1. Definition of the Topic & Key Legal Terms
Fraudulent Trade Practice refers to deceitful conduct by a business to mislead or cheat consumers or stakeholders for unlawful gain.
Unfair Trade Practice (UTP) is any trade or business conduct that causes loss or injury to a consumer by misleading representation, false advertisement, or deceptive pricing.
Key Legal Terms:
- Misrepresentation: False statement of fact inducing a party into a contract.
- Deceptive Advertisement: Ad that misleads consumers about product quality or pricing.
- Bait Advertising: Advertising a product at a low price to attract customers without intent to supply reasonable quantities.
2. Historical Background and Evolution
The regulation of unfair trade practices in India originated with the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act). However, the provisions were inadequate and were later subsumed under the Consumer Protection Act, 1986.
In 2019, the Consumer Protection Act, 1986 was replaced by the Consumer Protection Act, 2019, introducing a more robust mechanism to tackle unfair trade and marketing practices, including e-commerce and celebrity endorsements.
3. Statutory Framework
Consumer Protection Act, 2019
- Section 2(47): Defines “Unfair Trade Practice”
- Section 21: Power of Central Authority to issue directions against false or misleading advertisements
- Section 17: Jurisdiction of State Commissions to hear such complaints
Other Relevant Statutes:
- Indian Penal Code, 1860: Sections 415–420 (Cheating and dishonestly inducing delivery of property)
- Competition Act, 2002: Prevents anti-competitive and deceptive practices
- Food Safety and Standards Act, 2006: For adulterated/misbranded food products
- Drugs and Cosmetics Act, 1940: For misleading claims in healthcare and pharmaceuticals
4. Doctrinal Analysis & Academic Commentary
The principle underlying unfair trade practices is the doctrine of caveat venditor (let the seller beware), shifting the burden on businesses to ensure fairness and accuracy in their trade conduct.
Academic scholars emphasize the role of law in ensuring transparency, consumer choice, and information symmetry in markets. Prof. Avtar Singh noted that consumer trust is foundational to economic growth, and the law must actively restrain manipulative commercial behavior.
5. Landmark Case Laws
- Lakhanpal National Ltd. v. MRTP Commission, AIR 1989 SC 1693
Facts: Company used “100% pure” in advertisements despite using synthetic components.
Held: Misleading advertisements are unfair trade practices under MRTP Act. - Horlicks Ltd. v. Zydus Wellness Products Ltd., 2019 SCC OnLine Del 8854
Facts: Horlicks objected to a comparative ad by Complan (Zydus).
Held: Comparative advertising is permissible unless it denigrates or misleads. - Amazon Seller Services v. Amway India, 2020 SCC OnLine Del 454
Ratio: Unauthorized listing and misleading sales on e-commerce platforms can be restrained under unfair trade practice norms. - Cadbury India Ltd. v. Union of India, 2005 (3) CPJ 29
Held: Food items containing undeclared sugar substitutes amounted to unfair practice.
6. Contemporary Relevance & Real-Life Examples
- E-commerce: Misleading discounts on online platforms during festive sales have drawn government scrutiny.
- Influencer marketing: Social media influencers are now required to disclose paid promotions under the Guidelines for Prevention of Misleading Advertisements and Endorsements (2022).
- Health Claims: Misleading claims about immunity-boosting during COVID-19 (e.g., Coronil by Patanjali) raised legal and ethical debates.
📘 Also refer to: Consumer Affairs Guidelines on Endorsements
7. Comparative Analysis
| Aspect | India | USA | UK |
|---|---|---|---|
| Governing Law | Consumer Protection Act, 2019 | Federal Trade Commission Act, 1914 | Consumer Protection from Unfair Trading Regulations, 2008 |
| Regulating Authority | CCPA, NCDRC | Federal Trade Commission (FTC) | Trading Standards Authority |
| Scope | Includes e-commerce, advertising | Focus on competition & consumer harm | Focus on misleading actions |
| Penalties | Fine + imprisonment | Injunctions, civil penalties | Cease orders + penalties |
India has expanded its scope recently to include digital markets, in line with global practices.
8. Critical Perspectives & Scholarly Views
Critiques of India’s framework highlight:
- Enforcement bottlenecks: Delay in disposal by consumer forums
- Need for real-time intervention in online advertisements
- Weak compliance monitoring of celebrity and influencer endorsements
Scholars suggest proactive consumer education and technology-driven grievance redressal.
Dr. R.B. Singh notes the importance of embedding consumer literacy in economic policy and empowering citizens to detect deceptive practices.
9. Conclusion
The regulation of fraudulent and unfair trade practices plays a crucial role in upholding consumer rights, ensuring business integrity, and fostering trust in the market. While India’s legal framework has become more robust with the 2019 Act, constant evolution, effective enforcement, and awareness remain essential to deal with emerging challenges in digital and cross-border commerce.
10. Illustrative Hypothetical
Example:
A skincare brand claims in its advertisement that its cream removes “100% wrinkles in 3 days.” A consumer finds no such result and files a complaint. The Central Consumer Protection Authority (CCPA) investigates and finds false representation, penalizing the company under Section 21 of the CPA, 2019.