Legal and Ethical Issues in Retailing

There can be a variety of ethical and legal issues regarding retailing, some of which are as under:

 1. Illegal use of brand name

A retailer must obtain proper confirmation from the parent company for selling a specific brand name. Large retailers can impose their unfair terms on the suppliers, which is unethical. Retailers can charge undue profit margins on sale of brands without conveying the profits to the company, harming the interest of the manufacturer as well as the customer, which is illegal.

The legal issues will vary according to what country you are in. Ethical issues are more general and would include things like not getting supplies from an unethical source, being honest with the customer etc

Now-a-days Internet has important ethical connotations for retailing. Positive use of the Internet to publicise retailers’ social responsibility contrasts with questionable exploitation of the Web’s anonymity. The Net not only offers freedom of speech, but also widens opportunities for irresponsible activity, with low barriers to entry.

Thus, tensions exist between rights and freedoms, on the one hand, and abuses of freedoms, provoking calls for regulation, on the other. Ethical issues relating to e-commerce are identified, and privacy is highlighted both as central to the ethics of e-retailing and as a critical factor in its development. While retail interest in the Internet thus far has focused around e-commerce, impacts on retailer image – both positive and negative – should also be recognized

2.  Copyright

Copyright is a legal concept, enacted by governments, giving the creator of an original work of authorship exclusive rights to control its distribution, usually for 70 years after the author’s death, after which the work enters the public domain.

Generally, it is “the right to copy”, but it usually provides the author with other rights as well, such as the right to be credited for the work, to determine who may adapt the work to other forms; who may perform the work; who may financially benefit from it; and other, related rights.

It is an intellectual property form (like the patent, the trademark, and the trade secret) applicable to any expressible form of an idea or information that is substantive and discrete.

Copyright was initially conceived as a way for governments in Europe to restrict printing; the contemporary intent of copyright is to promote the creation of new works by giving authors control of and profit from them

Copyright has been internationally standardized, lasting between fifty to a hundred years from the author’s death, or a finite period for anonymous or corporate authorship; some jurisdictions have required formalities to establishing copyright, most recognize copyright in any completed work, without formal registration. Generally, copyright is enforced as a civil matter, though some jurisdictions do apply criminal sanctions

Most jurisdictions recognize copyright limitations, allowing “fair” exceptions to the author’s Notes exclusivity of copyright, and giving users certain rights.

The development of the Internet, digital media, computer network technologies, such as peer-to-peer file sharing, have prompted reinterpretation of these exceptions, introduced new difficulties in enforcing copyright, and inspired additional challenges to copyright law’s philosophic basis. Simultaneously, businesses with great economic dependence upon copyright have advocated the extension and expansion of their copy rights, and sought additional legal and technological enforcement.

Copyright Protection in India

India has one of the most modern copyright protection laws in the world. Major development in the area of copyright during 1999 was the amendment to the Copyright Act of 1957 to make it fully compatible with the provisions of the TRIPS Agreement. Called the Copyright (Amendment) Act, 1999, this amendment was signed by the President of India on December 30, 1999 and came into force on January 15, 2000.

The earlier 1994 amendment to the Copyright Act of 1957 had provided protection to all original literary, dramatic, musical and artistic works, cinematography, films and sound recordings. It also brought sectors such as satellite broadcasting, computer software and digital technology under Indian copyright protection. The Copyright Act is now in full conformity with the TRIPS obligations.

Consequent to the number of measures initiated by the government, there has been more activity in the enforcement of copyright laws in the country during the last year compared to previous years. This reflects the general improvement in the enforcement of the copyright law.

3. Trademarks

“Trademark is a mark or symbol used by a trader in association with specific goods manufactured and or sold; mark may be a symbol of reputation of some kind in the goods for its origin or quality or both.”

“The Brand name, Label or Logo of a company can be registered as a Trademark. Once it is registered then it is protected against misuse by the third parties.

The Registered Trademark is a valuable property, which can be transferred or sold or licensed to third parties.” In India, The Trademarks Act, 1999 governs this and the law encourages registration of Trademarks, as registration confers on the owner an exclusive right to use the mark.

 Service Mark: The Trademarks Act provided the facility to register marks for services as well as goods. Services has been defined to mean a service of any description which is made available to potential users and includes the provision of services in connection with business in any industrial or commercial matter, such as banking, communication, education, finance, insurance, real estate, transport, storage, material treatment, processing, supply of energy, lodging, entertainment, construction, repair, conveyance of news and advertising.

Certification Trademarks: Certification trademarks are those that are capable of distinguishing the goods or services in connection with which it is used in the course of trade and which are certified by the proprietor with regard to their origin, material, method of manufacture, the quality or other specific features.

Collective Trademarks: Collective trademarks are registered in the name of groups, associations or other organizations for the use of members of the group in their commercial activities to indicate their membership of the group.

Duration of Registration: The registration of Trade Mark is valid for 10 years. An application for the renewal of registration of a Trade Mark shall be made on the form along with prescribed fee at any time not more than 6 months before the expiration of the last registration.

Legal Benefits (Infringement and passing off): In a suit alleging trademark infringement or passing off, a court may grant an injunction; award damages; direct an account of profits to be produced; or issue an order requiring delivery of the infringing labels and marks of destruction or erasure.

Additionally, in respect of an infringement or passing off action, a court can grant an expert injunction along with an interim order for discovery of documents, preservation of infringing goods or other evidence. Furthermore, the court can restrain the defendant from disposing of or dealing with assets in a manner which may adversely affect the plaintiff’s ability to recover damages or avail any other pecuniary remedies that may be finally awarded to the plaintiff in the suit.

The TM Act has brought in criminal remedies over and above the civil remedies that were previously available. It has also given more powers to the courts. As a result, applying false trademarks or trade descriptions and selling goods or providing services with such descriptions is a cognizable offense under the TM Act.

Any police officer, not below the rank of a Deputy Superintendent of Police or his equivalent, can search and seize the articles bearing infringing trademarks, labels, etc., without warrant. Further, the TM Act has enhanced the punishment for these offenses.

An offender can be imprisoned for a term of not less than six months up to a maximum of three years. Moreover, a fine between ` 50,000 (US $ 1,111) and ` 200,000 (US$4,444) can be levied.

Laws Affecting The Retail Industry

There are several laws and regulations governing the retail sector, including safeguarding consumer interests, retailers, sales and constructive competition. Retail laws include –

(i) Consumer Protection Act, 2019

Consumer Protection Act, 2019 protects the interests of consumers in the retail market. Ensures timely resolution of consumer disputes. Consumers rely heavily on retailers for products and services, sometimes legal disputes can arise between the two parties. The Consumer Protection Act helps resolve such disputes.

Under the Consumer Protection Act, the Central Consumer Protection Authority form which acts as the sole regulator of all transactions among consumers and retailers. It empowers to protect the interests and rights of various consumers through the rules and authorities of the act. It can conduct investigations in matters where consumer rights are violated, keep a check on unfair trade practices, imposing penalties, etc.

(ii) Sales of Goods Act, 1930

In the retail sector, there is always the process of selling and purchasing goods. Thus, the laws related to this sale and purchase are codified under the Sales of Goods Act, 1930. These include laws related to agreements or contracts between a seller and a buyer.

Under the act, a contract for sales of goods forms where a seller forms a contractual relationship with the buyer where the seller transfers property or goods to the buyer for a price. Moreover, after the essential conditions are fulfilled and the ownership transfers to the buyer, the contract becomes a sale under this act.

(iii) Competition laws

With so many retailers entering the market, there is bound to be constructive competition among them. To oversee honest competition in the market, competition laws will be enacted. Assuring freedom of trade in the market for other retailers is a goal of the Competition Act, 2002. In India, several issues can affect the retail sector, including:

1. Anti-competitive agreements 

A contract that prevents, restricts or distorts competition. This is prohibited by the Competition Act, 2002. The act prohibits agreements that have an appreciable adverse impact on the Indian market in relation to production, supply, distribution, storage, acquisition and control of goods. It is important for retailers to be aware of the competition law implications of their agreements. Under the Competition Act, the same norm applies to retail via e-commerce.

2. Abuse of Dominance 

An enterprise that can operate independently is in a position above its competitors. To beat the competition, the enterprise engages in predatory pricing. In addition, it can be considered an abuse of a dominant position. Recently, the European Union began investigating Amazon for distorting competition and violating EU antitrust guidelines. Third party sellers who sell their products on Amazon and run their own businesses say Amazon uses their data for its own purposes. Sellers have been accused of monitoring their activity. In the EU, fair competition conditions are required.