Unfair Trade Practices and Institutional Challenges in India: An Analysis

1. Unfair Trade Practices and Institutional Challenges in India: An Analysis GIZ STAKEHOLDER CONSULTATION WORKSHOPApril 1-2, 2013; New Delhi

2. Presentation Outline Terms of Reference Unfair Trade Practices: Definitions Why are UTPs Bad? Legal and Institutional Framework of UTP in India Analyses of Regulatory Structure Legal and Institutional Framework – Globally Learning’s from International Experience Challenges and Recommendations Way Forward

3. Terms of Reference Analyse treatment of UTPs under Indian law to highlight institutional challenges faced and suggest an efficient approach to address the identified challenges • Objective • Identify the nature of UTPs currently existing in India • Determine institutional challenges • Propose recommendations on how UTPs can be effectively addressed based on national and international experience • Scope of Study • The study was completed in 6 week’s time and is mainly based on desk research and interviews of relevant stakeholders, that included regulators, research institutions, subject expert, lawyers, etc. • Challenge

4. Definitions World Bank and OECD Model Competition Law Paris Convention

5. Definitions: India In India Section 2(1)(r) of the Consumer Protection Act, 1986 defines UTP to mean 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, and includes, inter alia, the following: making any statement, whether orally or in writing or by visible representation which: falsely represents about goods or services relating to its standard, quality, price, value, nature, etc.; gives false or misleading facts disparaging the goods, services or trade of another person; permitting the publication of any advertisement for the sale or supply at a bargain price of goods or services not intended to be so offered; permitting the offering of gifts, prizes or other items with the intention of not providing them as offered; withholding from the participants of any scheme offering gifts, prizes or other items free of charge, on its closure the information about final results of the scheme; permitting the hoarding or destruction of goods; and manufacturing spurious goods or offering such goods for sale or adoption of deceptive practices in the provision of services. 

6. Why are UTPs Bad….. Frequent and widespread incidences of UTPs in India due to: Introduction of globalisation; Technological innovations; Lack of consumer awareness UTPs found in almost all the sectors, including: Pharmaceutical sector Education sector Food sector Misleading advertisements most common form of UTP practiced across all the sectors (study by CUTS CART) UTPs in a market may have the following effects Impact on price and quality of goods and services Impact on micro, small and medium enterprises Impact on Consumer Confidence and trust

7. Legal Framework - India

8. Institutional Framework - India COPRA has created a three-tier quasi-judicial system to deal with the consumer related issues, i.e. the District Forums, the State Commission or the National Commission with final appeal lying before the Supreme Court of India.

9. Institutional Framework - India In addition to COPRA the following institutional mechanism also exists: SectoralRegulations/Guidelines Each of the sector specific regulations/guidelines make provisions for specific machinery to manage UTPs in that sector: Single specialised agencies for Insurance sector, Securities sector, Food Processing sector Detailed legislations laid down for the pharmaceutical sector Education sector is a still developing sector and new policies are in pipeline. Real Estate Sector and also Intellectual Property Right (Trademarks) LokAdalats Throughout the year, the consumer forums hold a LokAdalat every Friday or Saturday for amicable settlement of cases

10. Analysis of Institutional Framework: Challenges Consumer ability to represent Provides consumer the freedom to approach any of the forum on its own without being represented by any advocate and without getting involved in unnecessary legal papers’ hassle. Inordinate delays in delivery of justice Provision for summary proceedings, with COPRA laying down the time schedule for disposal of cases. However, still a number of cases are pending in the forums taking away the right of speedy justice. The total number of consumer complaints filed/disposed since inception under COPRA and the number of complaints pending as on March 6, 2013 are:

11. Analysis of Regulatory Structure Sectoral Regulators vis-à-vis Consumer Forums • Under Indian law various sector specific law such as Drugs and Cosmetics Act, 1940, Food Safety and Standards Act, 2006, IRDA Act, 1999 and several other regulations co-exist along with COPRA to deal with UTPs. • Roles of sector-specific regulators and the consumer forums overlap but remain quite distinct. • CUTS believes that though Sectoral regulators may coexist with the consumer forums in India, the consumer forums must be given precedence over the sector specific regulators

12. Legal and Institutional Framework- Globally

13. Cont..

14. Learning from International Experience

15. Challenges Business to business disputes not covered under COPRA No power with consumer authorities under COPRA to take up a case suomotu COPRA mainly a compensatory legislation Lack of investigatory powers under COPRA to deal with UTP issues Confusion due to presence of sectoral regulations along with COPRA which may also lead to forum shopping Cross-Border disputes not covered in COPRA Lack of infrastructure and qualified personnel in the consumer forums especially at the local level Dominance of Judge’s opinion over other members of the consumer forum (Interview with stakeholders)

16. Recommendations Three options may be adopted to meet the mentioned challenges: Option A: An independent and specialised Consumer Protection Agency (Finance Ministry had turned down the Proposal) Option B: UTP under the ambit of Competition Commission of India as prevalent in large number of countries Option C: Amendment of COPRA to provide for investigative and injunctive powers

17. Competition Commission of India • PROS • Humanises competition law enforcement and reminds investigators that importance of competition is consumer welfare • Consumer protection generates public buy-in • Consumer investigations occur more frequently and are less resource intensive • Competition Authorities are better resourced than Consumer Protection Authorities • Consumers can file information to CCI, as against in the Consumer Protection Act • CONS • Geographical limitations: CCI is located in Delhi • Overburden of CCI by UTP related cases, as compared to RTPs • Limited resources to devote to UTP, RTP, Advocacy, etc

18. Amendment of COPRA More efficient to strengthen the institutional set-up already in place by amending the existing institutional set-up to fill the gaps found in the same Steps needed for fortification of the existing set-up: Provide investigative powers (MRTPC) to begin with at the National Commission and select State Commissions (big States) Grant the Commission with the power to order reasonable penalties other than just compensation Establish a separate investigatory body on the lines of DGIR (MRTPC and CCI) Co-ordination between the consumer law and other sectoral laws, by inclusion of a “spring board” mechanism like in Sweden, etc.

19. Way Forward Need for: a balanced regulatory frameworkcatering to interests of all the stakeholders incentives to be created for those actors who have legitimate interest in the enforcement of the law CUTS advocates the option of strengthening of the already established institutional set-up under COPRA as the most efficient and easy way forward. Finally whichever option is adopted by the Ministry of Consumer Affairs after careful consideration, the new regime must be brought slowly, cautiously and after thorough discussion

20. THANK YOU CUTS TEAM:Rajeev Mathur, Executive Director, rdm@cuts.orgUdai S. Mehta, Associate Director, usm@cuts.orgTanushree Bhatnagar, Executive Assistant to the Secretary General, CUTS tsb@cuts.org