Sunday, March 28, 2004

Paying the price for ignorance
Pushpa Girimaji

R.PRASAD went to buy a refrigerator. After looking at various brands, he chose a 260-litre, frost-free model. When he asked the price, the dealer told him that the maximum retail price (MRP) was Rs 16,500 but he would sell it to him for Rs 14,000. Prasad thought that a discount of Rs 2,500 made it a good bargain. He paid the dealer and asked for the product to be home delivered. However, when it arrived, he was in for a surprise. The refrigerator carton mentioned an MRP of Rs 15,000.

Prasad can proceed against the refrigerator dealer for making a false or misleading statement, thereby indulging in an unfair trade practice. What the dealer did is clearly defined as an unfair trade practice under the Consumer Protection Act. The Act provides a remedy for the affected consumer.

Under the Standards of Weights and Measures (Packaged Commodities) Rules, manufacturers have to specify on all pre-packed goods meant for retail sale, the MRP inclusive of all taxes. This is a requirement meant to ensure that consumers are not misled about the price of packed goods. In the above-mentioned case, the dealer took advantage of the fact that the consumer could not see the packaging and quoted a higher MRP.

For many years, MRP has become a tool in the hands of retailers to overcharge or mislead consumers. The MRP is that which a dealer can charge under the Standards of Weights and Measures (Packaged Commodities) Rules. It is an offence to sell at a price higher than the marked price. It is for this reason that manufacturers provide a more than adequate cushion for dealer margins while marking the MRP.

However, taking advantage of the ignorance of consumers, retailers have for years treated the MRP as the actual sale price.

Only last week, I noticed a food chain announcing a ‘discount sale’. The price reduction was not on the retailer’s original price but on the MRP of packed goods. In other words, he was treating the MRP as the actual selling price.

While on most products, the actual price could be about 10-15 per cent lower than the MRP, on some, the printed MRP is so high that the difference between the selling price and the MRP can be as much as 30-50 per cent. It is on these goods that the consumer may end up paying far more than necessary. Such goods range from salted savouries and pressure cookers to electrical goods like plugs and switches.

For several years, consumers and their groups have been protesting over the way unscrupulous dealers have been misleading consumers into believing that the MRP is the actual selling price. They have also been pointing out that the problem is worse in certain cases where manufacturers print highly exaggerated MRPs. They have, therefore, been demanding that the industry print on the packing, the manufacturer’s price or the price quoted by the manufacturer to the first wholesaler in the invoice or the First Point Price, in addition to the MRP. This can ensure transparency in pricing and give the consumer an idea of the percentage of the cut he/she can expect on the MRP.

The manufacturers, however, are unwilling to accept this suggestion. Their argument is that it is not practical and in a competitive regime, retailers cannot afford to charge the MRP as they would be forced to bring down the price. Well, it seems retailers have now begun to hike the MRP itself to show that they are offering a good bargain.

Consumers need to be very alert at the time of purchase. First and foremost, remember that the MRP represents only the ‘maximum’ price and not the actual selling price and you would be well within your right to demand that products be sold at prices below the MRP indicated on packages.

Secondly, while buying expensive goods, it is always better to check the actual selling price or the dealer price at a few shops, make a comparison and go for the best deal.

With respect to white goods like refrigerators, washing machines and airconditioners, where one does not get to see the packaging at the time of finalising the deal, ask the dealer for the price list of the manufacturer or call up the manufacturer to know the MRP. In fact, for these goods, manufacturers should put a sticker specifying the MRP on the product itself.