National Council of Applied Economic Research
Opinion: Palash Baruah and DL Wankhar
Offering discounts on inflated MRP to lure consumers should be construed as an act of price manipulation.
Online marketing or e-marketing has captured the landscape of shopping experience in the country. The ease of online browsing has meant consumers have a variety of choices, get convenient delivery services, return and exchange facilities and not to miss the attractive discounts being offered from time to time. But there have been umpteen number of instances when unsuspecting consumers were not given a fair deal. The manner in which MRPs are listed and discounts are being offered is one such example.
When a lay consumer browses an online marketplace, his understanding is that the MRP that is reflected on these online platform is the MRP of the product fixed by the manufacturer, and discount on the said MRP is being offered by the online sellers. But there are instances when there are more than one “listed” MRPs/prices quoted by sellers of an identical pre-packaged product sold online. Online sellers would then offer several discounts on these “listed” MRPs.
The seller offering the highest discount would be given preference in the listing on these online shopping platforms to attract the attention of the prospective consumers, albeit the “listed MRP” of the said seller could be the highest amongst the “listed MRP”. There are also instances where the MRP of the same identical product in a retail shop is lower that the “listed MRP” on these online shopping platforms. Different MRPs of the same identical product are also sometimes being listed across several online platforms.
The Legal Metrology (Packaged Commodities) Rules (amended in 2017 and made effective from January 1, 2018) defines retail sale price to mean “the maximum price at which the commodity in packaged form may be sold to the consumer inclusive of all taxes”. MRP includes the cost of production, transportation, trade margins and all applicable taxes. Shops or retailers can offer discounts on the MRP to acquire and attract customers. This is allowed as per law.
The amended LM Rules 18(2A), further mandates that “… no manufacturer or packer or importer shall declare different maximum retail prices on an identical pre-packaged commodity by adopting restrictive trade practices or unfair trade practices as defined under clause (c) of sub-section (1) of section 2 of the Consumer Protection Act, 1986 (68 of 1986).”
The amended Rules (2018) were made applicable to both off-line and online sale of products. It effectively implied that an identically pre-packaged product cannot have more than one MRP.
Consumer Protection Act
The Consumer Protection Act (CPA), 2019 defines “restrictive trade practice” to mean “a trade practice which tends to bring about manipulation of price or its conditions of delivery or to affect flow of supplies in the market relating to goods or services in such a manner as to impose on the consumers unjustified costs or restrictions …” It defines “unfair trade practices” to mean an act that “materially misleads the public concerning the price at which a product or like products or goods or services, have been or are, ordinarily sold or provided, and, for this purpose, a representation as to price shall be deemed to refer to the price at which the product or goods or services has or have been sold by sellers or provided by suppliers generally in the relevant market …” Hence, unfair trade practices have a broad definition under the consumer protection law.
With the introduction of LM Rule 18(2A), it prohibits manufacturers, packers or importers from declaring different prices on identical products. When an online seller(s) and the platform(s) through which products are sold performs an act to list an MRP or several and varying MRPs at variance with the MRP fixed by the manufacturer and then offering discounts on “inflated MRP” to attract and lure the consumers into buying the products, it is as an act of price manipulation. It should also be construed as “misleading advertisement” under the Consumer Protection Act and a concealment of the actual MRP of the product which constitute unfair trade practice.
In cases of such violations, there is a need for the government to take suo-moto actions against defaulting online sellers and online marketing platforms. It should not be left solely on the shoulders of a few pro-active consumers to apply for legal remedy. Supervisory checks, vigilance and monitoring such violations should be strengthened. Consumers should not be allowed to be taken for a ride by online shopping platforms in the guise of heavy discounts and ease of shopping experience. Hence, consumers’ awareness should also be enhanced to thwart any attempt to mislead them.
Baruah is Associate Fellow at NCAER, and Wankhar is a retired Government of India officer. Views are personal