COMPETITION LAW ASSIGNMENT

TOPIC- MISLEADING ADVERTISEMENTS AND

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 ABSTRACT

Advertisements are commercial instruments which are made with the intention to promote a
particular product. They also in a way enable the consumers to compare similar products. Such
activity is a part of advertiser’s freedom of speech and expression and is covered under the
ambit of Article 19. However for the protection of Article 19 the advertisements should involve
truth and must not be fraudulent. There exists a very fine line between the advertisement and a
“misleading advertisement”. When such a misleading advertisement affects the competitors,
there is a dearth of any platform for their redressal. Hence there exists a need for the redressal
mechanism for competitors as competitors can face irreparable injury due to a misleading
advertisement. Misleading advertisements does not come under the ambit of Competition Act as
they do not fit into “anticompetitive activities” or “abuse of dominance”. Moreover, competitor
could not file appeal under The Advertising Standards Council of India (ASCI) as it has lost its
independence as it came under the control of Ministry of Consumer Affairs, Food and Public
Distribution. Therefore, its role changed from an independent redressal platform to a consumer
protection unit. Therefore, an independent and a regulated body of experts should handle such
grievances of competitors and the ambit of competition act must be increased to include this
issue which has been hushed for a long time.

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 1. INTRODUCTION

We live in a world full of commercialization and advertisements form the backbone. We can see
and perceive the advertisements all the time. Advertisements are made only with the intention
that it appeals to consumers and increase the sale of the product. And for the very same purpose
advertisements are designed in such a way that consumers can relate themselves with the
protagonist and hence get persuaded to buy the product. To increase the appeal of advertisements
companies use celebrities, catchy taglines etc. Advertisements are linked to the competition as
they sway the public towards one product by showcasing it as superior over the other brands
which may also reduce the market share of a competitor. It is done as a particular advertisement
can disparage a competitor’s product which can lead to loss to public faith in that product. Hence
a very thin separates an appealing advertisement from the misleading ones.

This aim of this paper is to go through and analyse (i) the concept of commercial speech with
regards to Article 19 of the Constitution of India, (ii) the issues revolving misleading
advertisements, (iii) the challenges faced by competitors by the misleading advertisements and
the available regulatory framework, (iv) suggestions for a revision in the existing legislation and
the redressal mechanisms.

2. ARTICLE 19 AND THE FREEDOM OF COMMERCIAL SPEECH

“Our lives begin to end the day we become silent about things that matter.”

– Martin Luther King, Jr.

Freedom of speech and expression forms the silver lining of a democratic setup and also works
as an ailment in all the cancers of civil, political and other fundamental cancers that devour the
state. Article 19 of the Constitution of India lays down the right to freedom of speech and
expression. It means that everybody has to right to express their opinion or what they feel about
anything in any medium of communication. Individuals have right to speak and express their
thoughts. This article which seems very precise and clear was under a lot of contentions with
respect to the meaning of commercial speech and extent to which commercial speech can be
exercised. A closer look at Article 19 would help us understand its evolution and current
compass of the Article.

In the case of Romesh Thappar v State of Madras 1 it has been laid that “Freedom of speech and
expression also include that of the press. It includes the expression of ideas through signs,
pictures or movies, right to publicize his expression etc. Hence, it can be concluded, that the
scope of Article 19 is a wide one. The idea behind Article 19 is to provide maximum strength to
put forward one’s ideas and opinions. Although initially interpreted as an Article which
safeguards freedom of speech and expression of individuals, the intention was to protect any
communication that reaches the masses. This, on the one hand, ensures that there is commercial
1
1950 AIR 124, 1950 SCR 594

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freedom given to those who wish to market their product a certain way by associating it with a
tagline, jingle, assurance, guarantee or a celebrity. However, on the other hand, the reasonable
restriction on this freedom is in the form of a censorship which ensures that a consumer is not
stripped off his precious little, and left at the sake of a corporate giant.”

The Supreme Court in the case of Indian Express Newspaper v. The Union of India 2 by implied
means considered commercial speech to be partially protected under Article 19. The court stated
that “We are of the view that all commercial advertisements cannot be denied the protection of
Article 19(1)(a) of the Constitution merely because they are issued by businessmen and its true
character is detected by the object for the promotion of which it is employed”.

Finally, in the case of Tata Press Ltd v Mahanagar Telephone Nigam Ltd. made “commercial
speech” part of freedom of speech guaranteed under Article 19(1) (a). Therefore it has widen the
ambit or Article 19 as now the right to know is covered under it. It is so as it involves the
transmission of factual information by the advertiser’s to the consumers which forms the basis of
consumer’s decision.

3. UNFAIR TRADE PRACTICES

It is seen that business is not just focusing on own products but it also involves competitors
trying to reduce the goodwill of other competitors so that it can bring them loss. In order to
achieve this, a lot many tactics are followed which includes giving discounts, offers, schemes
and obviously a lot of advertisements.

“Unfair Trade Practices” is one other business technique regarded as controversial. Section 2 (r)
of the Consumer Protection Act, 1986 also defines the term as: “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”

Section 36 A of Monopolies and Restrictive Trade Practices Act, 1969 defines the term as: “A
trade practice which, for the purpose of promoting the sale, use or supply of any goods for the
provisions of any services, adopts any unfair method or unfair or deceptive practices”. This
section opens up a wide ambit and takes oral, written as well as visual representations under its
shelter.

It can be concluded from above that unfair trade practice includes all the commercial practices
and activities which are not favorable or are undesired. As laid down in Section 2 (r) (i) to (iv)
of the Consumer Protection Act, 1986- the practices may be in the form of a claim, fact,
representation with regards to its standard, quality, quantity, grade, composition, style, model,
sponsorship, its general condition etc. Now this section is a complete section in itself and it also
follows that it has a strong intent but still it does not specify the acts which are not included in
the unfair trade practices. And this is the point where the competitor’s position and stand
2
1986 AIR 515, 1985 SCR (2) 287

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weakens as there are no exceptions marked or laid down in the favour of competitors. Neither
does the section outline acts as “ethical business practices” as opposed to “unfair trade
practices.”

Now it is observed that these legislations only focus on “Consumer Protection” and “Fair
Competition” is not their primary focus. So even though these definitions are comprehensive in
itself, they are of limited utilization with respect to advertisements in the view of competitors.

In this paper, we, therefore, try to discuss how effective is the mechanism for providing a remedy
to a competitor. Clearly, we can conclude that the Consumer Protection Act, 1986 does not have
any promises to make to a competitor.3

4. MISLEADING ADVERTISEMENTS

Making any advertisement involves choosing what to be projected, how the things need to be
shown, in what way the product needs to be advertised and what contents should not be
displayed. In doing so sometimes it so happens that something which is not the truth is shown in
the advertisements and reality is ignored. This leads to the misleading of consumers and
competitors.

P. Ramanatha Aiyar has defined Misleading Advertising in his dictionary Advanced Law
Lexicon as: “Advertising that deceives or is likely to deceive those to whom it is addressed or
whom it reaches and, because of its deceptive nature, is likely to affect consumers’ behavior or
injures or is likely to injure a competitor”.4

No right or principle can said to be absolute and hence the same concept applies to the right of
publishing advertisements as well. It is expected out of advertisements that they will match some
standards. Hence there exist restrictions to protect the interest of consumers and competitors.
With the psychological reach of marketing and advertisements through the theory of behaviorism
as propounded by John B Watson, it goes without saying that the strategy of commercial giants
is such that it encourages people to identify themselves and subject themselves to
advertisements. Hence there has to be attached to this phenomenon a neutralizing technique, that
comes in the form of a responsibility. A corporate social responsibility that people cannot be
misled into believing a false attribute of the product so supposed to be sold to them.

Misleading advertisements are in actual a great threat to the society and also the well being of
economy as they put consumers as well as other competitors in wrong notions and detriment
their interests. But the point to be noted is that even after knowing that for both consumers and
competitors, the threat is equal still more emphasis is paid towards the protection of consumers
and interests of competitors are neglected.

3
https://www.researchgate.net/publication/264752841_The_Indian_advertising_
How_effective_is_the_regulatory_mechanism , excess on 9/April/2019, time 9:10 pm
4
Aiyar, P. Ramanatha (2005). Advanced Law Lexicon, 3, Wadhwa and Company Nagpur, 3034 (3rd ed)

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A question which arises at this point is that how far can the legislation differentiate between a
misleading advertisement and an advertisement made just to make the product survive the
market. As a market is composed of the two driving forces ie buyer and seller, the law for
misleading advertisement should be such as to protect the interest of both the stakeholders. If law
is made keeping in mind only the interest of buyers then it will become difficult for sellers to
even survive or introduce any new product in the market. On the other hand if corporates interest
are tried to be protected, it may happen that advertisements may lose its essence.

It is a basic understanding that a product cannot be viewed in false light. Hence a packet of
Maggi, when sold in the market always has a pictorial representation accompanied with
vegetables. The seller intends that the buyer manually “adds” such products as a taste enhancer.
However, the visual representation of something that does not exist as is depicted may be a
misleading advertisement if we take a strict interpretation. Since it is not possible for the
competitor to add dried vegetables himself as his profit margin reduces, his intent still remains
that the ultimate consumer manually adds vegetables to enhance the taste and nutrition benefits
of the snack. It is a highly suggested topping. In such a scenario would the representation of
Maggi with vegetables on the outer cover qualify as a misleading advertisement or not, is a
question left to interpretation.

5. REDRESSAL MECHANISM

Competition Act, 2002:

A very close analysis of misleading advertisements shows that it has its adverse effect on both
the consumer and the competitors. Still misleading advertisements are not prima facie covered
under the antitrust laws. Adverse effects of such advetisements include that consumers may get
influenced and buy something which by misrepresentation of facts or by fraud is portrayed to be
something which in reality it is not and on other hand a competitor may suffer loss in business or
repute owing to false claims by the opponents. The Black’s Law Dictionary defines a competitor
as: “A person endeavoring to do the same thing and each offering to perform the act, furnish the
merchandise, or render the service better or cheaper than his rival.” 5

The interlink between the competition law and misleading advertisements can be analyzed and
understood only upon knowing the history and intent of the Competition Act, 2002. Monopolies
Restrictive Trade Practices (MRTP) Act, 1969 was a precursor to the Competition Act, 2002. In
order to stop monopolization of market and any kind of business, the MRTP Act was enacted as
is also clearly seen from its name itself. During the time this act was enacted India was basking
in its newly got independence and was governed mainly by the socialist principles. There was no
concept to give the rights to private entities. It was the opinion of economists of that time that
Indian economy requires power vigilance so that only a select few don’t enjoy the benefits in

5
Black’s Law Dictionary, (1991), 284 (6th ed.)

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comparison to majority who was below poverty line. Hence the MRTP Act displayed the
authority of Government over the resources. 6

But as the time passes India witnessed a great shift in the economic conditions which lead to the
MRTP Act being withered away. New domestic as well as foreign players entered the markets
because of the shift of India from Nehruvian model to a liberalized model of economy. As a
result Raghavan Committee was set to suggest a new law repealing the MRTP Act, 1969. 7 Based
on the committee report the Competition Act was enacted on 13th January 2003.

Anticompetitive activities:

Section 3 prohibits agreements relating to: “production, supply, distribution, storage, and
acquisition or control of goods or services which causes or is likely to cause an appreciable
adverse effect on competition within India”. Hence agreements in any way relating to Anti-
Competitive activities are prohibited under Section 3 of the Competition Act.

Any agreement which have any form of bad effect on the competition is termed as an anti-
competitive agreement. Anticompetitive agreements include, but are not limited to- “an
agreement to limit production and/or supply; an agreement to allocate markets; an agreement to
fix the price; a bid rigging or collusive bidding; a conditional purchase/ sale (tie-in arrangement);
an exclusive supply/distribution arrangement; a resale price maintenance; and a refusal to deal.”

The above list of agreements make it easy to understand the intent of legislators, though the list
is not exhaustive. An advertiser and a company share a relation of a service provider and client.
So if an advertiser publicizes false claims, it cannot fall under this section. Also this part in no
way expressly prohibits any corporation from making false claims in their visual or print
advertisements. Even in the broadest interpretation of this section, in no way make it possible to
cover misleading advertisements in it.

Abuse of Dominance:

All the practices which prevent a healthy competition come within the ambit of abuse of
dominance. Situations to support this are when a company having a great market share misuses
its position and try to dominate its competitors or charge consumers more etc.

Dominance refers to a position of strength which enables an enterprise to operate independent of

6
Anonymous, Chapter III History and profile of ASCI Pg. 51 Available at
http://shodhganga.inflibnet.ac.in/bitstream/10603/3434/7/07_chapter%203.pdf Last accessed on 12th April,2019 5:29
PM
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Raghvan Committee. (2016). Committee report on Competition Law

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conditions to similar transactions, denying market access and using a dominant position in one
market to gain an advantageous position in another market.8

It is not that only dominant company makes false claims, even the companies which are
emerging use these tactics so that their brand name can get established or their market share
increases. Under Section 18 it is necessary for the Commission to eliminate practices that have
bad effect on any form of competition, take steps so that competition can be promoted and
sustained, protect the consumers from being violated and ensure freedom of trade of the
competitors. This duty is subject to the provisions of the act, which does not mention the term
misleading advertisement anywhere.

Section 19 empowers the Commission to conduct an inquiry into certain agreements and
dominant position of the enterprise. The Act provides for criterion based on which the
Commission determines if the transaction results in the appreciable adverse effect. The section
should also be having the deceptive practices of marketing as one of the criterion but it is not
added by the legislators in the section.

The point here to be noted is that the section 36 of the MRTP Act, 1969 had specifically included
misleading advertisements under the definition of Unfair Trade Practices but on the other hand
the Competition Act, 2002 does not provide for redressal against misleading advertisements.
Such omission in the Competition Act, 2002 can be gauged by the varying legislative intents
behind both acts. The legislative intent of the MRTP Act illuminated that the provisions dealing
with Unfair Trade Practices were primarily consumer-oriented whereas the Competition Act
seeks to redress the grievance of competitors with regards to unfair trade practices. Due to the
redundancy of MRTP Act, the need for a new statute was felt. During the same time, the
Consumer Protection Act, 1986 was passed seeking to redress consumer grievances against
manufacturers, producers, suppliers, and retailers. The Act incorporated provisions regarding
fraud and deceptive practices hence developing a new law for unfair trade practices. In light of
the same, the need to include provisions regarding unfair trade practices was not felt during the
enactment of the Competition Act. The Competition Act broadly serves the interest of consumers
and smaller competitors against their contemporaries. Though the act has dealt with their
problems to a larger extent, it still has some grey areas including the issues arising due to
misleading advertisements and their implications on the competitors. The Act is not exhaustive
and operates hand in hand with other laws and the provisions shall have effect notwithstanding
anything inconsistent therewith contained in any other law.9

6. CONCLUSION AND SUGGESTIONS

8
Dubey, R. (2006). Indian Competition Act: An Overview, (27 July, 2005). Accessed on: 18th April, 2019
9
Sunaina Kapoor and Neeraj Dubey PSA 2009 Page 2 Available at www.psalegal.com/pdf/TMT-BulletinIssue-
III11062009042225PM.pdf Last accessed on March 13 ,2019 7:08 PM

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A lot of legislations and laws cover the concept of unfair trade practices and market balances but
still no specific provision exist on the effects of misleading advertisements on competitors. The
burden of this thing can be put on the fact that many competitors themselves are knee deep into
committing this offence and others want to stay away from the technicalities of legal process
involved in protecting their own interests. Also it is the case that most competitors would find
even the slightest legal proceedings defamatory as well as expensive. And also it may happen
that competitors use false legal notices to lower the name of any good and popular brand. Hence
it is a major risk as if a brand is more famous it is more likely that any complaint against it will
come to knowledge of consumers very fast. Moreover consumers are more worried about quality
levels and packaging rather than advertisements and cases of false advertisements.

India being a welfare nation only focuses on the issues of consumers and not the issues of the
competitors. Blame for this cannot be put on the legislators as this problem has never been
highlighted by the competitors fearing the consequences which may follow after that. However,
it’s the time that ambit of Competition law is to be increased so that this issue can be included
which for a very long time has been kept in low voices of corporate survival. The intent of
competition act is to curb all form of unhealthy competition which can promote the healthy
competition. The only thing which can improve competitor’s situation is the change in existing
regime. It is suggested that misleading advertisements should specifically be included in Section
18 and 19. It will in a way empower the Commission and hence Commission will take right steps
to curb the competitors from misleading advertisements.

The public interest is promoted by the competitive environment and that is why FSSAI and
ASCI should encourage the competitors to bring the claims before it. At the same time it is the
need of the hour to have an independent redressal platform for competitors. Here independent
forum means which give more importance to the issues to competitors rather than only focusing
on the issues of consumers. This forum should include the experts in the area to have a balanced
opinion in each case. Such experts should be elected by the luminaries in the said field. Every
expert elected should have an equal say in the concerned matter and to regulate all the debates
and discussions a Presiding Officer can be appointed. Presiding Officer may be selected on the
basis of seniority. In every decision it is important that losses suffered by other competitors due
to misleading advertisements should be considered and decision may be given by a simple
majority. The body should be independent, fair and practical in each aspect. Courts can keep a
check on the power of forum and if any decision is irrational it may be interved by the court.
This would mean that no issue of power will take place. The decision should be given by the
panel within 6 months and if any member becomes bias there should be a procedure to remove
him. If such a forum comes into picture it would be a great step towards redressal mechanism for
competitors.

Bibliography

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 Books

1. James P. Nehf: Misleading and unfair advertising; HANDBOOK OF RESEARCH ON

 Websites

1. www.legalblog,com
2. www.ipleaders.com
3. www.manupatra.com

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