2.1 INTRODUCTION TO THE STUDY

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1 2.1 INTRODUCTION TO THE STUDY The attainment of independence of India on august 15, 1947 made a tremendous difference to the industrial landscape. The liberal industrial policy led to a rapid growth of industrialization and gave prosperity to the country to some extent, but on the other end it also created certain industrial empires, who have squeezed the Economic Power of the country. Economic Power can be said to exist, where decision making power with regard to economic resources, rest in the hand of the few industrialists. In October 1960 Planning Commission was appointed under the Chairmanship of Prof. P.C. Mahalanobis to ascertain the extent to which the operation of economic system has resulted in the concentration of wealth and means of production. The Committee, in its report submitted in February, 1964 observed that the working of planned economic has contributed to the growth of big companies in Indian Industry 1. Close on the heels of the Committee of Prof. P.C. Mahalanobis, the Government appointed the Monopolies Inquiry Commission under the Chairmanship of Shri K.C. Das Gupta in The terms of reference of the committee were: 1) To inquire into the extent and effect of concentration of economic power in private hands and the prevalence of monopolistic and restrictive practices in important sectors of economic activity other than agriculture with special reference to a) the factors responsible for such concentration and monopolistic and restrictive practices; b) their social and economic consequences and the extent to which they might work to the common determinant 2) To suggest such legislative and other measures that might be considered necessary in the light of such enquiry, including, in particular, and new legislation to protect essential public interests and the procedure and agency of the enforcement of such legislation. 29

2 The monopolies Inquiry Commission submitted its report to the government of India on 31 st October, In accordance with the terms of reference, the monopolies Inquiry commission append to its report a draft bill- The Monopolistic and Restrictive Trade Practices Bill, The Committee recommended for a separate legislation to deal the subject of economic concentration and restrictive trade practices. It is also recommended for setting up of Monopolies and Restrictive Trade Practices Commission. The principal objectives sought to be achieved through the MRTP Act are: a) Prevention of concentration of economic power to the common detriment b) Control of monopolies c) Prohibition of monopolistic trade practices d) Prohibition of restrictive trade practices e) Prohibition of unfair trade practices Out of these five, the first two have been de-emphasized after the 1991 amendment to the Act. The emphasis has not only shifted to the three last mentioned objectives but they have been re-emphasized. Yet to the extent that monopolies tend to bring about monopolistic trade practices, the Act provides for their surveillance. Briefly, the Act is designed to guard against different aspects of market imperfections. For instance, a merger which can increase the dominance of the combine or has resulted in a large share in the market can be looked at in terms of the provisions of the Act and the objectives governing them. In pursuance of the recommendations of the Monopolies Inquiry Commission, the Monopolies and Restrictive Trade Practices Act was passed by the parliament which came into operation from the 1 st June, The objectives of the Act were to provide that the operation of the economic system does not result in the concentration of economic power to the common detriment for the control of monopolies, for the prohibition of monopolistic and restrictive trade practices 3. It was thought that the above legislation by promoting competition would prevent the traders, manufacturers or producers form indulging in restrictive trade practices and 30

3 consumer would get a fair deal. However, it was soon realised that the legislation did not have the desired result in regulating the behaviour of the trading community. Thus, a High-Powered Expert Committee known as Sachar Committee was appointed in the year 1977 under the chairmanship of Justice Rajinder Sachar, a sitting Judge of the Delhi High court to suggest necessary changes required in the companies Act, 1956 and the MRTP Act, 1969 so as to simplify them and to make them more effective, the Committee submitted its report in 1978 After, as a sequel to the recommendations of Sachar Committee, the MRTP (Amendment) Bill, 1983 was introduced in the parliament for incorporating provisions relating to unfair trade practices. Thus, the provisions pertaining to Unfair trade practices were incorporated in the MRTP Act, 1969 which came into operation from August 1, Unfair trade practices were added to MRTP Act as part-b to chapter v. The practices are also mentioned in the consumer protection Act, RESTRICTIVE TRADE PRACTICES The term restrictive trade practice is used for any strategy used by producers to restrict competition within a given market. To maximize profits and market power, traders often attempt to indulge in certain trade practices which tend to obstruct the flow of capital into the stream of production. It may also bring manipulation of prices or conditions of delivery or affect the flow of supplies in the market so as to impose unjustified costs. Collusion resulting in the formation of a cartel is one such practice. Other practices that fall short of the formation of a cartel but are nonetheless against the public interest and illegal include: (a) the setting of minimum prices; (b) agreements to share markets; (c) the refusal to supply retailers that stock the products of other competitors; (d) setting different prices for different buyers (discriminatory pricing); (e) exchanging information. The aim of restrictive practices is to raise prices and restrict output to the benefit of the companies practicing them. The policy towards restrictive practices is of only recent origin in India. It was not until 1964 that the Indian Government appoint the Monopolistic and Restrictive Inquiry Commission mainly to inquire into the extent and effects of 31

4 concentration of economic power in private hands and suggest measures to control it. A restrictive trade practice is generally one which has the effect of preventing, distorting or restricting competition. In particular, a practice which tends to obstruct the flow of capital or resources into the stream of production is an RTP. Likewise, manipulation of prices, conditions of delivery or flow of supply in the market which may have the effect of imposing on the consumer unjustified costs or restrictions are regarded as restrictive trade practices. Competition is not always a necessary touchstone on which a trade practice is judged if it is a RTP 5. Certain common types of restrictive trade practices enumerated in the Act which do not have an element of competition are: (f) Refusal to deal; (g) Tie-up sales; (h) Full line forcing; (i) Exclusive dealings; (j) Concert or collusion-cartel; (k) Price discrimination; (l) re-sale price maintenance; (m) Area restriction; (n) Predatory pricing. All restrictive trade practices under the Act as mentioned above are deemed legally to be prejudicial to public interest. The onus is, therefore, on the entity, body or undertaking charged with the perpetration of the restrictive trade practice to plead for gateways provided in the Act itself. For instance in the following circumstances gateways can be pleaded: (o) That the restriction is reasonably necessary, having regard to the character of the goods to which it applies, to protect the public against injury (whether to persons or to premises) in connection with the consumption, installation or use of those goods; 32

5 (p) that the removal of the restriction would deny to the public, as purchasers, consumers or users of any goods, other specific and substantial benefits of advantages enjoyed or likely to be enjoyed by them as such whether by virtue of the restriction itself or of any arrangements or operations resulting there from; (q) that the restriction is reasonably necessary to counteract measures taken by any one person not party to the agreement with a view to preventing or restricting competition in or in relation to the trade or business in which the persons party thereto are engaged; (r) that the restriction is reasonably necessary to enable the persons party to the agreement to negotiate fair terms for the supply of goods to, or the acquisition of goods from, any one person not party thereto who controls a preponderant part of the trade or business or acquiring or supplying such goods, or for the supply of goods to any person not party to the agreement and not carrying on such a trade or business who, either alone or in combination with any other such persons, controls a preponderant part of the market for such goods; (s) that, having regard to the conditions actually obtaining, or reasonably foreseen at the time of the application, the removal of the restriction would be likely to have a serious and persistent adverse effect on the general level of employment in an area taken together, in which a substantial proportion of the trade, or industry to which the agreement relates is situated; (t) that, having regard to the conditions actually obtaining, or reasonably foreseen at the time of the application, the removal of the restriction would be likely to cause a reduction in the volume or earnings to the whole export business of India or in relation to the whole business (including export business) of the said trade or industry; (u) that the restriction is reasonably required for purposes in connection with the maintenance of any other restriction accepted by the parties, whether under the same agreement or under any other agreement between them, being a restriction which is 33

6 found by the Commission not to be contrary to the public interest upon grounds other than those specified in this paragraph, or has been so found in previous proceedings before the Commission; (v) That the restriction does not directly or indirectly restrict or discourage competition to any material degree in any relevant trade or industry and is not likely to do so; (w) That such restriction has been expressly authorized and approved by the Central Government; (x) That such restriction is necessary to meet the requirements of the defense of India or any part thereof, or for the security of the State; or (y) That the restriction is necessary to ensure the maintenance of supply of goods and services essential to the community. Every agreement falling within one or more of the following categories shall be deemed for the purposes of this Act, to be an agreement relating to restrictive trade practices and shall be subject to registration: (a) Any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought; (b) Any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods; (c) Any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person; 34

7 (d) Any agreement to purchase or sell goods or to tender for the sale or purchase of goods only at prices or on terms or conditions agreed upon between the seller or purchasers; (e) Any agreement to grant or allow concessions or benefits, including allowances, discount, rebates or credit in connection with or by reason of, dealings; (f) Any agreement to sell goods on condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged; (g) Any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal of the goods; (h) Any agreement not to employ or restrict the employment of any method, machinery or process in the manufacture of goods; (i) Any agreement for the exclusion from any trade association of any person carrying on or intending to carry on, in good faith the trade in relation to which the trade association is formed; (j) Any agreement to sell goods at such prices as would have the effect of eliminating competition or a competitor; (1) any agreement restricting in any manner, the class or number of wholesalers, producers or suppliers from whom any goods may be bought. (2) any agreement as to the bids which any of the parties thereto may offer at an auction for the sale of goods or any agreement whereby any party thereto agrees to abstain from bidding at any auction for the sale of goods; (k) Any agreement not herein before referred to in this section which the central Government may specify for the time being as being one relating to a 35

8 restrictive trade practice within the meaning of this sub-section pursuant to any recommendation made by the commission in this behalf; (l) Any agreement to enforce the carrying out of any such agreement as is referred to in this sub-section. The provisions shall apply in relation to agreements making provision for services as they apply in relation to agreements connected with the (production, storage, supply), distribution or control of goods. No agreement falling shall be subject to registration in accordance with the provisions of RTP if it is expressly authorized by or under any law for the time being in force or has the approval of the Central Government or if the Government is a party to such agreement. Registration of agreements: (1) The Central Government shall specify a day on and from which every agreement falling among the points mentioned above shall become registrable under this Act: Provided that different days may be appointed for different categories of agreements. (2) Within sixty days from the appointed day, in the case of an agreement existing on that day, and in the case of an agreement made, after the appointed day within sixty days from the making thereof, there shall be furnished to the Director General in respect of every agreement falling within above mentioned points, the following particulars, namely:- a) the name of the persons who are parties to the agreement and b) the whole of the terms of the agreement. (3) If at any time after the agreement has been registered, the agreement is varied (in respect of the parties or in respect of the terms thereof) or determined otherwise than by efflux of time; particulars of the variation or determination shall be furnished to the Director General within one month after the date of the variation or determination. 36

9 (4) The particulars to be furnished under this section in respect of an agreement shall be furnisheda) In so far as the agreement or any variation or determination of the agreement is made by an instrument in writing, by the production of the original or a true copy of that agreement; and b) In so far as the agreement or any variation or determination of the agreement is not so made, by the production of a memorandum in writing signed by the person by whom the particulars are furnished. (5) The particulars to be furnished by or on behalf of any person who is a party to the agreement or, as the case may be, was a party thereto immediately before its determination, and where the particulars are duly furnished by or on behalf of any such person, the provisions of this section shall be deemed to be complied with on the part of all persons. Explanation 1: Where any agreement subject to registration under this section relates to the (production, storage, supply) distribution or control of goods or the performance of any services in India and any party to the agreement carries on business in India, the agreement shall be deemed to be an agreement within the meaning of this section, notwithstanding that any other party to the agreement does not carry on business in India. Explanation 2: Where an agreement is made by a trade association, the agreement for the purposes of this section shall be deemed to be made by all persons who are members of the association or represented thereon as if each such person were a party to the agreement. MERITS OF COMPETITION 1. Provides employment: Competitive markets tend to provide the poor with opportunities to set up their own business. An inference can be drawn from 37

10 a situation in which there is only one supplier of food items in a market. He is in the position to charge the price according to his whims and fancies or in other words can say he has monopoly in that market. Thus he can earn enough profit, adopting such practices. 2. Innovation: When two or more firms operate in the same market, they leave no stone unturned to satisfy the more consumers than each their competitors. In the wake of market competition, they tend to use innovative measures to attract more and more consumers. 3. Choice for the consumer: In a competitive market, consumer can expect wider choice of goods and services at reasonable price and best quality. Competition compels the firms to minimize their costs and pass on the cost reductions to consumers. If the consumers can t afford to buy some product from one shop or he is unsatisfied with the quality of product sold by some shopkeeper, he can easily switch to the other shop dealing in the same trade. 4. Efficiency: Competitive market ensures efficiency resulting in best possible choice of quality, lowest prices and adequate supplies to consumers. UNFAIR TRADE PRACTICES 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 6. Unfair Trade Practice encompasses a broad array of tortes, all of which involves economics injury brought on my deceptive or wrongful conduct. The legal theories that can be asserted include claims such as trade secret misappropriation, unfair competition, false advertising palming off, and dilution. Unfair trade practices can arise in any field of technology and frequently appear in connection with the more traditional intellectual property claims of patent, trademarks and copyright infringement. Section 36-A defines unfair trade practices and cover the five types of practices which are regarded as unfair trade practices in certain situations. These practices are: 38

11 a) Misleading advertisements and false representations b) Bargain sale c) Offering gifts or prizes and conducting promotional contests d) Supplying goods not adapting to product safety standards e) Hording or destruction of goods, or refusal to sell the goods. 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, efficiency or length of life of the foods that is not based on an adequate or proper test; Makes to the public a representation in the form that purports to bea warranty or guarantee of the goods or services, 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. 39

12 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. Explanation -: for the purpose 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 contained in or on anything that is sold, sent, delivered, transmitted or in any other manner whatsoever made available to 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. 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. 40

13 Explanation - : for the purposes of clause (2), bargain price means (a) (b) a price that is stated in any advertisement to be a bargain price, by reference to an ordinary price or otherwise, or 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. 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. 41

14 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. CONTROL OF UNFAIR TRADE PRACTICES 7 It must be clarified that the gateways, which were available under Restrictive Trade Practices were not available to Unfair Trade Practices. However, order on an Unfair Trade Practices could be passed only if it was prejudicial to public interest. Similarly, a practice, which was specifically authorized by some existing law, was not actionable under the Monopolistic and Restrictive Trade Practices Act. The burden of proof that practice is prejudicial to public interest lies on the complainant. As a number of complaints about Unfair Trade Practices can be bogus, in genuine or frivolous, the Monopolistic and Restrictive Trade Practices Commission required to order the DGIR to make a preliminary enquiry in this regard. The enquiry could be started on any of the bases as specified in case of Restrictive Trade Practices and its order could fall in any one of the categories mentioned in case of Restrictive Trade Practices. In addition, the commission could order any information, statement or advertisement relating to a UTP to be published in public interest. The commission could also order compensation for loss or damage to the affected person or party. The loss could be: Directly pecuniary, capable of being quantified; Indirectly pecuniary, like loss of profitable opportunity, reputation or credibility; Non-pecuniary loss like mental agony, physical illness etc. 42

15 DIVISION OF UNDERTAKING AND SERVERENCE OF INTER- CONNECTION The Act empowered the central government to order, on the recommendation of the MRTP Commission, division of any undertaking or to severe inter-connection between related undertakings to reduce concentration of economic power, which might be detrimental to the public interest. Such organizations having large market share might show monopolistic behaviour leading to restrictive trade practices. If the commission, after enquiry, recommends to the central government that an undertaking be split into more than one undertaking, it then also had to specify the manner of division and compensation payable, if any. The overall splitting scheme might specify the following; Transfer of the shares of the principal undertaking to other (created) undertakings; Transfer of liabilities and obligations; Adjustment of contracts already made; Payment of compensation involved; and Consequential and supplementary matters Similarly, the central government might direct severance of interconnection between a principal and other related undertakings, which could be prejudicial to the public interest or detrimental to the growth of the industry. In both the cases, the government could order disinvestments of shares in a manner and within the time limit recommended by the Commission. Disinvestment could be through public auction of a part of the assets, public offer of shares or fresh issue of shares. Thus, in such cases, the power of final decision lay with the central government and the commission had only an advisory role. POWERS OF THE COMMISSION The MRTP Commission has the following powers: 43

16 1. Power of Civil court under the code of civil procedure, with respect to: a) Summoning and enforcing the attendance of any witness and examining him on oath; b) Discovery and production of any document or other material object producible as evidence c) Reception of evidence on affidavits d) Requisition of any public record from any court or office e) Issuing any commission for examination of witness; f) Appearance of parties and consequence of non-appearance 2. Proceedings before the commission are deemed as judicial proceedings with in the meaning of sections 193 and 228 of the Indian Penal Code. 3. To require any person to produce before it and to examine and keep any books of accounts or other documents relating to the trade practice, in its custody. 4. To require any person to furnish such information as respects the trade practice as may be required or such other information as may be in his possession in relation to the trade carried on by any other person. 5. To authorize any of its officers to enter and search any undertaking or seize any books or papers, relating to an undertaking, in relation to which the inquiry is being made, if the commission suspects that such books or papers are being or may be destroyed, mutilated, altered, falsified or secreted. 44

17 PRELIMINARY INVESTIGATION Before making an inquiry, the commission may order the Director General to make a preliminary investigation into the complaint, so as to satisfy itself that the complaint is genuine and deserves to be inquired into. REMEDIES UNDER THE ACT The remedies available under this act are:- a) Temporary Injunction: Where, during any inquiry, the commission is satisfied that any undertaking or any person is carrying on, or is about to carry on any monopolistic, restrictive or unfair trade practice, which is a pre-judicial to the public interest or the interest of any trader or class of traders generally, or of any consumer or class of consumers, or consumers generally, the commission may grant a temporary injunction restraining such undertaking or person form carrying on such practice until the conclusion of inquiry or until further orders. b) Compensation: Where any monopolistic, restrictive or unfair trade practice has caused damage to any Government, or trader or consumer, an application may be made to the commission asking for compensation, and the commission may award appropriate compensation. Where any such loss or damage is caused to a number of persons having the same interest, compensation can be claimed with the permission of the commission, by any of them on behalf of all of them. INQUIRY INTO UNFAIR TRADE PRACTICES The Commission may inquire into any unfair trade practice 45

18 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 practices 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 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. 46

19 How is right of a consumer protected under the Consumer Protection Act? The rights of the consumers are invoked in the Indian Legal System through the mechanism provided in the Consumer Protect Act (CPA). The CPA provides for establishment of Consumer Protection Councils Advisory and recommendation bodies The Consumer Protection Councils exist at the National, State and District Level. They are basically advisory bodies who meet at least 3 times a year to discuss and review consumer protection measures and issues. Two thirds of the members of these councils are non-official including representatives of women and consumer organisations. Redressal Forums Courts The CPA provides for three-tier quasi judiciary machinery at the national, state and district levels. The District Forum has jurisdiction to entertain complaints where the value of goods / services complained against and the compensation claimed is less than Rs. 5 lakhs, the State Commission for claims exceeding Rs. 5 lakhs but not exceeding Rs. 20 lakhs and the National Commission for claims exceeding Rs. 20 lakhs. If the value of the services and compensation asked for is a. < Rs 5 lakhs then one can complain to the District Forum at the District Headquarter, b. > 5 lakhs and within Rs. 20 lakh the complaint can be filed before the concerned State Commission at the State Capital. c. >20 lakhs the complaint can be filed before the National Commission. If the consumer is not satisfied with the Judgment of the District Forum, he/she can file and appeal to the State Commission. Similarly, appeal against an order of a State Commission lies before the National Commission. Appeal against an order of the National Commission has to be filed before the Supreme Court of India. To promote and protect the rights of the consumers with regard to defective goods, deficient services, overcharging or any unfair trade practices (as defined under 47

20 MRTP ACT 1969). It includes false statement on quantity or grade of goods/services, false claims to sponsorship, making false and misleading promises on the articles, false projection of the needs for or usefulness of goods/services, giving warranty on products not based on adequate or proper test, and the like, whether made orally or in writing or by visible representation. Rights of Consumers We know that today consumers face various problems on account of competition in the market, misleading advertisements, availability of inferior quality of goods and services, etc. Hence protection of consumers interest has become a matter of serious concern for the Government as well as public bodies. To safeguard the interest of consumers government has recognized certain rights of consumers. In other words, if consumers are to protect themselves from being exploited or cheated, they have to be given certain rights so that they are in a position to ensure that sellers of goods and service providers are more careful in dealing with them. For example, one of the rights of consumers is the right to choose. If we are aware of this right, we may ask for different varieties of the same product to be shown to you by the shopkeeper so that we can choose what you like. Sometimes, shopkeepers try to sell a particular brand of product on which they get higher commission on sale. It may not be of the best quality, or it may be available at a relatively lower price. This practice can be prevented if you exercise your right to choose the product and visit other shops if one shop does not have a large variety of the product. (i) Right to safety: Consumers have a right to be protected against marketing of goods which are injurious to health and life. As a consumer if one conscious of this right, one can take precautions to prevent the injury or if injury is caused in spite of precaution, one have a right to complain against the dealer and even claim compensation. For example, if a consumer buys any medicine, the pharmacy selling it can be held responsible if the medicine proves harmful. Again if gas cylinder is used for cooking, he has to check that it does not leak when it is supplied to you. If it starts leaking afterwards, the supplier will be 48

21 liable to pay compensation if the leakage of gas leads to fire and causes injury or death to anyone. (ii) Right to be informed: Consumers also have the right to be informed about the quantity, quality, purity, standard or grade and price of the goods available so that they can make proper choice before buying any product or service. Also, where necessary, the consumer must be informed about the safety precautions to be taken while using the product to avoid loss or injury. Taking the example of gas cylinder again, the supplier must inform the user to stop the flow of gas with the help of the regulator when it is not in use. (iii) Right to choose: Every consumer has the right to choose the goods needed from a wide variety of similar goods. Very often dealers and traders try to use pressure tactics to sell goods of poor quality. Sometimes, consumers are also carried away by advertisements on the TV. These possibilities can be avoided if consumers are conscious of this right. (iv) Right to be heard : This right has three interpretations. Broadly speaking, this right means that consumers have a right to be consulted by Government and public bodies when decisions and policies are made affecting consumer interests. Also, consumers have a right to be heard by manufactures, dealers and advertisers about their opinion on production and marketing decisions. Thirdly, consumers have the right to be heard in legal proceedings in law courts dealing with consumer complaints. (v) Right to seek redressal: If and when any consumer has a complaint or grievance due to unfair trade practices like charging higher price, selling of poor quality or unsafe products, lack of regularity in supply of services etc. or if he has suffered loss or injury due to defective or adulterated products, he has the right to seek remedies. He has a right to get the defective goods replaced or money refunded by the seller or dealer. He also has the right to seek legal remedies in the appropriate courts of law. Through this right the consumers are 49

22 assured that their complaints will receive due attention. This right also provides for due compensation to consumers if they have suffered a loss or are put to inconvenience due to the fault of the supplier or manufacturer. (vi) Right to consumer education: To prevent market malpractices and exploitation of consumers, consumer awareness and education are essentially required. For this purpose, consumer associations, educational institutions and Government policy makers are expected to enable consumers to be informed and educated about (a) the relevant laws which are aimed at preventing unfair trade practice; (b) the ways in which dishonest traders and producers may try to manipulate market practices to deceive consumers; (c) how consumers can protect their own interest; and (d) the procedure to be adopted by consumers while making complaints. Steps have been already taken by many consumer bodies to educate consumers through pamphlets, journals and posters. TV programmes have also come to play an effective role in this connection. Responsibilities of Consumers There is a well known saying that there cannot be rights without responsibilities. Having examined the consumer rights and the purpose served by them, it is necessary to consider whether consumers should also be responsible enough to be entitled to exercise their rights. For instance, to be able to exercise their right to be heard, consumers should avail of the opportunities to know and keep informed about consumer problems. To exercise their right to seek redressal of complaints, consumers must take all precautions to choose the right goods at the right price and learn how to use the products to prevent injury or loss. Specifically, the responsibilities of consumers may include the followings: i. Responsibility of self-help It is always desirable that a consumer should not depend on the seller for information and choice as far as possible. As a consumer, you are expected to act in a responsible manner to protect yourself from being deceived. An informed consumer can always take care of his/her interest more than 50

23 any one else. Also, it is always better to be forewarned and forearmed rather than getting remedies after suffering a loss or injury. ii. iii. iv. Proof of Transactions: The second responsibility of every consumer is that the proof of purchase and documents relating to purchase of durable goods should be invariable obtained and preserved. For example, it is important to get a cash memo on purchase of goods. A consumer remember that in case he has to make any complaint about defects in goods, the proof of purchase will enable him to establish his claim for repair or replacement of the goods. Similarly, durable consumer goods like TV, refrigerator, etc. carry warranty /guarantee cards issued by the dealers. The cards entitle the consumer to get the service for repairs and replacement of parts free of cost during a certain period after purchase. Proper claim: Another responsibility that consumers are expected to bear in mind is that while making complaints and claiming compensation for loss or injury, they should not make unreasonably large claims. Very often, consumers have to exercise their right to seek redressal in a court. There have been cases in which consumers claimed huge compensation for no apparent reason. This is regarded as an irresponsible act which should be avoided. Proper use of Product/services: Some consumers, especially during the guarantee period, make rough use of the product, thinking that it will be replaced during the guarantee period. This is not fair on their part. They should always use the products properly. Besides the above responsibilities, consumers should be conscious of some other responsibilities. They should stick to the agreement made with manufacturers, traders and service providers. They should make timely payment in case of credit purchases. They should not tamper with the media of services, like electric and water meters, bus and train seats, etc. They should remember that they can exercise their rights only when they are willing to fulfill their responsibilities. 51

24 PROVISIONS RELATING TO MONOPOLISTIC, RESTRICTIVE AND UNFAIR TRADE PRACTICES Section 10 of the MRTP Act, 1969 empowers the MRTP Commission to enquire into monopolistic or restrictive trade practices upon a reference from the Central Government or upon its own knowledge or on information. The MRTP Act,1969 also provides for appointment of a Director General of Investigation and Registration for making investigations for the purpose of enquiries by the MRTP Commission and for maintenance of register of agreements relating to restrictive trade practices. The MRTP Commission receives complaints both from registered consumer and trade associations and also from individuals either directly or through various Government Departments. Complaints regarding Restrictive Trade Practices or Unfair Trade Practices from an association are required to be referred to the Director General of Investigation and Registration for conducting preliminary investigation in terms of Sections 11 and 36C of the MRTP Act, 1969 and Regulation 119 of the MRTP Commission Regulations, The Commission can also order a preliminary investigation by the Director General of Investigation and Registration when a reference on a restrictive trade practice is received from the Central/ State Government, or when Commission s own knowledge warrants a preliminary investigation. Enquiries are instituted by the Commission under relevant Sections of the MRTP Act, 1969 after the Director General of Investigation and Registration has completed the preliminary investigation and as a result of the findings, submits an application to the Commission for an enquiry. 2.2 OTHER ACTS RESTRICTING OR CONTROLLING UTP The following Acts also give detail about Unfair Trade Practices: a) The Indian Panal Code 1860: inter alia contains provisions are with respect to weight and measures, public health, and property Marks. 52

25 b) The Carriers Act, 1865: Fixed the liabilities of common carriers for loss or damage to goods delivered to them for transportation. It also affirmed the liabilities of common carrier for loss of or damage to goods either may be occasioned by the negligence or criminal acts of themselves or their servants (agents). c) The Indian Contract Act, 1872: made provisions for governing trade relationship between parties inter-se. it gives right to the consumer to declare the agreement void or voidable if the same was based on misrepresentation or fraud. It also gives right to the consumer to claim compensation for loss or damage caused by breach of contract. d) The Poisons Act, 1919: was enacted to regulation the importation, possession and sale of poisons. It seeks to regulate the code of conduct of persons who are dealing with role of poisons. e) The Dangerous Drug Act, 1930: was enacted to control over certain operations relating to dangerous drugs. It also empowered to the central government to control dangerous drugs such as opium, cocaine, morphine, heroin, ganja etc. f) The sales of Goods Act 1930: deals with the rights and responsibilities of buyers and sellers. It contains the principle of implied conditions. These are that the goods shall be reasonably fit for the purpose for which it is purchased, and the goods shall be of it is purchased, and the goods shall be of merchantable quality. It is important to note that an express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith. g) The Drugs and Cosmetics Act, 1940: was promulgated to regulate the import, manufacture, distributions and sale of drugs. GUIDELINES FOR TAKING ACTION ON SAMPLES OF DRUGS DECLARED SPURIOUS OR NOT OF STANDARD QUALITY IN THE LIGHT OF ENHANCED PENALTIES UNDER THE DRUGS AND COSMETICS (AMENDMENT) ACT, 2008 The Drugs and Cosmetics (Amendment) Act, 2008 passed by the Parliament on 5th December 2008 provides deterrent penalties for offences relating to 53

26 manufacture of spurious or adulterated drugs which have serious implications on public health. It will help regulatory authorities to handle anti social elements involved in the manufacture of such drugs and playing with human safety. The penalty for manufacture of spurious or adulterated drugs has been enhanced to an imprisonment for a term which shall not be less than 10 years but which may extend to imprisonment for life and shall also be liable to fine which shall not be less than ten lakh rupees or three times value of the drug confiscated, whichever is more. In certain cases offences have been made cognizable and non-bailable. It also provides a tool of compounding of offences for dealing with certain minor offences. Under the Drugs and Cosmetics Act, 1940 control over manufacture and sale of drugs is exercised by the State Licensing Authorities. Licenses for drug manufacturing establishments and sale premises are granted by the said authorities. Inspections/raids are carried out by the Drug Inspectors appointed by the States to ensure compliance of the conditions of licenses. Samples are drawn by Drug Inspectors to check the quality of drugs marketed in the country. Legal/administrative actions as required under the said Act and Rules for the violation of the provisions of the Act are taken by the State Licensing Authorities. The actions are normally initiated on the basis of test reports of Government analysts declaring the drug samples as not of standard quality. The major categorization of not of standard quality reports could be as under:- Category A (Spurious and Adulterated Drugs) Spurious or imitation drug products are drug formulations manufactured concealing the true identity of the product and made to resemble another drug, especially some popular brand, to deceive the buyer and cash on the popularity of original product. The product may or may not contain the active ingredients. Spurious drugs are usually manufactured by unlicensed anti-social elements but sometimes licensed 54

27 manufacturers may also be involved. The adulterated drugs are those drugs which are found to contain an adulterant/substituted product or contaminated with filth rendering it injurious to health. Reports of availability of spurious drugs in the country shake the confidence of indigenous as well as foreign buyers. As the problem is an emotive issue also, it is required to be handled with a firm hand and in co-ordination with other agencies. Category B (Grossly sub-standard drugs) Drugs manufactured by licensed manufacturers and reported to have defects of serious nature to affect the quality of the drug. Such defects may arise out of gross negligence or non-conformance to GMPs during manufacture. These defects may broadly be as under: (i) Active ingredient contents below 70% for thermo labile products and below 5 % of the permitted limits for thermo stable products. (ii) Tablets/Capsules failing in disintegration tests wherever prescribed. (iii) Tablets/Capsules failing in dissolution test and active contents found less than 70% for thermo labile products and below 5 % of the prescribed limits for thermo stable products. (iv) Liquid preparations showing presence of fungus. (v) Parental preparations failing in sterility, pyrogen/endotoxin test or undue toxicity. (vi) Vaccines failing in potency, sterility, toxicity or moisture content. (vii) Presence of any adulterant which renders the product injurious to health. 55

28 Category C (Minor defects) Drugs manufactured by the licensed manufacturers found not of standard quality because of defects arising out of minor variations in quality. Such defects may arise because of inadequate pre-formulation development studies, lack of in process controls exercised by the manufacturer or unsuitable conditions under which drugs are stored or transported. Examples of some such the defects are as under: (i) Broken or chipped tablets. (ii) Presence of spot/discolouration/uneven coating. (iii) Cracking of emulsions. (iv) Clear liquid preparations showing sedimentation. (v) Change in colour of the formulation. (vi) Slight variation in net content. (vii) Formulations failing in weight variation. (viii) Formulations failing to respond to the colour test. (ix) Isolated cases of presences of foreign matter. (x) Labelling error including nomenclature mistake, Rx, NRx, XRx, Red Line, Schedule H. Caution, Colour etc. GUIDELINES The following guidelines should be adopted as model guidelines by the State Drug Control Organizations for uniform implementation of the provision of the Drugs and Cosmetics Act and rules made there under. While implementing the new provisions, the State Regulatory Authorities should ensure that the law is implemented in a comprehensive way. In order to effectively use the said instrument of law, it is 56

29 necessary to have Standard Operative Procedures set in each State to examine and process various violations of the provision of the Act. The State Drug Control Organizations should have internal mechanism of checks and balances to ensure that law abiding manufacturers and sellers of drugs are not harassed or put to a disadvantageous position. Care should be taken that while violations with criminal intent or gross negligence leading to serious defects are dealt with heavy hand, the violations involving minor variations in quality by licensed manufacturers are resolved through administrative measures. 1. In the case of detection of manufacture and/or sale etc. of spurious or imitation drug products by the unlicensed manufacturers or sellers, the case shall be investigated on top priority and provisions of section 36 AC of the Act invoked under which these offences are considered cognizable and non-bailable. Necessary help from the enforcement agencies like police etc. should also be obtained, wherever required, so that the rackets are busted and culprits booked in time for taking legal action. The investigations in such cases should be expedited and prosecutions launched at the earliest. The quick and timely investigations would have deterrent effect on the unscrupulous persons involved in the nefarious trade of spurious drugs. 2. In the case of detection of a case of manufacture and/or sale etc. of spurious drugs by a licensed manufacturer i.e. use of licensed premises for manufacture of spurious drugs and the criminal intent is apparent, the case is required to be pursued with equal vigour as in the case of unlicensed manufacturer. The investigations should also include the other activities carried out by the manufacturer in the premises. 3. In the case of drugs manufactured by a licensed manufacturer under a valid manufacturing license has been found grossly sub-standard, the matter may be investigated at the manufacturer s end, and where criminal intent or gross negligence has been established and if the merits of the case so demand, and where it is felt that administrative measures would not be sufficient to meet the ends of justice, the re-course to prosecution should be resorted to, 57