GOVT. CONTROL ON BUSINESS

In India a number of laws affecting business have become operational over the years. The important ones affecting marketing are listed below:

1) The Indian Contract Act, 1872

2) The Indian Sale of Goods Act, 1930

3) The Industries (Development and Regulation) Act, 1951

4) The Prevention of Food Adulteration Act, 1954

5) The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954

6) The Essential Commodities Act, 1955

7) The Companies Act, 1956

8) The Trade and Merchandise Marks Act, 1958

9) The Monopolies and Restrictive Trade Practices Act,. 1969 (MRTP Act)

10) The Patents Act, 1970

11) The Standards of Weights and Measures Act, 1976

12) The Consumer Protection Act, 1986.  

Some of the legislations mentioned above apply to every undertaking, irrespective of the nature of the product sold or the service provided by it like the Contract Act, the Sale of Goods Act, the Companies Act, the Trade and Merchandise Marks Act and the Standards of Weights and Measures Act, The MRTP Act, however, does not apply to public undertakings, government-managed private undertakings, financial institutions and co-operative societies.

As against this there are certain legislation listed above which seek to regulate certain decisions of undertakings engaged in the specific industries. These include the Industries (Development and Regulation) Act; 1951; the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954; the Prevention of Food Adulteration Act, 1954; the Essential Commodities Act, 1955, and the Cigarettes (Regulation of Production, Supply and Distribution) Act, 1975.

It would be too much to expect a marketer to know all about the various Acts listed above as well as few other like the Bureau of Indian Standards Act, 1986; the Drugs and Cosmetics Act, 1940, and the Drugs (Control) Act. 1950 that affect his decision-making. But, nevertheless, it is essential for him to have a good working knowledge of the major laws protecting competition, consumers and the larger interests of society. Such an understanding would help him to examine the legal implications of his own decisions.

According to Articles 39(b) and (c) of the Constitution of India, control-exists as a means of achieving a socialist pattern of society. These Articles ensure that "the operation of the economic system dos not result in the concentration of wealth and means of production to the common detriment" and that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.

The main reasons for government controls can be summarised as follows:

i)     protecting the welfare of individuals and, promoting higher standards of public health, general well being, safety, etc.

ii)   maintaining equality of opportunity for all persons irrespective of the sex, nationality, race or religion

iii)  restraining business from engaging in practices harmful to the interests of the public, like making false and misleading statements about a product or service, manipulating prices for personal gains, failing to support warranties, etc.

iv)  protecting small firms from the threats of unfair competition by big firms

v)   preventing unfair practices resulting from mergers or other forms of combinations like price fixing

vi)  Conserving national resources especially forests, fuels, water, energy, etc.

vii) preventing pollution of the environment

viii)preventing concentration of economic power and industrial wealth

ix)  encouraging widely dispersed industrial growth and the growth of small scale industries

x)   protecting the economy from dominance by foreign inventors and helping save the valuable foreign exchange resources.  

You should, however, remember that ours is a planned economy and it is not a case of natural growth but of a nurtured growth and the measures of government control and intervention are a reflection of the government's desire to achieve a desired direction or pattern in investment, production and distribution or consumption.

Indian Contract Act (1872)

Regulates the economic and commercial relations of citizens. The scope of this Act extends to all such decisions which involve the formation and execution of a contract. The essentials of a valid contract are specified and examined in detail.

A contract is an agreement enforeceable at law made between two or more persons by which rights are acquired by one or more to acts or forbearances of the part of the other or others.

The Act also specifies provisions for the creation of an agency and the rights and duties of a principal and an agent.

Indian Sale of Goods Act (1930)

Governs the transactions of sale and purchase. A contract of sale of goods is defined as a contract whereby the property in goods is transferred or agreed to be-transferred by the seller to the buyer for a price. The Act also lays down rules about passing of property in goods and the rights and duties of the buyer and seller, rules regarding the delivery of goods as well as the rights of the unpaid seller.

Industries (Development and Regulation) Act (1951)

It is through this Act that the industrial licensing system operates. In effect it empowers the government to licence (or permit) new investment, expansion of licensed units, production of new articles, change of location by the licensed units and also to investigate the affairs of licensed units in certain cases and to take over the management thereof, if conditions so warrant. The objectives behind these powers are, of course, development and regulation of important industries involving fairly large investments which have an all-India importance. It is in the actual implementation of these objectives that the relevant aspects of the industrial policy are expected to be fulfilled.

Industrial licensing is a form of direct state intervention in the market to overrule its forces. The underlying assumption here is that the government is the best judge about the priorities from the national point of view and also that it can do the allocation in a better and socially optimal way. It must, however, be understood that there are economic costs involved in the measures of control and the benefits that are expected to accrue at least equal to or more than the costs involved.

Prevention of Food Adulteration Act (1954)

Prohibits the production, storage distribution and sale of adulterated and misbranded food articles and to ensure purity in the articles of food.

Drugs and Magic Remedies (Objectionable Advertisements) Act (1954)

Prohibits the publication or issue of advertisements tending to cause the ignorant consumer to resort to self-medication with harmful drugs and appliances.

Advertisements for certain drugs for preventing diseases and disorders like epilepsy, prevention of conception, sexual impotency, etc. are also prohibited. The Act also prohibits advertisements making false claims for the drugs.

Essential Commodities Act (1955)

Provides for the control of production, supply and distribution in certain commodities declared as essential under Section 2(a) of the Act, in the public interest. Under Section 3(a) of this Act, the government can fix the price of such a commodity.

Companies Act (1956)

It is a piece of legislation which has far reaching effects on business by its regulation of the organisation and functioning of companies. With more than 650 sections it is one of the longest legal enactments. It is meant to regulate the growing uses of the company system as an instrument of business and finance and possibilities of abuse inherent in that system.

Trade and Merchandise Marks Act (1958)

Deals with the trade and merchandise marks registered under this Act.

A mark includes a device, brand, heading, label, ticket, name, signature word and letter of numeral or any combination thereof.

A trade mark is a distinctive symbol, title or design that readily identifies the company or its product. The owner of the trademark has the right to its exclusive use and provides legal protection against infringement of his right. A trademark is registered for a maximum period of 7 years and is renewable for a similar number of years, each time the period of 7 years expires.

Further, no such trade mark should be used which is likely to be deceptive or confusing, or is scandalous or obscene or which hurts the religious sentiments of the people of India.

Monopolies and Restrictive Trade Practices Act (1969) (MRTP Act)

Provides that the operation of the economic system does not result in the concentration of economic power to the common detriment, for the control of monopolies, for the prohibition of monopolistic, restrictive and unfair trade practices and for matters connected therewith or incidental thereto.

It may be of interest for you to know that the first country to pass such a legislation was the United State which has a free enterprise system. There such an Act was passed as far back as 1890 and is called the Sherman Antitrust Act. But so far as the United Kingdom is concerned it was only in 1948 that the Monopolies and Restrictive Practices (Inquiry Control) Act was passed. In 1956 and 1964 two more Acts were added, viz. Restrictive Trade Practices Act and the Resale Prices Act respectively. Our Act is modelled on the lines of the above three Acts.

Patents Act (1970)

Provisions of this Act are attracted especially where the company intends to produce patented products. A patent is the exclusive right to own, use and dispose of an invention for a specified period. The patent is a grant made by the Central Government to the first inventor or his legal representative.

Standards of Weights and Measures Act (1976)

Specifies the quantities in which certain products can be packed. The products are bread, butter, cheese, biscuits, cereals and pulses, cigarettes, cigar, cleaning and sanitary fluids, cleaning powder, condensed milk, tea, coffee, cooking oils, cosmetics, honey, ice cream, jams, sauces, milk powder, soaps, spices, toothpaste, etc.

Consumer Protection Act (1986)

Consumer Protection Act is the latest addition to the list of the legislations regulating marketing decisions in India. The Act is in addition to and not in derogation of the provisions of any other law which influence marketing decisions. The Act is intended to provide better protection of the interests of consumers and for that purpose makes provision for the establishment of Consumer Councils and other authorities for the settlement of consumers disputes and for matters connected therewith. It does not exclude or exempt from the purview of the regulatory measures the public enterprises, financial institutions, and co-operative societies, which enjoyed a privileged position under the MRTP Act being immune from any action even against those marketing practices of theirs which were considered against consumer or public interest. With the enforcement of the Consumer Protection Act, the consumer can get the redressal of his grievance even against the public organisations like the Delhi Development Authority, Municipal Corporations, Indian Railways, Delhi Transport Corporation (DTC) and other State Transport Corporations etc. In particular, this Act provides a new challenge to a large number of public sector undertakings engaged in manufacture or distribution of consumer goods and provisions of consumer services.

The new Act comes with sharper teeth. One of the weaknesses of earlier legislations was the confusion regarding the burden of proof. They never made it sufficiently clear whether the onus of proof rested with the manufacturer, the trader or the consumer.

The Act establishes a landmark in the sense that for the first time the onus has been shifted to the manufacturer and the seller.

The Act provides the consumer the right :

·         to be protected against marketing of goods which are hazardous to life and property

·         to be informed about the quality, quantity, Potency, purity, standard and price of goods to protect the consumer against unfair trade practices (the term `unfair trade practice' has been defined under the MRTP Act, under Section 36-A, and the relevant Section has been discussed later in this unit)

·         to be assured, wherever possible, access to an authority of goods at competitive prices.

·         to be heard and to be assured that consumers interest will receive due consideration at appropriate forums

·         to seek redressal against unfair trade practices or unscrupulous exploitation of consumers

·         to consumer education.  

These objects are sought to be promoted and protected by the Consumer Protection Councils to be established at the Central and State levels.

To provide speedy and 'simple redressal to consumer disputes, a quasi-judicial machinery is sought to be set up at the District, State and Central levels. These quasi-judicial bodies will observe the principles of natural justice and have been empowered to give reliefs of a specific nature and to award, wherever appropriate, compensation to consumers.

Penalties for non-compliance of the orders given by the quasi-judicial bodies have also been provided.

One could say that the scope of this legislation is much wider than any of the existing legislation. But the success will depend on whether the required infrastructure, particularly at the district and State levels, will get created and whether there will be necessary enthusiasm not only to create the machinery but also to implement the provisions of the Act.

Environment (Protection) Act (1986)

The Environment (Protection) Act provides for the protection and improvement of environment and for the prevention of hazards to human beings, other living creatures, plants and property.

Environment includes, water, air and land and the inter-relationship existing between them and the human beings, living creatures, plants, etc. Any solid, liquid or gaseous substances present which may tend to be injurious to environment is an environmental pollutant and the presence thereof is pollution.

The present enactment covers not only all matters relating to prevention, control and abatement of environmental pollution but also powers and functions of the Central Government and its officers in that regard and penalties for committing offences.

Bureau of Indian Standards Act (1986)

The Bureau of Indian Standards Act provides for the establishment of a Bureau for the harmonious development of the activities of standardisation, marking and quality certification of goods and for matters connected therewith or incidental thereto.

It has been provided that the Bureau of India Standards will be a body corporate and there will be an Executive Committee to carry on its day-to-day activities. It has also been stipulated that access will be provided for to the Bureau's Standards and Certification Marks to suppliers of like products originating in General Agreement on Trade and Tariff (GATT) code countries.

The Act does not make any change in existing law except to provide a new forum for deciding the cases effectively and without delay.

When the Indian Standards Institution was established in 1947, the industrial development in the country was still in its infancy. Since then there has been substantial progress in various sectors of the Indian economy and hence the need for a new thrust to be given to standardisation and quality control.  A national strategy for according appropriate recognition and importance of standards is to be evolved and integrated with the growth and development of production and exports in various sectors of the national economy. The public sector and private sectors including small scale industries have to intensify efforts to produce higher standard and quality goods to help in inducing faster growth, increasing exports and making available goods to the satisfaction of the consumers.

It was to achieve the above objectives that the Bureau of Indian Standards has been set up as a statutory institution.

Government Agencies  : To enforce the laws, the Government has established a number of regulatory agencies, like, the Bureau of Industrial Costs and Prices, the Agricultural Prices Commission^. and the MRTP Commission. The Bureau of Industrial Costs and Prices was established by the Government in 1971. Its job is to conduct enquires about industrial products and recommend prices.

The Agricultural Prices Commission was set up in January 1965 to advise the government on pricing policies for agricultural commodities.

The Government has also framed rules like the Prevention of Food Adulteration Rules, 1955 and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 to, enforce the provisions of the related acts. The enforcement of these Acts is the responsibility of the Central and the State Government.

The MRTP Commission has been established by the Government under section 5 of the MRTP Act, 1969. The Commission may inquire into any restrictive trade practice (i) upon receiving a complaint of facts which constitute such practice from any trade or consumers association having a membership of not less than twenty-five persons or from twenty-five or more consumers. or (ii) upon a reference made to it by the Central Government or a State Government, or (iii) upon an application made to it by the Registrar of Restrictive Trade Agreements (RRTA), or (iv) upon its own knowledge or information (also known as suo moto inquiries).

As far as monopolistic trade practices are concerned, an inquiry can be made either upon a reference made by the Central Government or upon its own knowledge or information.

A complainant is different from an informant since the latter is not recognised by the Act. In such cases the MRTP Commission have to decide whether any informant in any case is a person interested in the subject matter of the proceedings.

In respect of complaints received from consumer and trade associations directly, the MRTP Commission has to make a preliminary investigation through its Director General of Investigation to satisfy itself that the complaint deserves a full-scale inquiry.

Public interest groups have also grown up during the last one decade or so. These groups try to influence both government as well as business to pay more attention to consumer rights. They even take the matter to a law court to get justice to affected consumers against unfair dealings on the part of business enterprises.