Unit 4
CONSUMER PROTECTION ACT, 1986 AND COMPETITION ACT, 2002
Introduction to Consumer Protection
A consumer is the one who assumes to be treated like a King as they bring business to the seller. Previously “consumer was requested to beware” but these days fingers have been pointed to seller “let seller be beware” as due to policies introduced, authorities’ laws, consumer protection, NGO and the increased competition in the market.
Consumer Protection is a term given to a exercise wherein we need to protect the consumer from the unfair practice, teaching them about their rights and responsibilities and also redressing their grievances.
In today’s world, the protection of the consumer is regarded to be of utmost importance. All around the world, mechanisms have been pondered upon in order to uphold the satisfaction of the consumer.
The main objectives of the Consumer Protection Act are:
(a) Providing better and all-round protection to consumer.
(b) Providing machinery for the speedy redressal of the grievances.
(c) Creating framework for customers to seek redressal.
(d) Providing rights to consumers.
(e) Safeguarding rights of Consumers.
(f) To ensure fair, competitive and responsible markets that work well for consumers and promote ethical business practices.
(g) To promote and protect economic interest of consumers.
(h)To improve access to information that consumers require, to make knowledgeable choices according to their individual needs.
(h) To protect buyer from hazards.
The enactment of Consumer Protection Act succeeded in bringing pressure on business firms as well as government to correct business conduct which may additionally be unfair and against the interests of consumers at large. The enactment of COPRA has led to the setting up of separate departments of Consumer Affairs in central and state governments to spread information about legal process which people can use. This information is spread through posters and advertisements on tv channels.
The Consumers were the worst affected out of a trade cycle procedure as they could be effortlessly duped by the sellers or producers of products. Before the enactment of this act the consumers were easy targets as victims of the producers in the following ways-
1. Non-awareness regarding the market price of a particular product: A consumer who's no longer used to the duping techniques of sellers could be easily fooled by means of some clever sellers making easy money through demanding higher price for the same exact being sold at a much cheaper rate somewhere else. The price of a commodity in a perfectly competitive market is bound to be the same everywhere, sellers demanding higher fees will lose customers. But people who are not aware of the prevailing market price of the commodity they want to buy might be fooled.
2. Quality of the product- The quality of the good is a very important fact affecting the price of the commodity. If the quality is not equivalent to the price asked for the good, then the buyer's interests will be toyed with towards which the government should be considerate towards.
3. Adulteration of goods: To protect the consumer's rights from being hampered severely stringent steps must be taken in order to protect the goods from being tampered with through adulteration. Adulteration might have an effect on health due to the harmful substances mixed to get the desired apparent appearance.
4. Forum for the redressal of the grievances of the consumers: The act also helped in establishing a permanent forum where the aggrieved consumers could lodge cases against sellers and goods sold.
Who is a Consumer? [Sec 2(1)(d)]
A "consumer" means any person who
1. Buys any goods for a consideration. Any user of such goods when 1 such use is made with the approval of a person who buys goods for consideration.
2. Hires or avails of any services for a consideration. Any beneficiary of such services when such services are availed of with the approval of the person who hires or avails of any services for a consideration.
3. But does not include a person who avails of such services for any commercial purpose. (Commercial purpose does not include purchase of goods or hiring of services for earning livelihood by means of self. employment.)
Consideration has been paid or promised or partly paid and partly promised, or under any system of deferred payment. There has to be a sale transaction for consideration.
Who is not a Consumer?
A person is not a consumer if he -
1. Buys any goods without a consideration. Any user of such goods when such use is made without the approval of person who buys goods for consideration.
2. Hires or avails of any services without a consideration. Any beneficiary of such services for consideration when such services are availed of, without the approval of the person who hires such services for consideration.
3. Obtains the goods for resale or commercial purpose.
4. Obtains the service under a contract of personal service.
Who is a Person? [Sec. 2(1)(m)]
Every other association of persons whether registered under the Societies Registration Act, 1860 or not,
The definition of a "person" is inclusive. It includes both individual and legal person. Any company or association or body of individuals whether registered or not, means a "person".
What are Goods? [Sec. 2(1)(i)]
"Goods" means goods as defined in the Sale of Goods Act, 1930. The meaning of the word "goods" under the Consumer Protection Act is the same as defined under the Sale of Goods Act, 1930. Goods mean every kind of movable property other than actionable claims and money. It includes stock and shares, growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale.
What is Service? [Sec. 2(1)(o)]
"Service" means service of any description which is made available to potential users and includes, but not limited to, the provisions of facilities In connection with banking, financing insurance, transport, processing supply of electricity or other energy, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.
"Consumer dispute" means a dispute with the person against whom a complaint has been made, denies or disputes the allegation contained in the complaint.
In order to get a remedy on the Consumer Protection Act a person by himself has no locus standi under the Consumer Protection Act. A person has to be a consumer as per the definition of consumer given under the Act. There has to be a dispute between the consumer and the trader, many tax or service provider against whom he has a complaint and he seeks his relief provided under the Consumer Protection Act.
According to Section
2 (1) (b) complainant means-
Section 2(1)(r) "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 service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely, -
(1) The practice of making any statement, whether orally or in writing or by visible representation which, -
(i) Falsely represents that the goods are of a particular standard, quality, quantity, grade, composition, style or model;
(ii) Falsely represents that the services are of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new goods;
(iv) Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which such goods or services do not have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation which such seller or supplier does not have;
(vi) Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
(vii) Gives to the public any warranty or guarantee of the performance, efficacy or length of life of a product or of any goods that is not based on an adequate or proper test thereof: PROVIDED that where a defence is raised to the effect that such warranty or guarantee is based on adequate or proper test, the burden of proof of such defence shall lie on the person raising such defence;
(viii) Makes to the public a representation in a form that purports to be-
(i) a warranty or guarantee of a product or of any goods or services; or
(ii) a promise to replace, maintain or repair an article or any part thereof or to repeat or continue a service until it has achieved a specified result, if such purported warranty or guarantee or promise is materially misleading or if there is no reasonable prospect that such warranty, guarantee or promise will be carried out;
(ix) Materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market unless it is clearly the price at which the product has been sold or services have been provided by the person by whom or on whose behalf the representation is made;
(x) Gives false or misleading facts disparaging the goods, services or trade of another person.
The Central Consumer Protection Council
(1) 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 (hereinafter referred to as the Central Council). (2) The Central Council shall consist of the following members, namely, -
(a) the Minister in charge of 1[consumer affairs] in the Central Government, who shall be its Chairman, and
(b) such number of other official or non-official members representing such interests as may be prescribed.
1) Procedure for meetings of the Central Council
(1) The Central Council shall meet as and when necessary, but 1[at least one meeting] of the council shall be held every year.
(2) 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.
2) Objects of the Central Council The objects of the Central Council shall be to promote and protect the rights of the consumers such as-
(a) The right to be protected against the marketing of goods 2[and services] which are hazardous to life and property;
(b) The right to be informed about the quality, quantity, potency, purity, standard and price of goods 1[or services, as the case may be], so as to protect the consumer against unfair trade practices;
(c) The right to be assured, wherever possible, access to a variety of goods and services at competitive prices;
(d) The right to be heard and to be assured that consumers' interests will receive due consideration at appropriate forums;
(e) The right to seek redressal against unfair trade practices 1[or restrictive trade practices] or unscrupulous exploitation of consumers; and
(f) The right to consumer education.
The State Consumer Protection Councils
(1) The State Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Consumer Protection Council (hereinafter referred to as the State Council).
(2) The State Council shall consist of the following members, namely, -
(a) the Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
(b) such number of other official or non-official members representing such interests as may be prescribed by the State Government.
(3) The State Council shall meet as and when necessary but not less than two meetings shall be held every year.
(4) The State 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 by the State Government.
The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6.
The District Protection Council (Sec. 8A)
the State Government shall establish for every district a district consumer protection council. It shall consist of the following members namely:
(a) The collector of the district, who shall be its chairman, and
(b) Search number of other official and non-official members representing such interest as may be prescribed by the State Government.
The District Council shall meet as and when necessary but not less than two meetings shall be held every year. the District Council shall meet at such time and place within the district as the chairman may think fit and shall observe search procedure in regard to the transaction of its business as may be prescribed by the State Government.
Three Tier Consumer Grievances Machinery under the Consumer Protection Act!
1. District Forum:
District forum consists of a president and two other members. The president can be a retired or working judge of District Court. They are appointed by using state government. The complaints for goods or services worth Rs 20 lakhs or less can be filed in this agency. The agency sends the goods for testing in laboratory if required and gives decisions on the basis of facts and laboratory report. If the aggrieved party is not cosy by the jurisdiction of the district forum then they can file an appeal against the judgment in State Commission inside 30 days by depositing Rs 25000 or 50% of the penalty amount whichever is less.
2. State Commission:
It consists of a president and two other members. The president must be a retired or working decide of high court. They all are appointed by state government. The complaints for the goods really worth more than Rs 20 lakhs and less than Rs 1 crore can be filed in State Commission on receiving complaint the State commission contacts the party against whom the complaint is filed and sends the goods for testing in laboratory if required. In case the aggrieved party is not satisfied with the judgment then they can file an appeal in National Commission within 30 days by depositing Rs 3500 or 50% of penalty amount whichever is less.
3. National Commission:
The national commission consists of a president and four members one of whom shall be a woman. They are appointed by Central Government. The complaint can be filed in National Commission if the value of goods exceeds Rs 1 crore.
If aggrieved party is not satisfied with the judgment then they can file a grievance in Supreme Court within 30 days.
Basis | District Commission | State Commission | National Commission |
Composition | It consists of a president and two other members. | It consists of a president and two other members. | It consists of a president and four other members. |
Who can be a President | A working or retired judge of District Court. | A working or retired judge of High Court. | A working or retired judge of Supreme Court. |
Appointment of President | The president is appointed by the state government on the recommendation of the selection committee. | The president is appointed by the state government after consultation with the chief justice of the High Court. | The president is appointed by the central government after consultation with the chief justice of India, |
Jurisdiction | In 1986, it had jurisdiction to entertain complaints where the value of goods or services does not exceed Rs 5, 00,000 but now the limit is raised to 20 lakhs. | In 1986, it had jurisdiction to entertain complaints when the value of goods or services exceeds Rs 5,00,000 and does not exceed Rs 20,00,000 but now it is raised to more than Rs 20,00,000 and up to Rs1 crore. | In 1986, it had jurisdiction to entertain complaints where the value of goods or services exceeds Rs 20 lakhs but now the limit is raised and it entertains the complaints of goods or services where the value exceeds Rs 1 crore. |
Appeal against orders | Any person who is aggrieved by the order of District Forum can appeal against such order to State Commission within 30 days and by depositing Rs 25000 or 50% of the penalty amount whichever is less. | Any person who is aggrieved by the order of State Commission can appeal against such order to National Commission within 30 days and by depositing Rs 35000 or 50% of penalty amount whichever is less. | Any person who is aggrieved by the order of the National Commission can appeal against such order to Supreme Court within 30 days and by depositing 50% of penalty amount but only cases where value of goods or services exceeds Rs 1 crore can file appeal in Supreme Court. |
The Competition Act, 2002 was enacted by way of the Parliament of India and governs Indian competition law. It replaced the archaic The Monopolies and Restrictive Trade Practices Act, 1969. Under this legislation, the Competition Commission of India was established to forestall the activities that have an adverse effect on competition in India. This act extends to complete of India except the State of Jammu and Kashmir.
An Act to give, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain opposition in markets, to protect the interests of consumers and to ensure freedom of exchange carried on by other participants in markets, in India, and for matters related therewith or incidental thereto.
It is a tool to implement and enforce competition coverage and to prevent and punish anti-competitive business practices by firms and unnecessary Government interference in the market. Competition laws are equally applicable on written as well as oral agreement, arrangements between the organizations or persons.
1) The competition Act 2002 was formulated with following objectives:
1. To promote healthy competition in the market.
2. To prevent those practices which are having adverse effect on competition.
3. To defend the interests of concerns in a suitable manner.
4. To ensure freedom of alternate in Indian markets.
5. To prevent abuses of dominant position in the market actively.
6. Regulating the operation and activities of combinations (acquisitions, mergers and amalgamation).
7. Creating awareness and imparting training about the competition Act.
2) Main Features of Competition Act, 2002:
Following are some important features of the competition Act:
1. Competition Act is a very compact and smaller legislation which includes only 66 sections.
2. Competition commission of India (CCI) is constituted under the Act.
3. This Act restricts agreements having adverse effect on competition in India.
4. This Act suitably regulates acquisitions, mergers and amalgamation of enterprises.
5. Under the purview of this Act, the central Government appointed director General for conducting element investigation of anti-competition agreements for arresting CCI.
6. This Act is flexible enough to change its provisions as per needs.
7. Civil courts do not have any jurisdiction to entertain any swimsuit which is within the purview of this Act.
8. This Act possesses penalty provision.
9. Competition Act has replaced MRTP Act.
10. Under this Act, “Competition Fund” has been created.
The Competition Act, 2002 was amended by the Competition (Amendment) Act, 2007 and again by the Competition (Amendment) Act, 2009.
The Competition Act, 2003 gives for the setting up of a Competition Commission of India (CCI) with a view to:
A subsequent Competition Amendment Bill (2007) seeks to make the CCI function as a regulator and give impetus to factors like:
i. Quality of products and services,
ii. Healthy competition,
iii. Faster mergers and acquisitions of companies,
iv. Regulation of acquisitions and mergers coming inside the threshold limits,
v. allowing dominance with prevention of its abuse to give effect to the second technology economic reforms on the pattern of the global standards set by using the more developed countries, etc.
1) Establishment of Commission (Section 7)
2) Composition of Commission (Section 8)
3) Chairperson and Members of Commission (Section 9)
(a) The Chief Justice of India or his nominee- Chairperson;
(b) The Secretary in the Ministry of Corporate Affairs- Member;
(c) The Secretary in the Ministry of Law and Justice- Member;
(d) Two experts of repute who have special knowledge of, and professional experience in international trade, economics, business, commerce, law, finance, accountancy, management industry, public affairs or competition matters including competition law and policy- Members.
2. The term of the selection committee and the manner of selection of panel of names shall be such as may be prescribed.
4) Term of Office of Chairperson and Other Members (Section 10)
1. The Chairperson and every other member shall hold office as such for a term of five years from the date on which he enters upon his office and shall be eligible for re-appointment.
Provided that the chairperson or other members shall not hold office as such after he has attained the age of sixty-five years.
2. A vacancy caused by the resignation or removal of the chairperson or any other member under section 11 or by death or otherwise shall be filled by fresh appointment in accordance with the provisions of sections 8 and 9.
3. The chairperson and every other member shall, before entering upon his office, make and subscribe to an oath of office and of secrecy in such form, manner and before such authority, as may be prescribed.
4. In the event of the occurrence of a vacancy in the office of the chairperson by reason of his death, resignation of otherwise, the senior most member shall act as the chairperson, until the date on which a hew chairperson, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
5. When the chairperson is unable to discharge his functions owing to absence. illness or any other cause, the senior-most member shall discharge the functions of the chairperson until the date on which the chairperson resumes the charge of his functions.
DUTIES, POWERS AND FUNCTIONS OF COMPETITION COMMISSION OF INDIA
1) Duties of Commission (Section 18)
Competition Commission has to discharge the following duties:
i) To eliminate practices having adverse effect on competition.
ii) Promote and sustain competition.
iii) Protect the interest of consumers and
iv) Ensure freedom of trade carried on by other participants, in market in India.
2) Powers and Functions of Commission
1. Inquiry into certain agreements (Section 19): The commission may inquire into any allegation regarding contravention of the provisions i contained in Sec. 3(1) or 4(1) either on it's own motion or on receipt of any information from any person, consumer or their association or trade association. Or on reference from Central Government or State Government or a Statutory Authority.
2. Inquiry whether an enterprise enjoys dominant position: The commission shall, while inquiring whether an enterprise enjoys a dominant position or not under section 4, have due regard to all or any of the following factors, namely -
(a) Market share of the enterprise;
(b) Size and resources of the enterprise;
(c) Size and importance of the competitors;
(d) Economic power of the enterprise including commercial advantages over competitors;
(e) Vertical integration of the enterprises or sale or service network of such enterprises;
(f) Dependence of consumers on the enterprise;
(g) Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a government company or a public sector undertaking or otherwise;
(h) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers;
(i) Countervailing buying power;
(j) Market structure and size of market;
(k) Social obligations and social costs;
(l) Relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;
(m) Any other factor which the commission may consider relevant for the inquiry.
3. Inquiry into Combination by Commission (Section 20): Inquiry into acquisition, control and combination. The commission may, on its own or on information acquired, may inquire into whether such a combination has caused or is likely to cause an appreciable adverse effect on competition in India.
Factors having effect on combination:
(a) Actual and potential level of competition through imports in the market;
(b) Extent of barriers to entry into the market:
(c) Level of combination in the market;
(d) Degree of countervailing power in the market;
(e) Likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
(f) Extent of effective competition likely to sustain in a market;
(g) Extent to which substitutes are available or are likely to be available in the market;
(h) Market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
(i) Likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
(j) Nature and extent of vertical integration in the market;
(k) Possibility of a failing business:
(l) Nature and extent of innovation;
(m) Relative advantage, by way of the contribution to the economic development, by any combination having or likely to have appreciable adverse effect on competition;
(n) Whether the benefits of the combination outweigh the adverse impact of the combination, if any.
Section 3 of the Competition Act, 2002
Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services
4. Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.
5. Nothing contained in this section shall restrict—
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-Conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
(ii) the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.
Section 4
(a) directly or indirectly, imposes unfair or discriminatory—
(i) condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service. Explanation. — For the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of goods (including predatory price) or service referred to in sub-clause
(ii) shall not include such discriminatory condition or price which may be adopted to meet the competition; or
(b) limits or restricts—
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access 5 [in any manner]; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant market.
Explanation. —For the purposes of this section, the expression—
(a) “dominant position” means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour.
(b) “predatory price” means the sale of goods or provision of services, at a. price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.
1) Regulation of combinations
Section 6
2. Subject to the provisions contained in sub-section (1), any person or enterprise, who or which proposes to enter into a combination, 13 [shall] give notice to the Commission, in the form as may be specified, and the fee which may be determined, by regulations, disclosing the details of the proposed combination, within14 [thirty days] of—
(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of section 5, by the board of directors of the enterprises concerned with such merger or amalgamation, as the case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of section 5 or acquiring of control referred to in clause (b) of that section.
3. The Commission shall, after receipt of notice under sub-section (2), deal with such notice in accordance with the provisions contained in sections 29, 30 and 31.
4. The provisions of this section shall not apply to share subscription or financing facility or any acquisition, by a public financial institution, foreign institutional investor, bank or venture capital fund, pursuant to any covenant of a loan agreement or investment agreement.
5. The public financial institution, foreign institutional investor, bank or venture capital fund, referred to in sub-section (4), shall, within seven days from the date of the acquisition, file, in the form as may be specified by regulations, with the Commission the details of the acquisition including the details of control, the circumstances for exercise of such control and the consequences of default arising out of such loan agreement or investment agreement, as the case may be.
References-
