Month: July 2020

The Competition Commission of India is established under the Competition Act, 2002. It is a statutory body that has the power to govern and enforce the Competition Act including penalties.  It was established when the need for a healthy competitive environment became necessary following liberalisation under the Vajpayee government. 

The Commission is composed of a chairman and a minimum of 2 board members and a maximum of 6 board members. These members are required to have a minimum of 15 years of experience in their respective fields. Its objectives, duties and powers are enumerated in the Competition Act, 2002. Its main duty and object is to ensure that the Indian markets maintain a healthy and fair competitive environment and is granted power to ensure such an environment and penalise any acts adversely affecting its duties.

Composition of Competition Commission of India (CCI):

The CCI comprises of a Chairperson and six Members, who are appointed by the Government of India. The Commission is manned by the following members

• Chairperson
• Member 1
• Member 2
• Member 3
• Member 4

The term of office of all the members of CCI is 5 years or till the attainment of age pf 65 years (whichever is early). The members are eligible for re-appointment.

The Chairperson and other members of CCI cannot hold any further employment for a period of two years from the date they cease to hold office in the Commission. But this restriction does not applies to any employment in the Union and State Government authority.

Objectives of Competition Commission of India CCI:

The Competition Commission of India (CCI) has been entrusted with the following task:

• To promote and then sustain an enabling competition culture through engagement and enforcement which would inspire businesses to be fair, competitive and innovative.
• To enhance the consumer welfare
• To support economic growth.
• The Competition Commission of India aims to establish a robust competitive environment through proactive engagement with all the stakeholders including the consumers, industry, government as well as international jurisdictions.

Functions of Competition Commission of India (CCI):

• It is the duty of the CCI to eliminate such practices that have adverse effect on competition.
• It is mandated to promote and sustain competition while protecting the interests of consumers.
• CCI ensures freedom of trade in the Indian market.
• The Commission also gives opinion on competition issues when asked by a statutory authority which is established under law.
• It is also required to undertake competition advocacy.
• The CCI also creates public awareness and imparts training on competition issues.
• Additionally, an appellate body called ‘Competition Appellate Tribunal‘ was also set up based on the Amendment Act of 2009, which allows for final appeal to Supreme Court of India.
• CCI is therefore, fully empowered to carry out the mandated functions.

Regulation of combination

The term combination has a broad definition under the ACT, it includes

• Any acquisition of shares,
• Voting rights,
• Control of assets
•  Party to merger or amalgamation of enterprises

Any person/enterprise shall not enter into a combination which is likely to have an adverse effect on the competition and such a combination will be void.

If any person/enterprise proposes to enter into a combination he shall intimate the Competition Commission of India within 30 days of:

• Approval of the proposal relating to mergers and amalgamation by the BOD of the enterprises involved in the process.
• Execution of any agreement pertaining to acquiring of control.

Business Perspective

Business Operations in India necessitates the knowledge of the various laws and regulations and also the implementation of the same. Competition in the market is a huge challenge which needs to be dealt with carefully. It is essential for the businesses to realize that although competition brings prosperity, thriving and striving shall be a continuous process. 

The various matters to be kept in mind by the business houses are:

1. The markets are susceptible to formation of cartels which pose a risk of formation of monopolies. The awareness of the fact that such associations are not permitted under the Competition Act 2002 is essential.
2. When discussions are made with competitors documentation of the same should be done.
3. Any meetings wherein any matter is being discussed, which shall raise issues under the competition law shall be avoided.
4. It is advisable to avoid discussions pertaining to price and the actual cost to the company.
5. Appointment of an Ombudsman for advise on the Competition Law so as to prevent any legal issues may be done.
6. Communication aspects although seem trivial may leave an impact when it comes to abuse of dominant position issues. Any statements made shall be weighed carefully.

The Competition Act 2002 is a comprehensive law and the intent of the legislation is 

To promote fair competition, catch up with the global economy, safeguard the interest of the consumers and ensure a stable market for India.

Objectives

1. To promote healthy competition in the market.
2. To prevent those practices which are having adverse effect on competition.
3. To protect the interests of concerns in a suitable manner.
4. To ensure freedom of trade in Indian markets.
5. To prevent abuses of dominant position in the market actively.
6. Regulating the operation and activities of combinations (acquisitions, mergers and amalgamation).
7. Creating awareness and imparting training about the competition Act.

Important features of the competition Act:

1. Competition Act is a very compact and smaller legislation which includes only 66 sections.
2. Competition commission of India (CCI) is constituted under the Act.
3. This Act restricts agreements having adverse effect on competition in India.
4. This Act suitably regulates acquisitions, mergers and amalgamation of enterprises.
5. Under the purview of this Act, the central Government appointed director General for conducting detail investigation of anti-competition agreements for arresting CCI.
6. This Act is flexible enough to change its provisions as per needs.
7. Civil courts do not have any jurisdiction to entertain any suit which is within the purview of this Act.
8. This Act possesses penalty provision.
9. Competition Act has replaced MRTP Act.
10. Under this Act, “Competition Fund” has been created.

Competition Act, 2002 is an act that is provisioned keeping in view the economic development of the country and establishes a commission to prevent the practices which have adverse effect on the competition to promote and sustain competition in the Indian market. Also, it is established to protect the interests of consumers and to ensure the freedom of trade that is carried on by the various participants in the Indian market. It successfully replaced the Monopolies and Restrictive Trade Tactics Act, 196 and came into effect on 1st Sept 2009.

In cases where the compliance of Competition Act is breached, the Commission have various reforms to levy a penalty of such an entity. Let’s see various scenarios under Competition Act, 2002 where the Commission can levy a penalty of a business entity or person.

Following are the penalties under Competition Act, 2002:

Commission can whole sole setup an enquiry to see and judge the compliance of various orders under Competition Act 2002, by a business entity. In case the person or entity fails to comply with the orders and/or directions set up under the Competition Act 2002, he is liable to be punished with a monetary fine which could extend up to one lakh rupees for each day of non-compliance. However, this penalty cannot be more than ten crore rupees at single instance. This is especially applicable towards sections 27, 28, 31, 32, 33, 42A and 43A of the Competition Act 2002.

In case the person breaches the orders and directions of the Competition Act 2002 under sub section (2) of Section 42, then he shall be punished with an imprisonment for a term which may extend up to three years and /or with a monetary penalty of twenty-five crores as the Chief Metropolitan Magistrate of Delhi may deems fit.

However, a person or entity under this Act is empowered to make an application to Appellate Tribunal about recovery of compensation for any loss or damage that have been done due to such a non-compliance by another person or entity. And the Commission then can either approve, sanction or exempt the non-compliant company in this relation and order them to fulfill the losses.

Penalty for failure to comply with the directions of commission and Director General:

In any case if a person or entity fails to comply with the direction given by the Commission under the sub-section 2) and 4) of section 36 or the directions given by the Director General while exercising the powers referred to in sub section 2) of section 41, and that too without any reasonable cause, then such a person will be punishable and shall have to fulfill a fine which could extend up to the sum of one lakh rupees for each dayof non-compliance. However, this sum of penalty could not exceed one crore rupees.

Penalty for non-furnishing of Information on combinations:

In case any person or entity fails to give notice to the Commission under sub-section (2) of section 6, then such a Commission shall be imposed by a penalty which may extend up to one percent of the total turnover of the assets of such a combination.

Penalty for making false statement or omission to furnish the material information:

In case a person or a party makes statement which is false in any material or they know that they are furnishing a false material and/or omits to submit the material towards compliance of the Competition Act 2002, then such a person is liable to a penalty of not less than fifty lakh rupees and it may extend maximum to one crore rupees as may be determined by the Commission.

Penalty for the offences in relation to furnishing the information:

In case a person who is required to furnish an information under the Competition Act 2002 in form of any or documents or any other kind and makes a statement which he knows is falls and/or omits some of the material information, or willfully alter them or try to suppress or destroy any such document then such a person is liable to be punished with a monetary fine which may extend up to one crore rupees.

Till the 1960s, India was plagued with cases of black marketeering, hoarding, inadequate weighing and food adulteration. These were problems that affected the well-being of the consumer and amount to consumer exploitation.

The consumer movement began in the 1960s and gained momentum in the 1970s. Consumer dissatisfaction started to be demonstrated through the written word and in articles and newspapers.

The level of dissatisfaction with sellers and manufacturers and their practices resulted in consumers raising their voice. Resultantly, the government decided to give recognition to consumer protection by enacting the Consumer Protection Act on 24th December 1986. The Act was aimed at protecting the rights of the consumers and ensuring free trade in the market, competition and accurate information to be available. This day is now observed as National Consumers’ Day.

A consumer is an important participant in the market. In case of consumer exploitation, the rights of the consumer must be protected. There are six consumer rights as mentioned in the regulatory Consumer Protection Act of 1986.

Consumer Rights

There are six broad consumer rights defined as per the Consumer Protection Act, 1986. These are:

Right to Safety

The Consumer Protection Act defines this right as a protection against goods and services that are ‘hazardous to life and property’. This particularly applies to medicines, pharmaceuticals, foodstuffs, and automobiles. The right requires all such products of critical nature to life and property to be carefully tested and validated before being marketed to the consumer.

Right to Information

This right mentions the need for consumers to be informed about the quality and quantity of goods being sold. They must be informed about the price of the product and have access to other information specific to the product that they wish to consume.

Right to Choose

The consumer must have the right to choose between different products at competitive prices. Thus, the concept of a competitive market where many sellers sell similar products must be established to ensure that the consumer can actually choose what to consume and in what quantity. This is to avoid monopoly in the market.

Right to Seek Redressal

When a consumer feels exploited, he/she has the right to approach a consumer court to file a complaint. A consumer court is a forum that hears the complaint and provides justice to the party that has been hurt. Thus, if the consumer feels he/she has been exploited, they can approach the court using this right.

Right to be Heard

The purpose of this right is to ensure that the consumer gets due recognition in consumer courts or redressal forums. Basically, when a consumer feels exploited, he has the right to approach a consumer court to voice his complaint. This right gives him/her due respect that his/her complaint will be duly heard. The right empowers consumers to fearlessly voice their concerns and seek justice in case they are exploited.

Right to Consumer Education

Consumers must be aware of their rights and must have access to enough information while making consumption decisions. Such information can help them to choose what to purchase, how much to purchase and at what price. Many consumers in India are not even aware that they are protected by the Act. Unless they know, they cannot seek justice when they are actually hurt or exploited.

Consumer Protection Councils:

The Act provides for setting up a Central Consumer Protection Council by the Central Government and State Consumer Councils by each state of India. The Central Consumer Protection Council shall consist of (1) the Minister in Charge of Consumer Affairs in the Central Government who shall be its chairman and such number of other official or non-official members representing such interests as prescribed.

It is required by the Act that Central Consumer Protection Council will meet as and when necessary. However, at least one meeting of the Central Council must be held every year. The objects of the council are to protect the rights of consumers and promote their interest as listed above from (a) to (f).

The State Consumer Councils to protect consumer rights as per amendment in the Act in 1993 will consist of (1) the Minister in Charge of Consumer Affairs in the State Government concerned and members of other officials and non-officials representing such interests as may be prescribed by the State Governments. As in the case of the Central Council, the objects of State Councils will be to protect the rights of consumers as listed above from (a) to (f) within the State.

Consumer Disputes Redressal System:

Under the Consumer Protection Act 1986 three-tier consumer disputes redressal system at the District, State and National levels has been set up.

Thus the Act provides for establishing the following consumer redressal agencies:

1. District Consumer Forum in each district of a state set up by the State Government.
2. State Consumer Commission in each state set up by each State.
3. National Consumer Commission set up by the Central Government.

Composition of Consumer Redressal Agencies:

According to Consumer Protection Act 1986 each District Consumer Forum set up in each district of a State shall consist of a person who is or has been or is qualified to be a district judge. This person will work as president of the district consumer forum.

Two eminent members who have adequate knowledge and experience and have the ability in dealing with problems concerning law, commerce, economics, accountancy, industry, public affairs or administration and one of whom shall be a lady member, especially who is a social worker.

A District Forum has the jurisdiction to deal with the complaints where the value of good or service and the compensation claimed, if any, does not exceed Rs. 20 lakh (as per amendment in the Act in 2002). A complaint by consumers will be filed in a District Forum in case when the opposite party or each of the opposite party if there are more than one resides or carries on business within the district concerned at the time of filing the complaint or any one of the party (if there are more than one) residing or carrying on business in the district at the time of the filing of the complaint if the district forum grants permission for this.

The State Consumer Commission shall consist of:

(1) A person who is or has been a judge of a high court appointed by the State Government,

(2) Two other members of high standing and eminence who have adequate knowledge or experience concerning the problems relating to law, commerce, economics, industry, public administration etc. one of whom shall be a woman.

The State Consumer Commission as per the amendment of the Act in 2002 shall have the jurisdiction to entertain complaints where the value of goods or services and compensation claimed if any exceeds Rs. 20 lakh but is not more than Rs. 1 crore.

The State Consumer Commission will also entertain appeals against the orders of District Forums within the State. Besides, the State Consumer Commissions have been authorized to call for the records and give appropriate orders in case of any consumer dispute pending before the District Forum within the State or has been decided by it if the State Commission finds that a District Forum has exercised a power not vested in it by the Act or has failed to exercise a power or jurisdiction vested in it or acted illegally in exercise of its powers.

The National Consumer Commission will consist of:

(a) A person who is or has been a judge of the Supreme Court and is appointed by the Central Government in consultation with Chief Justice of India. He will also work as president of the national commission,

(b) Four other members of eminence having good knowledge or experience and ability to deal with the problems relating to commerce, economics, law, industry, public affairs or administration and one of whom shall be a woman.

National Consumer Commission has the jurisdiction:

(1) To entertain complaints where the value of goods or services and compensation claimed if any is, according to Amendment Act 2002, one crore or more;

(2) National Commission is authorized to hear appeals against the order of any State Consumer Commission;

(3) The Central Commission has the right to call for the records from the State Commissions.

It is important to note that all forums, commissions appointed under the Consumer Protection Act are in substantial matters not different from the ordinary civil courts. They are quasi-judicial tribunals created to render speedy justice

Remedial Action:

It may be noted that a complaint to a redressal agency may be filed by:

(a) An individual, consumer;

(b) Recognized consumer association,

(c) More than one consumers who have the same interest; and

(d) The State or Central Government. The complaint to a redressal agency must be in relation to goods sold or delivered or service provided to the complainant.

If the redressal agency is convinced that any of the allegations in the complaint filed before it is true, it shall issue an appropriate order to the opposite party.

This order may be any of the following types:

1. To remove the defect if found to be true by the appropriate laboratory from the good in question;
2. To replace the defective goods with the new goods of the same type free from the defects;
3. To return to the complainant price of the defective good or charges paid by him;
4. To pay the compensation to the complainant as may be decided by the redressal agency for the loss suffered by him;
5. To remove the defects or deficiencies in the service rendered to the individuals;
6. To stop the unfair or restrictive trade practice or give undertaking not to repeat in future;
7. Not to supply hazardous goods;
8. To withdraw the hazardous goods being offered for sale; and
9. To give adequate costs to the parties in question.

Penalties:

The Consumer Commissions are authorized to impose penalties on trader or person against whom complaint is made if he fails to comply with the order of the redressal agency. The penalty or punishment may involve imprisonment for a period not more than 3 years or a fine of not more than 10 thousand rupees or both.

The Consumer Protection Amendment Act 2002:

The Consumer Protection Act 1986 held great hopes for the helpless consumers who have been denied fair deal by the unscrupulous producers or traders. In the implementation of Consumer Protection Act 1986 some deficiencies in the Act were noticed. Therefore, some important amendments were made in the Act by Consumer Amendment Act 2002. With this amendment all the redressal agencies (District Forums, State Consumer Commissions and Central Consumer Commission) have been given the powers of a judicial magistrate of a first class for trial of offences within their jurisdiction, subject of course to the right of appeal from a lower redressal agency to a higher one.

The important changes made by the Consumer Protection Amendment Act 2002 are the following:

1. Both MRTP Act and Consumer Protection Act deal with unfair and restrictive trade practices. Amendment made in Consumer Protection Act in 2002 has clarified that the expression ‘restrictive trade practices’ will also include delay in supply of goods or services and rise in prices in the mean time.
2. Provisions regarding unfair trade practices have been made more stringent. It is now provided that if the representations contained in an advertisement for the sale or supply of a good or service are misleading, the advertiser can be held responsible for taking corrective steps at his own cost apart from other obligations.
3. The District Forums would be able to deal with cases involving the payment of compensation of Rs. 20 lakhs against the pre-existing Rs. 5 lakhs. Similarly, the State Consumer Commissions can now deal with cases involving compensation up to Rs. 1 crore while National Consumer Commission can deal with cases involving compensation of Rs. 1 crore or more instead of pre-existing Rs. 25 lakhs.
4. In the event of the death of the complainant, amendment in the Act in 2002 now provides for substitution of his legal representatives. Surviving legal representatives can file a complaint or get substitution in place of the existing one.
5. In regard to goods hazardous to life or safety of the public, traders supplying goods will be liable if it can be proved that the supplier could have known with due care that the goods or services supplied were hazardous to the public. Besides, liability of suppliers of spurious products and services is made clear in the Amendment Act 2002.
6. An important amendment relates to the meaning of expression ‘manufacturing’. Manufacturing has now been defined to include merely assembling parts of goods made by others or putting one s own mark on any good manufactured by others.
7. Amendment Act 2002 makes the restrictive trade practices more stringent by including under it trade practice which tends to the manipulation of price or the conditions of delivery of goods or affect the flow of supplies of goods in the market in a manner that imposes undue costs or restrictions on the consumers. Restrictive trade practice also includes delay in the delivery of goods beyond the period agreed to by the traders or delay in providing services when such delay is likely to lead to rise in their prices.
8. According to an important provision in the 2002 Amendment Act, in trading or commerce of goods or services misleading or deceptive conduct of traders or suppliers would be treated as unfair trade practice. Those who make misleading or false representation luring consumers to buy goods or services would fall within unfair trade practice and would be held liable. Under the Consumer Protection Amendment Act 2002 the consumers who are lured to enter into such a contract would be entitled to get the damages.

Similarly, Amendment Act 2002 also covers the unfair treatment to the consumers who have suffered by being lured in the schemes offering gifts, concessional prices or some items free of charge depending on the official results of a particular scheme. This amendment provides remedy to the consumers who might be unfairly treated in such schemes by requiring the promoter to disclose proper information regarding the results of a scheme by appropriate timely publication of results in newspapers, etc.

Proposed Amendments in Consumer Act, 2010:

The Cabinet has given clearance to the proposed amendments to the Consumer Protection Act which is likely to be passed by the parliament in winter session of 2010. These amendments seek to make the consumer protection law more responsive to consumer complaints through quicker disposal of cases. The proposed amendments have widened the scope of the law, specified time limit for quicker disposal of cases and rationalized qualifications for appointment of members of consumer forums at the state and national level.

Evaluation of Consumer Protection Act:

Consumer Protection Act with amendments made in it in 2002 is a quite comprehensive piece of legislation that seeks to protect the consumers against unfair and exploitative practices of manufacturers. Consumer awareness in India is now fast growing. As a result, the number of complaints by the end of 2002 before District Forums had been about 14 lakhs, that before State Commissions 2 lakhs and that before National Commission about 21,000 all of which amount to the total of about 162,100.

It is important to note that Consumer Protection Act is additional law protecting consumers but not a derogation of any other laws which protect consumers. Services or goods provided by those dealing in information technology, electronic commerce (E-Commerce) are also liable under the Consumer Protection Act apart from the Act governing Telecommunication Regulatory Authority of India (TRAI) which regulates not only transactions between competing providers of telecommunication services but also regulate them to protect consumer interests.

Similarly, the Consumer Protection Act is in addition to MRTP Act which also tries to protect the interests of consumers by controlling monopolistic and restrictive trade practices. According to G.L. Sanghi, “The tribunals created under the Consumer Protection Act are in substantial matters not different from the ordinary civil courts. They are quasi-judicial tribunals created to render inexpensive and speedy justice. They provide additional remedies through the newly created forums”.

A Comprehensive Act:

The Consumer Protection Act is quite a comprehensive legislation. Under the Consumer Protection Act not only manufacturers and suppliers of goods but also of such services as insurance providers, medical treatment, lending and recovery of bank loans also come within the purview of the Act. A few such important cases are worth explaining.

Consumer Protection Act and Medical Practitioners:

The applicability of Consumer Protection Act to medical practitioners is a highly complicated issue and the case relating to it went even up to the Supreme Court of India. In defence of medical practitioners it was argued that their services are excluded category being services under “Control of Personal Services”. Supreme Court rejected these arguments and brought medical practitioners, hospitals and nursing homes where services are rendered for valuable consideration under the purview of Consumer Protection Act.

Doctors and hospitals committing medical negligence have therefore become liable and damages for medical negligence can be claimed from them. Though this has created fear and concern among medical practitioners and private hospitals but this will help in preventing medical negligence on the part of doctors and hospitals.

It has been widely reported in the media about medical negligence, for example, of operating a wrong eye, removing a kidney of a person without his consent, leaving screw, scissors and a towel in the abdomen of a patient, giving a wrong injection leading to the death of a patient. For all these acts of negligence compensation can be claimed from doctors and hospitals and also penalties can be imposed on them.

In an important case Supreme Court held that a medical practitioner may be liable if there was a negligence in respect of diagnosis and/or treatment given to a patient provided it can be demonstrated that the negligent act was not based on reasonable and responsible information as to the kind and quality of treatment.

Insurance Companies and Consumer Protection Act:

One of the important categories where Consumer Protection Act has been usefully applied is the claims against insurance companies. Many insurance companies (including public sector insurance companies) often deny medi-claims to the insurers on one pretext or the other.

Generally insurance companies deny claims for damages to the insurers that they did not disclose the pre-existing disease they were suffering from at the time of getting insured. In many cases consumer commissions have rejected the arguments of insurance companies and have awarded damages to the insurers and require insurance companies to fulfill their contractual obligations.

In a recent case of accident claim the United India Insurance Company denied to pay the damages on a car which met with an accident on the ground that it was being plied without the ‘fitness certificate’ as required under the Motor Vehicles Act. In this case in Nov. 2007, National Consumer

Commission held that the insurance companies, if the terms of the policy were not breached, cannot refuse to entertain claims on the pretext that the insured violated some other laws or conditions “as the insurance is a matter of contract between the two parties.”

Recovery of Bank Loans and Consumer Protection Act:

The wide applicability of Consumer Protection Act can be understood from the recent judgment of the State Consumer Commission of Delhi which slapped a fine of Rs. 55 lakhs on ICICI Bank for trying to recover a vehicle loan by hiring musclemen. The goons of recovery agent of the bank forcibly dragged out a youth from the car, beat him up with iron rods and left him bleeding and drove away with the vehicle. Justice J.D. Kapoor, president of the commission, said, “We hold ICICI Bank guilty of the grossest kind of deficiency in service and unfair trade practice for breach of terms of contract of hire-purchase/loan agreement by seizing the vehicle illegally.”

Conclusion:

In view of the above usefulness and wide applicability of Consumer Protection Act, Mr. G.L. Sanghi is right in concluding, “In each and every area involving sale of goods and services for valuable consideration a consumer stands protected. The polarity of this law is unlimited. Its machinery is effective and awesome to the delinquent trader with solace to the consumer. As experience grows further improvements will un-doubtetedly make this remedy more and more useful”.