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Misleading And False Advertisement Unfair Trade Practices

Advertising is an instrument in the hands of the people who use it. If evil men use advertising for base purposes, then evil can result. If honest men use advertising to sell an honest product with honest enthusiasm, then positive good for our kind of capitalistic society can result.-John W. Crawford

Since globalization, there is cutthroat competition in the markets of India. Every firm or trader want to have edge over other in order to increase their sales, profits, and business. To promote the product of their company, they do advertisement to attract the large number of people at the same time. Those advertisement are made with the only motive to manipulate or influence the consumer towards the product.

Advertisements play a very vital role, as it creates goodwill for the manufacturing companies. Therefore, in order to boom and sometimes survival of the business in the market, companies use the misleading, false and deceptive advertisement to promote the sales. In this effort, sometimes advertisements are filled with the claims that are too hard to believe. Like, energy drinks are depicted as if they give superhuman powers to the consumer.

Some even believe that if they don't consume their chocolate-flavored milk powder, or if the addition of these powers helps their children absorb more calcium, their children will not grow properly. These fake advertisements are promoted by celebrities who never use the product themselves but appear in advertisements for products that promise consumers the same celebrity skin and hair. In all cases, the glow on the skin of the actress is due to the skills of the makeup artist.

Deceptive and false advertising is not only unethical; they distort competition and, of course, consumer choice. An advertisement becomes misleading or false when suppose an advertisement of a water purifier that filters only bacteria (and not viruses) claims that it gives 100 percent safe water, then it is a false statement or if an advertisement for a face cream claims that it removes dark spots on the face and even prevents them from coming back, the manufacturer should be able to prove this. Or else, it is a deceptive advertisement.

Section 2(1) (r) of Consumer Protection Act, 1986 defines the term 'unfair trade practices.- 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 false and deceptive practice.

Other such protection acts are Monopolies and Restrictive Trade Practices Act 1969, the main objective of the MRTP Act is to ensure that the operation of economic system does not result in the concentration of economic powers in the hands of a few hands but MRTP generally did not include any provinces against misleading and false advertisement but the 1984 amendments in MRTP Act incorporated, inter alia, new provisions for the regulation of unfair trade practices e.g. false representations, misleading advertisements, bargain sales, bait and switch selling, hoarding and destruction of goods etc.

People must be aware of their rights when someone breached their basic rights, there are many large firms on which consumers has filed a suit for not performing same activity as promised in the advertisements. This article will aid marketers to understand the impact advertisements have on consumer buying decisions.

It would give a suggestion, what entices a customer to choose a particular product? What are the other factors that lead a customer to buy a product? And finally, can advertisers still sell their products based on pure facts, or do they need to add big fancy lines that claims to push their products forward.

Advertising meaning and definition:
An advertisement is a marketing tool, which is used for sales promotion and publicity by the producers/manufactures to familiarize their product to consumers. It is a process of communication between the owner of the products or services and consumers. The consumers become familiar to the effectiveness and utility of the existing products and future products.

It helps the consumer in taking right decision and it is an art and communication technique by which the Trademark or brand of the product or service is made known to the people. According to William J. Stanton, Advertising consists of all the activities involves in presenting to a group, a non-personal, oral or visual, openly sponsored message regarding disseminated through one or more media and is paid for by an identified sponsor[7].

Overall advertising broadens the knowledge of the consumers, it helps the consumers to but product without wastage of must time, it creates the goodwill and increase the sales volume of the producers/manufactures. It is necessary to meet the competition in the market and to survive. Advertising prepares necessary ground for the salesman to begin his work effectively. And it also leads to large scale production creating more employment opportunities to the public in various jobs directly or indirectly.

Misleading and false advertisements:
An advertisement is said to be deceptive if it misleads people, changes reality and influences consumer buying behavior. In most jurisdictions, advertising regulations make it illegal to use false or misleading advertising. It is illegal to misrepresent the quality of any product, or its related specifications related to its Composition, manufacture, price or place of origin. "false" refers to the misrepresentation of the facts; false information can result in an unacceptable number of people using the information to make wrong decisions, but consumers are vulnerable to advertising when presented with a unique environment.

They see advertising messages as a guide for purchasing decisions. Consumers are helpless when they fail to spot misleading news. In the age of wider access to information, consumers should be careful to gather as much information as possible. Gathering information or searching is an important phase of buying behavior, the warning buyer beware still holds. Advertising consists of communications about the characteristics of the product or service. False advertising consists of intentionally made statements about a product or service with the aim to Mislead consumers into conclusions about the product or service.

Advantages and disadvantages of unfair trade practices:
Advantages from the viewpoint of manufactures:
  1. Increase in the sales:
    The main objective of the manufacturer in advertising their products is to promote sales of its products. Goods produced on a mass scale will retain existing markets through mass advertising, but they can also expand markets by attracting more people to their products and suggesting new uses for them. Advertising is a helping hand in sales.
     
  2. Reduces cost:
    Sales turnover and encourage mass production of goods are enhanced by advertising that results in large scale production, average cost of production reduces and results in higher profits. At the same time, when the cost of advertising and selling costs gets distributed over a larger volume of sales, the average cost of selling also lowers down.
     
  3. Constant demand:
    Seasonal fluctuations on demands for products are smoothened by advertising generally the manufacturers try to discover and advertise new possible uses of which a seasonal product maybe put. The innovation of cold tea and cold coffee for the use during summer has helped in increasing the demand for these beverages even in that season.

Advantages from the viewpoint of consumers:
  1. Improvement in quality:
    Generally, products are advertised under brand names; when the advertisement prompts a person to use the product, it is done in the hopes that the content of that brand is better than that of other brands of the same product. A repeat order is to be expected based on your expectations. Otherwise, sales can be very high once and then very low as consumer confidence in the quality of the product deteriorates.
     
  2. Purchasing convenience:
    Shopping becomes easy for consumers after advertising. In general, resale prices (prices at which retailers must sell products) are set and advertised. advertising offers a definite and positive assurance to the consumer that they will not be overcharged for the advertised product. The consumer can make his purchases with the greatest ease and confidence.
     
  3. Consumer education:
    As an educational and dynamic principle, the main aim of advertising is to inform and educate customers about new products, their properties, prices and uses, as well as to convince them to adopt new ways of life, improve their old habits and indolence and have a better standard of living.

Disadvantages of unfair trade practices:
  1. Deferred revenue expenditure:
    It is an accrued income expense because the results do not occur immediately as advertising is a significant part of the organization's total budget, so a large investment does not necessarily produce immediate results that limit its usefulness.
     
  2. Misrepresentation of facts:
    A major disadvantage of advertising is the misrepresentation of facts about products and services. Advertisers often misrepresent the unreal / false benefits of a product and make big claims to encourage people to take action that is beneficial to them but is counter to the consumer's self-interest.
     
  3. Consumer's deficit:
    Advertising arouses desires, since consumers have little purchasing power, it leads to dissatisfaction, which is obviously undesirable from a social point of view, especially if it affects a large majority of people. important if it acts as an impetus for social change.
     
  4. Increased cost:
    It is highly debated whether advertising creates additional costs for a product that have to be paid for by the community. In some ways this is true because the cost of doing it is part of the total cost of the product, but at the same time it would be unfair to assume that if the cost of advertising were reduced, the product would inevitably be cheaper. it is one of the cost elements, but it is cost that brings savings on the sales side.
     
  5. Multiplication of needs:
    Advertising forces people to buy things they do not need as they are human instincts, possessions, social recognition, etc. that are induced by the advertiser to sell products. Various appeals are made to arouse interest in the product. Feelings and emotions are played with in order to acquire customers.

All the above factors drive consumer behavior to purchase a product after viewing the ads. As they are also vulnerable to unfair business practices due to a lack of knowledge of adequate rights. These unfair business practices can give manufacturers an advantage in the short term, but in the long run they affect the organization and ultimately the entire industry and society. Misrepresentations of the products can be of any kind. Unfair business practices also cause several grievances and can lead to unwanted financial losses for sellers.

Existing Legal situation
The Indian Courts are under constant pressure to expand counterfeiting offenses in order to broaden the base of relief through the mechanism of restricting and punishing improper conduct in the marketplace. In addition, criminal sanctions and administrative enforcement are available in the context of monopolies and restrictive trade. The Practices Act of 1969 (hereafter the "MRTP Act") and the Consumer Protection Act of 1986 perform the functions of the Unfair Competition Action.

The MRTP Act, as originally drafted, did not contain any provision to protect consumers from false or misleading advertising or similar unfair commercial practices, but important changes were made in 1984 to keep the relationship honest and truthful between manufacturers and consumers. Therefore, the MRTP Commission was empowered to prohibit a company from publishing certain types of advertising that were deemed false and misleading and therefore harm the public interest.

The purpose of the MRTP law is to ensure that the functioning of the economic system does not lead to a concentration of economic power in the hands of a few merchants, which is to be achieved by the approval of the central government on the proposals for significant expansion, establishment of new undertakings, mergers, amalgamation, takeovers and the like.

Section 33 of the Act is the important section of the Act that lists the categories of registrable agreements that cover a wide range of corporate activities. These restrictive and monopoly agreements include sales, production and distribution, horizontal and vertical agreements, price discrimination and non-price discrimination, territorial and customer allocation, price maintenance in resale and agreements on price reductions.

It is worth noting that any agreement that falls under any of the clauses (a) to (b) of Section 33 (1) is deemed to be an agreement relating to restrictive business practices and is a record per se.

The MRTP Act restricts restrictive trade practices in three ways:
  1. certain types of restrictive trade agreements (e.g. exclusive dealing, pricing) must be registered;
  2. the MRTP Commission may investigate any restrictive trade practices and, if the practices are found to be detrimental to the public interest, order that they may be suspended or not repeated in the future, or cancel the agreement; and
  3. the restrictive business practice of maintaining the resale price is totally prohibited.

The scope of the term "unfair trade practices" was recently challenged by the Supreme Court of India at Lakhanpal National Ltd against the MRTP Commission. The MRTP law focuses on the effect of the manufacturer's representation on a person in the street.

In India, until 2002, the Monopolies and Restrictive Trade Practices Act (MRTP), enacted to prevent monopolies and restrictive Trade practices, was the primary anti-unfair business practice legislation in the country. The Competition Act 2002, which delegated all cases pending in the MRTP to the Competition Commission of India (CCI) for ruling from the stages they were in, no provision to deal with unfair trade practice was incorporated in the Competition Act and thus this was instead enforced by the Consumer Protection Act of 1986 (COPRA) which was already dealing with unfair trade practices.

Article 2 (r) of the Consumer Protection Act 1986 defines unfair trade practices "A trade practice that uses an unfair or unfair method or deception to promote the sale, use or delivery of goods or to provide a service, including any of the following practices : make a statement, whether oral, written or visually, permit the publication of an advertisement in a newspaper or otherwise, permit the:
  1. offering of gifts, prizes or other items with the intent not to appear as advertised or to give the impression of being to awaken that something is given or offered free of charge if it is covered in whole or in part by the total amount charged in the transaction.
  2. the conduct of a competition, lottery, game of chance or skill with the aim of directly or indirectly selling, using or providing any product or commercial interest.

Permits the sale or supply of goods that are suitable for use are intended or can be used by consumers who know or have reason to believe that the products do not meet the standards prescribed by the competent authority regarding performance, composition, content, design, construction, execution or packaging, insofar as this is necessary is to prevent or reduce the risk of injury to the person using the goods. Permits the hoarding or destruction of goods or refuses to sell or offer for sale the goods or provide a service if the hoarding or destruction or denial increases or tends to increase the cost of those or similar goods or services.

There are other regulatory agencies also that protect the right of consumers against unfair trade practices:
  1. Advertising Standards Council of India (ASCI):
    The ASCI code was made mandatory for television advertising through the 2006 amendment to the Cable Television Network Rules. According to ASCI rule 7, advertising must not be discriminatory because of race, caste, etc. on crime, disorder or incident or vulgar then it should be stopped immediately and to resolve disputes related to this, the Consumer Complaints Council (CCC) was established.
     
  2. Advertising Agencies Association of India (AAAI):
    The Advertising Agencies Association of India (AAAI) is the official national organization of advertising agencies established to advance their interests so that they continue to make a substantial and growing contribution to the nation and work towards the following goals:
To benefit Indian consumers and to protect their interests by helping ensure that advertising is honest and in good taste, To benefit Indian advertisers by promoting their sales, increasing their sales and increasing productivity & profitability, to stimulate business and industrial activity, To benefit media by establishing sound business practices between advertisers and advertising agencies and each of the various media owners,

To benefit the nation by harnessing advertising for the good of the country, its institutions, its citizens to co-operate with the Government in promoting its social objectives and in the task of nation-building and, To question advertising that is wasteful and extravagant to make it possible for the small entrepreneur to grow through advertising and to compete with the biggest to encourage market and media research to serve society by meeting its social responsibilities etc.[1].

Many other agencies are Press council of India (PCI) and Prasar Bharati which preserve the freedom of the press and of maintaining and improving the standards of press in India. The present Council functions under the Press Council Act 1978. It is a statutory, quasi-judicial body which acts as a watchdog of the press. It adjudicates the complaints against and by the press for violation of ethics and for violation of the freedom of the press. And the objectives of public service broadcasting are achieved in terms of Prasar Bharati Act through All India Radio and Doordarshan, which earlier were working as media units under the Ministry of I&B and since the above said date became constituents of Prasar Bharati.

List of Cases:
  1. Godfrey Philips India Ltd vs. Akshay Kumar[1]:
    The lawsuit was filed against the advertisement challenged by the cigarette company. The product was sold under the name "Red and White", along with the sentences that read, "Red and white smokers are unique", the packaging also contained a picture of actor Akshay Kumar.

    And also contained a line describing the harmful effects of the image of a famous actor promoting the tagged cigarette, giving the impression of an acrobatic ability like that of the actor. The case reached the National Commission, where the complainants stated that, due to the announcement by the National Commission that the complainant could not appear because he did not represent a volunteer organization, there were no signs of damage or accidents. The appeal was allowed with no costs.
     
  2. Pooja Roy vs. Krishnango Bhattacharya[2]:
    M / s Kasko India, a licensed pharmaceutical wholesaler, has been charged with tampering with the manufacturer's original labels and affixing new printed labels to extend the expiration date, as well as selling counterfeit medicines in what was considered an unfair business practice in the pharmaceutical sector.
     
  3. Reckitt & Colman of India Ltd. Vs. Kiwi T.T. K. Ltd [3]:
    Hon'ble Delhi High Court (S.K. Mahajan, J.) ruled that a manufacturer has the right to make a statement that their products are the best and to make some declarations to inflate their products, and the same will not lead to Lawsuits give other distributors or manufacturers of similar products to initiate proceedings, as this is not a degradation or defamation of the manufacturer's products. However, a manufacturer has no right to claim that its competitors' products are bad at bloating and promoting its goods.
     
  4. Consumer Guidance Society v. Amway India Enterprises[4]:
    Amway companies that sell a wide variety of consumer goods and nutritional supplements. Some Amway products were mislabeled and adulterous products such as Nutrilite Protein, Amway Madrid Safad Musli contained ingredients of a different quality than stated on the label. According to the results, Amway has recovered and billed unfair business media outlets and directed them to remove their mislabeled products and renew their advertisements.
     
  5. PepsiCo Inc. and ors. Vs. Hindustan Coca Cola Ltd. and Anr[5]:
    It was held by the Hon'ble Delhi High Court that- comparative advertising is permissible subject to the rider that it does not denigrate the product of the appellant……If a trader compares his goods with the goods of rival without in any way advertising that the trademark is used in relation to his goods, there is prima facie no infringement.
     
  6. Buddhist Mission Dental College and Hospital vs. Bhupesh Khurana and Ors[6]:
    The appellant published an advertisement in the Hindustan Times inviting applications for admission in the Degree Course of Bachelor of Dental Surgery (BDS).In the said advertisement it was specifically highlighted that the appellant college is a premier dental college of Bihar established and managed by the Vishwa Buddha Parishad. It was also mentioned in the advertisement that the said institution is the Buddhist Mission Dental College and Hospital under Magadh University, Bodh Gaya and Dental Council of India, New Delhi. But latter on it was found that the institute was neither recognized nor affiliated and the complainant student lost two valuable years.

    Hon'ble court supported the view of the National Consumer Redressal Commission that this was a case of total misrepresentation on behalf of the institute which tantamount to unfair trade practice. Hon'ble Court also directed the institute to pay an additional compensation of Rs One lakh to each of the respondents along with cost of litigation and the amount of compensation imposed by National Commission within two months of the direction[7]

Consumers are often exposed to unfair business practices by giant marketers and consumers are victims of their fierce business competition. The outlook for the consumer justice system in our country appears positive given the provisions in Indian laws and regulations and the various proactive measures taken by the government. Consumers need to be aware of their rights which they can use to protect themselves from such unfair monopoly practices.

The government should take steps to educate people about the various remedies they can take if their rights as a consumer are violated. From business and industry, civil society organizations and, above all, the consumer. It is important to keep the practice of unfair trade under control in the years to come.

What to do?
Therefore, with a brief look at the above discussion, false and misleading advertising poses a serious threat to the consumer in general and to society in general; However, we must take the following precautions to check and stop this bad practice:
  • Before buying any product, ask yourself: if, why, when, where, how, how much, how often, how long, etc.
  • Consumer Oriented advertisement will have to be truthful and ethical, it must not mislead the consumer,
  • Make honest and truthful statements and assertions, which is essential for the prohibition of misleading advertising,
  • Do not offend the public with decency or morals,
  • Do not advertise products that are dangerous or harmful to society or people, especially minors, and respect fairness in competition, considering the interests of the consumer,
  • Main Demand, Reasons to Buy, Hidden Properties, Different Advantages and Money in Every marketing situation must be carefully analyzed in order to determine the advertising potential of a products to be determined.

Advertising is an important part of the communication strategy in the marketing mix. It is an external stimulus that arouses latent needs. This means "internal tension" between buyers, and it is very easy to promote corruption through such advertising in the entertainment business in a country like India if not properly verified. If not properly controlled and avoided, counterfeit advertisements can compromise and mislead our freedom of choice and buy goods.

However, the government should also take steps to raise awareness among ordinary consumers such as NGOs. Law enforcement agencies should not be apathetic and insensitive in implementing existing consumer protection legislation. Take special care to protect children, youth communities, and patients from the evil resulting from false and misleading advertising.

Consumers are often exposed to unfair business practices by giant marketers and consumers are victims of their fierce business competition. The outlook for the consumer justice system in our country appears positive given the provisions in Indian laws and regulations and the various proactive measures taken by the government. Consumers need to be aware of their rights which they can use to protect themselves from such unfair monopoly practices.

The government should take steps to educate people about the various remedies they can take if their rights as a consumer are violated. From business and industry, civil society organizations and, above all, the consumer. It is important to keep the practice of unfair trade under control in the years to come.

References:
  1. Ahmad, F. (April- june 1996). False And Misleading Advertisements — Legal Perspectives. Journal of the Indian Law Institute, Vol. 38( No. 2 ), 168-183. Retrieved from https://www.jstor.org/stable/43927467
  2. Dr Swati Sinha, D. P. (n.d.). False and Misleading Advertisements and protection of the consumers: Indian scenario. International Journal of Law and Legal Jurisprudence Studies .
    N.S., S. (2015). A Study On Unfair Trade Practices In India. Journal On Contemporary Issues Of Law [JCIL], Volume 4 (ISSUE 7), 75-83.
    Nuseir, M. T. (2018). Impact of misleading/false advertisement to. Int. J. Economics and Business Research, 16(4), 453-465. doi: 10.1504/IJEBR.2018.095343
    Puri, K. (July-September 1992). Protection Against Monopolistic And Unfair Trade Practices In India. Journal of the Indian Law Institute, Vol. 34(No.
  3. 443-455. Retrieved from https://www.jstor.org/stable/43951454
    Sayed, I. (2014). An Empirical Research on Misleading Advertisements and Its Impact on Consumer Buying Behaviour . http://www.globalbizresearch.org/, 4-14.
End-Notes:
  1. Godfrey Philips v Ajay Kumar AIR 2008 SC 1828
  2. Pooja Roy v. Krishnango Bhattacharya (2008) C.R.R 2796 of 2008 Calcutta H.C
  3. Reckitt & Colman of India Ltd. Vs. Kiwi T.T. K. Ltd 1996 PTC (16) 393
  4. Consumer Guidance Society v. Amway India Enterprises (2007) C.C 140 of 2007
  5. PepsiCo Inc. and ors. Vs. Hindustan Coca Cola Ltd. and Anr 2003 (27) PTC 305(Delhi)
  6. Buddhist Mission Dental College and Hospital vs. Bhupesh Khurana and Ors MANU/SC/0204/2009; (2009)4SCC484
  7. Dr. Swati Sinha and Dr. Pradip Kumar Das, False and misleading advertisements and protection of the consumers: Indian scenario. International Journal of Law and Legal Jurisprudence Studies: ISSN:2348-8212

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