Unfair trade practices

Topic: Consumer Rights and Consumer Protection · NCERT: Class 7, Ch 12 "Understanding Markets"; Class 9, Ch 9 "The Price Puzzle: What Drives the Market"; Class 10, Ch 5 "Consumer Rights"

Meaning

An unfair trade practice is any dishonest or deceptive method a seller uses to sell goods or services, which causes a loss to the buyer. NCERT examples include under-weighing, adding hidden charges and selling adulterated or defective goods. Its legal definition in India is in Section 2(47) of the Consumer Protection Act (CPA), 2019 [2]. It matters because it shows how a market can cheat buyers when sellers have more power and information. Protection against it is one of the main reasons consumer protection laws exist.

Explanation

How sellers cheat: the main forms

• NCERT forms (everyday cheating):
• Under-weighing: the buyer gets less weight or measure than they paid for.
• Hidden charges: the seller adds charges that were not mentioned earlier.

• Adulterated or defective goods: the seller sells impure, mixed or faulty items. Examples are water in milk and cheap oil mixed into mustard oil.

• Legal forms under CPA 2019, Section 2(47) [2][3]:

• false claims about a product's standard, quality or grade;
• selling old goods as new;
• claiming sponsorship, approval or benefits that the product does not have;
• misleading warranties or guarantees;
• misleading claims about price;

• running down (disparaging) a competitor's goods or services.

• Wider list under CPA 2019: the Act also covers false claims about a product, hoarding (holding back stock to create an artificial shortage and push prices up), refusing to take back defective goods and refusing to give a bill (cash memo).

Why small cheating adds up: a worked example

• A shopkeeper sells sugar at ₹45/kg but gives only 950 g for each "1 kg".
• Loss to one buyer: 50 g × ₹45 ÷ 1,000 g = ₹2.25. That is too small for most people to fight over.
• Gain to the seller: with 1,000 customers a day, the seller gains ₹2,250 a day, or about ₹8.2 lakh a year.
• Lesson:
• the loss is spread thin across many buyers → each buyer stays silent;
• the gain is concentrated in one seller → the seller has a strong reason to keep cheating;
• so the market does not correct itself, and rules are needed.

What makes unfair trade practices grow

• Market power of large producers: market power means one seller or a few sellers can influence price, quality or information, so buyers have little choice.
• Producers are few, rich and powerful.

• Consumers buy in small amounts and are scattered, so they cannot easily act together.

• Control of information: big companies can spread false information through the media.

• The buyer cannot easily check the claim → the buyer makes a wrong choice → the buyer loses money or health.

• Seller's attitude: when a buyer complains, the seller often says, "If you didn't like what you bought, please go elsewhere." The seller acts as if their duty ends with the sale.

• Class 9 link: "markets do not always work fairly." Markets can slide into monopoly (one seller controlling supply), which gives sellers even more room to cheat.
• What reduces it: quality marks such as ISI and Agmark (Class 7), aware consumers who ask for a bill and complain, and strong laws with real penalties.

In India

• Roots of the consumer movement: adulteration, shortages and hoarding triggered the Indian consumer movement in the 1960s. That movement led to COPRA 1986.
• Law now in force: CPA 2019 replaced COPRA 1986. It was passed by the Lok Sabha on 30 July 2019 and by the Rajya Sabha on 6 August 2019 [4].
• Its definitions of "unfair trade practice" are in Section 2(47) [2].

• One of the six consumer rights in the Act is the right to seek redress (a remedy or compensation) against unfair trade practices [4].

• Central Consumer Protection Authority (CCPA):

• an executive agency (a government regulator, not a court) that came into existence on 24 July 2020 [6];

• it can investigate violations, order recalls of unsafe goods, order refunds and start class actions (cases on behalf of a whole group of consumers) [4][6].

• Enforcement record:

• CCPA had issued 325 notices for violations of consumer rights, misleading advertisements and unfair trade practices, with penalties of ₹1.19 crore (as of December 2024) [7].

• In the coaching sector, CCPA issued 45 notices and fined 19 coaching institutes ₹61.60 lakh for misleading advertisements (December 2024) [8].

• Product liability: manufacturers and service providers must compensate consumers harmed by defective goods or deficient services [4].

• Where to complain: the three-tier Consumer Disputes Redressal Commissions (courts for consumer cases). Which commission hears a case depends on how much was paid. This is called pecuniary jurisdiction. The current limits come from the Jurisdiction Rules, 2021 [5]:
• District: up to ₹50 lakh;
• State: ₹50 lakh – ₹2 crore;
• National: above ₹2 crore.

Don't confuse with

• Misleading advertisement: this is a false or deceptive advertisement, defined in Section 2(28) of CPA 2019 [2]. Unfair trade practice (Section 2(47)) is the wider idea and covers any deceptive selling method. The two are linked: an ad that makes a claim which would count as an unfair trade practice if the seller made it is itself a misleading advertisement [2][3].
• Adulteration: this is one type of unfair trade practice, where cheaper or harmful substances are mixed into goods. It is not the whole concept. It is also one of the 1960s triggers of the consumer movement.
• Market power / monopoly: this is the cause, meaning a seller's ability to control price, quality or information. An unfair trade practice is the act of cheating that this power makes easier.
• Product liability: this is the remedy, meaning the duty to compensate a consumer harmed by defective goods or deficient services [4]. It is not the wrongful practice itself.

Prelims Hooks

• "Unfair trade practice" is defined in Section 2(47) of CPA 2019, and "misleading advertisement" in Section 2(28). Trap: neither is in Section 7 [2].
• Section 2(47) includes selling old goods as new, false claims about standard, quality or grade, misleading warranties and disparaging a competitor's goods [2][3].
• CCPA came into existence on 24 July 2020. It is an executive agency, not a court [6].
• CCPA's record: 325 notices and penalties of ₹1.19 crore (as of December 2024) [7]. 19 coaching institutes were fined ₹61.60 lakh (December 2024) [8].
• Triggers of the Indian consumer movement (1960s): adulteration, shortages and hoarding. These led to COPRA 1986.
• Trap: a trader buying goods for resale or a commercial purpose is not a "consumer" under CPA 2019, so they cannot complain as a consumer [4].

Mains Points

• Why the market cannot fix this by itself: each buyer's loss is tiny (₹2.25 in the sugar example), but the seller's gain is large and concentrated (about ₹8.2 lakh a year).
• Consumers are scattered and have less information → they rarely complain → the cheating continues.

• This is a case of market failure caused by unequal power and information. It justifies statutory regulation through the CCPA and consumer commissions (GS-III).

• From caveat emptor to seller responsibility: caveat emptor means "let the buyer beware".

• COPRA 1986 gave consumers after-the-fact redress through consumer courts.

• CPA 2019 added preventive regulation through the CCPA, along with product liability and a detailed legal list of unfair trade practices [2][4]. This is a GS-II link on regulatory bodies.

• Does enforcement deter? CCPA's fines, such as ₹61.60 lakh on coaching institutes [8], show that enforcement is becoming real. But total penalties of ₹1.19 crore (as of December 2024) [7] are small compared with the size of the market. Also, pendency (cases waiting to be decided) in consumer commissions weakens the right to redress. The 2021 cut in pecuniary limits was meant to reduce the pile-up in District Commissions [5], but it moves more cases to State Commissions.

Related concepts

• Market power of large producers
• Misleading advertising
• Adulteration

Read more

• The consumer in the marketplace: why rules are needed