Consumer Issues
Legal gaffe makes a mockery of MRP

The maximum retail price is supposed to make consumers better off. However, we learn that using fine prints of the law, retailers are selling above MRP and getting away

 

The laws related to maximum retail price (MRP) have been carelessly drafted that even shops which sell above MRP cannot be punished. It would seem that legal experts and bureaucrats who draft legislations are ignorant of the basics. More pertinently, it would seem that not printing the MRP on a packaged commodity would attract punishment, but selling above MRP would be allowed! Most people believe that the MRP printed on packaged commodities is beneficial to the consumers, as they cannot be sold above the MRP. It prevents exploitation of consumers. However, defective drafting of the laws has made MRP a meaningless number.

A recent judgment by the National Consumer Commission (NCC) has upheld the order of Bharuch (Gujarat) District Forum imposing a fine on Hotel Nyay Mandir for charging more than the MRP on some soft drinks. In another case, the Delhi State Consumer Commission imposed huge punitive damages of Rs50,000 on a restaurant serving mineral water to its customers at three times the MRP. While these decisions are welcome from the point of view of the consumer, unfortunately it goes against an order of the Supreme Court and is liable to be struck down.

The Supreme Court order (State of Himachal Pradesh Vs Associated Hotels of India, AIR 1972 SC 1131) given in 1972 makes MRP applicable only to retail sales, i.e. goods sold in shops. The Supreme Court held that such food and drinks can not be considered retail sales since they are always accompanied by service. So food and drinks consumed in hotels, restaurants or airplanes may be sold at prices above the MRP. However, it is different for shops, kirana stores, etc. They could charge more than MRP and still get away with it! Let us explore how and why.

The Standards of Weights and Measures Act, 1976, (the Act) only mandates that the price be printed on the package whereas the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (the Rules) go impermissibly further by stipulating that price charged can not exceed the printed price. The Act always supersedes the rules, and thus the latter would not have any bearing on the former, no matter how sensible or valid. The Act does not forbid selling packaged commodities for a price higher than the printed price much less specify the penalty for selling above the printed price.

According to the Section 39 of The Act, “No person shall—
(a) make, manufacture, pack, sell, or cause to be packed or sold; or
(b) distribute, deliver, or cause to be distributed or delivered; or
(c) offer, expose or possess for sale, any commodity in packaged form
to which this Part applies unless such package bears thereon or a label securely attached thereto a definite, plain and conspicuous declaration, as prescribed, of –
(i) the identity of the commodity in the package;
(ii) the net quantity, in terms of the standard unit of weight or measure, or the commodity in the package; (iii) where the commodity is packaged or sold by number, the accurate number of the commodity contained in the package;
(iv) the Unit sale price of the package;
(v) the sale price of the package.”


According to Section 23(2) of the rules, the retail sale of any packaged commodity at a price higher than the printed MRP is prohibited. It says, “No dealer or other person including manufacturer, packer, and wholesale dealer shall make any sale of any commodity in packed form at a price exceeding the retail sale price thereof.”

Thus it is clear that while the rules state that anything cannot be sold above MRP, sadly it cannot be enforced since the Act supersedes rules. Violation of the Act, I an MRP, would attract a fine of Rs5,000 or a prison term of five years with a fine. Section 63 of the Act states, “Whoever, in the course of inter-state trade or commerce, sells, distributes, delivers or otherwise transfers, or causes to be sold, distributed , delivered or otherwise transferred any commodity in a packaged form which does not conform to the provisions of this Act or any rule made there under, shall be punished with fine which may extend to Rs5,000, and, for the second or subsequent offence, with imprisonment for a term which may extend to five years and also with fine.”

One would expect that legal experts and bureaucrats would notice this and make the change accordingly. However, it seems they haven’t learnt anything and have just simply drafted a new act and rules without bothering to take cognizance of this glaring loophole.

The central government enacted the Legal Metrology Act 2009 (the New Act), which came into force on 1 April 2011 and replaced The Standards of Weights and Measures Act, 1976. The new act rationalizes the units for measurement to be used in India. The Act also specifies the metric system (metre, kilogram, etc.) to be used. It regulates the manufacture, sale and use of standard weights and measures.

According to Chapter V, of the Legal Metrology Act 2009, it appears that the non-conformity refers only to weight, number, etc. and not to the price. So there is no explicit prohibition of sale above the MRP. Several sections in this chapter devote to ‘weight’ or ‘number’ but not price. The only difference in this Act is the quantum of fine is much higher, at Rs25,000 instead of Rs5,000. Section 36 of the Legal Metrology Act states, “Whoever manufactures, packs, imports, sells, distributes, delivers or otherwise transfers, offers, exposes or possesses for sale, or causes to be sold, distributed, delivered or otherwise transferred, offered, exposed for sale any pre-packaged commodity which does not conform to the declarations on the package as provided in this Act, shall be punished with fine which may extend to twenty-five thousand rupees, for the second offence, with fine which may extend to Rs50,000 and for the subsequent offence, with fine which shall not be less than Rs50,000 but which may extend to Rs1 lakh or with imprisonment for a term which may extend to one year or with both.”

Similarly, according to Section 18(2) of The Legal Metrology (Packaged Commodities) Rules, 2011 (which replaced the Standards of Weights and Measures (Packaged Commodities Rules, 1977), it states that, “No retail dealer or other person including manufacturer, packer, importer and wholesale dealer shall make any sale of any commodity in packed form at a price exceeding the retail sale price thereof.”
Basically, the old and the new acts and rules are the more or less the same! It would seem that MRP is just a fiction. Anybody would be able to sell it above MRP.
In fact, there are several Supreme Court orders which prescribe the limits of rules made under an Act. They all say that Rules cannot extend the boundaries of the Act under which they have been made (e.g. Bharathidasan University Vs All-India Council for Technical Education, (2001) 8 SCC 767). They should have included the prohibition of charging a price higher than the printed price in the Act itself and not just in the rules. Unless parliament fixes this lacuna, MRP will continue to remain a paper tiger and not benefit any consumer.

User

COMMENTS

Dr Anantha K Ramdas

3 years ago

On the MRP issue, which has been so well covered in this article, I would like to mention that the senior citizens are entitled to a 10% discount on medicines obtained from drug stores. Most people don't know this and shop keepers do not volunteer to reduce the price.

When I came to know of senior discount, very reluctantly, I was offered a 5% discount. As it is on branded drugs which are more expensive than generic (which the shop keeper won't offer, unless one demands it), the manufacturers give trade discounts, which may go as high as 30%.

Public are not aware of this discount system. Why not the authorities make a new ruling that all the MRP prices mentioned in the packages are also SUBJECT to say 10% senior discounts?

uttamkumar dubey

3 years ago

Aditya , your mail id pls.

Thanks,
uttam

Shaila Rajiv

4 years ago

Thank you Aditya. MRP has not much choice on the customer for the perishable commodities. Business goes around the laws for profits, and loop holes are invented to avoid the taxes.

What is a law if it’s not made use of ? As Anada Ramdas suggest, the media should be used to bring up the ongoing saga as in the end it’s the common man who bear the pain. It’s not worth to suffer in silence.

anantha ramdas

4 years ago

In reply to Pravesmilo, I would suggest that he/she buys milk from Milk depots in the area or have it home delivered by the company. If there are no other shops around, I would suggest a receipt is taken for the purchase and lodge the complaint with the manufacturer, in writing, and send the same by registered post. Write the details in the local newspaper and if there are neighbours who also face this problem, organize a protest and boycott the shop.

I agree you cannot go to the consumer court for this, but somewhere you and I need to draw the line and put up the resistance to stop this fleecing by shopkeepers.

REPLY

pravsemilo

In Reply to anantha ramdas 4 years ago

Actually we get milk directly from milk man. Sometimes if he doesn't show up, I have to go to the shop.

Actually the shop here in question is itself a milk depot of Jersey dairy. Even the guy who does door delivery charges a bit extra.

I will keep in mind the reciept part. The next time I go to the shop, I will insist on that.

Madhur Kotharay

4 years ago

What happens if the product is sold in places that are hard to reach, such as some mountaintops (temples, forts, etc) or forests or beaches / ferries? Should the person providing the product not charge extra, as his transportation and stocking costs are higher?

What about chilling the soft drink or storing a medicine or a chocolate in a fridge? Can the shop charge more? Should the shop not charge more?

a v moorthi besides TIHAR

4 years ago

Even a big firm like Cargil Foods or Bunge Ltdhas MRP like Rs 100/- for 1 litre Rath vanaspati (purchased for sake of curiosity value for children who are in early 20's- who may never know till early 80's DALDA chahiye to shop keeper meant consumers wanted vanaspati (hydrogenated vegetable fat) even as Rath of Shriram food (of DCM GROUP) was equally popular in Delhi and neighbouring states. Easyday ( a Bharati - Walmart unit) outlet offers it for Rs 67/- . your neighborhood shop keeper would have sold it to customer ( u and me) for Rs 100/- So what can one conclude about MRP.

Now coming think of satchet revolution in items like Shampoo there weight does not matter it is pice like Re 1/- matters, sane is the case with tooth pastes meant for overnite use by bus and train travellers. so price related package does not imply company misleads the onsumer for that companies have high power prefixed be it detergent powder, bar or health drinks suffixed with 23 vitamins or 32 minerals etc

i conclude MRP is the biggest flaw rather retail price should be same all over the country (uniform tax should be levied at factory level, so that printing of price on package will have any meaning)

anantha ramdas

4 years ago

Thank you Aditya for writing this article.
You are right, as my nearest Kirana stores charge me a "negligible" 50 paise extra for a litre of milk when I buy in an emergency situation.

As against this, my monthly provisions come from a Mahalaxmi Stores, just opposite to Nilgris supermarket, whose proprietor Suja gives me a "discount"
on the MRP in order to retain and expand his clientele. When I spoke to him, he said trade discount received gives him the opportunity to do so.

I suggest Aditya does a follow up article by speaking to consumer durable producers, as this will be just as educative.

REPLY

pravsemilo

In Reply to anantha ramdas 4 years ago

+1

The dairy parlour near my home sells a milk packet priced at 19 Rs at 22.5 Rs. Not to forget this is a state govt owned dairy.

The same quality packet of a private dairy priced at 22 is sold at 22.5. When I asked why this disparity - the reply that I got is that 19 Rs is the price for a white card holder.

I went to other shop where I had to buy a milk of lower qaulity due to non availability. Even that being priced at 17 Rs was sold at 18.5.

I lodged a complaint at the website of both state owned and private dairies. However I don't expect much from them as their feed back system itself was not working well.

I called up the private dairy's consumer cell. To my amusement the guy said since it is morning and the milk is fresh they charge the extra premium.

A consumer court is very near my house. But they charge 2000 Rs to hear a case. So much for a paltry 3.5 Rs difference. I wonder what should I do?

parveen kumar kalra

4 years ago

Sir,
The manufacturer of Areated Water viz, Pepsico & Coke are selling the same identical pack of Coke Tin with MRP OF RS 20/- in general market, whereas the same pack with MRP of Rs 50/- is sold at Self service food joints like HALDIRAM etc. In such like cases when there is no extra service provided to the customer, why the customer is made to pay 250% above the normal price.
Pl place the said fact to the learned Court,Law makers & manufacturers.
P.K.KALRA

REPLY

param

In Reply to parveen kumar kalra 4 years ago

if no service is being provided at HALDIRAMs, no one would buy that can at 50 mrp in the first place...

pravsemilo

In Reply to parveen kumar kalra 4 years ago

I am not a big fan of colas - but there is a MRP issue here too.

Their ad quote the price as 8, but no retailer sells for 8. Everyone charges 10.

Economy & Nation Exclusive
China’s slow rot or dramatic crash?

In a country where information is tightly controlled, the size and extent of the underground economy can only be guessed. When this part of the economy goes bust, the landing will be very hard indeed

The Chinese economy, like the economies of the rest of the BRICs, is slowing. Despite some neutral official numbers, other numbers like industrial production and electricity consumption indicate that China’s growth rate may have fallen below the target of 7.5%. In May real estate values have fallen in a record 54 of 70 cities. In the first five months of 2012, real estate sales volume slowed by 9% compared to a year earlier. The central bank cut interest rates for the first time since late 2008, suggesting a weaker economy than forecast.
 
With all this bad news, China is still growing at a rate that any other country would envy. Business cycles have been part of every market in history. Have the Chinese found a way to prevent them?
 
Some people certainly think so. The famous Goldman Sachs’ economist, Jim O’Neill, and the creator of the term ‘BRIC’, still sees China as a “beacon of light”. O’Neill no longer believes that indicators like electricity consumption and industrial production, which have been so accurate in the past, still reflect the true level of China’s economic activity. Instead he has switched to indicators of consumption, including monthly retail sales, which seem to support his forecast that China’s economy is in for a ‘softer’ landing. This thesis is quite common among economists and has probably been priced in to global equity markets.
 
Other economists also do not see a “hard landing” but for other reasons. The excellent economist Andy Xie points out that economic collapses occur only when creditors fear for their loans and try to collect from defaulting debtors. There is a major difference in different economies depending on their legal infrastructures. In countries like the US, when a debt is not paid, the courts will happily enforce the contract. The creditor can satisfy the debt in cash, collect the collateral, foreclose on the real estate or force the debtor into bankruptcy. In other countries like Japan, debts are not collected. The difference is between a sharp crash and protracted slowdown.
 
Although a crash or hard landing may sound worse than a slowdown or a soft landing, in fact the soft landing is worse. Unless creditors can clear the loans and reallocate capital to more efficient enterprises, the economy cannot restart. The country’s economy becomes littered with zombie banks and mispriced assets. Growth comes to a halt, since the market is not allowed to function. The stagnation can last for over a decade.
 
This is what is occurring in China. Their 2008 bankruptcy law is unused. Defaulting debtors just leave town. Foreclosures are rare. Banks don’t force developers to repay loans on time, so developers see no need to liquidate inventories at lower prices. Prices do not crash, but sales do.
 
Most of the loans did not go to developers or private businesses. Instead they went to local governments and SOEs. With slowing real estate sales, the main source of income for local governments is drying up. Rather than trying to collect from another branch of the government, the state-owned banks simply roll the loans over.
 
Professor Michael Pettis has pointed out these problems for years. He understands the sclerosis inherent in the system, but believes that Beijing will prevent a slowdown by forcing banks to lend more to local governments for infrastructure projects. While this might be sufficient to stimulate the economy for a few months, eventually the loans for these projects or the bonds issued to finance them will end up in default as well.
 
Despite these predictions, there will in fact be a crash in China. As central banks in the US and Europe are discovering, there are limits to the ability of government to manipulate a market. The Chinese government controls the banking system, but there is a shadow banking system. This system is not only unregulated, its size and extent are unknown.
 
The concrete business is an excellent example. Families will buy a concrete mixer with vendor financing. Then the owners will double up on their debt by using the equipment as collateral for new loans. Finally mixing companies sell their ready-mixed concrete on credit to developers. This overleveraged pyramid could easily collapse like a house of cards.
 
Financial reform could make the problem worse. By controlling interest rates for loans and deposits, the government guarantees profits for its banking monopoly and creates a hidden tax on depositors to help clear bad loans. But the monopoly is breaking down. Banks have to offer higher rates to attract depositors.
 
In a country where information is tightly controlled, the size and extent of the underground economy can only be guessed. In most emerging markets it is over 50% of the regular economy. When this part of the economy goes bust, the landing will be very hard indeed.  

(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at [email protected] or [email protected].)

User

UK banks’ operations in disarray: Are we prepared for such goof-ups here?

The RBI should also implement measures to avoid UK-like incidents happening here

More than 12 million bank customers in the UK were in for a surprise last week when they found that they could not operate their accounts due to malfunctioning of banks’ software, resulting in a chaos at National Westminster Bank, one of the country’s biggest banks. As per reports, the problem arose when their technology staff was in the process of installing an upgradation to their payment processing system but resulted in corrupting the entire system that prevented their customers from accessing their accounts for as many as four days. This problem spread to two other banks, namely Royal Bank of Scotland and Ulster Bank, who are all part of the same group of the Royal Bank of Scotland.

As per PTI reports, many of the customers of these banks have been unable to pay their bills and are now likely to face penalties for missing the payment. The banking group has, however, assured that none of their customers will suffer monetary loss as a result of this problem, and banks are expected to come back to normalcy during this week.
Surprisingly, it is not clear as to why these banks which were affected by the software problem have not been able to make use of their disaster recovery set up, unless they had resorted to upgrade their entire technology set up at one go, putting at risk the normal functioning of the banks’ operations for a number of days.

Nearer home, a similar problem, though on a much smaller scale, happened at Axis Bank, one of the major private sector banks in our country, two years back when they were upgrading their software and the branches of this bank were unable to update the pass books of account holders for a number of days. This resulted in some of the customers of the bank voicing their concern to its technology partner, Infosys Technologies during the annual general meeting, as the bank had put the blame on the IT company for the glitch in their software.  

There is a lesson to be learnt from this incident for the banks in India, too. Almost all our banks are now on core banking solutions (CBS) and improvements in technology are happening every day. It is, therefore, possible that such situations may arise here anytime in the future and banks should guard against such mishaps occurring due to lack of knowledge on the part of staff concerned.  

The second incidence of a bank mishap that was reported in UK last week was in respect of malfunctioning of an ATM located outside a super market called Sainsbury’s in Central London. Luckily for bank’s customers it was case of an ATM dispensing double the money requested for by the customer, debiting only 50% of the money disbursed to the account of the card holder. There was virtual run on the machine, when it started paying double the amount and people started queuing up to benefit from this largesse. Many customers walked away hundreds of pounds richer after withdrawing the maximum of 300 pounds on multiple cards to beat the restriction on withdrawing from a single card.

As per PTI  reports, this bonanza to customers happened because of an error committed by the employee of the bank, who loaded the 10 pounds tray with 20 pound notes by mistake. The ATM was finally closed down when a customer reported the matter to the supermarket.

In 2008, Sainsbury's was the focus of another similar incident when customers of their local store in Hull realised the ATM outside was giving out twice the requested withdrawal.

The question being asked is what you should do when you receive excess cash from an ATM. As per the opinion of a practicing lawyer in UK as reported in the media, the position is pretty clear that the excess money does not belong to the bank’s customer. The 1968 Theft Act of England says, “A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention permanently depriving the other of it.” So the best course of action in terms of law is to report it straightaway to the bank and surrender the excess cash against an acknowledgment, It is the only way you can preserve your position, but if you sit on it and wait for the bank to find you, your position becomes a lot weaker, says the lawyer.  

Despite this stated position, on previous occasions when such mistakes happened, some banks in the UK have reportedly chosen to write off the losses rather than pursue a large number of claims.

Our experience in India so far is exactly opposite of what happened in UK. We have a large number of instances where the ATMs have failed to dispense cash but no instances of excess cash being disbursed have come to our notice so far. The Reserve Bank of India (RBI) has, therefore, come out with guidelines to be followed by banks when their ATMs fail to dispense cash to the customer, even after the requested withdrawal amount gets debited to the customer’s account.

As per RBI directions, with effect from 1 July 2011, the bank is bound to reimburse the amount not disbursed or short disbursed by ATM on verification within seven working days from the date of customer’s complaint, failing which the card issuing bank should pay to the customer in addition to the claimed amount, a penalty at the rate of Rs100 per every day’s delay.  However, the customer is entitled for such compensation for the delay only if a claim is lodged with the card issuing bank within 30 days of the failed transaction.


But as there are no reports of ATMs dispensing excess cash here, the RBI has not come out with any guidelines in this regard. But in all fairness and equity, the customer should refund the excess amount to the bank without asking and this could be the norm if such a thing should happen in India. For the sake of clarity and avoidance of any doubt, the RBI should come out with guidelines in this regard also as such instances of dispensing excess cash cannot be ruled out here in the wake of growing number ATMs and the proposed introduction of white label ATMs shortly.

(The author is a banking analyst. He writes for Moneylife under the pen-name ‘Gurpur’)

User

COMMENTS

a v moorthi besides TIHAR

4 years ago

recently when data centre of PNB at New Delhi was affected in a fire accident their branch operations across India came to stand still for 3-4 days because their IT team had not bothered to conduct drills on regular intervals to check whether branches were able to access server at DR Site when data centre fails and whether the infrastructure systems like LL Connectivity is working.

another issue is CBI is issuing Non Personalised Mastero cards without CVV number. Without CVV card cannot be used for inline booking of train tickets in irctc. but MTNL allows payment of bills by the very same card when Master card secure code is registered for the non CVV card and fed while paying MTNL bill. So "Gurpur" may thro some light on this ? as CBI was unable to throw more light on this

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)