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Unfair Trade Practices Worldwide

Consumer rights are at a discount

Unfair Trade Practices WorldwideIn recent years, consumer complaints about unfair trade practices have shown a sharp rise in the insurance, banking and telecom sectors. Now, a sample survey on the Impact of the Consumer Protection Act by the Indian Institute of Public Administration, covering rural and urban consumers in 10 districts of five States, has shown the prevalence of such practices across the goods and services sectors, affecting nearly 40% of consumers.

In a free market economy, competition promotes improvement in the quality of goods and services and sometimes even brings about a reduction in tariffs with the  telecom and aviation sectors being the best examples.

But on the flip side, aggressive competition also brings about dishonest and devious selling practices. Unless nipped in the bud, they can hurt consumers badly. It is for this reason that in many countries, competition commissions work not only to prevent anti-competitive practices, but also unfair trade practices, including misleading advertisements.

In the US, for example, the Federal Trade Commission is in the process of mailing 50,365 refund cheques to consumers victimised by a bogus ‘work at home and earn substantial sums’ offer. Last year, it forced a footwear company to fork out $40 million as the firm lied to the consumers and had made unsubstantiated claims about the benefits of the shoe. Similarly in Canada, the Competition Bureau has begun legal proceedings against four telecom companies for misleading advertising, seeking consumer refunds and administrative monetary penalties to the tune of $31 million. In Australia, the Competition and Consumer Commission has hauled up an energy company for making false representations during home calls with regard to the supply of retail electricity.

India too had an unfair trade practices watchdog once. In 1984, when the Monopolies and Restrictive Trade Practices (MRTP) Act was amended to bring unfair trade practices under the ambit of the law, the investigative wing under the Director General (Investigation and Registration) and the adjudicatory wing, the MRTP Commission worked in tandem to bring the perpetrators of unfair trade practices to book. Even today, I can recall those field investigations into ‘discount sales’ taken up by the office of the DG, exposing a variety of sharp practices adopted by retailers to increase their sales graph, without incurring any cut in their profit margin.

From fly-by-night non-banking financial companies that inveigled consumers into investing their hard-earned money with promises of high returns to educational institutions and health clinics, the Commission cracked the whip on all those indulging in dishonest practices.

Post-1991, when the government embarked on a process of economic liberalisation and globalisation, it should have strengthened the unfair trade practices wing of the MRTPC, but it failed to do so. Even 10 years hence — in 2002 — when it brought in the Competition Act, it should have converted the MRTPC into an Unfair Trade Practices Commission, vested with more powers to act on behalf of consumers or it should have brought unfair trade practices too under the ambit of the Competition Act. It did neither.

In 2009, it dissolved the MRTP Commission to make way for the Competition Commission of India (CCI), but kept unfair trade practices out of its purview on the ground that consumer courts created under the Consumer Protection Act could handle them. How can consumer courts, which are adjudicatory bodies, play the role of a regulator?

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