The expression 'unfair trade practice' is one which is elaborately defined in the Consumer Protection Act and the Monopolies and Restrictive Trade Practices Act. However, much of the litigation in both forums centres around it. When the MRTP Commission fades away, this phrase will remain only in the consumer law. The Competition Act, which is yet to be implemented in full, does not deal with UTP directly. Despite the detailed definition, it divided two judges of the Supreme Court in a recent appeal against a judgment on the MRTP commission. In another decision, the commission itself confused UTP with 'deficiency in service.'
First, the differences in the Supreme Court over the applicability of the definition. In Philips Medical Systems (Cleveland) Inc vs Indian MRI Diagnostic & Research Ltd, the Indian firm ordered a whole body CT scanner from the manufacturer in the US. The US corporation required licences from the respective governments which did not come in time. Therefore the offer lapsed and the deal fell through. Fresh negotiations began between the firms, but it was apparently for a refurbished machine at a higher price. Following differences, the Indian firm called off the talks and imported a similar scanner from Japan.
The Indian firm also moved the commission alleging 'restrictive trade practice' by the US firm pleading losses and seeking compensation. The commission held the US firm guilty of both unfair and restrictive trade practices and awarded compensation. Therefore, the US firm appealed to the Supreme Court where it succeeded in setting aside the commission's order.
Though both the judges in the Supreme Court agreed on quashing the commission's order, they could not agree on the interpretation of the UTP. How can there be a UTP when there was no supply of goods at all, one judge asked.
The original MRTP Act did not contain the phrase UTP. The law was aimed against restrictive and monopolistic practices only. The assumption was that if the manufacturers, producers or dealers could be prevented from distorting competition, the consumer would automatically get a fair deal. This was not to be. Therefore, the concept of UTP was introduced in 1984 through an amendment.
According to this judge, the amendment was meant to protect consumers against false and misleading ads and defective goods, among other things. It was not meant to deal with a situation where goods are not sold at all, as in this case. The definition of UTP was further amended in 1991, but still this sort of situation was not covered by the change.
The other judge felt that the phrase should be liberally interpreted. He said: 'There may be situations where a promise to supply a particular good, which the supplier knew that he was in no position to supply, with a motive of promoting of some other model, could occur. In such a case, a customer may be forced to obtain the same material from some other party and suffer losses in the process. Even without actual sale of goods, such an act on the part of the supplier could also amount to UTP.'
Normally such differences in the Supreme Court are resolved by referring them to a larger bench, but in this case the disagreement was left as it is, perhaps because the commission itself is on its last legs.
However, since the definition of UTP in the Consumer Protection Act is identical to that of the MRTP Act, the problem is bound to be brought back to the Supreme Court soon by consumer activists and lawyers. The Competition Act does not define UTP itself, but only 'trade practice.'
Moreover, the proposed Competition Commission is enjoined to carry on with part of the cases pending before the MRTP commission. The commission set up under it also has the duty to 'eliminate practices having adverse effect on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade carried on by other participants.' Therefore, there should be more clarity in the interpretation of UTP.
The confusion now prevailing can be gauged from another judgment of the MRTP commission in the judgment, KLM Royal Dutch Airlines vs Director General, delivered last month. Some consignments of badges and crests sent for a tournament in New Orleans, US, did not reach before the event, raising a claim for damages for 'deficiency in service.'
The commission treated it as a UTP and ordered the airline to 'cease and desist' from it in future. On appeal, the Supreme Court treated it as a case of deficiency in service. It observed that the concepts are different and the 'element of UTP definitely stands on a higher and onerous platform than deficient service.' These are propositions on which consumers deserve more light in future.
