Unfair Trade Practices in India: Legal Framework and Landmark Judgments

Pratham Dave

01 Feb 2025 — 4 min read

Written by Pratham Dave, Fifth Year Law Student, GLS University.

Introduction

Unfair trade practices have been a significant concern in India, affecting consumers, businesses, and the overall market economy. The term refers to deceptive, fraudulent, or unethical business practices that harm consumer interests. These may include false advertising, misleading representations, hoarding, black marketing, and unfair pricing tactics. To combat such practices, Indian laws provide various legal provisions and remedies. This article examines unfair trade practices in India, highlighting relevant statutes, key provisions, and landmark judgments that have shaped consumer protection laws.

Legal Framework for Unfair Trade Practices in India

Unfair trade practices in India are primarily regulated under the Consumer Protection Act, 2019, along with other legislation such as the Competition Act, 2002, the Indian Penal Code, 1860, and the Essential Commodities Act, 1955.

1. Consumer Protection Act, 2019

The Consumer Protection Act, 2019 (CPA, 2019) replaced the Consumer Protection Act, 1986, providing a more comprehensive framework to address unfair trade practices. Under Section 2(47) of the Act, "unfair trade practices" include:

False representation regarding the quality, standard, or grade of a product or service.
Misleading advertisements that induce consumers to buy goods or services under false pretenses.
Non-compliance with prescribed safety standards, leading to harm.
Hoarding and black marketing of essential goods.
Selling goods at prices higher than the Maximum Retail Price (MRP) or misrepresenting discounts.

2. Competition Act, 2002

The Competition Act, 2002 aims to prevent anti-competitive practices and monopolistic behavior that harm consumer welfare. Section 4 of the Act prohibits the abuse of dominant market position, which includes unfair pricing, predatory pricing, and restricting market access to competitors.

3. Indian Penal Code, 1860 (IPC)

The IPC contains provisions to penalize fraudulent practices that deceive consumers.

Section 415-420 deals with cheating, fraudulent representation, and dishonest inducement leading to harm or loss to another person. The severity of punishment increases depending on the nature of the offense
Section 489 punishes false trade descriptions and counterfeiting.

4. Essential Commodities Act, 1955

The Essential Commodities Act, 1955 prevents hoarding and black marketing of essential goods. It empowers the government to regulate the production, supply, and distribution of essential commodities in the public interest.

Types of Unfair Trade Practices in India

1. Misleading Advertisements

False advertising is one of the most common unfair trade practices. Businesses often exaggerate product benefits or conceal vital information.

Case Law: Havells India Ltd. v. Amritanshu Khaitan & Ors. (2015)
- In this Case, The Delhi High Court outlined two key elements to determine whether an advertisement is misleading. The Court stressed that an advertisement is considered misleading if it deceives its target audience and has the potential to influence consumer behavior or harm competitors due to its deceptive nature. These factors are essential in assessing the legality and ethicality of advertisements.
Case Law: Freedom 251 (Smartphone Scam)
- In early 2016, Ringing Bells introduced the Freedom 251 smartphone, claiming to offer a fully functional device at an incredibly low price. The company’s misleading advertising led to numerous pre-bookings, but it failed to deliver the phones. It was later discovered that the product was simply a repackaged Chinese phone. As a result, legal action was taken for fraud and misrepresentation, making the Freedom 251 scam one of India’s largest tech frauds.

2. False Representation of Goods and Services

Many companies misrepresent product quality or durability, misleading consumers into making purchases under false assumptions.

Case Law: M/s Daimler Chrysler India Pvt. Ltd. v. M/s Controls & Switchgear Company Ltd. & Anr.
- The Supreme Court held that Mercedes-Benz India misrepresented airbag functionality, creating a false impression of safety, amounting to unfair trade practice. The ruling reaffirmed that misleading disclosures on product quality or safety violate consumer law, warranting penalties and compensation.

3. Hoarding and Black Marketing

Retailers and wholesalers sometimes hoard essential commodities to create artificial shortages and inflated prices.

Case Law: Bram Health Care Pvt. Ltd. v. Union of India
- The Delhi High Court recognized the unethical practices of overpricing, hoarding, and black marketing of oxygen, medicines, and medical equipment during the COVID-19 second wave. By directing that these supplies be sold at MRP or below, the court aimed to prevent exploitation, ensure fair pricing, and regulate essential services like ambulances, reinforcing consumer protection against unfair trade practices.

4. Predatory Pricing

Companies sometimes sell products at extremely low prices to drive competitors out of business, an unfair trade practice under the Competition Act, 2002.

Case Law: MCX Stock Exchange v. National Stock Exchange (2011)
- The Competition Commission of India (CCI) ruled against NSE for abusing its dominant position by offering free trading services to eliminate competition.

Redressal Mechanisms for Unfair Trade Practices

The Consumer Protection Act, 2019 provides three levels of consumer redressal forums:

District Consumer Disputes Redressal Commission - handles cases up to ₹1 crore.
State Consumer Disputes Redressal Commission - Deals with cases between ₹1 crore and ₹10 crores.
National Consumer Disputes Redressal Commission (NCDRC) – Takes cases above ₹10 crores and appeals from lower commissions.

How to File a Complaint?

Consumers can file complaints against unfair trade practices through the National Consumer Helpline (NCH) or the E-Daakhil Portal, launched by the government for online consumer grievance redressal.

Recent Developments and Government Initiatives

The Central Consumer Protection Authority (CCPA) was established under the CPA, 2019, to monitor unfair trade practices and misleading advertisements. Some key measures include:

Crackdowns on false claims in healthcare and food advertising.
Actions against e-commerce platforms for deceptive pricing tactics.
Stricter penalties for misleading endorsements by celebrities and influencers.

Conclusion

Unfair trade practices continue to pose challenges in India's evolving marketplace. While legal frameworks such as the Consumer Protection Act, 2019, and the Competition Act, 2002, provide strong mechanisms to curb these malpractices, effective enforcement remains crucial. Consumer awareness and timely action against unethical business practices are essential for a fair and transparent market. By utilizing redressal mechanisms and staying informed about their rights, consumers can play a vital role in preventing unfair trade practices in India.