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The new guidelines to prevent unfair trade practices

GS Paper 2

Syllabus: Government policies and interventions for development in various sectors and issues arising out of their design and implementation, trade practices etc


Source: The Hindu


  • On July 4, the Central Consumer Protection Authority (CCPA) announced five guidelines to prevent unfair trade practices and to protect consumer interests regarding the levy of service charges in hotels and restaurants.
  • The guidelines are in addition to the Center’s 2017 guidelines which prohibit the levy of service charges on consumers by hotels and restaurants, and terms the charging for anything other than “the price displayed on the menu card along with the applicable taxes” without “express consent” of the customer as “unfair trade practices”.


New Guidelines:

  • Prohibition from levying extra charges: Hotels or restaurants are prohibited from levying extra charges automatically or by default in the bill or by any other name.
  • No forced service charges: Also, they are not allowed to force service charges, and must clearly inform the consumers that service charges are voluntary, optional, and at their discretion.
  • No restriction on entry based on service charges: Hotels and restaurants are no longer allowed to restrict entry or services based on the collection of service charges.
  • No addition of service charges and GST on total: Hotels cannot add service charges to their bills and charge GST on the total.
  • Tips or donations no longer permitted: Any tip, donation, token, gratuity, etc. is no longer permitted to be charged and shall be considered as a separate transaction between the consumer and the staff of the hotel and restaurant.
    • It is entirely up to the consumer to decide whether or not to tip.
    • If a consumer enters a restaurant or orders something, the restaurant policy cannot require them to tip.
  • Unfair trade practice: Guidelines now consider charging a customer other than the price of food items displayed on the menu along with applicable taxes, as an unfair trade practice’ under the CPA.


Redressal mechanisms:

  • If any consumer finds that a hotel or restaurant is levying a service charge in violation of these guidelines:
    • They may request the concerned hotel or restaurant to remove the service charge from the bill
    • May lodge a complaint on the NCH, which works as an alternate dispute redressal mechanism at the pre-litigation level
    • Call 1915 or through the NCH mobile app.
    • Complaint against unfair trade practice with the Consumer Commission electronically through for its speedy and effective redressal.


Central Consumer Protection Authority (CCPA):

●      The CCPA has been established to regulate matters related to the violation of the rights of consumers.

●      Under the Consumer Protection Act (CPA), 2019, the authority was established to regulate violations of consumer rights, unfair trade practices, and false or misleading advertisements that are prejudicial to the interest of the public.

●      The CCPA has authority under section 18 of the CPA, 2019 to protect, promote and most importantly enforce the rights of the consumers and prevent violation of their rights under the Act.

●      It also seeks to ensure that no person engaged in unfair trade practices.

●      It is also empowered to issue guidelines to enforce the rights of the consumers laid down in the Act.


Service charge:

●      Service charge is a tip or a direct transaction between the customer and the restaurant staff, specifically the wait staff.

●      It is a fee collected to pay for services associated with the purchase of a primary product or service.

●      It is collected by hospitality sectors and food and beverage industries as a fee for serving customers.



Insta Links:

Consumer Protection Act, 2019


Practice Questions:

Q. Which of the following consumer rights is/are defined by Consumer Protection Act 2019?

  1. Right to Safety.
  2. Right to Choose.
  3. Right to seek Redressal.
  4. Right to Consumer Education.

Select the correct answer using the codes given below:

a. 1, 2 and 4 only

b. 1 and 4 only

c. 2 and 3 only

d. 1, 2, 3 and 4

Ans: (d)


Six consumer rights have been defined in the act:

  • Right to Safety.
  • Right to be Informed.
  • Right to Choose.
  • Right to be heard.
  • Right to seek Redressal.
  • Right to Consumer Education.