India: Unfair Trade Practice Relating To Promotional Prize Schemes

Last Updated: 20 November 2015
Article by Mansi Chaturvedi

Most Read Contributor in India, September 2016

This Article focuses on one aspect of unfair trade practices- unfairness in holding of games, contests, lotteries and similar schemes for promoting sales and services in the context of protecting consumers from incurring unnecessary expenses. Having the mindset of earning huge profits, Companies have got into aggressive and competitive trade practices to entice the customers. These practices raise the question about the truthfulness and fairness of representation of products, services, advertisements, schemes and modalities for promotion of products and services. This Article focuses on the present position/or necessary factors taken into consideration by the judiciary while delivering justice regarding such disputed matters.


Consumer Protection Act, 1986

As per section 2(r) of the Consumer Protection Act,1986, defines unfair trade practice, 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 including 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 and section(3A) of the Act states withholding from the participants of any scheme offering gifts, prices or other items free of charge on its closure the information about final results of the scheme. The participants of a scheme shall be deemed to have been informed of the final results of the scheme where such results are within a reasonable time published, prominently in the same newspaper in which the scheme was originally advertised. The use of the word "including" means that the unfair methods and unfair or deceptive practices enumerated in the Act are inclusive and not exhaustive. Thus, there can be unfair trade practices other than those specifically enumerated in the Act. This provision reveals that even if conducting any contest, lottery etc. is without any reference to promoting sale, use or supply of any product, it may be to promote some business interest which may ultimately result in promotion of sale, etc. The lottery involves the drawing of lots for a prize which is defined in Oxford Advanced Learners' Dictionary (New 8 Edition). Therefore, holding a draw of lots to identify the lucky winners is nothing but conducting a lottery.


As per paragraph 5(f ) Advertisements inviting the public to take part in lotteries or prize competitions permitted under law or which hold out the prospect of gifts shall state clearly all material conditions as to enable the consumer to obtain a true and fair view of their prospects in such activities. Further, such advertisers shall make adequate provisions for the judging of such competitions, announcement of the results and the fair distribution of prizes or gifts according to the advertised terms and conditions within a reasonable period of time. With regard to the announcement of results, it is clarified that the advertiser's responsibility under this section of the Code is discharged adequately if the advertiser publicizes the main results in the media used to announce the competition as far as is practicable, and advises the individual winners by post


According to Tamil Nadu Prize Schemes (Prohibition) Act, 1979, the prize schemes are banned in Tamil Nadu state as they comes under the ambit of the word lottery which amount to unfair trade practices. According to the Act, prize scheme is any scheme by whatever name called whereby any prize or gift (whether by way of money or by way of movable or immovable property) is offered, or is proposed to be given or delivered to one or more persons to be determined by lot, draw or in any other manner from among persons who purchase or have purchased goods or other articles from shops, centers or any other place whatsoever specified by the sponsors of the scheme or on any event or contingency relative or applicable to the drawing of any ticket, lot, number or figure in relation to such purchasers.


In Britannia Industries Ltd. Vs. State of West Bengal1 company advertised a Scheme captioned "50-50 Jodi Banao Offer" whereunder a person buying a pack of 50-50 Biscuit, 50-50 Maska Chaska or 50-50 Pepper Chakkar, all manufactured by the petitioner company, was to match the half picture found inside the pack with the other half of the said picture, which could be found only in some other pack of any of the above referred three products. If a person was able to match the two halfs of the same picture, he was entitled to participate in a draw of lot in which several prizes such as laptops, watches and mobile phones were included.

The following essentials of an unfair trade practice were defined by the hon'ble Judge in para 10.

The basic ingredients of 'unfair trade practice' are:

(i) it must be a trade practice;

(ii) the trade practice must be employed for the purpose of promoting the sale, use or supply of any goods or for the provision of any service; and

(iii) the trade practice adopts any unfair method or unfair or deceptive practice including any of the practices enumerated in sub-clauses (1) to (6) of Section 2(1)(r) of the Act.

The petitioner, adopted a deceptive practice, for the purpose of selling more packs of 50-50 Biscuits, Masala Chaska and Pepper Chakkar, by not disclosing a material condition attached to the 50-50 Jodi Banao Offer, that even if the consumer was able to match the picture of the product to be given as prize, he will not be entitled to the prize, but will only get a chance to participate in a draw of lots, to select the winner(s) of the prize. It is also indulged into a deceptive practice for achieving higher sales of its above referred products, even after 15/04/2007, by not printing the date of closure of the offer, on the wrappers of the product. The petitioner therefore is guilty of indulging in unfair trade practices, for promoting the sale of its products. Petitioner company was indulged into unfair trade practice by

(1) Alluring the consumers to purchase multiple packs of its product by inducing them to believe that the second half of the picture might be available in the subsequent pack purchased by them,

(2) By not disclosing the terms and conditions attached to the Scheme to the consumers,

(3) By holding a draw for selecting the winner of the prizes and

(4) By not printing the date of closure of the Scheme on the wrapper of the product.

In Colgate Palmolive (India) Ltd. v. MRTP Commission2, the following additional requirements were laid down:

"(3) The trade practice should fall within the ambit of one or more of the categories enumerated in clauses (1) to (5) of Section 36-A.

(4) The trade practice should cause loss or injury to the consumers of goods or services.

(5) The trade practice under clause (1) should involve making a 'statement' whether orally or in writing or by visible representation."

In General Motors (India) Pvt. Ltd. vs. Ashok Ramnik Lal Tolat & Anr.3 According to the observation made by the judge's mere proof of "unfair trade practice" is not enough for claim or award or relief unless causing of loss is also established.

In re Avon Cycle Pvt. Ltd. Vs. Unknown4, the company advertised a scheme offering 42 prizes on the basis of a lucky draw. The company attempted to justify the scheme on the basis that it was financed out of the profits of the company and not by increasing the prize. The scheme was held to be unfair trade practice prejudicial to public interest for several reasons.

1). The conduct of lotteries, contests etc. tends to induce consumers to buy products on consideration other than quality and price. When the essential consideration of quality and prices are lost sight of, consumer and public interest suffers.

2). The award of prizes, benefits only a miniscule number of consumers. Discriminatory benefits of this kind to a select few without any corresponding benefit to or, as often happens at the expense of the bulk of the consumers is obviously not in the overall interest of the consumers. On the other hand, the same amount, if utilized for the purpose of reducing prices or providing better services to the consumers, in general will enhance consumer satisfaction.

3). The practice of offering prizes by lottery tends to encourage the gambling instinct leading to unnecessary, avoidable and excessive purchases by consumers for the purpose of gaining entry into the lottery. Such available and excessive purchases are the real loss to the consumers. Instead of protecting consumer's interest, lotteries and contests therefore, clearly act in a prejudicial manner in regard to consumer and public interest.


In case of Companies chooses to come up with a sales promotion scheme, it should demonstrate its genuineness by disclosing material information to the public/ultimate consumers in case of not attracting the provisions of unfair trade practices. The following practices such as disclosing the terms and conditions of the scheme, disclosing the relevant time period, disclosure of the date for the announcement of the scheme, disclosure of the methodology to choose a winner, disclosing the chances of winning a prize in a scheme etc., these disclosures would keep the trustworthiness, fairness and credibility of a Company in conducting such schemes.


1 MANU/CF/0661/2015

2 (2003) 1 SCC 129

3 (2015) 1 SCC 429

4 1986 60 CompCas 1036

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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