MARKETING, ADVERTISING AND PRODUCT SAFETY-ETHICAL ISSUES

• VIRTUALLY ALL ASPECTS OF MARKETING-FROM THE DEVELOPMENT OF NEW PRODUCTS TO PRICING, PROMOTION, AND SALES- RAISE ETHICAL QUESTIONS.

• MARKETING CONSISTS OF THE PERFORMANCE OF BUSINESS ACTIVITIES THAT DIRECT THE FLOW OF GOODS AND SERVICES FROM THE PRODUCER TO CONSUMER OR USER.

CONSUMER RIGHTS• TRADITIONALLY, PRODUCERS ARE REGARDED

AS HAVING THE FOLLOWING RIGHTS:1. THE RIGHT TO MAKE DECISIONS REGARDING THE

PRODUCTS OFFERED FOR SALE, SUCH AS THEIR DESIGN AND STYLE.

2. THE RIGHT TO SET THE PRICE FOR PRODUCTS AND ALL OTHER TERMS OF SALE, INCLUDING WARRANTIES.

3. THE RIGHT TO DETERMINE HOW PRODUCTS WILL BE MADE AVAILABLE TO CONSUMERS(DECISIONS ABOUT DISTRIBUTION CHANNELS).

4. THE RIGHT TO PROMOTE PRODUCTS IN ANY WAY THAT THEY CHOOSE, INCLUDING THE USE OF ANY TRUTHFUL ADVERTISING MESSAGE.

• THESE RULES ARE LIMITED BY THE USUAL RULES OF FAIR MARKET EXCHANGES.

• -THAT IS PRODUCTS MUST BE AS REPRESENTED;• -PRODUCERS MUST LIVE UPTO THE TERMS OF

THE SALES AGREMMENT, AND• -ADVERTISING AND OTHER INFORMATION ABOUT

PRODUCTS MUST NOT BE DECEPTIVE.• CONSUMERS, ON THE OTHER HAND, ARE

TRADITIONALLY RECOGNIZED AS HAVING ONLY THE RIGHT NOT TO BUY-THAT IS RESTRICTED TO “VETO” OPTION.

• THE RIGHTS OF CONSUMERS ARE NOT VIOLATED IF PRODUCERS FAIL FOR ANY REASON TO PROVIDE CONSUMERS WITH GOODS THEY DESIRE.

• MOREOVER, THE BURDEN OF PROTECTING THE INTERSTS OF CONSUMERS FALLS PRIMARILY ON CONSUMERS THEMSELVES.

• IN PARTICULAR, THEY HAVE THE RESPONSIBILITY FOR ACQUIRING THE INFORMATION NEEDED TO MAKE RATIONAL CHOICES.

• THE NUMBER ONE RULE IS THUS CAVEAT EMPTOR, OR BUYER BEWARE.

• IN 1962, PRESIDENT JOHN KENNEDY OF U.S. PROCLAIMED A FOUR-POINT BILL OF RIGHTS FOR CONSUMERS:

1. THE RIGHT TO BE PROTECTED FROM HARMFUL PRODUCTS.

2. THE RIGHT TO BE PROVIDED WITH ADEQUATE INFORMATION ABOUT PRODUCTS.

3. THE RIGHT TO BE OFFERED A CHOICE THAT INCLUDES THE PRODUCTS THAT CONSUMERS TRULY WANT.

4. THE RIGHT TO HAVE A VOICE IN THE MAKING OF MAJOR MARKETING DECISIONS.

• THE FIRST TWO OF THESE RIGHTS ARE NOW EMBODIED TO SOME EXTENT IN CONSUMER PROTECTION LEGISLATION-THE CONSUMER PRODUCT SAFETY ACT (1972), THE FAIR PACKAGING AND LABELING ACT(1966) AND THE MAGNUSON-MOSS WARRANTY ACT(1975).

PACKAGING AND LABELING• CONSUMERS NEED A CERTAIN AMOUNT OF

INFORMATION TO MAKE RATIONAL CHOICES, AND OFTEN THIS INFORMATION IS NOT EASILY OBTAINED.

• THE MORE INFORMATION CONSUMERS HAVE, THE BETTER THEY CAN PROTECT THEMSELVES IN THE MARKETPLACE.

• THE ETHICAL QUESTION, THOUGH, IS, HOW MUCH INFORMATION IS A MANUFACTURER OBLIGATED TO PROVIDE?

• TO WHAT EXTENT ARE CONSUMERS RESPONSIBLE FOR INFORMING THEMSELVES ABOUT THE PRODUCTS FOR SALE?

• MANUFACTURERS OFFER A NUMBER OF REASONS FOR NOT PROVIDING MORE INFORMATION.

• -A DETAILED LISTING OF AMOUNTS OF INGREDIENTS MIGHT JEOPARDIZE RECIPES THAT ARE TRADE SECRETS;

• -LISTING THE KIND OF FAT WOULD PREVENT THEM FROM SWITCHING INGREDIENTS TO TAKE ADVANTAGE OF CHANGES IN THE RELATIVE PRICES OF DIFFERENT OILS;

• -PRODUCT DATING IS OFTEN MISUNDERSTOOD BY CONSUMERS, WHO REJECT OLDER PRODUCTS THAT ARE STILL GOOD,

• AND PACKAGING HAS TO BE DESIGNED WITH MANY CONSIDERATIONS IN MIND, SUCH AS EASE IN FILLING, THE PROTECTION OF GOODS IN TRANSIT, THE PREVENTION OF SPOILAGE, AND SO ON.

• SO THE MANUFACTURERS SAY THEY HAVE A NUMBER OF PRACTICAL CONSTRAINTS.

PRICING• THE QUESTION OF HOW MUCH INFORMATION

SELLERS ARE OBLIGATED TO PROVIDE ARISES ALSO IN PRICING.

• THE PROLIFERATION OF PRODUCTS AT DIFFERENT PRICES MAKES IT DIFFICULT FOR CONSUMERS TO COMPARE EVEN THOSE FROM THE SAME MANUFACTURER.

• AS A RESULT, LOCAL AND STATE GOVERNMENTS NOW REQUIRE RETAILERS TO MARK THE PRICE ON EACH PRODUCT.

• GENERALLY, SELLERS ARE NOT OBLIGATED TO PROVIDE COMPLETE INFORMATION.

• BUT ONLY TO AVOID MISREPRESENTATION.

• HOWEVER, BUYERS ARE ENTITLED TO RELY ON ANY REPRESENTATION THAT ARE MADE TO MAKE MINIMAL ASSUMPTIONS ABOUT THE QUALITY OF GOODS AND THEIR SUITABILITY.

• THESE ARE REFERRED TO IN LAW AS IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR USE.

• HOWEVER, BEYOND THE OBLIGATIONS TO BE TRUTHFUL AND FULFILL WARRANTIES, BOTH EXPRESSED AND IMPLIED, CAVEAT EMPTOR IS THE RULE OF THE MARKETPLACE.

• AN ALTERNATIVE RULE THAT UNDERLIES MUCH CONSUMER PROTECTION LEGISLATION IS THAT MANUFACTURERS HAVE AN OBLIGATION TO PROVIDE RELEVANT INFORMATION.

• THIS IS NECESSARY, AS CONSUMERS CANNOT REASONABLY OBTAIN FOR THEMSELVES SUFFICIENT INFORMATION TO PROTECT THEMSELVES IN THE MARKET PLACE.

• BECAUSE MANUFACTURERS ALREADY HAVE THE INFORMATION AS THEY MAKE KEY DECISIONS ABOUT THE PRODUCTS, THEY CAN PROVIDE INFORMATION IN A COST EFFECTIVE WAY.

DECEPTIVE AND MANIPULATIVE MARKETING

PRACTICES• MARKETING PRACTICES ARE DECEPTIVE WHEN

CONSUMERS ARE LED TO HOLD FALSE BELIEFS ABOUT A PRODUCT.

• EXAMPLESMARKDOWNS FROM A SUGGESTED RETAIL PRICE THAT IS NEVER CHARGED.BOGUS CLEARANCE SALES IN WHICH INFERIOR GOODS ARE BROUGHT IN.

PACKAGING AND LABELING ARE DECEPTIVE WHEN THE SIZE OR SHAPE OF A CONTAINER, A PICTURE OR DESCRIPTION, OR THE USE OF TERMS SUCH AS ECONOMY SIZE AND NEW AND IMPROVED MISLEAD CONSUMERS IN SOME SIGNIFICANT WAY.

• MANIPULATION IS DISTINGUISHED FROM DECEPTION IN THAT IT TYPICALLY INVOLVES NO FALSE OR MISLEADING CLAIMS.

• INSTEAD, IT CONSISTS OF TAKING ADVANTAGE OF CONSUMER PSYCHOLOGY TO MAKE A SALE.

• MORE PRECISELY, MANIPULATION IS NONCOERCIVELY SHAPING THE ALTERNATIVES OPEN TO PEOPLE OR THEIR PERCEPTION OF THOSE ALTERNATIVES SO THAT THEY ARE EFFECTIVELY DEPRIVED OF A CHOICE.

• EXAMPLES OF RELATIVELY HARMLESS FORMS OF MANIPULATION INCLUDE MULTIPLE PRICING, SUCH AS“3 FOR $1” AND “BUY TWO, GET ONE FREE” AND ODD-EVEN PRICING, $2.99 INSTEAD OF $3.00.

WHEN CUSTOMERS ARE ACCUSTOMED TO PAYING A CERTAIN PRICE FOR A PRODUCT, MANUFACTURERS OFTEN REDUCE THE AMOUNT IN ORDER TO MAINTAIN THE SAME PRICE, A PRACTICE KNOWN AS CUSTOMARY PRICING.

• A MORE OBJECTIONABLE FORM OF MANIPULATION IS “BAIT AND WATCH”.

• A PRACTICE IN WHICH A CUSTOMER IS LURED INTO A STORE BY AN ADVERTISEMENT FOR A LOW-COST ITEM AND THEN SOLD A HIGHER PRICED VERSION.

• OFTEN THE LOW COST ITEM IS NOT AVAILABLE.• BUT EVEN IF IT IS, THE ADVERTISED PRODUCT

MAY BE OF SUCH LOW QUALITY THAT CUSTOMERS ARE EASILY “SWITCHED” TO A HIGHER PRICED PRODUCT.

• BAIT ANT SWITCH IS MANIPULATIVE NOT ONLY BECAUSE CONSUMERS ARE TRICKED INTO ENTERING THE STORE BUT BECAUSE THEY ENTER IN A FRAME OF MIND TO BUY.

• THE DIFFICULT ETHICAL QUESTION IN THIS AREA CONCERN THE DEFINITIONOF DECEPTION AND MANIPULATION ANDTHE DIVIDING LINE BETWEEN ACCEPTABLE AND UNACCEPTABLE MARKETING PRACTICES.

MARKETING RESEARCH• COMPANIES ENGAGE IN A GREAT AMOUNT OF

SYSTEMATIC INFORMATION GATHERING ABOUT CONSUMERS.

• THIS IS DONE TO AID THEM IN DEVELOPING NEW PRODUCTS AND PLANNING MARKETING STRATEGIES.

• DATA ARE COLLECTED USING ALL THE TECHNIQUES OF SOCIAL SCIENCE RESEARCH, INCLUDING IN-DEPTHS SURVEYS, FIELD STUDIES, AND CONTROLLED LABORATORY EXPERIMENTS.

• ONE SET OF PROBLEMS FOR MARKETING RESEARCH CONDUCTED BY OUTSIDE AGENCIES CONCERNS THE RELATIONS BETWEEN RESEARCHERS AND CLIENTS.

• ALSO, INTEGRITY IN UNDERTAKING RESEARCH ASSIGNMENTS AND HONESTY IN INTERPRETING DATA AND PRESENTING RESULTS.

• A THREAT TO PRIVACY COMES FROM THE USE OF RESEARCH DATA IN THE GROWING FIELD OF DATA BASE MARKETING, IN WHICH RETAILERS, THROUGH CREDIT-CARD RECORDS AND OTHER INFORMATION, ARE ABLE TO CONSTRUCT DETAILED PROFILES OF INDIVIDUAL CUSTOMERS.

ANTICOMPETITIVE MARKETING PRACTICES• THE MAJOR ANTICOMPETITIVE MARKETING

PRACTICES FOLLOWED ARE:-1. PRICE FIXING

2. RESALE PRICE MAINTENANCE

3. PTICR DISCRIMINATION

4. RECIPROCAL DEALING, TYING ARRANGEMENTS AND EXCLUSIVE DEALING

• THE OVERALL ETHICAL OBJECTION TO THESE PRACTICES IS THAT THEY ARE NOT FAIR FORMS OF COMPETITION.

• IN PARTICULAR, ANTICOMPETITIVE PRACTICES DISTORT PRICES BY PREVENTING THE MARKET FROM SERVING AS A MECHANISM FOR SETTING PRICES FAIRLY.

ADVERTISING• ADVERTISING IS WIDELY CRITICIZED.• EXAGGERATED CLAIMS AND OUTRIGHT

FALSEHOODS ARE THE MOST OBVIOUS TARGETS FOR COMPLAINTS.

• FOLLOWED CLOSELY BY THE LACK OF TASTE, IRRITATING REPETITION, AND OFFENSIVE CHARACTER OF MANY ADS.

• QUESTIONS HAVE BEEN RAISED ABOUT THE MORALITY OF SPECIFIC KINDS OF ADVERTISING.

• SUCH AS ADVERTISING FOR ALCHOHOL AND TOBACCO PRODUCTS AND ADS AIMED AT CHILDREN.

• PARTICULAR ADS ARE ALSO FAULTED FOR THEIR USE OF EXCESSIVE SEX OR VIOLENCE.

• FINALLY, THERE IS GREAT CONCERN ABOUT THE POTENTIAL OF ADVERTISING FOR BEHAVIOUR CONTROL.

• THERE ARE TWO ETHICAL ISSUES IN ADVERTISING, NAMELY-THE CHARGE THAT ADVERTISING USES UNACCEPTABLE MEANS OF PERSUASION-AND THE PROBLEM OF DEFINING AND PREVENTING DECEPTIVE ADVERTISING

• PERSUASION• THERE IS NO DISPUTING THE FACT THAT THE

POWER OF PERSUASION IS SUBSTANTIAL.• THE MAJOR DIFFERENCE IS WHETHER THERE IS

ANYTHING MORALLY OBJECTIONABLE ABOUT THE USE OF THIS POWER.

• DEFENDERS OF ADVERTISING POINT OUT THAT THERE IS ARGUMENT IN ITS FAVOUR.

• ADS THAT CITE GOOD REASONS FOR BUYING A PRODUCT (BY SHOWING ITS USES, FOR EXAMPLE) ORPREFERRING ONE PRODUCT OVER ANOTHER (SUCH AS LOW COST OR BETTER QUALITY)

MAKE A RATIONAL APPEAL TO CONSUMERS AND PERMIT THEM TO EVALUATE THE REASONS AND DECIDE FOR THEMSELVES.

• SIMILARLY, GOOD ADVERTISING APPEALS ON MANY LEVELS;-IT IS AESTHETICALLY PLEASING,-INTELLECTUALLY STIMULATING,-AND OFTEN HUMOROUS OR HEARTWARMING.

• IN MANY ADS, BOTH RATIONAL AND NONRATIONAL ELEMENTS ARE COMBINED FOR GREATER EFFECT WITHOUT REDUCING PEOPLE’S FREEDOM OF CHOICE.

• ANY CRITERION OF RATIONAL PERSUATION MUST CONSIDER THE ENDS FOR WHICH TECHNIQUES OF PERSUATION ARE USED ANDNOT MERELY THE TECHNIQUES THEMSELVES, CONSIDERED AS MEANS.

• CAMPAIGNS AGAINST SMOKING AND DRUG USE ARE NOT USUALLY THOUGHT TO BE OBJECTIONABLE

• BUT IF ADS TO INDUCE PEOPLE TO SMOKE AND ANTISMOKING ADS BOTH EMPLOY THE SAME NONRATIONAL TECHNIQUES OF PERSUATION-INCLUDING SOME THAT PEOPLE CANNOT REASONABLY EXPECTED TO RESIST-THEN THE MORAL DIFFERENCE BETWEEN THEM CANNOT BE SOLELY A MATTER OF THE MORALITY OF THE MEANS.

• SO THE MORALITY OF ADVERTISING DEPENDS, AT LEAST IN PART, ON THE ENDS FOR WHICH CERTAIN TECHNIQUES ARE USED.

DECEPTIVE ADVERTISING• EXAMPLES

– AN AD CLAIMS THAT A CHILDREN’S CEREAL CONTAINS LESS SUGAR THAN AN APPLE. THE CEREAL IS 40 PERCENT SUGAR, AND ITS CALORIES HAVE LITTLE NUTRITIONAL VALUE, WHEREAS AN APPLE CONTAINS MANY NUTRIENS THAT THE CEREAL LACKS.

– AIRFARES ARE OFTEN ADVERTISED FOR ONE-WAY TRAVEL, BUT THIS PRICE IS AVAILABLE ONLY WITH A ROUND-TRIP PURCHASE. THE ADVERTISED AIRFARE ALSO OMITS APPLICABLE TAXES. THE ROUND-TRIP CONDITION AND THE POSSIBILITY OF TAXES ARE REVEALED IN SMALL PRINT ELSEWHERE IN THE AD.

• WHETHER THESE ADS ARE DECEPTIVE IS NOT EASY TO DETERMINE BECAUSE THE TERM DECEPTION DOES NOT HAVE A CLEAR SETTLED MEANING.

• THERE ARE OTHER ADVERTISING CLAIMS THAT ARE FALSE IF TAKEN LITERALLY BUT ARE COMMONLY REGARDED AS HARMLESS EXAGGERATION.EXAMPLES-EVERY RAZOR BLADE GIVES THE CLOSEST, MOST COMFORTABLE SHAVE

-EVERY TYRE, THE SMOOTHEST, SAFEST RIDE; AND -EVERYPAIN KILLER, THE QUICKEST, GENTLEST RELIEF.

• DECEPTION OCCURS WHEN A FALSE BELIEF, WHICH AN ADVETISEMENT EITHER CREATES OR TAKES ADVANTAGE OF, SUBSTANTIALLY INTERFERES WITH THE ABILITY OF PEOPLE TO MAKE RATIONAL CONSUMER CHOICES.

• AT LEAST TWO FACTORS ARE RELEVANT TO THE NOTION OF SUBSTANTIAL INTERFERENCE.

• ONE IS THE ABILITY OF CONSUMERS TO PROTECT THEMSELVES TO MAKE RATIONAL CHOICES DESPITE ADVERTISING THAT CREATES OR TAKES ADVANTAGE OF FALSE BELIEFS.

• THUS, CLAIMS THAT ARE EASILY VERIFIED OR NOT TAKEN SERIOUSLY BY CONSUMERS ARE NOT NECESSARILY DECEPTIVE.

• THE SECOND FACTOR IS THE SERIOUSNESS OF THE CHOICE THAT CONSUMERS MAKE.

• FALSE BELIEFS THAT AFFECT THE CHOICES WE MAKE ABOUT OUR HEALTH OR FINANCIAL AFFAIRS ARE OF GREATER CONCERN THAN FALSE BELIEFS THAT BEAR ON INCONSEQUENTIAL PURCHASES.

PRODUCT LIABILITY THEORY• DO MANUFACTURERS HAVE A RESPONSIBILITY TO

ENSURE THAT A PRODUCT IS SAFE BEFORE IT IS PLACED ON THE MARKET?

• THE RIGHT OF CONSUMERS TO BE PROTECTED FROM HARMFUL PRODUCTS RAISES INNUMERABLE PROBLEMS FOR MANUFACTURERS.

• EVERY PRODUCT CAN BE MADE SAFER AT SOME COST.

• BUT IS THERE A LIMIT TO THE SAFETY IMPROVEMENTS THAT A MANUFACTURER OUGHT TO PROVIDE?

• THREE THEORIES ARE COMMONLY USED TO DETERMINE WHEN A PRODUCT IS DEFECTIVE AND WHAT IS OWED TO THE VICTIMS OF ACCIDENTS CAUSED BY DEFECTIVE PRODUCTS.

THE DUE CARE THEORY• THIS THEORY HOLDS THAT MANUFACTURERS

OUGHT TO EXERCISE DUE CARE.

• THEIR OBLIGATION IS TO TAKE ALL REASONABLE PRECAUTIONS TO ENSURE THAT PRODUCTS THEY PUT ON THE MARKET ARE FREE OF DEFECTS LIKELY TO CAUSE HARM.

• ACCORDING TO THIS THEORY, MANUFACTURERS ARE LIABLE FOR DAMAGES ONLY WHEN THEY FAIL TO CARRY OUT THIS OBLIGATION AND SO ARE AT FAULT IN SOME WAY.

• BY FAILING TO EXERCISE DUE CARE, A MANUFACTURER IS ACTING WRONGLY AND HENCE OUGHT TO PAY COMPENSATION TO ANYONE WHO IS INJURED AS A RESULT.

• THE LEGAL EXPRESSION OF THIS THEORY IS THE VIEW IN THE LAW OF TORTS THAT PERSONS ARE LIABLE FOR ACTS OF NEGLIGENCE.

• A MANUFACTURER CAN BE ASSUMED TO KNOW MORE THAN THE AVERAGE PERSON ABOUT THE PRODUCT AND, HENCE, CAN BE LEGALLY REQUIRED TO EXERCISE A GREATER DEGREE OF CARE.

• THE STANDARD OF DUE CARE FOR MANUFACTURERS OR OTHER PERSONS INVOLVED IN THE SALE OF A PRODUCT TO A CONSUMER, INCLUDING WHOLESALERS AND RETAILERS, COVERS A WIDE VARIETY OF ACTIVITIES.

• AMONG THEM ARE THE FOLLOWING.1. DESIGN2. MATERIALS3. PRODUCTION4. QUALITY CONTROL5. PACKAGING, LABELING, AND WARNINGS6. NOTIFICATION

THE CONTRACTUAL THEORY• THE SECOND THEORY IS THAT THE

RESPONSIBILITY OF MANUFACTURERS FOR HARM RESULTING FROM DEFECTIVE PRODUCTS IS THAT SPECIFIED IN A SALES CONTRACT.

• THE RELATION BETWEEN BUYER AND SELLER IS VIEWED IN THIS THEORY AS A CONTRACTUAL RELATION, WHICH IS SUBJECT TO THE TERMS OF THE CONTRACT.

• EVEN IN THE ABSENCE OF AN EXPLICIT, WRITTEN CONTRACT, THERE MAY STILL BE AN IMPLICIT, UNDERSTOOD CONTRACT BETWEEN THE TWO PARTIES THAT IS ESTABLISHED BY THEIR BEHAVIOUR.

• THERE IS ALSO AN IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE WHEN THE BUYER IS RELYING ON THE SELLER’S EXPERTISE IN THE SELECTION OF THE PRODUCT.

• THE ETHICAL BASIS FOR THE CONTRACTUAL THEORY IS FAIRNESS IN COMMERCIAL DEALINGS.

THE STRICT LIABILITY THEORY• A THIRD THEORY, NOW GAINING WIDER

ACCEPTANCE, HOLDS THAT MANUFACTURERS ARE RESPONSIBLE FOR ALL HARM RESULTING FROM A DANGEROUSLY DEFECTIVE PRODUCT EVEN WHEN DUE CARE HAS BEEN EXERCISED AND ALL CONTRACTS OBSERVED.

• THIS VIEW, IS KNOWN IN LAW AS STRICT LIABILITY.

• A MANUFACTURER NEED NOT BE NEGLIGENT NOR BE BOUND BY ANY IMPLIED OR EXPRESS WARRANTY TO HAVE RESPONSIBILITY.

• THE MERE FACT THAT A PRODUCT IS PUT INTO THE HANDS OF CONSUMERS IN A DEFECTIVE CONDITION THAT POSES AN UNREASONABLE RISK IS SUFFICIENT FOR HOLDING THE MANUFACTURER LIABLE.

• THE ETHICAL ARGUMENTS FOR STRICT LIABILITY RESTS ON THE TWO DISTINCT GROUNDS OF EFFICIENCY AND EQUITY.

• ONE ARGUMENT IS PURELY UTILITARIAN AND JUSTIFIES STRICT LIABILITY FOR SECURING THE GREATEST AMOUNT OF PROTECTION FOR CONSUMERS AT THE LOWEST COST.

• THE SECOND ARGUMENT IS THAT STRICT LIABILITY IS THE FAIREST WAY OF DISTRIBUTING THE COSTS INVOLVED IN THE MANUFACTURE AND USE OF PRODUCTS.

• BOTH OF THESE ARGUMENTS RECOGNISE THAT THERE IS A CERTAIN COST IN ATTEMPTING TO PREVENT ACCIDENTS AND IN DEALING WITH THE CONSEQUENCES OF ACCIDENTS THAT DO OCCUR.

• PREVENTING ACCIDENTS REQUIRES THAT MANUFACTURERS EXPEND GREATER RESOURCES ON PRODUCT SAFETY.

MONOPOLIES AND RESTRICTIVE TRADE PRACTICES

ACT, 1969 (MRTP ACT)• MRTP ACT MAKES DETAILED PROVISIONS IN

RESPECT OF RESTRICTIVE TRADE PRACTICES.(RTP).

• RTP IS ONE, WHICH HAS, OR MAY HAVE, EFFECT OF PREVENTING, DISTORTING OR RESTRICTING COMPETITION IN ANY MANNER AND IN PARTICULAR:

a) WHICH TENDS TO OR OBSTRUCTS FLOW OF CAPITAL, RE RESOURCES FOR PRODUCTION, OR

b) WHICH TENDS TO IMPOSE UNJUSTIFIED COSTS OR RESTRICTIONS ON CONSUMER RELATING TO GOODS AND SERVICES; BY MANIPULATION OF PRICES, OR CONDITIONS OD DELIVERY OR TO AFFECT SUPPLIES IN MARKET.

• SOME TRADE PRACTICES ARE ‘DEEMED RESTRICTIVE TRADE PRACTICES.

• THE DEEMED RTPs ARE AS FOLLOWS:-a) RESTRICTIONS ON BUYING AND SELLING-THIS MEANS

RESTRICTING PERSON OR PERSONS TO WHOM GOODS MAY BE SOLD OR FROM WHOM TO BE BOUGHT. E.g. CHEMISTS ASSOCIATION ASKING ITS MEMBERS NOT TO DEAL IN GOODS OF PARTICULAR MANUFACTURER; ASSOCIATION NOT PERMITTING BUYERS TO DO BUSINESS WITH NON-MEMBERS.

b) TIE-IN SALES OR FULL LINE FORCING-THIS MEANS REQUIRING A PERSON TO PURCHASE SOMETHING ELSE COMPULSORILY ALONG WITH GOODS HE WANTS TO PURCHASE.

c) EXCLUSIVE DEALING AGREEMENT-NOT TO DEAL WITH GOODS OTHER THAN THOSE OF SELLER. e.g. MANUFACTURER ASKING DEALER NOT TO DEAL IN SIMILAR PRODUCTS OF HIS COMPETITOR, DIRECTLY OR INDIRECTLY.SUPREME COURT HAS HELD THAT A ‘NEGATIVE COVENANT’ RESTRAINING FRANCHISES FROM DEALING WITH COMPETING GOODS DURING TERM OF FRANCHISE AGREEMENT IS VALID AND IS NOT RESTRICTIVE OF TRADE AND BUSINESS. (FRANCISE MEANS OWNER ALLOWING USE OF HIS BRAND NAME SUBJECT TO CERTAIN CONDITIONS, QUALITY RESTRICTIONS etc.

d) COLLECTIVE PRICE FIXATION AND TENDERING-THIS MEANS A COLLECTIVE AGREEMENT TO PURCHASE OR SELL OR TO TENDER ONLY AT AGREED PRICE AND TERMS. e.g. ALL TYRE MANUFACTURERSINCREASING PRICE UNIFORMLY AND SIMULTANEOUSLY BY MUTUAL AGREEMENT.

e) DISCRIMINATORY DEALINGS-MEANS ALLOWING CONCESSIONS, DISCOUNT, BENEFITS, ALLOWANCES, REBATE etc. GIVING CONCESSIONS OR BENEFIT ON THE BASIS OF TURNOVER OR GIVING LARGE DISCOUNTS TO LARGE BUYERS WOULD BE A RTP IF SUCH DISCOUNTS ARE INJURIOUS TO COMPETITION. GIVING LARGER DISCOUNT TO LARGE BUYERS WILL REDUCE COMPETITIVENESS OF SMALL DEALERS.

f) RESALE PRICE MAINTENANCE-THIS MEANS’NOT TO ALLOW RESALE BELOW CERTAIN PRICE OR NOT TO SELL ABOVE A CERTAIN PRICE.’ IF MAXIMUM PRICE IS INDICATED, IT SHOULD BE CLEARLY STATED THAT THE DEALER IS FREE TO CHARGE BELOW THE INDICATED PRICE. ANY AGREEMENT FOR RESALE PRICE MAINTENANCE IS VOID.DIRECT PRICE MAINTENANCE PERMITTED WHERE THE MANUFACTURER SELLS GOODS THROUGH ITS OWN RETAIL SHOPS AND FIXES PRICES TO BE CHARGED IN SUCH SHOPS.

g) RESTRICTIONS ON OUTPUT OR SUPPLY-THIS MEANS AN AGREEMENT TO LIMIT, WITHHOLD OR RESTRICT THE OUTPUT OR SUPPLY OF ANY GOODS OR ALLOCATE ANY MARKET OR AREAS FOR DISPOSAL OF GOODS. e.g. CONDITION IN AN AGREEMENT PROHIBITING SALE OUTSIDE ALLOTTED AREA.

THIS DOES NOT MEAN THAT THESE ARE

THE ONLY RTPs.

UNFAIR TRADE PRACTICE• A TRADE PRACTICE WHICH FOR PURPOSE OF

PROMOTING SALE, USE OR SUPPLY OF ANY GOODS OR PROVISION OF SERVICES, ADOPTS ANY UNFAIR METHOD OR UNFAIR OR DECEPTIVE PRACTICE.

• FALSE OR MISLEADING REPRESENTATION- MAY BE ORAL OR IN WRITING. THE STATEMENT MAY BE ON WRAPPER OR CONTAINER OR ON DISPLAY BOARD OR CONTAINED IN OR ON ANYTHING THAT IS MADE AVAILABLE TO MEMBER OF PUBLIC.

• PRODUCT SAFETY STANDARDS.