09 Mba Bl Lec Nov 18 Cpa & Unfair Trade Practices Final

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Consumer Protection Act , 1986

CHAPTER 13 , pp 581 - 624

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What isConsumer

Protection ?

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Protecting the Consumer2/3 of spending in the world economy (more than $30 trillion$30 trillion) is by consumers.

Yet they have no voice!Yet they have no voice!

New Economic PolicyNew Economic Policy floods market with products — Ye Dil Ye Dil Maange More Maange More — — too little information for informed choice.

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15 March 1962 : US President Kennedy introduced the

revolutionary notion of rights for consumers to the US Congress:

"Consumers, by definition, includes us all. They are the largest economic group in the economy, affecting and affected by almost every public and private economic decision. But they are the only important group whose views are often not heard.”

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9 April 1985 : UN General Assembly adopted guidelines for:

• consumer protection

• high levels of ethical conduct of producers / distributors of goods & services

• curb abusive business practices adversely affecting consumers

• develop markets providing consumers greater choice at lower prices.

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UN Principles of Consumer Protection

(a) Protect from hazard to health & safety;

(b) Promote & protect economic interests;

(c) Provide adequate information for informed choice as per individual wish & need;

(d) Consumer education including environmental, socio-economic impacts of choice, teaching a value system on wisely using money & goods, complaining effectively;

(e) Provide effective redress—formal and informal procedures that are fast, fair, cheap, accessible;

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UN Guidelines (contd.)(f) Encourage Business Chambers to resolve

consumer disputes through advisory services & informal complaint handling mechanisms;

(g) Freedom to form groups & present views in decision-making affecting consumers;

(h) Promote sustainable consumption patterns.

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CPA, 1986 is complementary to other laws to protect consumers Laws like the Indian Penal Code,

Indian Contract Act, Sale of Goods Act, Drugs and Cosmetics Act, Agricultural Produce (Grading and Marking) Act, Weights & Measures Act, MRTP have existed since pre-independence, but none enshrines rights of Consumers, nor provides swift remedy. Many not applicable to services. Usual remedies like civil suits are costly and time consuming.

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Exclusion Clauses Have NoEffect in Consumer Protection

• Exclusion clauses are terms of a contract which try to limit the liability of one of the parties if they breach the contract

• These clauses can create unfair situations where one party is able to insist they are included in the contract because that party is much stronger than the other party

• Exclusion clauses , privity of contract have no effect in applying CPA

• Tort of negligence applicable to all parties in supply chain.

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Consumer Protection Act, 1986 is unique in the world

• Exclusive courts for consumer disputes in all districts, state and national capitals.

• 6 consumer rights specified.

• Consumer Protection Councils from national to state and district levels.

• Covers private, public, cooperative sectors.

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Consumer's Rights : Consumer's Rights : Sec 6, C. P. Act, 1986Sec 6, C. P. Act, 1986

1.1. Right to SAFETY against hazardous goods Right to SAFETY against hazardous goods and servicesand services

2.2. Right to be INFORMED about quality, Right to be INFORMED about quality, quantity, purity, standard, price, etcquantity, purity, standard, price, etc

3.3. Right to CHOOSE from a variety at Right to CHOOSE from a variety at competitive pricescompetitive prices

4.4. Right to BE HEARDRight to BE HEARD

5.5. Right to seek REDRESSALRight to seek REDRESSAL

6.6. Right to CONSUMER EDUCATIONRight to CONSUMER EDUCATION

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Who is a Consumer?A person , who buysbuys any goodsany goods or or hireshires any serviceany service (fully or partly paid for) , from a business seller.

But NOTBut NOT goods or services obtained for resale or for any commercial resale or for any commercial purposepurpose (except self-employment) .

NOT NOT any service free of charge or under a contract of personal service .

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Who is a Consumer?A person , who uses any goodsuses any goods or any or any serviceservice with the permission of the consumer is also a consumer.

Example : 1. A tenant using the landlord’s telephone with his permission was held to be a consumer of telephone services .

2. Wife eating food ordered by husband is a consumer .

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Who is a Consumer?

R&B Customs Brokers Co Ltd v. United Dominions Trust Ltd :

A company, purchaser of a second hand car from a seller selling in the course of business, for the use of its managing director was held to be acting as a consumer buyer.

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Who is a Consumer?Buyer in following cases is a

consumer :

1. Supply of water to cultivators

2. Supply of electricity to a factory

3. Financing of a car by a financier

4. Watercoolers for a bus stand

5. Buyer of a shop

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Who is a Consumer?Buyer in following cases is not a

consumer :

1. Co-op housing society

2. Taxis for tour operations

3. Electricity for a factory

4. Machines for sole properietorship factory

5. Operation at charitable hospital

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Consumer Protection Act, 1986-socio-economic legislation-ensures speedy, cost-effective disposal of grievances- amendment of 15.3.2003 makes it more functional & purposeful- Act applies to all goods & services (unless exempted)- Consumer:

1. one who buys goods or hires services for a consideration

2. beneficiary of such service- exclusion : services free of charge 1

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Consumer Dispute Settlement- Defective goods, deficiency of service may provide cause for dispute and reason for complaint to the consumer

-These disputes and complaints are required to be settled (redressed) speedily. 1

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Consumer Grievance Redressal Agencies

A hierarchy of three levels :

1. District Forums

2. State Commissions

3. National Commission

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Consumer Courts

Jurisdiction and appeals : District Forum (less than Rs. 20 Lacs) State Commissions (between Rs. 20 Lacs - 1 Crore) National Commission (more than Rs. 1 Crore)

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Who can file a complaint in a Consumer Forum?

Sec 2(b) :

• Consumers or group of consumers having similar interests

• Voluntary Consumer Associations

• Central or State Government

• Legal heir or representative of a deceased consumer

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WHAT TO WRITE IN A COMPLAINT?

The following information must be furnished with the complaint :- 1. Name and full address . 2. Name and full address of opposite party . 3. Description of goods or services. 4. Quality and quantity . 5. Price . 6. Date & proof of purchase or hiring . 7. Nature of problem . 8. Type of redressal wanted .

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Procedure for Filing a Complaint Under Consumer

Protection Act• File in triplicate on plain paper to

the District Consumer Disputes Redressal Forum where the seller has his business or residence or where the cause of action arises.

• File complaint within 2 yearswithin 2 years from the date of the cause of action.

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UNIQUE FEATURES OF CONSUMER FORA

– No lawyer or agent is necessaryNo lawyer or agent is necessary for filing complaint or to make submission. If due to lawyer’s conduct consumer suffers, it is a deficiency in service open to redress.

– Small nominal fees payable. No charges for despatching notices to opposite parties etc.

– Every complaint shall be heard and disposed of within 90 daysdisposed of within 90 days (150 days in case of lab test) from the date of receipt of notice by the opposite party.

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Fees payable  District Forum

Value and compensation claimed - Fee• Upto Rs 1 Lakh : Rs 100• Rs 1 lakh & above but < Rs 5 lakh : Rs 200• Rs 5 lakh & above but < Rs 10 lakh : Rs 400• Rs 10 lakh & above but < Rs 20 lakh : Rs 500

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WHAT KIND OF REMEDIES ARE PROVIDED

LAW PROVIDES FOR THE FOLLOWING REMEDIES IN CASE OF A COMPLAINT:- 1. REMOVAL OF THE DEFECT OR DEFICIENCY.2. REFUND OF MONEY.3. REPLACEMENT OF THE GOODS.4. COMPENSATION FOR LOSS OR HARASSMENT OR MENTAL AGONY.5. PROHIBITION OF MARKETING OF GOODS HAZARDOUS FOR HEALTH OR ENVIRONMENT.

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Bodies to Facilitate Consumer Awareness

• Central Consumer Protection Council.

• State Consumer Protection Council .

• District Consumer Protection Council .

• District Consumer Information Centre .

• Consumer Complaint Cells of Business Chambers & Traders’ Associations.

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Consumer Education to cover:• Health, nutrition, food-borne diseases, food

adulteration.

• Product hazards.

• Product labeling.

• Protective laws.

• How and whom to approach for redress.

• Information on weights, measures, packaging, prices, quality, availability of basic needs.

• Environment, pollution, sustainable consumption.

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UNFAIR TRADE

PRACTICES

CHAPTER 13 , pp 624 - 631

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MONOPOLIES AND RESTRICTIVE

TRADE PRACTICES ACT,1969

BROUGHT INTO FORCE IN 1970

MODIFIED IN 1984 TO ADD PART B TO IT, WHICH DEFINES UNFAIR

TRADE PRACTICES

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THE SAME SET OF PROVISIONS HAVE ALSO BEEN ADDED TO :

CONSUMER PROTECTION ACT , 1986

Sec 2(1)(r)(i)

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UNFAIR TRADE PRACTICE Where , by any method

whatsoever , a belief is created in the minds of consumers as to some quality or utility of goods or services , and the goods or services actually fall short of those beliefs , the method adopted is an unfair trade practice.

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UNFAIR TRADE PRACTICES1. FALSE REPRESENTATION

2. FALSE OFFER OF BARGAIN SALE

3. OFFERING OF GIFTS / PRIZES

4. NON COMPLIANCE TO STANDARDS

5. HOARDING , DESTRUCTION OR REFUSAL OF GOODS

6. SPURIOUS GOODS , DECEPTIVE PRACTICES

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1.FALSE REPRESENTATION Adopting misrepresentation of facts to

promote sale, use or supply of goods or services, e.g.

Misleading buyers about another’s goods or Misleading buyers about another’s goods or services.services. Eg. Pepsodent whitens teeth twice Eg. Pepsodent whitens teeth twice as effectively as Colgate.as effectively as Colgate.

Falsely claiming a sponsorship, approval or Falsely claiming a sponsorship, approval or affiliation. affiliation. Eg. Our software is tested & Eg. Our software is tested & approved by Microsoft.approved by Microsoft.

Offering misleading warranty or guarantee. Offering misleading warranty or guarantee. Eg. A computer with 3 yrs warranty requires Eg. A computer with 3 yrs warranty requires entering into an AMC from the beginning.entering into an AMC from the beginning.

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1.FALSE REPRESENTATION Adopting misrepresentation of facts to

promote sale, use or supply of goods or services, e.g.

False suggestion as to quality, efficacy etc.False suggestion as to quality, efficacy etc. Eg. If you use our fairness cream, you Eg. If you use our fairness cream, you become as beautiful as SS or KK .become as beautiful as SS or KK .

False need or requirement creation.False need or requirement creation. Eg. Eg. Unless you regularly take our Vitamin tablets Unless you regularly take our Vitamin tablets after 50 , you cannot remain healthy .after 50 , you cannot remain healthy .

Suggest false recommendation by doctors.Suggest false recommendation by doctors. Eg. Dentist ka sujhaya no. 1 brand , Eg. Dentist ka sujhaya no. 1 brand , approved by leading specialistsapproved by leading specialists

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2. FALSE OFFER OF BARGAINExamples :

1. Shirt prices slashed by two third

2. 50 % discount clearance sale

3. Buy fans at 30% discount

4. Motors at 40% discount

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3. SCHEMES OFFERING GIFTSOffering, then withholding

gifts/prizes.

False claim of offering gifts/services when cost is included partly in the price.

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4. Non-compliance to Prescribed Standards

EXAMPLES :Medicines not manufactured according to

standardsElectrical items not manufactured as per

standardsFood purity not as requiredServices not provided as per standard eg.

Surgical procedures not done as per requirements , Auditing not done as reqd.

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5. Hoarding , Destruction , Refusal

Output restraint on delivery / flow of supplies to impose unjustified costs / restrictions on consumers.

Hoarding and creating false scarcity.

Destruction of goods to create scarcity and price increase.

Refusing to sell on unjust grounds.

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6. Spurious Goods , Deceptive Practices

Collusive tendering ; market fixing territorially among competing suppliers , depriving consumers of free choice , fair competition .

Supplying only to particular distributors or on condition of sale only within a territory .

Delaying in supplying goods/services leading to rise in price .

Requiring a consumer to buy / hire any goods or services as a pre-condition for buying/hiring other goods or services .

Spurious services .

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MRTPC• Complaints related to unfair trade

practices can also be made to the Monopolies and Restrictive Trade Practices Commission.

• They prove redressal of such complaints by ordering that

• Such practice be stopped

• By cancelling contracts involving such practices, and

• By awarding compensation for loss or injury to consumer.

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NEW COMPETITION LAW BEING PROMULGATED TO

REPLACE MRTP ACT

• See pp 632 – 651 under “Competition Act.”

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DOs for Fair BusinessRight product, right service at right price

with cash-memo.Honour warranty and guarantee. Provide

reliable, adequate after-sales service and spare parts.

Honour Consumer Rights to safety, choice, information.

Undertake & participate in factual consumer education programmes.

Build up a social coalitionsocial coalition between producers, sellers, consumersproducers, sellers, consumers. Establish Establish consumer complaints cells, voluntary codes.consumer complaints cells, voluntary codes.