Why protect the consumers? Reason for Enacting the Act

• Doctrine of Caveat Emptor

This implies that the responsibility of identifying goods and finding defects with them lies with buyer.

Why protect the consumers?

Reasons for Enacting the Act

• Collective Bargaining

Sellers Lobby; Forming cartels; Artificially keeping prices high!!!!

• Multiple Laws

India Contract Act; Sale of Goods Act; Essential Commodities Act

• Hurdles in the Litigation

Going to regular court; Expensive & Time Consuming

• Remedy

Punishment in the form of Punitive & Deterrent measure

An Act to provide for the better protection of the interests of consumers and for that purpose to make provisions for the establishment of consumer councils and other authorities for the settlement of consumers' disputes and for matters connected therewith.

Short title, extent and application:

(1). This Act may be called the Consumer Protection Act, 1986.

(2). It extends to the whole of India except the State of Jammu and Kashmir.

(3). Save as otherwise expressly provided by the Central Government by notification, this Act shall apply to all goods and services.

Hence… There was

‘Consumer is the king of the market’

“Sellers market” is now “Buyers market”

&

• With industrial development leading to the influx of various goods and services in the market; Consumers have to be protected!

The act was passed in:

Lok Sabha on 9th December,1986 and

Rajya Sabha on 10th December, 1986 and

Assented by the President of India on 24th December, 1986 and was

Published in the Gazette of India on 26th December, 1986.

This act was enacted in the 37th year of the Republic of India and was amended from time to time in the following years i.e. 1991, 1993 and 2002.

Choose Information

Safety Consumer Rights Redressal

Education Heard

Objectives of CPA, 1986

Scope of the Act

• Applies to whole of the state Exept the state of Jammu and Kashmir

• Applies to all type of goods and services, public utilities & public sector undertakings

• All types of complains relating to goods ,unfair trade practice

• Remedies under this act is same as those in other laws.

• A suit pending in civil court cannot be heard in consumer court

• Consumer forums have the power to adjudicate disputes, but they do nat have trappings of a court

• The consumer court powers are limited

Definitions

ti f s r r t ti t, 1 , fi s rt i r s

i r s i ri s s ti s.

SSeecctioonn 22 oof TThhee CCoonnsuummeer PProoteecctioonn AAcct, 1998866, ddeefinnees cceertaainn wwoordds wwhhicchh aaree uuseedd inn vvaarioouus seecctioonns.

r ri t r t r : . (1)( ) : AApppprooppriaatee LLaabbooraatooryy : SS. 22(1)(aa) :

“ r ri t l r t r ” s l r t r r r is ti : “AApppprooppriaatee laabbooraatooryy” mmeeaanns aa laabbooraatooryy oor oorggaannisaatioonn :

I. is t tr l r t I. RReeccooggnniseedd bbyy thhee CCeenntraal GGoovveernnmmeennt

II. is st t r t, s j t t s i li s s

r s ri t tr l r t i t is lf; r

II. RReeccooggnniseedd bbyy aa staatee ggoovveernnmmeennt, suubbjeecct too suucchh gguuiddeelinnees aas mmaayy bbee ppreesccribbeedd bbyy thhee CCeenntraal GGoovveernnmmeennt inn thhis bbeehhaalf; oor

III. s l r t r r r is ti st lis r r l

f r t ti i i f r , i is i t i , fi r i

t tr l r t r t t r t f r rr i t

l sis r t st f s it i t t r i i t r

s s s ff r f r f t.

III. AAnnyy suucchh laabbooraatooryy oor oorggaannisaatioonn eestaabblishheedd bbyy oor uunnddeer aannyy laaww foor thhee timmee bbeeinngg inn foorccee, wwhhicchh is mmaainntaainneedd, finnaanncceedd oor aaiddeedd bbyy thhee CCeenntraal GGoovveernnmmeennt oor aa SStaatee GGoovveernnmmeennt foor ccaarryyinngg oouut aannaalyysis oor teest oof aannyy ggoooodds wwithh aa vvieeww too ddeeteermminninngg wwhheethheer suucchh ggoooodds suuffeer foormm aannyy ddeefeecct.

l i t . (1)( ) : CCoommpplaainnaannt SS.22(1)(bb) :

i. s r, r i. AA ccoonnsuummeer, oor

ii. l t r s r ss i ti r ist r r t

i s t, 1 , r r t r l f r t ti i i

f r ; r

ii. AAnnyy vvooluunntaaryy ccoonnsuummeer aassoocciaatioonn reeggisteereedd uunnddeer thhee CCoommppaanniees AAcct, 1995566, oor uunnddeer aannyy oothheer laaww foor thhee timmee bbeeinngg inn foorccee; oor

iii. tr l r t r t t r t, r i

s l i t;

iii. TThhee CCeenntraal GGoovveernnmmeennt oor aannyy SStaatee GGoovveernnmmeennt, wwhhoo oor wwhhicchh mmaakkees aa ccoommpplaainnt;

i . r r s rs, r t r r r s s rs

i t s i t r st,

ivv. OOnnee oor mmooree ccoonnsuummeers, wwhheeree thheeree aaree nnuummeeroouus ccoonnsuummeers hhaavvinngg thhee saammee innteereest,

. I s f t f s r, is l l ir r r r s t ti

r i l i t.

vv. Inn ccaasee oof ddeeaathh oof aa ccoonnsuummeer, hhis leeggaal hheeir oor reeppreeseenntaativvee wwhhoo oor wwhhicchh mmaakkee aa ccoommpplaainnt.

f i t ti UUnnfaairr trraaddee pprraaccticceess

Unfair trade practices [sec. 2(1) (r)]

It means trade practices which a trader, 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.

The practices included are:

(1)The practice of making any statement, whether orally or in writing or by visible representation which-

Falsely represents that the goods are of particular standard, quality, quantity, grade, composition, style or model;

Falsely represents that the services are of particular standard, quality or grade;

Falsely represents any rebuilt, second hand, renovated, or old goods as new goods;

Represents that the goods or services have sponsorship, approval, performance, characteristic, accessories, uses or benefits which such goods or services do not have;

Represents that the seller or the supplier has sponsorship or approval or affiliation which such seller or supplier does not have;

Make a false or misleading representation concerning the needs for , or the usefulness of, any goods or services;

Gives to the public any warranty or guarantee of the performance or length of life of a product or of any goods that is not based on an adequate or proper test thereof.

Materially misleading the public concerning the price at which a product or like products or goods or services, have been or are ordinarily sold or provided.

Unfair trade practices - contd…

2. False offer of bargain price [section 2(1)(r)(2): A price that is stated in any advertisement to be a

bargain price by reference to ordinary price or otherwise

A price that a person who reads, hears or sees the advertisement would reasonably understand to be a bargain price having regard to the prices at which like products are sold.

Contd…

3. Schemes offering gifts or prizes [section 2(1)(r)(3)] Offering gifts or prizes or other items with the

intention of not providing them and conducting promotional contests.

Creating an impression that something is being given free of charge when it is fully or partly covered by the amount charged in the transaction.

Conducting of any contest, lottery or game of chances etc for the purpose of promoting-directly or indirectly-the sale, use or supply of any product or any business interest.

Contd…

Society for Civil Rights vs Colgate Palmolive Eg: A scheme sponsored by Colgate Palmolive

(India) Ltd induced the contestants to buy a minimum of 2 Trigard toothbrushes to be able to participate in the contest. The early bird prizes to be awarded for entries received early had nothing to do with any skill. It was held not to be in public interest.

Contd…

4. Withholding any schemes [sec 2(1)(r)(3A)] Withholding from the participants of any

scheme offering gifts, prizes or other items free of charge, on its closure the information about final result of scheme. The participants of a scheme shall be deemed to have been informed of the final results of the scheme where such results are within a reasonable time published prominently in the same newspapers in which the scheme was originally published.

Contd…

5. Non compliance of prescribed standards [sec 2(1)(r)(4):

The prescribed standard may relate to performance, composition, contents, design, packaging etc as are necessary to prevent or reduce the risk of injury to the person using the goods.

CONTD…

6. Hoarding, destruction or refusal [sec 2(1)(r)(5): Hoarding, destruction or refusal to sell the goods

which raises or tends to raise the cost of those or other similar goods or services shall amount to an unfair trade practice.

Contd…

7. Manufacturing or sale of spurious goods [section 2(1)(r)(6):

Spurious goods and services means such goods and services which are claimed to be genuine but are not so.

DEFECT Sec 2 (1) (f)

“Any fault, imperfection or shortcoming in the quality, quantity, potency, or standard which is required to be maintained by or under any law for the time being in force, or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods”

I IL CCOONNSSUUMMEERR PPRROOTTEECCTTIOONN CCOOUUNNCCILSS

Central Level

State Level

Central Consumer Protection Council

The Central Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Central Consumer Protection Council

Consists of…..

the Minister in charge of consumer affairs in the Central Government, who shall be its Chairman

such number of other official or non-official members representing such interests as may be prescribed

Procedure for meetings of the Central Council

The Central Council shall meet as and when necessary, but at least one meeting of the council shall be held every year

The Central Council shall meet at such time and place as the Chairman may think fit and shall observe such procedure in regard to the transaction of its business as may be prescribed

State and district onsu er Protection

ouncils

State and district CConsummer Protection CCouncils

The state consumer protection councils(Sec.7and 8)

Members :-

Chairman:-The minister in charge of consumer affairs of the state government.

Such number of other official or non-official members representing such interests as may be prescribed by the state government.

Meetings:-

Number of meetings:-Not less then 2 meetings every year

Time and place:- Depends on the chairman

Objective:-

To promote and protect within the states

The rights of the consumer as laid down in

Sec(6)

The district consumer protection council

Members:-

District collector is the Chairman

Other official and non-official members are appointed by the state government

Meetings:-

Number of meetings:- not less then 2 meetings

Time and place:- as decided by the chairman

Objective:-

To protect and preserve the right of the

consumer within the district laid down under the Sec(6).

L I

IL L I

CCOOMMPPLAAINNTTSS && WWHHOO CCAANN FFILEE AA CCOOMMPPLAAINNTT??

Complaint

A complaint is any allegation in writing made by a complainant that, an “unfair trade practice” or a “restrictive trade practice” has been adopted by any trader.

Under sec2(1)c of consumer protection act, A complaint must be made with a view to obtaining any relief provided.

WHO CAN FILE A COMPLAINT?

A consumer can file a complaint under the Act ,

Who is a Consumer?

A Consumer under the Act is:" One who buys any goods, hires and service/services for a consideration which has been paid or promised or partly paid and partly paid and partly promised under any system of deferred payment."

A consumer means a person belonging to the following categories:

i) one who hires or avails of any service or services for a consideration, which has been paid or promised or partly paid and partly promised, or under any system of deferred payment.

ii) Any voluntary consumer association registered under the Companies Act or any other law for the time being in force.

Cont…

iii) Class action complaints - one or more consumers, where there are numerous consumers having the same interest.

iv) The Central Government

v) The State Government or Union Territory Administrations.

I I I I

L I IL

TTIMMEE FFRRAAMMEE WWITTHHINN WWHHICCHH AA CCOOMMPPLAAINNTT CCAANN BBEE FFILEEDD

Time frame within which a complaint can be filed

Section 24A of the Act provides that a consumer dispute can be filed within two years from the date on which the cause of action arises.

The point of time when cause of action arises is an important factor in determining the time period available to file a complaint. There are no set rules to decide such time. It depends on the facts and circumstances of each case.

The complaint should be filed within 2 years from the date of cause of action.

Appeals are require to date of receipt of the

be filed within 30 days from the court's order.

It may be noted that these time frames are not absolute limitations. If the Consumer Forum is satisfied that there was sufficient cause for not filing the complaint within the prescribed period, it can entertain a complaint beyond limitation time. However the Forum must record the reasons for condensation of delay.

titi ct, CCoommppeetitioonn AAct, 22000022

Competition

Is “a situation in a market in which firms or sellers

independently strive for the buyers’ patronage in order to

achieve a particular business objective for example, profits,

sales or market share” (World Bank, 1999)

“Competition” is an age-old phenomenon

Benefits of Competition:

Companies : Efficiency, cost-saving operations, better utilization of resources, etc.

The Consumer : Wider choice of goods at competitive prices

The Government : Generates revenue

BUT…………………………

….Benefits of Competition ………all these benefits are lost if Competition is

UNFAIR or NON-EXISTANT

• Choice of CARS in the olden days

• MTNL Monopoly : The position today

• Airlines : INDIAN AIRLINES : JET : SAHARA

• Indian Railways : The monopoly continues….

It is not necessary that there are a

producers/suppliers to have competition

large number of conditions.

A single producer can exist and provide a competitive atmosphere provided entry of new firms is easy and not

costly.

Entry barriers can be due to

incumbent firms, legal barriers or

the market position of

strategic barriers

Incumbent firms may use their power as “first Movers” to block entry.

Legal barriers include licensing and other Government regulations

Contd…

by incumbent price reduction

Strategic barriers are generally erected firms in the form of artificial and sudden

with a view to thwarting new entry.

Contestability of markets ensure competitive conditions in the market.

Competition is expected to enhance allocated and productive efficiency so as to maximize economic welfare.

Monopoly (market) power tends to lead to inefficient allocation of sources and discourages innovation or introduction of better technology.

OBJECTIVES OF COMPETITION LAW &

POLICY

Promoting economic efficiency in both static and

dynamic sense protecting consumers from the undue

exercise of market power facilitating economic

liberalization, including privatization. Deregulation

and reduction of external trade barriers

Preserving and promoting the sound development of a

market economy

OBJECTIVES OF COMPETITION LAW &

POLICY

ensuring fairness and equity in market place

transactions

Protecting the ‘public interest’ including in some cases

considerations relating to industrial competitiveness

and employment

Protecting opportunities for small and medium

business

Competition Law

and to prevent and punish anti-competitive bu iness

prac ices by firms and unnecessary Government

It

t

is

t

a

r

tool to implement

t

and enforce competition spolicy

in erfe ence in the marke .

Competition Law generally covers 3 areas:

– Anti - Competitive Agreements, e.g., cartels,

buse of Dominant Position – A predatory pricing, barriers to

by renterprises, e.g.,

ent y and

– Regulation of Mergers and Acquisitions (M&As).

Contd…

The need for Competition Law arises because market can suffer from failures and distortions, and various players can resort to anti-competitive activities such as cartels, abuse of dominance etc. which adversely impact economic efficiency and consumer welfare.

Thus there Competition Competition

is need for Competition Law, and a Watchdog with the authority for enforcing

Law.

Elements of Competition Policy

• Putting in place a set of Policies that enhance competition

in local and national markets.

• A Law designed to prevent anti competitive business

practices and unnecessary government intervention.

Competition Policy

It includes Reforms in certain Policy areas to make these more pro-competition:-

• Industrial policy

• Trade policy

• Privatization/disinvestment

• Economic Regulation

• State aids

• Labour policy

• Other such policies

Industrial Policy

Industrial Policy has to address and reform licensing

requirements, restrictions on capacities, or on foreign

technology tie ups, guidelines on location of

industries, reservations for small scale industry, etc.

These adversely affect free competition in the market.

Trade Policy

Trade policy has important implications for

development of competition in the markets. Measures

for liberalisation of trade promote greater competition

e.g. reducing tariffs, removal of quotas/physical

controls, investment controls, conditions relating to

local content etc.

Privatization/Disinvestment

Thus privatization of state owned enterprises is

important element of competition policy.

However, in privatization/ disinvestment process, care

is to be taken that state monopoly is not replaced by

private monopoly.

Privatization/Disinvestment

Empirical research has found that state- owned

enterprises generally tend to be less efficient than

private owned firms, for reasons such as manager

compensation, low incentives, lack of direct

accountability, hard budget constraints for managers,

etc.

State owned enterprises are generally insulated from

market forces and receive protection/benefits such as

government imposed barriers to entry, price regulation

and subsidies.

Economic Regulations

New legislation and regulations to promote competition and to bring about restructuring of major industrial sectors is essential. Legislation to aim at separating natural monopoly elements from potentially competitive activities, and the regulatory functions from commercial functions, and also create several competing entities through restructuring of essential competition activities and to create a competitive environment .

Examples:

– Electricity sector

– Telecommunications sector

– Ports

State Aids

Several state aids create unequal operating conditions for

businesses. Examples:

– Subsidies

– Tax rebates

– Preferential loans – Capital injection

Expe ience suggests that such policy measures rarely

have rsuccessful

tresults and destroy incentives for firms to

become efficien .

Temporary n

specificifi

state- aid for well stated

public

purpose ca be just ed.

Evolution of Competition Law

Before MRTP Act came into force (1970), limited provisions existed under :

The Indian Contract Act

Directive Principles of State Policy (Non-enforceable)

The MRTP Act brought in a four-pronged thrust :

Concentration of economic power

Restrictive Trade Practices

Monopolistic Trade Practices

Unfair Trade Practices

MRTPs vis-à-vis Competition Act

Under the Competition Act :

Provision for Unfair Trade Practices

Only Consumer Courts will have jurisdiction

Pending cases will be continued by MRTPC for 2 years

After 2 years :

All cases (except Disparagement Cases) will be

transferred to National Commission under CPA

All Disparagement Cases will be transferred to

Competition Commission

Status of the Competition Commission

• It is a body corporate

• It has Regulatory and judicial powers; functions through

Benches

• Each Bench shall consist of at least two Members and one

of such Members must be a judicial Member

Suo Moto Inquiry

• Commission has suo moto power to enquire whether an

Anti-Competitive Agreement or Abuse of Dominant

Position causes or is likely to cause an appreciable adverse

effect on competition

This power must be exercised within one year from the

date combination has taken effect

Anti-competitive Agreements

These are agreements which cause or are likely

to cause an appreciable adverse effect on

competition within India:

Horizontal Agreements:

These are between and among competitors who are at the same stage of production, supply, distribution, etc.

These are presumed to be illegal

Examples: cartels, bid rigging, collusive bidding, sharing of

markets, etc.

Anti-Competitive Agreements

Vertical Agreements:

• Vertical Agreements are between parties at different stages of production, supply, distribution, etc.

• These are not presumed illegal; are subject to rule of reason.

Examples: tie-in arrangements, exclusive supply/distribution agreements, refusal to deal.

Agreement

Any arrangement or understanding or action in concert –

Whether or not such arrangement or understanding is formal

or in writing

Or whether or not such understanding or arrangement is

intended to be enforceable by legal proceedings

Adverse effect on competition Creation of barriers to entry

Driving existing competitors out of market

Benefits to consumers

Benefit to Scientific and technical knowhow

Agreements presumed to have adverse effect

Directly or indirectly determines purchase or sales price

Limits or controls production, supply, technical know how

Shares the market or sources of production

Results in bid rigging or collusive bidding

CCI orders against Anti-competitive agreements

Penalty equal to three times the amount of profit made out

of such agreement or 10% of average turnover of the

cartel for preceding three years whichever is higher

Powers of Competition Commission as Regards

Agreements

After the inquiry into the Agreement, Competition

Commission can:

direct parties to discontinue the agreement

prohibit parties from re-entering such agreement

direct modification of the agreement

impose penalty upto 10% of average turnover of the

enterprise

PROTECTION OF INTELLECTUAL PROPERTY

RIGHTS

Competition Act

The prohibition on horizontal and vertical

agreements do not restrict the right of any

person to impose reasonable restrictions to

protect any of his rights under the Copyright

Act, the Patents Act, the Trade and

Merchandise Marks Act, Designs Act

Abuse of Dominance

“Dominant position” is defined as a position of strength

which enables the enterprise

to operate independently of competitive

forces in the market, or

to affect its competitors or consumers in its

favor.

No mathematical or statistical formula is adopted to

“measure” dominance –

Abuse of Dominant Position Includes practices like:

• Unfair or discriminatory conditions or prices,

• Limiting or restricting production or technical/scientific development,

• Denial of market access, and

• Predatory pricing.

Power of the Competition Commission

After inquiry into abuse of dominant position, the

Competition Commission can order:

discontinuance of abuse of dominant position

impose a penalty upto 10% of the average

turnover of the enterprise

Combinations Regulation

Combinations, in terms of the meaning given to them in the

Act, include mergers, amalgamations, acquisitions.

in order to establish whether the higher concentration in the

market resulting from the merger will increase the possibility

of collusive or unilaterally harmful behavior, it must first be

established as to what the relevant market is

Contd…

Horizontal Mergers

Vertical Mergers

Conglomerate Mergers

Pre-Notification

The requirements for prior notification

Relevant Product Market

Physical characteristics or end-use of goods

Price of goods or service

Consumer preferences

Exclusion of in-house production

Existence of specialized producers

Classification of industrial products

Factors to be considered while determining Dominance

Dominant position linked to a host of factors

Market share of enterprise

Size and resources of enterprise

Size and importance of competitors

Commercial advantage of enterprise over competitors

Relevant Geographic market

Relevant geographic market can be

defined as the area in which products are

available at approximately the same price

given transport costs and any increase in

demand can be met from neighboring

areas profitably

Mergers and Acquisitions

Commission is expected to regulate “Combinations”, i.e.,

large mergers, acquisitions, etc. likely to have appreciable

adverse effect on competition.

• Threshold:

For single enterprise

– Assets > Rs.1000 crores

– Turnover > Rs.3000 crores

Mergers and Acquisitions

Threshold:

For group of enterprises

– Assets > Rs.4000 crores

– Turnover > Rs.12000 crores

Similarly, threshold is provided for overseas groups.

Mergers & Acquisitions

• Notification of Combination to Commission is voluntary

• If notified, Commission to take a decision within 90 days on

the combination. Decision may allow, disallow, modify, etc. the

combination.

Powers of Commission

• Cease and desist order

• Impose penalty up to 10% of turnover.

• In case of cartel, penalty can be 10% of turnover or 3 times

of profit illegally gained from cartel activity, whichever is

higher.

Powers of Commission

• Recommend to Government the division of dominant

Enterprise

• Various penalties ranging from Rs.1 lac upto Rs.1 crore are

also provided for failure to comply with direction/order of

Commission.

Competition Advocacy

The Competition Commission of India, in terms of

advocacy provisions in the Act, is enabled to participate

in the formulation of the country’s economic policies and

to participate in the reviewing of laws related to

competition at the instance of the Central Government.

Commission is required to take measures for promotion

of Competition Advocacy, creating Awareness and

imparting Training about competition issues [Section

49(3)]

Contd…

Advocacy means competition promotion through non-enforcement measures

competition competition

advocacy and creation of issues, the Commission

For promotion of awareness about may:-

i) Undertake appropriate programmes / activities etc.;

ii) Encourage and interact with the organizations of stakeholders, academic community etc. to undertake activities, programmes, studies, research work, etc. on competition issues;

Thank You …..