Unfair Assingment New

7/31/2019 Unfair Assingment New

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WELCOME


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CRITICAL EVALUATION OF UNFAIRAND RESTRICTIVE TRADE

PRACTICES


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Seminar on critical view of unfair trade practices & restrictivetrade practices

By Mamatha Shetty,

Final year LLM, Role Number 207,

Submitted to

Dr. B.K. Raveendra, Chairperson,K.S.L.U., Hubli

S.D.M. College, Mangalore .

S.D.M. Law college for Post graduation studies Law


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Introduction Article 19 (1)(g):guarantees to all citizens freedom to

practice any profession, or to carry on any occupation,trade or business subject to the restriction under thesame Article 19(6). Article 301 guarantees freedom of trade, commerce andintercourse throughout the territory of India subject torestrictions envisaged under Part XIII (Articles 302-307).The need to regulate business in the interest of general

public, is recognized in all countries is reflected in thedirective principles of state policy of our Constitution(Articles 38,39,41,42 and 43).


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With liberalization of the industrial policy in July, 1991, to attain the goal of globalization, thegovernmental control of private business seems

to have considerably reduced. Despite thisdevelopment, business activities always need tobe regulated through independent regulators.The enactment of the Electricity Regulatory Commissions Act, 1998, the Insurance Regulatory and Development Authority Act, 1999, theTelecom Regulatory Authority of India Act, 1997.

competition slowly increased between privatesectors, thereby different types of trading systemstarted such as unfair trade practices andrestrictive trade practices,


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and the consumers are deprived of their interest therefore

the other similar legislations by Parliament are the

legislative measures in the right direction which aim atprotecting the consumers from various risks such asunfair trade practices, restrictive trade practices etc.Moreover, legislations such as the Consumer Protection Act, 1986 was in existent but defined unfair tradepractice only after liberalization utill MRTP Act wasdealing with it but sevices were not covered also certainnew types of unfair trade practices were not coveredtherefore amendments to CP Act But slowly in the nameof competition unfair trade practice started thereforeonce again to prevent abuse of dominance positions of

the big companyies the Competition Act, 2002 enacted.


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and are directly aimed at protecting the consumers by givingthem rights and quick remedies by repealing MRTP Act.Examples of unfair trade practices includes, unfair

competition, misbranding goods quality, origin, or durability;using false advertising ; mislabeling to mislead consumerabout product size; and advertising or selling rebuilt goods asnew and deficiency in services etc


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To criticize the unfair trade practices and restrictivetrade practices at national level it is essential tolook into 3 legislation.

1] MRTP ACT2] Consumer Protection Act3] Competition act and4] an evolution of judicial decisisions.


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What does 'unfair trade practices'mean?

Unfair Trade Practices under MRTP Act, 1969 (UTPs)

Essentially (UTPs) under Section 36A in the MRTP Actinclude :False representation and misleading advertisement of goods and services.

Falsely representing second-hand goods as new.Misleading representation regarding usefulness, need,quality, standard, style etc of goods and services.


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False claims or representationregarding price of goods and services.

Giving false facts regardingsponsorship, affiliation etc. of goodsand services.

Giving false guarantee or warranty ongoods and services without adequatetests.


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Unfair practices may be categorized asunder:

1.FALSE REPRESENTATION 2.FALSE OFFER OF BARGAIN PRICE 3.FREE GIFTS OFFER AND PRIZESCHEMES4.NON-COMPLIANCE OF PRESCRIBED

STANDARDS 5.HOARDING, DESTRUCTION, ETC.


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INQUIRY INTO UNFAIR TRADE PRACTICES The Commission may inquire into

Any unfair trade practiceUpon receiving a complaint from any tradeassociation, consumer or a registered consumer

association, orUpon reference made to it by the CentralGovernment or State Government

Upon an application to it by the Director GeneralorUpon its own knowledge or information.


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RELIEF AVAILABLE After making an inquiry into the unfair trade practice 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 berepeated;The agreement relating thereto shall be void in respectof such unfair trade practice or shall stand modified . Any information, statement or advertisement relating tosuch unfair trade practice shall be disclosed, issued orpublished as may be specified


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The Commission may permit the party to carry on any tradepractice to take steps to ensure that it is no longer prejudicialto 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 additionalinformation while passing orders relating to unfair tradepractices.


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Cases1]M.O. Hasan Kuthoos Maricar v Joseph K Thomas [1991] II

CPJ 30 TNFACT: here money was deposited in advance for the supply of a car within two months and the car was actually suppliedsome time after two months,.

Held: the retention of the money beyond the period was heldto be an unfair trade practice entitling the party to 14%interest on the deposit for the period of delay.UTP applies both goods as well as to services:2] Birla [1990]: failure to appoint dealers network forservicing the products as per warranty constituted an unfairtrade practice according to the decission of MRTPCommission.


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Patel Amritlal v. The manager,

Mehsana Agro Auto Ltd., 1995Delivery of a vehicle was withheld on the ground of non-payment of handling and storage charges regarding whichthere was no provision in the contractual clause quitelogically because the price quoted was ex-showroom and notex-factory. This was clearly and obviously a case of grossunfair trade practice.


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ra e prac ce s ou e ere oconstitute unfair trade practice:

Morgan Standley MF v. Kartick Dass [ 1994 SCC (4) 225] it washeld that in share allotment and refund matters, theapplicant is merely a prospective investor and not a consumerand as such no trading activity was involved at that stage thatis to say that no trade practice was involved and accordingly the charge of unfair trade practice was not legally sustainable.Over ruled : (1998/CTJ/553/CP/SCDRC) of the Delhi State

Commission which has decided that not issuing sharecertificates despite payment of all money constitutesdeficiency in service and the consumers are entitled forcompensation.


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B h h h li i i d h


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Both the share applicants once again remitted the money along with interest for late payment which was encashed by the company. When the share certificates were notforthcoming both of them filed a complaint in the DistrictForum claiming a compensation of Rs 50198.Though the District Forum refused to grant thecompensation claimed, it found deficiency in the services of

M/s Videocon International Limited, and directed it to pay Rs 5000 each on account of damages for the harassmentcaused to the complainants . M/a Videocon InternationalLimited appealed against this order in the State

Commission. The company argued that in view of the judgement in the case of Morgan Stanley Mutual Fund,share holders are not consumers and their complaints needto be dismissed as not maintainable .

B h i i h k i h h f f h


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But the commission has taken a view that the fact of thepresent case is quite different from that of the MorgonStanley case and as such the contention of the company ismisconceived . Here, the company has allotted the shares onthe basis of the applications received and has also receivedthe call money. But it has failed to dispatch the sharecertificates till the present complaint has been filed.

The State Commission felt that since holders did not receivethe share certificates in time, they could not off load theshares thereby leading to loss, harassment and mental agony. As a result they are eligible for compensation. The company

has been directed to pay Mrs Prakash Kaur and Mrs HarbirKaur Rs 2500 each as compensation.

Sh bi M H H d [1993] Si il l f il


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Shabina Motars v. Hero Honda [1993] Similarly, a mere failureon the part of the company to fulfill a promise of grantingdealership to complainant did not constitute any unfair tradepractice.


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i R f l t d l


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i. Refusal to deal ii. Tie up sales iii. Full line forcing iv. Exclusive dealings

v. Price discrimination vi. Resale price maintenance

vii. Area restrictionThe traders, in order to maximize their profits and to gain power in

the market, often indulge in activities that tend to block the flowof capital into production. Such traders also bring in conditions of delivery to affect the flow of supplies leading to unjustified costs.


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RTP under CP ActSec. 2(1) (nn ) means any trade practice which requires aconsumer to buy, hire or avail of any goods or, as the case may be, services as a condition precedent for buying, hiring oravailing of other goods or services.Technically, this type of arrangement is called tie-up sales ortying arrangement. The effect of such an arrangement is thata purchaser is forced to buy some goods or services which hemay not require along with the goods or services which he wants to buy. Thus where a buyer agrees to purchase productX upon a condition that he will also purchase product Y

from the seller, the sale of product Y (tied product) is tied tothe sale of product X (tying product). The buyer has to forego his free choice between competingproducts . This results in neutralizing healthy competition inthe tied market.

E l A g di t ib t i i t d hi t t b


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Example : A, a gas distributor insisted his customers to buy gas stove as a condition to give gas connection. It was heldthat it was a restrictive trade practice - Re. Anand Gas RTPE43/1983 (MRTPC).However, where there is no such precondition and thebuyer is free to take either product, no tying arrangementcould be alleged even though the seller may offer both the

products as a single unit at a composite price.Example : A is a furniture dealer. He is selling Sofa at Rs.20,000 and Bed at Rs. 15,000. He has an offer that whoever will buy Sofa and Bed both, he will charge Rs. 30,000 only.

Here the choice is open to the customer to buy the productssingle or composite. This is not a restrictive trade practice.

Note : The term restricti e trade practice has a er ide


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Note : The term restrictive trade practice has a very widemeaning when read in context of the MRTP Act, 1969.However under Consumer Protection Act, 1986, it has beenused in a narrower sense.Thus, compelling a consumer to buy insurance cover whilepurchasing a vehicle, or insisting on purchase of gasstove as aprecondition to release gas connection shall be a restrictive

trade practices .


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difference between a restrictive trade practice and anunfair trade practice

"Unfair trade practice " as per Section 2(r) means a tradepractice which, for the purpose of promoting the sale, use orsupply of any goods or for the provision of any service, adoptsany unfair method or unfair or deceptive practice, whilerestrictive trade practice means a trade practice whichtries to manipulate the price or conditions of delivery toaffect flow of supplies in the market relating to goods orservices in such a manner as to impose on the consumersunjustified costs or restrictions [as per section 2(nnn)].

Metamorphosis from MRTP Act 1969 to Competition


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Metamorphosis from MRTP Act, 1969 to Competition Act, 2002In the context of the new economic policy paradigm, India

has chosen to enact a new competition law called theCompetition Act, 2002. The MRTP Act has metamorphosedinto the new law, Competition Act, 2002. The new law isdesigned to repeal the extant MRTP Act. As of now, only a

few provisions of the new law have been brought into forceand the process of constituting the regulatory authority,namely, the Competition Commission of India under thenew Act, is to an extent completed.

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India .


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Reason for repealing MRTP Act


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Reason for repealing MRTP ActLacuna in MRTP Act: A perusal of the MRTP Act will show that there is neither definition noreven a mention of certain offending tradepractices, which are restrictive in character.Some illustrations of these are:

Abuse of Dominance;Cartels, Collusion and Price Fixing;

Bid Rigging; andPredatory Pricing.


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Another dimension is the dynamic context of international as well as the domestic trade and

market. When the MRTP Act was drafted in 1969,the economic and trade milieu prevalent at thattime constituted the premise for its variousprovisions. There has been subsequently a seachange in the environment, with considerablemovement towards LPG. The law has to yield tothe changed and changing scenario on theeconomic and trade front. Hence, the new lawthe Competition Act, 2002.


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S.No MRTP Act, 1969 Competition Act,

2002 1 Based on the pre-reforms

scenario Based on the post-reforms scenario

2 Based on size as a factor Based on structure as afactor

3 Competition offences implicitor not defined

Competition offencesexplicit and defined

4 Complex in arrangement andlanguage

Simple in arrangement andlanguage and easily

comprehensible

5 14 per se offences 4 per se offences and all


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5 14 per se offencesnegating the principles ofnatural justice

4 per se offences and allthe rest subjected to ruleof reason.

6 Frowns upon dominance Frowns upon abuse ofdominance

7 Registration of agreementscompulsory

No requirement ofregistration of agreements

8 No combinations regulation Combinations regulatedbeyond a high thresholdlimit.

9 Competition Commissionappointed by theGovernment

Competition Commissionselected by a Collegium(search committee)

10 Concept of Group Act had

wider import and was

Concept has been simplified

11 Very little administrative and Relatively more autonomy for the


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yfinancial autonomy for theCompetition Commission

y yCompetition Commission

12 No competition advocacy rolefor the CompetitionCommission

Competition Commission hascompetition advocacy role

13 No penalties for offences Penalties for offences

14 Reactive and rigid Proactive and flexible

15 Unfair trade practices

covered

Unfair trade practices

omitted (consumer fora willdeal with them) 16 Does not vest MRTP

Commission to inquire into

cartels of foreign origin in a

Competition Law seeks toregulate them.

Critical Analysis of Unfair trade practices and


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Critical Analysis of Unfair trade practices andRestrictive Trade Practice

Interpretation: The expression 'unfair tradepractice ' is one which is elaborately defined in the

Consumer Protection Act and the Monopoliesand Restrictive Trade Practices Act. But the wordUnfair is still under confusion. The Act only provides various types of practices which can becalled as unfair practices but does not define whatis unfair . It is left to the discretion of judiciary to construe based on the fact andcircumstances .

Due to this problem the word Unfair has


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Due to this problem the word Unfair hasundergone various drastic changes by the

judicial interpretations starting from thepre economic liberalization and till date.Therefore it is necessary to study certain

judicial decisions to understand theevolution of the word Unfair andprevailing problems in the society due to

its wider interpretation.

The word Trade practice is not defined under CP


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The word Trade practice is not defined under CP Act.

Section 2(1)(d) consumer means---- but does not include a person who avails of such services for any commercial purposes ;Explanation . For the purposes of this clause, commercial purposedoes not include use by a person of goods bought and used by him andservices availed by him exclusively for the purposes of earning hislivelihood by means of self-employment; Act does not consider a person who buys goods for COMMERCIALPURPOSE as consumer.Example: A person buying one truck or tempo or sewing machine or onecomputer will be considered as consumer for the purpose of this act.

But if a person buys 2 typewriters, out of which one is used by a personemployed by him, he will not be eligible under CPA as person is buyingthe goods for resale or commercial purposes is not a consumerRetailer is not considered as consumer. Therefore where doesretailer should go for his claim if he finds he is affected by unfairtrade practices.

Trader u/s2(1)(q) a person:-


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Trader u/s2(1)(q) a person:] who sells or distributes any goods for sale; and

B] includes the manufacturer thereof; andC] where such goods are sold or distributed in packageform, includes the packer thereof;

Most of the trade is taking place through agencies. Butagencies are not considered as trader under CP ActCase:kuldip singh Karla v. Roshan Lal Pal, II (1993) CPJ 170[NC]

Held: middlmen who buys and sells cannot be called astrader and made liable for defects in title when sold to theconsumer.Same in the case of Restrictive Trade practices . What isjustifiable and unjustifiable is again question and left to

the discretion of the judiciary.

Not releasing sanctioned loan by bank is unfair trade


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Not releasing sanctioned loan by bank is unfair tradepractice

Fact:

Back-tracking from releasing the sanctioned loan toconsumer by a bank, amounts to unfair trade practice, aconsumer court has said while directing ICICI bank to pay acompensation of Rs 1.46 lakh to an Air Force personnel for

resorting to such act."The conduct of the bank makes out a case of unfair tradepractice, mal-practice, arbitrariness and gross deficiency inservice on its part who even during inquiry proceedings

failed to place on record the decision of the competentauthority that the loan sanctioned to the complainant wasnot to be released," the West Delhi District Consumer Forumsaid.

This is the era of competition. But the Competition Act,


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This is the era of competition. But the Competition Act, which is yet to be implemented in full, does not deal withUTP directly. The Competition Act does not define UTPitself, but only 'trade practice. '

Cases: In Philips Medical Systems (Cleveland) Inc vsIndian MRI Diagnostic & Research Ltd. [1986][Judges were divided]

Fact: the Indian firm ordered a whole body CT scanner fromthe manufacturer in the US.The Indian firm also moved the commission alleging'restrictive trade practice' by the US firm pleading losses

and seeking compensation. The commission held the USfirm guilty of both unfair and restrictive trade practices and awarded compensation. Therefore, the US firm appealedto the Supreme Court where it succeeded in setting aside thecommission's order.

Though both the judges in the Supreme Court agreed on


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Though both the judges in the Supreme Court agreed onquashing the commission's order, they could not agreeon the interpretation of the UTP . How can there be aUTP when there was no supply of goods at all, one judgeasked.KLM Royal Dutch Airlines vs. Director General ,. [MRTPcommission in the judgment] Some consignments of badgesand crests sent for a tournament in New Orleans, US, did notreach before the event, raising a claim for damages for'deficiency in service.'


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Over Burden on Consumer Forum


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Ove u de o Co su e o u

Consumer forum is dealing with the Disputes arising out of

insurance schemes, Banking sector, Medical Sector, TRAIetc.. Once again it is entrusted to deal with different types of unfair trade practices which are vast within it and leading todelay in the disposal of the cases also affecting the rights of

the consumers as well as the partys right which will againhave adverse impact on the market in total economy of thecountry.Though On December 16 th 2011, The Government has

introduced Consumer Protection (Amendment) Bill,2011, in Lok Sabha so as to facilitate quicker disposal of cases and to widen and amplify the scope of some of theprovisions of the Act not yet come into existence.

Suggestion : competition Act should define unfair


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Suggestion : competition Act should define unfairtrade practices and competition commission of Indiashould take up the matter of UTP in its jurisdiction.

No penal provision and ill doer are not punished or


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p p pfined.

No penal provision to the ill doer and they are not punished

under CP Act, only relief to consumers in the case of unfairtrade practice and restrictive trade practice that the DistrictForum may order is to discontinue them, or not to repeatthem .

The District Consumer Disputes Redressal Fora / StateCommission / National Commission may, as the case may be.order for following remedies against the consumer complaintmade to it:

to remove the defect pointed out by the appropriatelaboratory from the goods in question;to replace the goods with new goods of similar description which shall be free from any defect;


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to cease manufacture of hazardous goods and to desist from


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goffering services which are hazardous in nature;to pay such sum as may be determined by it if it is of the

opinion that loss or injury has been suffered by a largenumber of consumers who are not identifiable conveniently:to issue corrective advertisement to neutralize the effect of

misleading advertisement at the cost of the opposite party

responsible for issuing such misleading advertisement;to provide for adequate costs to parties.In case of unfair trade practice by Foreign country then Antidumping measures are taken.


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Case Law on Misleading Advertisement and


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Case Law on Misleading Advertisement andFalse Representation amounting to unfair

trade practices

Under MRTP as well as under consumer protection act.

1] Acupressure Therapy Health Centre (1986): . The MRTP


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p py ( )Commission held that the facts of acupressure thereby werefalse and misleading. Accordingly, injunction was issuedrestraining the respondent from giving out advertisementscontaining misleading facts. (ii) DG (I & R), New Delhi v. Principal, Kathiar MedicalCollege, Patna (1989).: Director General filed an applicationsuo moto against Principal, Kathiar Medical College, which was registered under the Societies Registration Act. It wasalleged that the respondent had been giving wrongimpression in his publicity material that the college wasauthorised and equipped to impart medical educationleading to M.B.B.S. degree. The college was actually neitherrecognized by the Medical Council of India nor affiliated toany University. The Commission held it to be a case of misleading advertisement amounting to unfair trade

iii) In Snowhite Clothiers (1986 ), the respondent issues


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) ( ) padvertisements promising discounts up to 50% upon statingin the advertisements "Drop in for unbelievable bargain inmen's, ladies and children wear ". The Commission ruled that

the advertisements were misleading in that the normal price was not shown, the bargain sale period was not indicated -'till stocks last ' was held a vague term amounting to unfairtrade practices and misleading the facts.

iv) In Panama Textiles, Bombay (1987), the dealer wasfound to have conducted the bargain in the name and style'ZAPATA' at YWCA, Ashoka Road, New Delhi and at NDMCHall Punchkuin Road, New Delhi. In the impugned 'bargainsale', the said dealer was found to have sold spurious/sub-standard suiting, etc. falsely claiming that to be of well-known brands manufactured by M/s Raymond Woollen Ltd.,Grasim Industries Ltd., M/s Bombay Dyeing, etc. Held thedealer had indulged in an unfair trade practice

COMPARATIVE ADVERTISING IN INDIA


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COMPARATIVE ADVERTISING IN INDIA The term comparative advertising refers to any form of advertising in which a trademark owner attempts to enjoy

pecuniary benefits from a comparison between his product,service, or brand and that of a competitor. Comparativeclaims may vary in nature. They may explicitly name acompetitor or implicitly refer to him. They may either

emphasize the similarities or the differences between theproducts. They may also state that the advertised product isbetter than or as good as the competitors. Comparativeadvertising generally possesses two components, puffery and

denigration.

Puffery is where the advertiser seeks to draw the consumers


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attention by making superlative claims about his productthat are assertions of opinion, rather than verifiablestatements of fact. Often puffery crosses the limits of tolerance and seeks to portray the competing product in anegative light. The same is then said to amount todenigration , which the courts have strictly prohibited.

Thus, the material question that often arises is to whatextent comparative advertising may be restricted. The

answer lies in developing a clear understanding of theconflicting interests of the various stakeholdersinvolved, including the advertiser, the competitor and the consumer.

The advertisers objective herein is to present his products in


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a manner such that the consumer is most likely to purchaseit. On the other hand the competitor would always try toprevent any advertising that aims at denigrating his productor makes false claims, or uses his product as a standard whichthe advertiser claims to exceed. The helpless consumer finds himself in the midst of a cacophony of claims, and has the right to be accurately informed about thequality or utility of the products available in themarket.

Any attempt at developing a mechanism to regulate


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advertising has to be made with reference to theconstitutional guarantee provided to the same under Article19(1)(a) of the Constitution of India. Initially, advertising wasexcluded from the ambit of the provision, with the SupremeCourt holding in Hamdard Dawakhana v. Union of India , AIR 1960 SC 554that while advertisements were a form of speech, they were not constitutive of the concept of freespeech . The reason for the same was that in seeking topromote trade and commerce they were guided by the objectof commercial gain.

The subsequent process of economic liberalization, however,


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brought about certain substantive changes in the structure of the market for consumer goods. The advent of a widerrange of products and services led to increasedcompetition , with advertising acquiring a vital role in thedetermination of consumer demand and in influencing thedynamics of the market as a whole. The media too wasincreasingly reliant on advertising revenues, as were otherforms of public entertainment such as sports and culturalevents.

A shift in the constitutional position was evidenced in the


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case of Tata Press v. Mahanagar Telephone Nigam Ltd .,(1995) 5 SCC 139. wherein advertising was observed to bebeneficial to consumers as it facilitated the free dis-semination of information, leading to greater publicawareness in a free market economy. Further, it was held tobe the life blood of the free media due to the substantialcontributions it gave to print and electronic mediaorganizations. In light of the same, the Court reversed theposition as adopted in Hamdard Dawakhana , and heldadvertising to be constitutive of commercial speech, andtherefore brought it within the ambit of constitutionalprotection conferred by Art. 19(1)( a).

The onus of regulating advertising in India has been assumed by awide array of governmental authorities and tribunals but


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wide array of governmental authorities and tribunals, butpresently there exists no dedicated statutory mechanism toregulate the dissemination of untruthful or disparagingmaterial through such medium . Primarily, matters related tountrue and misleading advertising were adjudicated upon by theMonopolies and Restrictive Trade Practices (MRTP)Commission, constituted under the Monopolies and RestrictiveTrade Practices Act, 1969 (MRTP Act). The Act defined an unfair

trade practice under 36A to include any false representation of goods with regard to their quality, quantity or utility. Theprovision also incorporated the clause that a warranty orguarantee of performance or durability of the product, if notadequately substantiated, would amount to an unfair trade

practice. Further, to advertise a false or misleading factdisparaging the goods, services or trade of another person too wasbrought within the ambit of the same . However, the MRTP Act was subsequently repealed by virtue of 66 of the Competition Act, 2002.

Fortunately, the power to enquire into complaints of unfair


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trade practices was vested with the consumer grievanceforums established under the Consumer Protection Act, 1986(CP Act)[section 9]. For such purpose, the definition of unfair trade practice as under 36A has been incorporated parimateria in 2(1)(r ) of the CP Act. While the saidprovision has put in place an effective mechanism to addressthe grievances of the consumer, it fails to provide relief toa competing seller as the CP Act excludesmanufacturers, sellers and service providers from itsambit [As observed in Colgate Palmolive (India) Ltd. v. Anchor Health and Beauty Care Private Ltd. , 2009 (40)PTC 653.]

Such parties are often compelled to take recourse to common


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law remedies in the form of injunctive action or monetary damages, for the securing of their interests, with a significantproportion of complaints by competing manufacturers andsellers involving alleged violations of their intellectualproperty rights through the said advertisements.

Mainly there are two cases under which rulings havereferred to the interests of consumers, other than kiwicase and the Colgate Case is not in direct contradictionto prior decisions.

Puffery


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First indian case: Reckitt & Colman of India Ltd v. M.P.Ramchandran&Anr. , 1999 PTC (19) 741:

Fact: In the concerned matter, the plaintiff and defendant weremanufacturers of clothing detergent brands Robin Blue andUjala, respectively. It was contended by the plaintiff that thedefendant, in its advertisement, had intentionally displayed a

container that was similar to the one in which the plaintiffsproduct was sold, and in regard to which the plaintiff had aregistered design. A further insinuation to the product of theplaintiff was in the fictitious product being priced at Rs. 10,

which was known to be the price at which Robin Blue wassold.

The advertisement went on to state that the said productBlue was uneconomical and depicted that the same was a


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Blue was uneconomical, and depicted that the same was aproduct of obsolete technology and hence ineffective. There was also an implication that the product failed to dissolve

effectively in water, and hence damaged clothes by leavingblue patches on them .It was argued by the defendant that the bottle depicted in theadvertisement did not bear any resemblance to Robin Blue,and that the object of the portrayal had been merely to assertthe technological superiority of Ujala over other competingproducts. Hence, it was denied that there was any specificdisparagement of Robin Blue in the concernedadvertisement.The Court herein relied upon the common law position asheld in De Beers Abrasive v. International GeneralElectric Co, 1975 (2) All ER 599. and enunciated thefollowing principles to state the law on the subject:

1. A tradesman is entitled to declare his goods to be best inh d h h h d l i i


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the words, even though the declaration is untrue.2. He can also say that his goods are better than hiscompetitors, even though such statement is untrue.3. For the purpose of saying that his goods are the best in the world or his goods are better than his competitors he caneven compare the advantages of his goods over the goods of

others.4. He, however, cannot while saying his goods are better thanhis competitors, say that his competitors goods are bad. If hesays so, he really slanders the goods of his competitors. In

other words he defames his competitors and their goods, which is not permissible.

5. If there is no defamation to the goods or to thef f h d i li b if h i


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manufacturer of such goods no action lies, but if there issuch defamation an action lies and if an action lies forrecovery of damages for defamation, then the Court is alsocompetent to grant an order of injunction restraining therepetition of such defamation.

Therefore, the question to be determined by the Court was whether the advertisement merely puffed the product of theadvertiser, or in the garb of doing so, was denigrating theproduct of the plaintiff.

It was observed herein that the assertions in the


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advertisement were aimed at denigrating theproduct of the plaintiff by indicating to anexisting and future customers that the product was both uneconomical and ineffective. Hence,the Court passed an order of injunction against

the defendant, restraining him from broadcastingthe said advertisement.

Analysis:


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A significant aspect of the manner in which puffery has beeninterpreted in this case is the broadly liberal attitude adoptedtowards untrue and imprecise statements. The law as hadevolved in England and found resonance in Ramchandran ,considered it permissible to allow the advertiser to enhancethe perceived utility of his product, even at the expense of factual accuracy. The emphasis of the Court in this regard was to prevent any loss or injury to the interests of thecompeting manufacturer or seller, with any activedisparagement of a competing product beingimpermissible .The said approach, while protecting the rights of thecompeting parties, was woefully inadequate inaddressing the concerns of the other significant marketgroup, the consumers.

The Ramchandran position on puffery was reconsidered to ali it d t t i th tt f Gl S ith Kli


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limited extent in the matter of Glaxo Smith KlineConsumer Health Care Limited v. Heinz India PrivateLimited and Ors [2007 (2) CHN 44 ]. Herein, the parties were manufacturers of the reputed nutritional drinksHorlicks and Complain respectively. In addition toallegations of implied disparagement, it was contended by the plaintiff that the advertisement had attributed certainqualities to the defendants product in an imprecise anduntruthful manner.

A significant evolution of the law on false and impreciseff i th f C l t P l li (I di )


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puffery was seen in the case of Colgate Palmolive (India)Limited v. Anchor Health and Beauty Care Private Ltd[. 2009 (40) PTC 653.] The parties herein were manufacturersof dental care products including toothpastes, with theplaintiff seeking an injunction restraining the defendantfrom broadcasting the contentious advertisement. It wascontended by the plaintiff that in the advertisement thedefendant had stated that its product Anchor was the only one that contained three ingredients, namely calcium,fluoride and triclosan. Further, it was also claimed by thedefendant that Anchor was the first toothpaste that couldprovide all round protection . The plaintiff objected to thefirst assertion as being false on the basis that even itsproducts contained all of the three named ingredients.

Having established itself as a pioneer in the market for dentald t it g d th t ti t f th


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care products, it argued that an assertion on part of thedefendant that Anchor was the first product to provide all round protection was an act of denigrating the competingproduct in an implied manner. Hence, it was argued that thedefendants assertions were both false and disparaging, withthe same exceeding the tolerable limits of puffery. Thedefendant replied to the same arguing that its use of the word only was intended to mean that its product was theonly one containing the three ingredients within the specificrange of white toothpastes. Further, with regard to the usageof the word first, it argued that it related to the adoption of the slogan all round protection, and not the utility of thebrand.

Held : The Court rejected the defendants argument and held


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that the advertisement sent a message to a consumer of averageintelligence that Anchor was in fact the only product containingthe said ingredients, and that it was the first to provide optimalprotection. A significant development seen in the reasoningof the Court was the introduction of the element of consumer protection in the law regulating puffery, with theCourt observing that the consumer was as significant a

stakeholder in the market as the competing manufacturers . With consumers being the often gullible targets of advertisingcampaigns, the protection of their interests was required whileestablishing a substantive mechanism to regulate comparativeadvertising. In an analysis of the judicial trend on the subject sinceRamchandran , it observed that the law in India had failed to takeaccount of the demands of consumer justice, despite theintroduction of the Consumer Protection Act, 1986, and thesubsequent broadening of the jurisprudence and policy relating toconsumer protection.


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Hence, the right that had been conferred on advertisersto make untrue statements regarding the utility of the


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to make untrue statements regarding the utility of the product was extinguished . With reference to the presentmatter, the Court accepted the defendants argument thatthere had been no active disparagement of the plaintiffsproduct. However, the use of the terms only and first inan untruthful and misleading manner was considered to be constitutive of an unfair trade practice .Hence, the Court admitted the prayer of the plaintiff to alimited extent and restrained the defendant from the usageof the words first and only in the said manner.

RECENT JUDICIAL TRENDS: DIFFERENTIATINGSIMPLE PUFFERY FROM DENIGRATION


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SIMPLE PUFFERY FROM DENIGRATION The two fundamental facets of comparative advertising arepuffery and denigration , with there being a need tocomprehensively differentiate the nature of the two in orderto develop any broad mechanism of regulation. An attemptmay be made towards the same by way of an analysis of certain recent case law on the subject. An understanding of the judicial opinion herein might help in determining auniform standard of tolerance to differentiate cases of simplepuffery from those of actionable denigration.

The case of Dabur India Ltd. v. M/S Colortek MeghalayaPvt Ltd 2010 (42) PTC 88 laid down certain principles to


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Pvt. Ltd. 2010 (42) PTC 88. laid down certain principles tohelp ascertain the important of implied disparagement incomparative advertising. Herein, the appellant was amanufacturer of mosquito repellent creams, namely Odomos and Odomos Naturals . The respondent alsomanufactured a mosquito repellent cream under the brandname Good Knight Naturals. The respondent telecast theadvertisement of Good Knight Naturals, with the appellantcontending that the same disparraged its product.The question that arose before the Court was whether thetelecast disparaged the product of the appellant in animplied manner, and if so, whether the appellant wasentitled to an injunction against the telecast.

The Court observed that a seller always has the scope torepresent his product in a manner that gains him additional


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represent his product in a manner that gains him additionalpurchasers than what he would have normally had. Thislatitude, however, in no way implies any permission formisrepresentation, but only a description of permissibleassertion. To substantiate this argument, the Court alsoplaced reliance on the principle of civil law, simplexcommendatio non obligat , which means that simplecommendation can only be regarded as a mere invitation to acustomer, without any obligation as regards the quality of goods. Thus, each seller has the right to naturally try andaffirm that his wares are good enough to be purchased, or of superlative quality.

Although the Court held that commendatory expressionsshould not to be treated as serious representations of fact it


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should not to be treated as serious representations of fact, itfurther stated that such principle was by no meansconclusive as the limits of permissible assertion are notalways discernible.The Court thus laid down certain guiding principles whereinit observed that an advertisement is constitutive of commercial speech and is protected by Art. 19(1)( a) of theConstitution. While there would be some grey areas in theprocess of representation, any commendatory statementsneed not necessarily be taken as serious representations of fact, but only as glorifying the product, provided that theadvertisement is not false, misleading, unfair or deceptive. Also while glorifying the product, an advertiser may notdenigrate or disparage a rival product.


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However, the possibility always remains that whenever anadvertiser promotes his product through puffed statements


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advertiser promotes his product through puffed statements,there may be an assumption that he is implying at theinferiority of another product. Referring to the case of PepsiCo. Inc. & Ors. v. Hindustan Coca Cola Ltd, the Courtformulated certain tests to determine any cause of action fordisparagement:1. What is the intention behind the advertisement, asdeciphered from the story line and the message ostensibly sought to be conveyed?2. Is the manner of advertisement or comparison by and largetruthful or does it falsely denigrates or disparages the rivalsproduct?3. Finally, does the ad have the overall effect of promoting thesellers product or showing the rival in poor light?


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A further submission by the appellant was that the use of expressions such as an apprehension of getting rashes and allergy ith th f it ll t ll ti th t


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with the use of mosquito repellent creams, or an allegation thatother creams caused stickiness, amounted to disparagement of itsproduct. The same was also rejected by the Court as there was no

suggestion that any specific product caused rashes or allergies or was sticky. A general proposition had been advanced whichsuggested that if a mosquito repellent cream was applied on theskin, there may be an apprehension of rashes and allergy. Sincethe respondents were also promoting a mosquito repellent cream,there was no reasonable apprehension that they would denigrateall mosquito creams or of the fact that such creams caused rashesor allergies. The respondents were only suggesting that since theirproduct contained certain exclusive ingredients, there is a lesserchance of the consumer suffering from any side effects. Withregard to the point on stickiness, the Court observed that it

was entirely dependent on the subjective opinion of theconsumer, and thus ended all apprehension of denigrationof the appellants product .[See also, S.C. Johnson & Son, Inc & Anr. v. Buchanan GroupPty Ltd., High Court of Delhi at New Delhi CS(OS) No.2173/2009.

The respondent allegedly disparaged the goods of thepetitioner by claiming that their product is of superior


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petitioner by claiming that their product is of superiorquality and while drawing this comparison depicted acontainer which had striking resemblance with thepetitioners product. The respondents argument that thecomparison was of a generic nature was turned down and theCourt held that it was comparison and since suchcomparison showed the petitioners product in poor light, it was disparagement. It also seemed to recognizethe impact of advertisement on sales figures.]

An analysis of the law governing comparative advertising inIndia reveals that in the absence of a dedicated legislative


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gmechanism regulating the same, a largely makes shiftapproach has been followed, with diverse aspects of the same

being determined with reference to inconsistent standards.Such an approach is insufficient on a sustainable basis, as theselective application of diverse laws leaves behind a trail of lacunae in any attempt to determine the question in acomprehensive manner. In order to arrive at a uniformstandard or level of tolerance, the twin components of simplepuffery and denigration have to be addressed keeping inmind the nature such representations . Herein, it is relevantto note that while the level of permissibility with regard to

puffery has been varying, the position on denigration hasbeen largely consistent. Further, it is essential to incorporatethe interests of all the concerned stakeholders, includingmanufacturers, advertisers, competing parties andconsumers.


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A possible method to evolve a more comprehensivescheme of regulation may be in allowing the advertising


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scheme of regulation may be in allowing the advertisingindustry to suggest the broad structure for the same, while ensuring that the rights of both the competitorand consumer are safeguarded . This may be done by way of adopting the model as has evolved in Britain, with thenorms as prescribed by the advertising body being legally enforceable. Such norms may be used to determine certain uniformstandards with regard to both simple puffery anddenigration, keeping in mind the demands of consumer justice and fair competition. While the necessity forintroducing a more comprehensive regulatory regime cannotbe overemphasized, it must be remembered that advertisingdisputes, being commercial in nature, should preferably beresolved within the market.

The courts in this regard should not allow themselves to be


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The courts in this regard should not allow themselves to beused as instruments for the settlement of market disputes, with their intervention being required only in case of any

express violation of the law.

Comparative advertising in India puff under scrutiny The Madras High Court observed that: Recognizing theright of producers to puff their own products even withuntrue claims, but without denigrating or slanderingeach others products, would be to derecognize therights of the consumers guaranteed under the

Consumer Protection Act 1986. The court also held that: To permit two rival traders toindulge in puffery, without denigrating each othersproducts, would benefit both of them, but would leavethe consumer helpless.


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Based on these findings, the court crafted the followingprinciples:


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principles: Publication of advertisements as free commercialspeech is protected by Article 19(1)(a) of theConstitution; Restrictions contained in statutes such as theMonopolies and Restrictive Trade Practices Act and theConsumer Protection Act satisfy the test of reasonablerestrictions allowed by Article 19(2) of the Constitution; If a case of disparaging advertising falls within thedefinition of the term unfair trade practice, an action

may be brought before a consumer court or a civil courtby a consumer, a group of consumers, a consumerassociation, the central or state governments, amanufacturer or marketer where the advertising

contains a false representation as per Section


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The court, observing the statutory basis of unfair tradepractices, noted that: It is doubtful if false claims by


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p act ces, oted t at: t s doubt u a se c a s bytraders, about the superiority of their products, eithersimpliciter or in comparison with the products of theirrivals, is permissible in law. In other words, the law as itstands today, does not appear to tolerate puffery anymore. Notably, the court found to be permissibleadvertisements which tend to enlighten the consumer,either by exposing the falsity or misleading nature of the claim made by the trade rival or by presenting acomparison of the merits (or demerits) of theirrespective products. Interpreting such advertisementsto be in the public good, the court cited two instancesas an exception to this namely, if an advertisement ismotivated by malice, and if it is false.

The court held that this sort of advertising wouldbenefit society because competitors are naturally better


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y p yequipped to expose a rivals untrue claims. The courtalso held that the benefit to society from such anexposure would outweigh the loss of business for theperson affected. This observation was based on thecourts assumption that comparative advertising, even if it did not amount to a disparagement of other goods,could result in consumers being misled.The court held that it was ultimately to the benefit of consumers to allow truthful exposures and to restraintraders from making false representations, incorrectrepresentations, misleading representations or issuingunintended warranties (as defined as unfair tradepractice under the Consumer Protection Act).

This balancing of trader interests with consumerinterests means that an advertisement which makes


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false claims, whether comparative or not, may besubject to an injunction or restraining orders from acourt. Legal landscape far from settled. While theMadras High Court judgment is theoretically bindingon concurrent courts in Madras and on lower courts within its jurisdiction, judges who disagree with thefindings in a case have the option to offer a new opinionor refer the matter to a Division Bench (of two or more judges) for a definitive interpretation. This judgment isexpected to be influential among high courts in other

jurisdictions. However, it is likely that the law in thisarea will witness some inconsistency until the SupremeCourt makes a definitive ruling.

Conclusion


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To conclude the concept stated and the categoriesenumerated in the act has high priority on thosematters which relate to the basic necessities of life and to situations in which the impact of falseand misleading advertising or other unfair ordeceptive practice falls with cruelest impact uponthose who are least able to resist, namely, the

elderly and the poor.

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