Unfair Trade Practices in India: Consumer Protection Act Provisions

# Unfair Trade Practices in India: Consumer Protection Act Provisions

In an increasingly complex marketplace -- where consumers face a deluge of advertising, online platforms, subscription models, and aggressive marketing techniques -- the law against unfair trade practices serves as a critical shield for consumer protection. The **Consumer Protection Act, 2019** (CPA 2019), which replaced the older Consumer Protection Act of 1986, substantially strengthened the legal framework to address modern forms of unfair trade practices.

This article provides a comprehensive overview of what constitutes an unfair trade practice under Indian law, the powers of the **Central Consumer Protection Authority (CCPA)**, penalties for violations, the growing concern around dark patterns, and the remedies available to consumers.

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What is an Unfair Trade Practice?

Definition Under Section 2(47) of the CPA 2019

**Section 2(47)** of the Consumer Protection Act, 2019 defines "unfair trade practice" to mean a trade practice which, for the purpose of promoting the sale, use, or supply of any goods or provision of any service, adopts any **unfair method or unfair or deceptive practice** including any of the following practices:

#### 1. False Representation

Making a false or misleading representation regarding:

- The **standard, quality, quantity, grade, composition, style, or model** of goods or services.

- The **usefulness, need for, or fitness** for a particular purpose of goods or services.

- The **sponsorship, approval, performance characteristics, accessories, uses, or benefits** of goods or services.

- The availability of goods or services in the market or their price.

- The **condition, warranties, guarantee, rights, or remedies** available to the consumer.

- The **identity of the manufacturer** or the place of origin of the goods.

#### 2. False Representation as to New or Reconditioned Goods

Representing that goods are **new** when they are in fact second-hand, renovated, reconditioned, or old.

#### 3. Misleading Representation About Prices

Making a representation that:

- The goods or services are available at a **bargain price** when in fact they are not.

- The price advantage exists when it does not.

#### 4. False Claims About Gifts, Prizes, or Free Offers

Offering gifts, prizes, or other items with the intention of not providing them as offered, or creating the impression that something is being given free or at a concessional price when the cost is actually factored into the price of other goods or services.

#### 5. Product Safety Standards

Offering for sale goods that do not comply with the **mandatory standards** prescribed under any law for the time being in force, including the **Bureau of Indian Standards (BIS) Act, 2016**.

#### 6. Hoarding or Destruction of Goods

Permitting the **publication of any advertisement** whether in any newspaper or otherwise, for the sale or supply at a bargain price of goods or services that are not intended to be offered for sale or supply, or that are not available in reasonable quantities.

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Misleading Advertisements: Section 2(28) CPA 2019

The CPA 2019 introduced a specific definition of "misleading advertisement" under **Section 2(28)**:

A "misleading advertisement" means any advertisement which:

1. **Falsely describes** such product or service.

2. Gives a **false guarantee** or is likely to mislead consumers as to the nature, substance, quantity, or quality of such product or service.

3. Conveys an **express or implied representation** which, if made by the manufacturer or seller, would constitute an unfair trade practice.

4. Deliberately conceals **important information**.

Key Elements

- The advertisement need not actually deceive a specific consumer; it is sufficient if it is **likely to mislead** the general class of consumers to whom it is directed.

- The standard applied is that of an **ordinary, reasonable consumer**, not an exceptionally wary or gullible consumer.

- Both **direct claims** and **implications or innuendos** in an advertisement can constitute misleading advertising.

The **Supreme Court** in **Colgate Palmolive (India) Ltd. v. Hindustan Unilever Ltd. (2014) 2 SCC 723** held that comparative advertising is permissible in India, but it must be **truthful, honest, and not misleading**. A competitor's product cannot be disparaged through false or misleading claims.

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Central Consumer Protection Authority (CCPA)

One of the most significant innovations of the CPA 2019 is the establishment of the **Central Consumer Protection Authority (CCPA)** under **Section 10**.

Powers of the CCPA

The CCPA has broad powers to protect, promote, and enforce consumer rights as a class, including:

1. **Inquire into violations**: The CCPA can conduct inquiries into unfair trade practices and misleading advertisements **suo motu** (on its own motion) or on a complaint.

2. **Issue directions**: The CCPA can issue directions to:

- **Recall products** that are dangerous, hazardous, or unsafe.

- **Reimburse** the price of goods or services to purchasers.

- **Discontinue** practices that are unfair or restrictive.

3. **Action against misleading advertisements** (Section 21):

- Issue directions to the **trader or manufacturer** to discontinue the misleading advertisement or modify it.

- Issue directions to the **advertiser** (ad agency) to discontinue the misleading advertisement.

- **Impose penalties**: Up to **Rs. 10 lakh** for a first offence and up to **Rs. 50 lakh** for subsequent offences.

- **Prohibition from endorsing**: The CCPA can prohibit the endorser of a misleading advertisement from making any endorsement for a period of up to **one year** for a first offence and up to **three years** for subsequent offences.

4. **Filing complaints**: The CCPA can file complaints before the **Consumer Disputes Redressal Commissions** (District, State, or National) on behalf of consumers as a class.

Investigation Wing

Under **Section 15**, the CCPA has an **Investigation Wing** headed by a Director General, which can conduct investigations into unfair trade practices and misleading advertisements.

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Penalties for Unfair Trade Practices

Under the CPA 2019

The Consumer Disputes Redressal Commissions (at the District, State, and National levels) have the power to grant the following reliefs upon finding an unfair trade practice:

1. **Remove defects** from goods.

2. **Replace goods** with new goods of similar description.

3. **Refund** the price paid.

4. Pay **compensation** for any loss or injury suffered by the consumer.

5. **Discontinue** and not repeat the unfair trade practice.

6. Pay **punitive damages** in appropriate cases.

7. Pay **adequate costs** to parties.

Penalties for Misleading Advertisements (Section 89)

- **Manufacturer/Endorser**: If any person manufactures, sells, or offers to sell, or endorses any product or service that causes personal injury or harm to the consumer, they may be punished with imprisonment up to **6 months** and fine up to **Rs. 20 lakh** for a first conviction. For a subsequent conviction, imprisonment up to **5 years** and fine up to **Rs. 50 lakh**.

- **False or misleading advertisement**: Under Section 89, any person who publishes or is party to the publication of a misleading advertisement may be punished with imprisonment up to **2 years** and fine up to **Rs. 10 lakh**.

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Dark Patterns: The Modern Form of Unfair Trade Practices

In the digital economy, a new and insidious form of unfair trade practice has emerged: **dark patterns**. These are deceptive design choices in user interfaces that manipulate consumers into making decisions they would not otherwise make.

Guidelines for Prevention and Regulation of Dark Patterns, 2023

The **Department of Consumer Affairs**, Government of India, notified the **Guidelines for Prevention and Regulation of Dark Patterns, 2023** on 30th November 2023. These guidelines identify and prohibit the following dark patterns:

1. **False urgency**: Creating a false sense of urgency (e.g., "Only 2 left!" when stock is actually abundant).

2. **Basket sneaking**: Adding additional items or services to the shopping cart without the consumer's consent.

3. **Confirm shaming**: Using language or emotion to steer users away from making a particular choice (e.g., "No thanks, I don't want to save money").

4. **Forced action**: Forcing users to take an additional action (such as signing up for a newsletter) to complete a desired task.

5. **Subscription traps**: Making it easy to subscribe but unreasonably difficult to cancel.

6. **Interface interference**: Highlighting certain options and obscuring others to manipulate user choice.

7. **Bait and switch**: Advertising one product and then substituting another.

8. **Drip pricing**: Showing a low initial price and then adding charges incrementally during checkout.

9. **Disguised advertisements**: Ads designed to look like regular content or search results.

10. **Nagging**: Repeated and intrusive requests to take a specific action.

These guidelines apply to all platforms, advertisers, and sellers offering goods or services in India, including **e-commerce** platforms.

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ASCI Guidelines

The **Advertising Standards Council of India (ASCI)** is a self-regulatory body that oversees advertising practices. While ASCI's Code is not statutory law, it provides influential guidelines:

- Advertisements must be **truthful and honest**.

- Advertisements must not be **offensive or harmful**.

- Advertisements must be **fair in competition** (comparative advertising must not denigrate competitors).

- **Influencer advertising**: ASCI has issued specific guidelines requiring influencers to disclose paid partnerships or sponsored content (the "paid partnership" disclosure requirement).

The CCPA has recognized ASCI's role and has, in several cases, taken cognizance of ASCI rulings when acting against misleading advertisements.

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How to File a Consumer Complaint for Unfair Trade Practices

Before Which Forum?

Consumer complaints can be filed before the **Consumer Disputes Redressal Commission** based on the value of goods/services and compensation claimed:

- **District Consumer Disputes Redressal Commission**: Up to **Rs. 1 crore**.

- **State Consumer Disputes Redressal Commission**: Above Rs. 1 crore and up to **Rs. 10 crore**.

- **National Consumer Disputes Redressal Commission (NCDRC)**: Above **Rs. 10 crore**.

Who Can File?

Under **Section 35** of the CPA 2019, a complaint can be filed by:

1. The **consumer** to whom the goods are sold or services provided.

2. Any recognized **consumer association** (whether the consumer is a member or not).

3. One or more consumers, on behalf of numerous consumers having the **same interest** (representative complaint).

4. The **Central Government** or any **State Government**.

5. The **Central Authority (CCPA)**.

6. The **legal representative** of a deceased consumer.

Procedure

1. **Draft and file the complaint**: The complaint can be filed **online** through the **e-Daakhil portal** (edaakhil.nic.in) or physically before the appropriate Consumer Commission.

2. **Court fee**: A nominal court fee is payable based on the value of the claim.

3. **Documents**: Attach all relevant documents -- bills, receipts, advertisement copies, correspondence, photographs, and any other evidence of the unfair trade practice.

4. **Limitation**: The complaint must be filed within **2 years** from the date on which the cause of action arose (Section 69). The Commission may condone delay if sufficient cause is shown.

Relief Available

The Commission can order:

- Refund of price with interest.

- Compensation for loss, injury, or suffering.

- Replacement or repair of goods.

- Discontinuation of the unfair trade practice.

- Punitive damages.

- Costs of the proceedings.

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Key Cases on Unfair Trade Practices

1. **Lucknow Development Authority v. M.K. Gupta (1994) 1 SCC 243** (Supreme Court): A landmark case where the Court held that deficiency in service by a government housing authority (delay in construction, failure to provide amenities) constitutes an unfair trade practice. The Court observed that consumer protection law is a **beneficial legislation** and must be construed broadly.

2. **General Motors (India) Pvt. Ltd. v. Ashok Ramnik Lal Tolat (2015) 1 SCC 429**: The Supreme Court held that concealment of a defect or misrepresentation about the quality of a product constitutes an unfair trade practice, entitling the consumer to compensation.

3. **Amway India Enterprises Pvt. Ltd. v. 1MG Technologies Pvt. Ltd. (2020)** (Delhi HC): The court addressed issues of misleading representation in online marketplaces and the responsibility of e-commerce platforms for products sold through them.

4. **CCPA v. Ola and Uber (2023)**: The CCPA took action against ride-hailing platforms for alleged unfair trade practices, including misleading pricing and lack of transparency in fare calculation.

5. **Vodafone Idea Ltd. -- CCPA Order (2022)**: The CCPA ordered Vodafone Idea to compensate consumers for misleading advertisements regarding network coverage and data speed.

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Unfair Contract Terms: Section 2(46)

The CPA 2019 also introduced the concept of **unfair contract terms** under **Section 2(46)**. A contract term is unfair if it:

- Requires excessive **security deposits**.

- Imposes a **disproportionate penalty** for breach.

- Refuses to accept **early repayment** of debts.

- Entitles the seller to **terminate** without reasonable cause while denying the same right to the consumer.

- **Unilaterally** imposes conditions not apparent at the time of entering the contract.

- Permits the seller to **vary the terms** of the contract unilaterally.

Under **Section 49**, the State and District Commissions have jurisdiction to declare any contract term as unfair and strike it down.

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Frequently Asked Questions

What is the difference between an unfair trade practice and a deficiency in service?

An **unfair trade practice** relates to deceptive or manipulative methods used in promoting or selling goods/services (such as false advertising, bait and switch, or dark patterns). A **deficiency in service** under Section 2(11) CPA 2019 relates to a failure in quality, nature, or manner of performance of a service that the consumer is entitled to expect. Both can be grounds for a consumer complaint, and sometimes the same conduct may constitute both.

Can a consumer complaint be filed against an online seller or e-commerce platform?

Yes. The CPA 2019 and the **Consumer Protection (E-Commerce) Rules, 2020** apply to all e-commerce entities and sellers. Consumers can file complaints against online sellers, e-commerce platforms (marketplace and inventory models), and even against individual sellers operating through platforms. The complaint can be filed based on the consumer's location (place of residence or work), not just the seller's location.

Are celebrity endorsers liable for misleading advertisements?

Yes. Under **Section 21** of the CPA 2019, the CCPA can prohibit endorsers (including celebrities and influencers) from making endorsements if they endorse a misleading advertisement. For a first offence, the endorser can be prohibited from endorsing for up to **one year**, and for subsequent offences, up to **three years**. However, the endorser has a defence if they can prove that they exercised **due diligence** to verify the claims in the advertisement.

What is the time limit for filing a consumer complaint?

Under **Section 69** of the CPA 2019, a consumer complaint must be filed within **2 years** from the date on which the cause of action arose. The Consumer Commission has the power to condone the delay if the complainant shows **sufficient cause** for the delay.

Can the CCPA act on its own without a consumer complaint?

Yes. The CCPA has the power to act **suo motu** (on its own motion) against unfair trade practices and misleading advertisements. The CCPA has an Investigation Wing that can initiate inquiries based on its own monitoring, media reports, or intelligence inputs.

What penalties can be imposed for dark patterns?

Dark patterns are treated as **unfair trade practices** under the CPA 2019 and the Guidelines for Prevention and Regulation of Dark Patterns, 2023. Violations can attract the full range of penalties available under the CPA 2019, including compensation to consumers, penalties by the CCPA (up to Rs. 10 lakh for first offence, Rs. 50 lakh for subsequent offences), and even criminal prosecution under Section 89 in severe cases.

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Conclusion

The Consumer Protection Act, 2019 represents a significant evolution in India's consumer protection framework, providing robust mechanisms to address both traditional and modern forms of unfair trade practices. The establishment of the CCPA, the specific provisions on misleading advertisements, the recognition of dark patterns, and the enhanced penalties reflect a legislative commitment to keeping pace with the rapidly changing marketplace.

For consumers, understanding their rights under the CPA 2019 and the remedies available -- both through the CCPA and the Consumer Disputes Redressal Commissions -- is the first step toward protecting themselves against unfair trade practices. For businesses, compliance with fair trade practices is not merely a legal obligation but a foundation of sustainable commerce and consumer trust.

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*Disclaimer: This article is intended for educational and informational purposes only. It does not constitute legal advice. Consumer protection laws, CCPA guidelines, and judicial interpretations are subject to change. Readers are encouraged to consult a qualified legal professional for guidance specific to their circumstances.*