Consumer Protection in India: Needs and Methods

Consumer Protection in India: Needs and Methods!

Introduction:

Consumer awareness about their legitimate rights has been constantly growing in recent years.

Consumer protection movement is a part of global recognition and concern that consumers are a weak party in buying goods and services as compared to the manufacturers and traders producing and selling them.

Ideally, a market economy where firms compete to sell goods and services to the consumers should serve the interests of consumers better but more often than not the consumers are exploited by the adoption of unfair and restrictive trade practices. Far from being a sovereign the consumer is a child who is too weak to resist or challenge the suppliers of goods and services.

Therefore, even in a free market economy he needs protection of his rights by a legal authority. Consumer protection is necessary even in a controlled economy where public enterprises play a dominant role since consumers are likely to be denied their rights in their case too.

Most consumers buy goods and services after being lured by advertisements exaggerating the contents and quality of their products or services. Legal support to them is required if they are to be protected from the exploitation and deception by the suppliers so that erring vendors are brought to book.

It is this increasing realisation of the helplessness of the consumers and to ensure their legitimate rights that led to the resolution of the United Nations General Assembly in 1985 recommending to the member states for adopting preventive, protective and curative measures for the benefit of consumers.

Thus this resolution required the member states to create agencies for adjudication of consumer claims and to create conducive environment for protection of consumers. In the UN General Assembly resolution Consumer Councils were recommended to be set up for redressal of the complaints and claims of consumers.

In what follows we first spell out the consumers’ rights and then explain the need for consumer protection. We will then proceed to explain the important methods for consumer protection and Consumer Protection Act 1986 and later amendments made in it in 2002 for protection of consumer rights and redressal of consumer disputes.

Consumer Rights:

Consumers in the developed countries such as the USA and UK are much more conscious of their rights. But in countries such as India consumers are quite a vulnerable lot due to their poverty, illiteracy and lack of awareness of legal rights. As a result, manufacturers and suppliers of goods and services generally exploit the consumers by adopting unfair and restrictive trade practices.

However, consumer awareness is constantly increasing in India too and the consumers who have been deceived or exploited are increasingly approaching the consumer forums or councils set up by the government for redressal of their complaints and settlement of their claims for damages.

The following are the important consumer rights:

1. The Right to be heard:

The consumer has the right to be heard if he has any complaint or grievance regarding the good or service received. This implies that consumers’ complaints and grievances must receive due attention and consideration at an appropriate forum.

2. The Right to safety:

The consumers are entitled to protection of their health and safety from the goods and services they buy. They should not be supplied goods or services which are hazardous to their health and safety.

3. The Right against exploitation:

This covers right to protection from unfair trade practices and unscrupulous exploitation of consumers by charging excessive prices by suppliers of goods or services.

4. The Right to be informed:

This implies that consumers should be given correct and full information about the quality of goods that they buy. They should be provided information about the ingredients of the product, freshness of the product, any side effects that may occur as a result of consumption of a commodity. This right applies especially to the drug manufacturers and suppliers.

5. The Right to choose:

This implies that consumers should be provided a variety of products from which they can make a choice of their liking. The opportunity to choose from limited options restricts their right to choose.

6. The Right to get redress:

This implies that consumers’ complaints and grievances about the products and services supplied to them must be redressed. That is, they should not only be heard but their complaints must be redressed and compensated adequately.

In India, the Consumer Protection Act 1986 was passed which was later amended in 2002, wherein most of the consumer rights have been provided and mechanism for redressal of their complaints have been put in place.

The Need for Consumer Protection:

Consumers are largely denied their due rights, especially in developing countries such as India. The consumers are spread widely all over a country and are poor, illiterate and are generally not aware of their rights, though their awareness has recently increased. The manufacturers and suppliers of goods or services often exploit consumers by adopting a number of unfair and restrictive trade practices. They often merge and also form tacit cartels to raise prices for maximising their profits at the expense of consumers.

For instance, in case of drugs manufacturers generally charge high prices which are much above their cost of production. Some pharmaceutical companies misuse their patent rights to exploit consumers. They therefore need protection from unfair and restrictive trade practices of producers and suppliers of goods or services.

Misleading advertising is another means by which the producers deceive the consumers. Advertisement is of two types. One is informative advertisement which informs the consumers about the availability of certain products at certain prices. This is not objectionable as it provides information to the consumers.

However, more often the purpose of advertisement by the manufacturers and suppliers is to mislead the ill-informed consumers about the quality and contents of their products and services. They indulge in what is called persuasive advertisement to compete away customers from their rivals. Such persuasive advertisements serve no useful social purpose and lead to deception of consumers.

The cost of advertisement is added to the cost of production and this leads to very high prices being charged from the consumers. The Indian readers will be knowing well that crores of rupees are spent on film actors and cricket players as brand ambassadors and on advertisements on print and electronic media to promote the sale of their products.

From whom such heavy costs incurred on advertising are recovered? Such heavy advertising expenditures just enable the manufacturers at the most to maintain their market shares of the product without adding much to its total output. The consumers need protection from such deception of persuasive advertisements. The government should not allow such heavy advertising cost to be incurred as valid cost for calculation of taxable profits of the firms.

The other and highly injurious practice by the suppliers, especially in India, is widespread practice of adulteration of commodities. The adulteration by private sector can take place right from the manufacturing point to the ultimate supplier of the products to the consumers.

It has been found that small pebbles and dust are mixed with wheat, maize, jawar and bajra to increase weight, sand is mixed with cement, leaves and barks of some trees are mixed with tea leaves. Again Vanaspati is often mixed with Desi ghee and butter, etc. All these practices of adulteration are hazardous to health and life of the consumers and they need protection from them. But the most injurious is the widespread practice in India by manufacturers and dealers of spurious drugs which do immense harm to the health and life of the people.

It is due to the above practices of the manufacturers and suppliers which have resulted in consumer protection movement and have forced the governments to enact legislation to protect the consumers.

Consumerism:

Social movement to protect the consumers from unfair and unhealthy restrictive trade practices by the manufacturers and suppliers is also called consumerism. An eminent management expert states, “Consumerism is a social movement seeking to augment the rights and powers of consumers”. Similarly, Boyd and Allen state, “Consumerism may be defined as the dedication of those activities of both public and private organisations which are designed to protect individuals from practices that impinge upon their rights as consumers”.

Important Methods of Consumer Protection:

How to ensure consumer protection from unfair, restrictive, deceptive and exploitative practices of manufacturers and suppliers?

The important ways for consumer protection are:

1. Imposition of self-regulation and discipline by the manufacturers and suppliers of goods and services for working in the interests of consumers.

2. The role of government which can enact laws for the protection of consumers and make arrangements for their enforcement.

3. Voluntary organisation of consumers to form groups such as NGO, cooperative societies to safeguard the interests of consumers.

We explain below in detail the above three ways of protection of consumers.

Imposition of Self-Regulation and Discipline by Manufacturers and Dealers:

The important way for consumer protection is the voluntary imposition of self-regulation and discipline by the manufacturers and others engaged in supplying and distributing goods and services. If they are self enlightened, they would pay due attention to the consumer rights. Of course, producers’ main aim is to maximise their profits but this should be achieved by raising their efficiency in production and quality of their products rather than deceiving and exploiting consumers.

The socially responsible producers and distributors must not form cartels and adopt monopolistic practices to fleece consumers by charging high prices. Prime Minister Dr. Manmohan Singh in the annual session of Confederation of Indian Industry (CII) in May 2007 rightly urged the captains of Indian industries to exercise self-restraint in charging and raising prices by using their monopolistic power.

To quote him, “The operation of cartels by groups of companies to keep prices high must end. It is unacceptable to obstruct the forces of competition from having free play. It is even more distressing in a country where the poor are severely affected by rising commodity prices. Cartels are a crime and go against the grain of an open economy”.

He further adds. “Maximisation of profits should be within the bounds of decency and greed’. Similarly, long ago, Mr. T. Thomas, a former chairman of Hindustan Lever Limited in his speech at the 44th Annual General Body Meeting in 1977 stated, “Restraint is best exercised voluntarily than through legislation which will otherwise become inevitable. Advertising agencies and marketing management have a very important role to play in this respect. By over-playing the claims they will be cutting the very branch on which they are perched”.

However, in our opinion it is idle to expect that private business executives will impose self-discipline on them and exercise restraint on deceiving and exploiting the consumers for maximising their profits. The fact is they regard making large profits as a symbol of their success in business and it has therefore become a mission of their life.

However, a novel way to ensure compliance of business for paying due regard to the consumer rights and the promotion of social welfare is to ‘publicize’ certain important information about proper code of conduct and require businesses to report their degree of compliance to this information. For example, in the USA, the government provides and widely publicizes information about industrial pollutants and require the manufacturers to report about the extent of pollution generation by them.

The submission of reports about their emission of pollutants and Government’s publicity about them induces some compliance by them in maintaining standards of safety. A noted example is the ‘US Toxic Release Inventory’. According to this, manufacturers are required to submit reports about the toxic materials they release in the environment. This induces them to reduce pollution to maintain their reputation.

Voluntary Organisation of Consumers to Protect their Rights:

In some countries the consumers have organised themselves on a voluntary basis to form consumer groups or councils. They are non-government organisations (NGOs) to protect consumer rights.

These voluntary consumer groups or councils protect consumer rights in the following ways:

1. They issue leaflets providing information so as to educate consumers on matters affecting them.

2. They have been pressing for proper labeling of the products with maximum price to be charged, the contents of the product, especially drugs, side effects if any, of the product etc.

3. Organizing movements against the malpractices of manufacturers and traders of the products.

In Delhi, Mumbai and other important cities voluntary consumer organisations came into existence in sixties and seventies when prices of goods rose very high to resist the hike in prices by traders arbitrarily. The idea of Super Bazar on cooperative principles emerged from this price resistance movements of consumers. Besides, an organisation named ‘Common Cause’ established by late. Mr. H.D. Shourie and based in Delhi did a very useful work in protecting the rights of consumers.

Consumer cooperative movement also started to protect the consumers against the malpractices and traders of goods. A consumer cooperative is a voluntary association of consumers formed to promote their interests. The consumers enhance their bargaining power as against traders and manufacturers.

The consumer cooperatives protect the consumers in the following ways:

1. Since these cooperatives purchase commodities in bulk and generally directly from the manufacturers they are able to provide goods to the consumers at reasonable prices.

2. Secondly, the consumers themselves control the cooperatives. They are therefore assured of standard quality and unadulterated goods.

3. Correct weights and measures are used by the cooperative societies and therefore consumers are saved from any deception in this regard.

4. In India consumer cooperatives are especially engaged in distributing essential commodities at controlled prices.

Despite the efforts of voluntary organisations to protect consumers and safeguard their legitimate rights, these voluntary organisations have not succeeded much in protecting consumers. Their growth has been limited mainly to house building societies.

Other voluntary cooperative societies work at the level of distributing goods and are able to eliminate malpractices of middlemen. But, the real problem is to save the consumers from monopolistic, unfair and restrictive trade practices of manufacturers of goods and services and misleading advertisements by them to exploit the consumers.

Government Role in Consumer Protection:

The government can play an important role for protection of consumers. It can enact various legislations for protection of consumers. According to the UN Guidelines for Consumer Protection, “the government role in consumer protection is vital and finds expression through policy making legislations and establishment of institutional authority for its enforcement. To provide a legal basis for its enforcing basic consumer rights every country needs to have irreducible minimum of consumer protection legislation covering physical safety, promotion and protection of consumers’ economic interests, standards for the safety and quality of goods and services, distribution facilities, redress, education and information programmes. Governments also require the necessary machinery to enforce such legislation.”

In both the developed and developing countries the governments have taken several measures to protect consumers. Laws relating to cooperative societies have been enforced in India for quite some time now. Besides, consumers have been sought to be protected by enactment of several laws by government. The important laws have been passed by the government to protect consumers and uphold their rights.

These laws include:

(1) Prevention of Food Adulteration Act, 1954,

(2) the Essential Commodities Act, 1985,

(3) Agricultural Produce (Grading and Marketing) Act,

(4) Drugs Control Act,

(5) Drugs and Cosmetics Act,

(6) Standards of Weights and Measures Act,

(7) Drugs and Magic Remedies (Objectional Advertisement) Act,

(8) Water (Prevention and Control of Pollution) Act,

(9) Prevention of Black Marketing and Maintenance of Essential Commodities Act, and

(10) Air (Prevention and Control of Pollution) Act.

Besides, Monopolistic and Restrictive Trade Practices (MRTP) Act was passed in 1969 to check monopolistic and restrictive trade practices. This Act was based on the economic theory that control of monopolies and prevention of mergers will lead to competition among the manufacturers and suppliers of goods and therefore cause expansion in their output and will therefore also provide benefits to the consumers. Under Section 12B of the MRTP Act, MRTP Commission has been given the necessary powers to award compensation in the matter of unfair trade practices.

Above all, in 1986, the Indian government passed Consumer Protection Act. Under it the consumers have the right to approach appropriate consumer forum or commission set up under the Act to get their complaints redressed. In what follows we will explain the provisions of Consumer Protection Act 1986.