An Assignment On: - Unfair Trade Practices in India
An Assignment On: - Unfair Trade Practices in India
An Assignment On: - Unfair Trade Practices in India
AN ASSIGNMENT ON
SUBMITTED BY:
SHIVANGI AGRAWAL
FACULTY OF LAW,
IN
2019
FACULTY OF LAW
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LAW OF CONSUMER PROTECTION
ACKNOWLEDGEMENT
First of all I express my sincere gratitude to my teacher Dr. Gulab Rai & Mr. Bhanu Pratap
Singh who enlightened me with such a wonderful and elucidating research topic. Without
Him, I think I would have accomplished only a fraction of what I eventually did. I thank
him for putting his trust in me and giving me a project topic such as this and for having the
faith in me to deliver. Him sincere and honest approach have always inspired me and pulled
me back on track whenever I went off- track. Sir, thank you for an opportunity to help me
grow. I also express my heartfelt gratitude to everyone‘s help for the completion of this
project.
Next I express my humble gratitude to my parents for their constant motivation and
selfless support. I would thank my brother for guiding me.
I also express my gratitude to all the class mates for helping me as and when required and
must say that working on this project was a great experience. I bow my head to the almighty
for being ever graceful to me.
SHIVANGI AGRAWAL
B.Com.LL.B (Hons.),
9th Semester
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LAW OF CONSUMER PROTECTION
CONTENT
➢ INTRODUCTION………………………………………………………..
➢ EVOLUTION OF CONSUMER PROTECTION LAWS TO CURB
UNFAIR TRADE PRACTICES…………………………………………
➢ UNFAIR TRADE PRACTICES & INDIAN SCENARIO……………..
➢ UNFAIR TRADE PRACTICES IN VARIOUS SECTORS……………
➢ UNFAIR TRADE PRACTICES AND ECONOMY INTERACTION...
➢ CONSUMER……………………………………………………………...
➢ CONSUMER MOVEMENT IN INDIA…………………………………
➢ CONSUMER RIGHTS IN INDIA………………………………………
➢ FORMS OF CONSUMER EXPLOITATION IN INDIAN MARKET
CAUSES OF CONSUMER EXPLOITATION………………………..
➢ REMEDIES AVAILABLE UNDER THE CONSUMER
PROTECTION ACT AGAINST UNFAIR TRADE PRACTICES……
➢ CASE LAWS……………………………………………………………...
➢ CONCLUSION …………………………………………………………..
➢ BIBLIOGRAPHY………………………………………………………...
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LAW OF CONSUMER PROTECTION
INTRODUCTION:
The term Unfair Trade Practice extensively explains any deceitful, misleading or deceptive
exchange practice; or business deception of the items or administrations that are constantly
sold; which is disallowed by a statute or has been perceived as significant under law by a
1
judgment of the court. Generally unfair trade practices may include illegally refusing any
transaction, deceptively soliciting customers, disrupting business activities of the rivals
unfairly, unfairly excluding competitors. In the new corporate and business world today where
there is cut throat competition the business persons daringly use unfair trade practices to edge
over the other. This may give them advantage for short term but in long run it affects the
organization and eventually the entire industry and society. The misrepresentation of the goods
can be of any kind. The unfair trade practices also invite a cluster of torts and can bring in
unwanted financial losses to the sellers.2
It should be noted at the outset that generically unfair trade practices involves interaction
among different firms as well as between firms and consumers. So any discussion on the issue
will involve slight digression into competition law, as different legal systems have a different
approach to unfair trade practice. Some legal systems see both prongs with the same lenses and
some have separated the two. In India, after recommendations of Raghvan committee, this
logical separation between Consumer-Company and Company-Company disputes regarding
unfair trade practice occurred. But nonetheless, still a discussion on the same becomes
necessary to see the overall dynamic of consumer protection laws in reference to unfair trade
practices around the world.
The MRTP Act, a socialist-era enacted law to prevent monopolies and restrictive trade
practices in India, was the only legislation to deal with unfair trade practices as for a very long
time after independence, the private sector was not considered important. Also, consumerism
as such was considered bad, so there was no specific provision for consumer protection in the
1
Beena Deewan, Unfair Trade Practices and its Emerging Challenges, ANMRJR Vol 4 Issue 12,
https://abhinavjournal.com/journal/index.php/ISSN-2277-1166/article/viewFile/871/pdf_195
2
Pham, Alice, “Competition Law in Vietnam: A Toolkit”, CUTS HRC, Hanoi,:
http://www.cutsinternational.org/HRC/pdf/Vietnam_Toolkit.pdf
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law. MRTP mainly dealt with unfair trade practice in sense of competition between different
companies. This continued till 1984, the MRTP Act gave protectionto consumers to deal with
false or misleading advertisements or other similar unfair trade practices. There was a need to
protect the gullible consumers from unfair trade practices. The Government of India then
appointed an expert committee on the MTRP Act, under the chairmanship of Justice Rajindar
Sachar. The Sachar committee was to review and suggest changes required to be made in
MRTP Act in view of recent developments in economy and market structure. This was a signal
of moving towards a more matured economy where consumers have rights vis-a-vis industries.
The Sachar Committee went on to a deep survey and reached at a conclusion that a new chapter
should be added to the MRTP Act for the purpose of dealing with unfair trade practices with a
change that stakeholders will be consumers, manufacturers, suppliers, traders and other persons
in the market. This was to address the whole supply chain network making everyone in the
chain to identify their corresponding practices as unfair or fair. Otherwise it would have been
hard to pinpoint the exact origin of unfair trade practices given the complex supply chain of
market. This multi stakeholder approach made each aware of nature of activities which they
are not supposed to do. The recommendation were adopted in 1984 and the amendment for the
purpose of institutional enforcement of newly added provisions created a new authority which
was supposed to be an independent body, called as the Director General of Investigation and
Registration (DGIR). It was to work under MRTP Commission, the ombudsman for MRTP
Act. It could take up cases on the basis of a complaint, or suo-moto. Director General of
Investigation and Registration could investigate into issues of restrictive or an unfair trade
practice from a host of activities mentioned in Section 36A of the MRTP Act. But after the
investigation it ought to bring the problem in the MRTP Commission for taking ahead the case
and for a full-fledged inquiry. If, in the inquiry of MRTP Commission, it was opined that the
activities under scan are „prejudicial to the public interest or to the interest of any consumer or
consumers generally‟, then the MRTP Commission was empowered to act and stop the activity
of such a trade practice under the statute. For the purpose of complaint, either MRTP
Commission can take matter suo-moto or receive complaint from particular consumer or any
association of consumers. Trade associations also could approach the MRTP Commission for
complaint.
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In India, till 2002, the Monopolies and Restrictive Trade Practices Act (MRTP), which was
enacted to prevent monopolies and restrictive trade practices, was the foremost legislation to
deal with unfair trade practices in the country. The MRTP Act was repealed giving way to the
Competition Act, 2002, thus transferring all the pending cases in the MRTPC to Competition
Commission of India (CCI) for adjudication from the stages they were in. However, no
provision to deal with unfair trade practice was incorporated in the Competition Act and thus
this was, instead, given effect under Consumer Protection Act, 1986 (COPRA) which was
already dealing with unfair trade practices.3
Section 2(47) of the Consumer Protection Act 2019 defines unfair trade practices as: 4
“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,
including any of the following practices, namely:—
i. falsely represents that the goods are of a particular standard, quality, quantity, grade,
composition, style or model;
ii. falsely represents that the services are of a particular standard, quality or grade;
iii. falsely represents any re-built, second-hand, renovated, reconditioned or old goods as new
goods;
iv. represents that the goods or services have sponsorship, approval, performance,
characteristics, accessories, uses or benefits which such goods or services do not have;
v. represents that the seller or the supplier has a sponsorship or approval or affiliation which
such seller or supplier does not have;
3
Sharad Vadehra, Growing Incidences of Unfair Trade Practice in India, Mondaq,
http://www.mondaq.com/india/x/343952/Consumer+Trading+Unfair+Trading/Growing+Incidences+Of+Unfair
+Tra de+Practices+In+India
4
Section 2(47), The Consumer Protection Act 2019, No.68 of 2019(India)
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vi. makes a false or misleading representation concerning the need for, or the usefulness of,
any goods or services;
vii. gives to the public any warranty or guarantee of the performance, efficacy or length of life
of a product or of any goods that is not based on an adequate or proper test thereof”
viii. Makes to the public a representation in a form that purports to be – (i) a warranty or
guarantee of a product or of any goods or services; or (ii) a promise to replace, maintain or
repair an article or any part thereof or to repeat or continue a service until it has achieved a
specified result. if such purported warranty or guarantee or promise is materially misleading or
if there is no reasonable prospect that such warranty, guarantee or promise will be carried out;
ix. Materially misleading the public concerning the price at which a product or like products
or goods or services, have been, or are, Ordinarily sold or provided, and, for this purpose, a
representation as to price shall be deemed to refer to the price at which the product or goods or
services has or have been sold by sellers or provided by suppliers generally in the relevant
market unless it is clearly specified to be the price at which the product has been sold or services
have been provided by the person by whom or on whose behalf the representation is made;
x. Gives false or misleading facts disparaging the goods, services or trade of another person.
2. Permits the publication of any advertisement whether in any newspaper or otherwise, for the
sale or supply at a bargain price, of goods or services that are not intended to be offered for
sale or supply at the bargain price, or for a period that is, and in quantities that are, reasonable,
having regard to the nature of the market in which the business is carried on, the nature and
size of business, and the nature of the advertisement.
3. Permits – (a) the offering of gifts, prizes or other items with the intention of not providing
them as offered or creating the impression that something is being given or offered free of
charge when it is fully or partly covered by the amount charged in the transaction as a whole.
(b) the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting,
directly or indirectly, the sale, use or supply of any product or any business interest
4. Permits the sale or supply of goods intended to be used, or are of a kind likely to be used by
consumers, knowing or having reason to believe that the goods do not comply with the
standards prescribed by competent authority relating to performance, Composition, contents,
design, constructions, finishing or packaging as are necessary to prevent or reduce the risk of
injury to the person using the goods;
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5. Permits the hoarding or destruction of goods, or refuses to sell the goods or to make them
available for sale, or to provide any service, if such hoarding or destruction or refusal raises or
tends to raise or is Intended to raise, the cost of those or other similar goods or services.” 5
In the recent past, there have been many incidences of unfair trade practices coming up to
light. Unfair trade practices in India have penetrated through various sectors to the Indian
Scenario. Some of them are through Food Processing Industry, Pharmaceutical Industry,
Insurance, Education etc.
1. Pharmaceutical Sector: The competition among the generic drugs and brand name drug
dealers has been never ending. These competitions can sometime turn ugly leading to many
incidents of unfair trade practices in the sector of medicines. It is widely observed that in case
of prescription of a drug, where the doctor is decision maker for the ultimate user, i.e., the
patient, the pharmaceutical industry has a powerful influence on prescribing habits of doctors.
There is an essential difference between promotion and information. A medical representative
while delivering information to the doctors about new drugs, including its usefulness and
efficacy may have precompetitive effects. The marketing strategies adopted by firms such as
giving the doctors gifts like mobile, cars or even sponsored nursing home, may downplay the
demand side and hence raise prices for consumers.6 in the year 2003, Consumer Education and
Research Society, Ahmedabad, brought to the notice of the regulatory authority in Gujarat, the
sale and promotion of certain health gadgets by Conybio Health Care, in violation of the Drugs
and Magic Remedies (Objectionable Advertisements) Act. The company was found promoting
and distributing sun shades to cure migraines and sun strokes, socks for acidity, pillow covers
for spondylitis, palm guards for Parkinson’s disease, eye-shade for sinusitis, T-shirts for high,
low blood pressure, short pants that cure gas, acidity, prostate, piles, urinary system problems,
ladies briefs for menstrual problems, bed sheets for paralysis strokes and brassieres for breast
cancer. When the regulator asked the company to produce scientific evidence to support the
effect of infrared rays which it claimed was present in the products, the company said it ha
5
Ibid P.4
6
CENTAD, “Competition Law and Indian Pharmaceutical Industry”, 2010,
http://www.cci.gov.in/images/media/completed/PharmInd230611.pdf
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never undertaken such studies by any recognized Indian institute. Subsequently, the regulator
prohibited the sale and promotion of the products.7
2. Food Processing Sector: There has been a global concern about food safety and unfair trade
practices in quality and quantity of the food products. Almost everyone has come across cases
of deliberate addition of chemicals like additives and adulterants, for the purpose of disguising
inferior commodities, contaminating or earning undue profits or food contamination during
production, processing, packaging and storage. Such unethical and unfair trade practices are of
very serious nature since they pose grave threat to consumer’s health directly. In May, the Food
and Drugs Administration (FDA) officials seized 500 kg mangoes worth Rs. 25,000 that were
being ripened with the use of a chemical called calcium carbide during a raid at a shop of a
mango trader in Pune. Artificial ripening by using carbide is banned under the Prevention of
Food Adulteration Act. The chemical, if consumed in large quantities, damages internal organs.
The FDA officials destroyed the mangoes at a dumping ground, while the chemical samples
were sent to a city based public health laboratory for further investigations.8 The most recent
controversial case dealing with the unfair trade practices is the Nestle Maggi case. The
government of India had filed suit of unfair trade practice against the company under Sec12
(1)(d) in the National Consumer Dispute Redressal Commission. The issue was regarding the
misleading advertisements of the product. Prior to that the Food Safety and Standards of India
have asked the company to withdraw from the market the newly introduced varieties of Maggi
Noodles alleging it not fit for consumption due to non-maintenance of prescribed standard of
quality in them, the excess presence of lead and misleading labelling regarding the presence of
MSG.9
7
Ibid. P.1
8
Food and Drugs Administration seizes 500 kg mangoes being artificially ripened”, May 10, 2012, The Times of
India, http://articles.timesofindia.indiatimes.com/2012-05- 10/pune/31655099_1_calcium-carbide-rule-44-aa-
kgmangoes
9
Sonuk Mitra, Government Drags Nestle to Consumer Court Seeking Compensation, LiveMint, Aug 12 2015,
http://www.livemint.com/Companies/5rWThfcBq5qYp0uW2b83KP/Govt-to-seek-Rs426-crore-as-damages-
fromNestle-India.htm
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the promises made will be delivered. Companies often lure consumers with attractive schemes,
but later try to renege on their commitment.10 They contain many wide exclusion and
exemption clauses favourable to large enterprise. The favourable terms are often in small prints
which the individual never reads since it is a laborious and profitless task to discover what
these terms are.11
Among other purposes of prohibiting unfair trade practices, it is a market ethic of second order,
the first order being Intellectual Property Right and related issues which are tangibly embodied
into laws. It is a truism that absence of competition not only harms the general businesses, but
it also impedes the consumer choice. Presence of many competitors is single best guarantee of
consumer satisfaction in long run which perhaps is unachievable by any law as such. So, the
two aspects as we talked above - about entanglement when seen from lens of consumer are
aspects of the same thing. In general, price and quality of goods and services depend crucially
on how far unfair trade is regulated in an economy. In this neoliberal era, when governments
have stopped providing even most basic goods and services, consumers can not be assured of
quality and proper pricing without a legal enactment. The invisible hand of market ought to be
guided by rules of fair trade. In the Indian context, where medium and small scale is a major
commodity manufacturer, abating unfair trade practice becomes important because they don't
possess market power as few other big players do. Therefore, for fast paced and inclusive
economic development of India, it is important that interests of medium and small scale
industries are taken into account while framing the legal prohibition of unfair trade practices.
But nonetheless, in the fast transitioning economies it is very subjective to quantify some new
emerging practices as unfair given the huge competition locally and globally. In market system
with too many sellers, advertisements are often disguised.
The general principle is “buyer-beware”. But in a larger sense, the individual buying power of
a consumer is limited and the absence of consumer groups necessitates legal framework for
consumer protection. Therefore, lastly, I would recommend that the legal system of India
should be so strong in future that even a small consumer should feel empowered to address
his/her grievances against unfair trade in the market.
10
al, Lokesh, “Unfair Terms in Contract and Legal Remedy Available in India”, Corporate Law Dossier,
http://coporatelaws.wordpress.com/2010/05/13/unfair-terms-in-contract-and-legalremedy-available-in-india
11
Godfrey Philips v Ajay Kumar AIR 2008 SC 1828
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CONSUMER:
A person who buys any goods or services for a consideration which has been paid or promised
or partly paid and partly promised or under any system of deferred payment is a Consumer. A
person who obtains such goods for resale or for any commercial purposes will not be a
consumer. However, if such goods are bought by a person exclusively for the purpose of
earning his livelihood by means of self-employment then such a person will be considered as
a consumer.
Dynasties prior to the British rule, there were enactments to punish the dishonest and unfair
traders and producers. The laws of Manu and Chanakya’s ‘Arthasastra’ also refer to the
punishments to be awarded to dishonest traders. The British introduced in India laws such as
the Sale of Goods Act, Weights and Measurements Act which were being followed in England.
Some organized effort to protect consumers from the middlemen was made in the 1940s by
eminent freedom fighters such as Sri Tanguturi Prakasam, Sri C. Rajagopalachari (Rajaji), etc.,
in Southern India. They started consumer co-operative stores to retail essential commodities.
This became a social movement and the concept of consumer co-operatives spread to different
parts of the country. Today, consumer organizations such as the Mumbai Grahak Panchayat in
Mumbai are continuing this approach to consumer welfare by organizing the procurement and
distribution of essential items to their members.
The origin and growth of the consumer movement in India which has many similarities to the
movements elsewhere can be divided into three significant phases.
The first phase constitutes the 1960s in which organisations such as the Consumer Guidance
Society of India (Bombay) were formed to inform and educate consumers on the quality of
goods and services and to conduct simple tests on goods of daily consumption.
They are strong and clear laws in India to defend consumer rights. Out of the various laws that
have been enforced to protect the consumer rights in India, the most important is the Consumer
Protection Act, 1986. According to this law, every body, including individuals, a firm, a Hindu
undivided family and a company, have the right to exercise their consumer rights for the
purchase of goods and services made by them. It is significant that, as consumer, one knows
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the basic rights as well as about the courts and procedures that follow with the infringement of
one’s rights.
➢ The right to be protected from all kind of hazardous goods and services
➢ The right to be fully informed about the performance and quality of all goods and
services
➢ The right to free choice of goods and services
➢ The right to be heard in all decision-making processes related to consumer interests
➢ The right to seek redressal, whenever consumer rights have been infringed
➢ The right to complete consumer education
In a commercial society, the customer should be king. Even so, there are plenty of ways
establishments rip consumers off and treat them below par. No matter what types of goods you
buy, you need to be on the guard for consumer exploitation. Some types of exploitation are
small and somewhat unimportant, but other types of exploitation can be quite costly.
Goods that are sold by weight or volume are subject to short-changing and consumers are left
to pay the price when businesses short-change their consumers. In some cases the short-
changing is unintentional, the result of a mechanical failure or an improperly rectified scale. In
other cases, the short-changing may be a deliberate repetition, intended to bring the company
more business. From the butcher holding his thumb on the gauge while counting out the steaks
to a gas station whose pumps provide three-quarters of a gallon instead of a full one, there are
many ways consumers are cheated and exploited in this way.
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➢ To remove the defect pointed out by the appropriate laboratory from the goods.
➢ To replace the goods with the new goods of similar description, which are free from
similar defects.
➢ To return the price or the charges paid by the complainant
➢ To pay such amount as compensation to the consumer for any loss or injury suffered
by the consumer due to the negligence of the opposite party.
➢ To remove the defects or deficiencies in the services in question;
➢ To discontinue the unfair trade practice or the restrictive trade practice or not to repeat.
➢ Not to offer the hazardous goods for sale.
➢ To withdraw the hazardous goods from being offered for sale and
➢ To provide for adequate costs to parties
CASE LAWS:
The suit was filed against the impugned advertisement by the cigarette company. The product
was sold in the name of “red &White, along with the sentences stating, “ Red &White smokers
are one of kind” the packet also had a picture of actor Akshay Kumar, and also contained a
line stating the harmful effects of smoking. The complainant contented that, the picture of a
famous actor promoting the tag lined cigarette gives impression of the ability to do stunts like
that of the actor. And this would draw away the customer’s attention from the warning. The
complaint was rejected in district forum as it was filed in civil court as well. The case reached
the National Commission, where the appellants stated that there is no evidence of any harm or
misfortune due to the advertisement. It was held by the National Commission that complain
12
Godfrey Philips v Ajay Kumar AIR 2008 SC 1828
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couldn’t file as it was not on behalf of any volunteer organisation. The appeal was allowed with
no costs.
Kamath was approached by Spice Communications Ltd. who supplied form and booklet
wherein a map of Karnataka was printed indicating that the tower would be erected at a place
called Virajpet. On that assurance Kamath filled up an application for the connection by paying
Rs. 3,100/- to them. Sim card was supplied at a cost of Rs. 6,800/-. Spice Communications
could not erect the tower and thus Kamath could not use the cell phone from Virajpet despite
a sum of Rs. 22/- being charged per day. On the map of Karnataka which was printed in the
brochure it was assured by mid-99. Spice Communications did not construct the tower because
it was not viable. A consolidated amount of Rs. 30,000/- along with Rs. 10,000/- was paid to
Kamath and the Commission held that this was an unfair trade practice.
The Amway Enterprises who offers a variety of consumer product and food supplements. It
was found that some products of Amway were misbranded and also adulterer. The products
like Nutrilite Protein, Amway Madrid Safad Musli contained different quality of ingredients
than mentioned in the label. On the findings it was held that Amway have restores to unfair
means of business and were charged compensation charges and directed to remove their
misbranded products and renew their advertisements.
13
N. Ravindranath Kamath v. Spice Communication Ltd., (2006) (4) CPJ 67 NC.
14
Consumer Guidance Society v. Amway India Enterprises (2007) C.C 140 of 2007
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CONCLUSION:
Consumers are frequently being subjected to unfair trade practices by the giant sellers and
consumers are becoming a prey to their cut throat business competition. The awareness among
consumers in today's modernized world is giving way to consumers ascertaining the rights
provided to them under Consumer Protection Act and seeking redressal against the unfair trade
practice. The prospect of the consumer justice system in our country appears to be bright in
view of the provisions available in the Indian statutes and legislation and various proactive
policies, schemes being adopted by the Government. The illiterate group of consumers should
be made aware of their rights that they can use to safeguard themselves from such unfair
practices by the monopolists. The government should take measures to educate people about
the various redressal forms that they can approach on breach of their rights as a consumer.
Involvement of trade and industry, civil society organizations and above all consumer
themselves is vital to keep a check on the practice of unfair trade in the years to come.
With the liberalization of our economy large number of Multinational Corporations has entered
India. Some of them may adopt all sorts of unfair trade practices and try to exploit the Indian
consumer. So an alert consumer is need of the hour. Consumer Education has become an
integral part of formal education therefore all universities, colleges and school education
department should make necessary step to introduce consumer education in their curriculum at
all levels.
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BIBLIOGRAPHY:
➢ Aggarwal V.K., “Consumer Protection Law and Practice”, Bharat Law House
Publisher‟s Distributors Pvt. Ltd. New Delhi, Fifth Edition.
➢ Carl Buik, (2008), “Dealing with Unfair Trade Practices”, Report from Centre for
Competition, Investment and Economic Regulation (CUTS CCIER)
http://www.circ.in/pdf/CPS-06-.
➢ Competition and Consumer Act (2010), Australian Government,
https://www.comlaw.gov.au/Details/C2011C00003
➢ Dugar, S.M., (2010) “Guide To Competition Law”, Vol. 1, 45hedition, Lexis Nexis
➢ GargSambhav, (2010), “An Exploration into Working And Performance Of Consumer
Disputes Redressal Agencies In India” International Journal Of Research In Commerce
and Management, Vol.1, Issue-1
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