Chapter 3

Ethics of Consumer Protection

 INTROCUCTION

Dr Estes’ - HIDDEN TAXATION (uncompensated costs to society,

namely, the external diseconomies. For the persons affected, these
represented “coerced assessments” )

The Stakeholder Alliance, A North American Advocacy Group is

pressing corporations to become fully accountable to their
stakeholders.
 Customers’ Information Needs
The information needs of customers are:
• Detailed legal records with reference to products and services,
• penalties inflicted and citations for regulatory non-compliance, detailing each
incident and corresponding penalty, settlement effected and such related
information.
• Risks of injury from normal usage of product/service
• Noise, odour and other nuisances/problems associated with use of the
product/service
• Design for recycling
• Biodegradability of products and packaging
• Warnings, with appropriate detail
• Content, additives and treatments of food and medicines, sufficient to allow
reasonably-informed consumers to make rational market decisions and to protect
themselves and their families; and
• Hidden characteristics.
 Consumer and Consumer Protection

A consumer is any person who, or firm—Hindu undivided family (HUF), co-

operative, or association—which,
• buys or hires (fully/partly paid for) any goods or service.
• the purpose of purchase of goods should not be for resale or any
commercial purpose (except self-employment).
• the services availed does not include free service or services under a
personal contract.
Consumer Protection refers to the steps necessary to be taken or measures
required to be accepted to protect consumers from business malpractices.
 Parties to Consumer Protection

a. Consumers: Should know their rights and exercise them.

b. Businessmen: Producers, distributors, dealers, wholesalers as well as
retailers should pay due attention to consumer rights in their own
interest, by ensuring supply of quality goods and services at
reasonable prices.
c. Government: The government should enforce various laws and
amend existing laws to protect consumer interests.
 History and Growth of Consumer Protection

• 1920s: Efforts in the US to reduce the exaggerated claims of advertisers

of goods and services and demands made for impartial testing of
goods.
• 1930s: Growth of consumer co-operatives, the first federal consumer
agency, food and drug administration, demands for labelling of
products and the introduction of USDA stamps.
• 1940s: 150 local consumer councils across the United States eventually
drew together to form the National Association of Consumers.
• 1950s: The American Council of Consumer Interests was established by
750 members from universities, schools and consumer research
organizations.
 Ralph Nader’s Contribution to
Consumer Protection

• “consumer advocate”.
• accountability of carmakers.
• improved environment, healthcare, insurance, pension and disability
rights.
• numerous non-profit organizations.
• educated America’s consumers.
• US Public Interest Group (PIRG).
• the Center for Study of Responsive Law, Center for Auto Safety, the
Disability Rights Center, the Pension Rights Center, the Project for
Corporate Responsibility, and the Clean Water Action Project.
 Consumer Duties and Responsibilities

1) Substantiate the complaint

2) Listen to seller
3) Cooperate with the seller if needed
4) Avoid inconvenience to others
5) Not personalize issues
6) Not lend self to others
7) Be well informed
8) Understand the grievances redressal process
9) Avoid impulsive buying
10) Buy goods from authorized agents
 How are Indian Consumers Exploited?
1) prices of products and services
2) selling practices
3) advertisements
4) quality
5) Sale of hazardous products to ignorant consumers
6) Suppression of material information
7) False product differentiation
8) Producers’/sellers’ collusion
9) Supply of adulterated and substandard products
10) Cheating consumers by giving lesser quantity for the price
11) Dishonoured guarantees and warranties
12) Poor redressal of customers’ genuine grievances
 How are Indian Consumers Exploited? (Contd.)

13) Creating a scare out of scarcity

14) Making consumer buy unwanted goods
15) Misleading representation on utility of products
16) Manipulating conditions of delivery
17) Customers pay for numerous intermediaries
18) Fall in prices never passed to consumers
19) Buying unaffordable goods
20) Advertisement cost
21) Counterfeits: These constitute a substantial quantity of goods on store
shelves
22) Hoarding and blackmarketing
23) Tie-in-sales
24) Gifts for products/services
 Legal Protection to Consumers

A number of laws have been passed by the Government of India over the
years to protect the interest of consumers.
1. Agricultural Products (Grading and Marketing) Act, 1937
2. Industries (Development and Regulation) Act, 1951
3. Prevention of Food Adulteration Act, 1954
4. Essential Commodities Act, 1955
5. The Standards of Weights and Measures Act, 1956
6. Monopolies and Restrictive Trade Practices Act, 1969
7. Prevention of Black-marketing and Maintenance of Essential Supplies
Act, 1980
8. Bureau of Indian Standards Act, 1986
9. Consumer Protection Act, 1986
 Consumer Protection Act 1986

The Consumer Protection Act (COPRA), 1986, conferred a legal right to the
individual consumer to seek legal redress or recover costs and damages for
injury or loans suffered by him/her as a result of faulty, defective goods and
services, bought or secured for valuable consideration.
The SIX RIGHTS of the consumer as enunciated under Section 6 of the
COPRA are:
I. The Right to Safety
II. The Right to be Informed
III. The Right to Choose
IV. The Right to be Heard
V. The Right to Seek Redressal
VI. The Right to Consumer Education
 Redressal agencies under COPRA

Redressal agencies for settlement of consumer disputes:

• A Consumer Disputes Redressal Forum known as the District Forum has
been established by the State Government in each district of the State
by notification.
• A Consumer Disputes Redressal Commission known as the State
Commission has been established in each state by the State
Government by notification.
• A National Consumer Disputes Redressal Commission known as the
National Commission established by the Centre by notification.
 Consumer Protection (Amendment) Act 2002

The main changes introduced by the Amendment Act are as follows:

• The District Consumer Redressal Forums can now deal with complaints
involving compensation amount upto Rs 2 million
• For the State Commission the limit is Rs 10 million
• For the National Commission, the limit is more than Rs 10 million.
• Setting up of benches and increase in the number of members in the
National and State Commissions.
 Consumer Protection (Amendment) Act 2002
• A sitting judge of the High Court is to preside over selection committee
when the president of the State Commission is absent.
• In the absence of the incumbent president of the District Forum, State
Commission or National Commission, the senior member to act as
president of the respective bodies.
• Minimum qualifications prescribed for members of all consumer
courts.
• For admission of complaints, issue of notices and disposal of complaints
a specific time frame has been prescribed.
• Exclusion of services used for commercial purposes from the purview
of consumer courts
• The court can award punitive damages.
• Any affected party to deposit 50 percent of the amount awarded to the
consumer if appealed against the order of the Forum
• If any person fails to pay compensation, the consumer court can order
recovery in the same manner as arrears of land revenue.
 Institutional Arrangements Under Copra

• Consumer protection councils—both as the centre and states

THREE-TIER CONSUMER DISPUTE REDRESSAL SYSTEM
• District forums
• State Consumer Dispute Redressal Commission
• National Commission
 Role and Initiatives of Voluntary Organizations

1) Consumer Associations or Councils

2) Consumer Co-operatives
3) Co-ordination at the National Level
 Other Initiatives to Promote Consumer Protection

1) National Awards
2) Publicity measures
3) Customer Service Department of RBI