trademark; or
- makes disposes of, or has in his possession, any die, block, machine, plate, or other instruments to falsify or of being used for falsifying a trademark; or
- applies any false trade description to goods or services or
- applies to any goods to which an indication of the country or place in which they were made or produced or the name and address of the manufacturer or person for whom the goods are manufactured is required to be applied under S.139, a false indication of such country, place, or address; or
- tampers with alters or effaces an indication of origin which has been applied to any goods to which it is required to be applied under S.139; or
- causes any of the things above-mentioned in this section to be done,
-shall, unless he proves that he acted without intent to defraud, be punishable with imprisonment for a term which shall not be less than six months but which may extend to three years and with a fine which shall not be less than fifty thousand rupees but which may extend to two lakh rupees;
Provided that the court may, for adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of fewer than six months or a fine of fewer than fifty thousand rupees.
3. Penalty for selling goods or providing services to which false trademark or false trade description is applied (S.104) –
Punishment- same as provided under S.103.
4. Enhanced penalty on second or subsequent conviction (S.105) –
Whoever having already been convicted of an offence under S.103 or S.104 is again convicted of any such offence shall be punishable for the second and every subsequent offence, with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to two lakh rupees;
5. Penalty for removing selling piece goods[8], etc., without the mark (S.106).
If any person removes or attempts to remove for sale these goods or cotton yarn or cotton threads that are not marketed in accordance with the provisions following the Act, all such goods will be forfeited to the Government, and the person shall be punishable with a fine.
6. Penalty for falsely representing a trademark as registered (S.107):-
Punishment- imprisonment for a term that may extend to three years or with a fine or both.
7. Penalty for improperly describing a place of business as connected with the Trade Marks Office (S.108)
If any person uses on his place of business, any document issued by him, or otherwise, words which would reasonably lead to the belief that his place of business is, or is officially connected with the Trade Mark’s Office, he shall be punished with imprisonment for a term which may extend to two years, or with fine, or with both.
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[1] व्यवसायिक गैरफायदेशीरर/अनुचित कृत्य [व्यापार कदाचार/अनुचित व्यवहार]
[2] The Director General v. Ravi Foundation Bombay 1986
Facts-the respondent claimed that with the diet treatment offered to women before pregnancy one could give birth to a boy or a girl of one’s choice. The claim on the basis of expert medical opinion was found to be false and baseless.
Held– it was held to be an unfair trade practice.
[3] प्रतीस्पध्र्यास तुच्छ लेखने /दाखविने इ.[ लेख / प्रदर्शन आदि]
[4] (1989) I CPJ 10
[5] (1987)
[6] 1986
[7] बनावट व्यवसाय चिन्ह [नकली व्यापार संकेत]
[8] Piece goods, such are ordinarily sold by length or by the piece, which has been manufactured, bleached, dyed, printed, or finished in the factory.