September 19, 2020

Unfair Trade Practices and Passing Off

By E-Justice India Legal Articles 0 Comments

Author : SHEETAL MAGGON

Introduction

Before understanding the meaning of unfair trade practices, it is important to know the meaning of the word ‘trade’. What does the word trade mean? Trade can be referred as the process of buying and selling of goods or commodities at either a wholesale or a retail market, within a country or between two or more countries. The term trade practice refers to the practices that are related to carrying out a particular trade or we can say all the activities which help in conducting trade. It includes price that is charged for selling the product, the method of trading and any isolated action made by the person who is associated with the trade. These practices should be conducted fairly so that all the consumers in the market are satisfied. Some traders uses unfair trade practices to earn more profit by misleading their consumers.

Unfair Trade Practices

Unfair Trade Practices refers to the methods in which a trader or a businessman falsely or unethically or illegally misrepresents his goods or services to the consumers in a deceptive or fraudulent way, just for the sake of promoting his goods or services.

According to section 2(1) (r) of Consumer Protection Act, 1986, “unfair trade practice means a trade which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice.” This means any unfair or illegal or deceptive practice which is adopted by the traders for sales promotion is known as unfair trade practice.

Now, according to Section 36-A of The Monopolies and Restrictive Trade Practices Act, 1969, the term Unfair Trade Practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any services, adopts one or more of the illegal practices which has been mentioned in various clauses of this section and thereby causes loss or injury to the consumers of such goods or services, whether by eliminating or restricting competition or otherwise. These unfair trade practices include:

The promotional activities where the manufacturer falsely represents that the commodity which is manufactured by him is of a particular standard, quality, quantity, grade, composition, style or model.
The activities where the trader claims that the goods or services are of high performance, have better benefits as compared to other products, have sponsorship and approval, but the goods or services rendered by him does not have any of these qualities.
The activities in which the trader misleads its consumers on the basis of needs or uses of products or services.
Falsely giving any warranty or guarantee about the performance or durability of the product given by him which is actually not based on proper test.
The activities where the manufacturer sells 2^nd hand goods as new products.
The activities where the trader falsely promises for extra warranty, repair or maintenance of the product, more than the guarantee or warrantee which is given by the company of that particular product, hence, misleading the consumers.
The activities where the businessman gives false representations about the product through advertisements.

Generally, all these practices are used by businessmen and traders just to gain an advantage in the market or to turn on their profits. Because of these practices and trading methods, consumers have been victimised for a very long time. These laws are enacted to protect all types of consumers in the market.

Case Laws

In the case of Miss Sonika Tandon & Ors. V. Rauf Muslim Jamia Bahera (1), the complainant i.e. took admission in a college to study the course of B.D.S. According to the advertisement published by the institute, the institute was recognised by the Dental Council of India, have proper infrastructure and teaching staff. But as soon as the complainant went to college, she got to know that there are no such facilities in the institute that has been mentioned in the advertisement. The court held that this particular case includes unfair trade practice as the institute misled the students through illegal and wrong information. The court directed the opposite party to refund the fees of Rs. 40,000 to the complainant along with a sum of Rs. 2 lacs for the loss and injury happened to the complainant.
In Proctor & Gamble Home Products v. Raj Dev Bhardwaj (2), the company selling detergent powder represented in the detergent packets that the amount of powder in the packet is 1 kg and it contains free Aerial Bank Cake which weighs 125grams. Instead of total weight of 1 kg and 125 grams the packet weighed 1 kg and 75 grams. Therefore, each packet is underweight by 50 grams. The court held that it is an unfair trade practice as per section (1) (s) of the consumer protection act. Further the court ordered the opposite party to compensate the complainant with an amount of Rs. 2,000.

Passing Off

No man can have any right to present his goods as the goods of someone else. Based on this philosophy, passing off can be explained as, when the defendant sell goods by making a false representation of the good, in order to deceive the consumer and the consumer believes that the goods being sold by the defendant actually belongs to him only. The tort of passing of generally deals with the protection of the goodwill of traders and businessmen. It protects the traders from being exploited and ensures business generosity. Basically, the tort of passing off deals with the companies which are not having a registered trademark so that one do not get the benefit of labour of another person. The Trade Marks Act, 1999 deals with the laws related to passing off. Section 27 (2) of the act states that “Nothing in this Act shall be deemed to affect rights of action against any person for passing off goods or services as the goods of another person or as services provided by another person, or the remedies in respect thereof.” Section 134 (1) (c) states that No Suit “for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff’s trade mark, whether registered or unregistered, shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.” Section 135 of the act describes the relief in suits for passing off.

For any infringement to come under passing off action, it must fulfil three conditions which are:

The trademark must have a reputation in the market.
There should be some misrepresentation on the part of defendant
It should cause some injury or loss to the plaintiff/ complainant.

The complainant needs to prove the following to make the trader liable for tort of passing off:

The goods sold by the complainant must be known to the public by any mark or appearance.
The defendant who is liable for passing off must made a copied representation either spoken or written.
The goods sold by the defendants must have misled the people and made them believe that they are his goods and not plaintiff’s.

Remedies to passing off include injunction, damages or compensation and account of profits.

Conclusion

The article is based on unfair trade practices and passing off in law of torts. It can be concluded that passing of is one type of unfair trade practice only, remedies of which has been mentioned above. We can say that trademarks gives protection to the goods and services which are registered under the trademarks act. On the other hand, goods which are not registered are being protected under the tort of passing off. The remedy under both the cases is almost same. The rivalries between the traders based on unfair trade practices and passing off of the goods and services of each other should be stopped as it creates a negative environment in the market.

Endnotes

III (1997) C.P.J. (J&K S.C.D.R.C.).
III (1997) C.P.J. 251 (H.P. S.C.D.R.C., Shimla)