Unit-1 Concept and Types of Consumer: Importance (Significance) of Consumers

Unit-1
Concept and Types of Consumer

Consumers are the basic economic entities of an economy. All the consumers consume goods
and services directly and indirectly to maximize satisfaction and utility.
Consumers have limited income and by which they want to satisfy their maximum utility
(utility is the want satisfying capacity of a commodity).
Generally, consumer means an individual only; however, consumers will consist of a

particular individual, a group of individuals, institutions etc.
Importance (Significance) of Consumers:
The importance of consumers in different avenues is discussed below:
(i) Encourage Demand:

Consumers are the main source of demand for all the goods. The producers of industrial
goods or the producers of agricultural products are all producing the various items according
to the demand in the market. According to Prof. Marshall, it is the demand which controls the
production or market. Hence, the consumers create demand in the market and producers
produce goods or services accordingly.
(ii) Create Demand for Various Products:

The different consumers have different types of demand or a single consumer can also
demand different types of products. These will encourage the producers to produce various
types of products in the market. For example, some consumers want to consume paddy,
whereas some consumers want to consume wheat.
However, there are some consumers; who want different qualities of paddy and wheat also.
Thus, there are some consumers who prefer red colour soap whereas other’ consumers prefer
green colour soap. Therefore, to satisfy all the types of consumers, producers must increase
the production of various products.
(iii) Increase Demand for Consumer Goods:

Consumers create more demand for all the types of consumer goods, like durable, semi-
durable and perishable goods. Durable consumer goods include furniture, utensils,
televisions, etc. and for semi-durable goods like clothes, books, shoes etc. On the other hand,
perishable goods like bread, butter, vegetables, fruits etc. are all demanded by the consumers
for their consumption purposes. Naturally, all these create an atmosphere to increase demand
for consumer goods.
(iv) Enhance Service Diversification:

Consumers not only consume different varieties of goods, but also consume large varieties of
services to maintain the standard of living. These include health service, educational service,
banking and insurance service, transport and communication service, etc. Day by day the
consumption of these services is rising. This will lead to expansion or enhancement of service
sector within the economy.
Types (Kinds) of Consumers:
According to the nature of consumption, consumers are of following types:
(i) Direct Consumers:

History tells us that at the very early stage of civilization producers produced all the basic
needs of life for themselves and their families. All the basic needs like food, clothing and
shelter they produced for their own and their family’s consumption. Hence, the producers
were producing goods for their self- consumption. Thus, they were called as direct consumers
or direct producers also.
(ii) Consumers by Exchanging Products:

With passage of time and civilization people understood the benefits of exchange. Hence,
they tried to specialize on a particular or few products and then tried to exchange the product
with the other product(s). The exchange started with barter system and now continuing with
monetary system.
This will create the concept of marketable surplus, i.e., the producers are not only producing
goods for self-consumption, but some excess or surplus product(s) they are keeping to get
other product(s) in exchange. For example, a farmer producing pulse not only for self-
consumption but the extra or surplus pulse he will exchange with the producer of other
product, say paddy.
(iii) Modern Consumers:

These consumers only go to the market to buy the goods and services available in the market
through money only. Here, the producers are also producing goods or services directly sent to
the market for the consumers. These consumers buy all the goods and services in lieu of
money. The modern consumers are the outcome of monetary system
Need for Consumer Protection

Consumer protection was not necessary when the world was younger and communities
smaller. In the lifestyle of those times unfair trade was almost impossible. The industrial
revolution and a shift of population from rural areas to towns and anonymity of urban living
gave plenty of scope for malpractices.
In our country, buyers have a very weak bargaining power and cannot assert their right being
heard. Consequently, manufacturers and traders are tempted to follow diverse practices which
turn out to be unfair to consumers.
To check the onslaught on consumers, a host of legislations were enacted. These include Sale
of Goods Act, 1930; Essential Commodities Act, 1955; Prevention of Food Adulteration Act,
1954; Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities
Act, 1980; Standards of Weights and Measures Act, 1956; Agricultural Products and Grading
and Marketing Act (AGMARK), 1937; Indian Standards Bureau Certification Act, 1952;
MRTP Act, 1969 etc.
Besides the applicability of the above legislations, the Consumer Protection Act, 1986 was
enacted which was substantially amended by the Consumer Protection (Amendment) Act,
1993 w.e.f. 18th June, 1993.
Consumer means any of the following persons:
A person who buys any goods for a consideration which has been paid or promised or partly
paid and partly promised or under any system of deferred payment. The term includes any
other user of such goods when such use is made with the approval of the buyer.
The expression ‘consumer’, however, does not include a person who obtains such goods for
resale or for any commercial purpose.
A person who hires or avails of any service for consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred payment. The
term includes any other beneficiary of such services with the approval of first mentioned
person.
Consumer protection is needed because of following:
 We need physical protection of the consumer, for example protection against products that
are unsafe or dangerous to his health and welfare.
 Consumer want protection against deceptive and unfair trade and market practices.
 Consumers protection is needed against all types of pollution so that they can enjoy a
healthy environment-free from water, air and food pollution.
 Consumer protection is also needed against the abuse of monopolistic and restrictive trade
practices. Protection delayed is protection denied.
On the one hand consumers, particularly in India, are unorganized, illiterate and ignorant,
poor and backward, relatively uninformed and above all they still have the traditional outlook
and attitude to suffer in silence. On the other side, businessmen and traders are organized,
well-informed, intelligent and competent sellers. The negative sides of our life have enabled
unscrupulous businessmen to exploit consumers in India.
Consumers in modern markets are amateurs whereas the persons confronting them are
professional sellers. The consumer choice is influenced by mass advertising and other
promotional devices which make people want things which neither they really need nor they
can afford
Approaches to Consumer Protection

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 maximize 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.
Consumer Buying Motives

Consumer behaviour basically starts with needs. Need may be of different types, at different
point of time. The need hierarchy as given by Abraham Maslow classifies the needs into five
types viz. Basic need, Safety need, Social need, Esteem need and Self-actualization needs. A
person moves from one level need to another, as one need is satisfied, he moves on to next
need. It is for this need that consumer shows some behaviour pattern.
When a need is sufficiently aroused, it becomes a motive. William J. Stanton points out that
“a motive is a need sufficiently stimulated to move an individual to seek satisfaction”. He
further adds that “the motive become the buying motive when the individual seeks
satisfaction through the purchase of something”. According to D. J. Durian “Buying motives
are those influences or considerations which provide the impulse to buy induce action or
determine choice in the purchase of goods or services”.
Buying motives are those motives of consumer’s which are sufficiently stimulated so as to
induce the consumer to buy the product. These are the needs, which are pressing needs,
causing anxiety and restlessness to the customers, so much so that the consumer has to make
efforts to buy a suitable product. Buying motive is a motive which can be satisfied by the
purchase of the commodities.
Types of Buying Motives:
Buying motives can be grouped into different levels. First, when the need is recognised by
buyer and he talks about the motives for buying the product (conscious). Second the buyer is
convinced that he has a need to buy but is not in position to understand the motives (sub-
conscious) and last buyer is not in position to explain the factors which influence their
purchase decisions (unconscious). These motives are known as conscious, sub-conscious and
unconscious motives.
Another classification of motives which is widely accepted is by Ramaswamy and Nama

Kumari as:
1. Product Motives
2. Patronage Motives
1. Product Motives:
Product motives are those motives which are related to the product that induce the consumer
to buy the product. Product motive may relate to different attributes of the product.
It can be further classified as:
1. Emotional product motives

2. Rational product motives
3. Operational product motives
4. Socio-psychological motives
Emotional product motives are those which invoke a person emotionally so that he buys the
product, without analysing and evaluating its various attributes. Examples of emotional
product motives are love, pride fear, comfort, ego, habits etc. Here consumer has the motive
of only buying the product because he is emotionally attached to it. Other factors are absent
here. As against the emotional motives, there are rational motives.
These are the motives which are concerned with the logical analysis of the various aspect of
the product. Here the consumer makes a rational evaluation of different product attributes so
as to determine its want satisfying potential, only then he buys the product. The various
utility attributes of the product, credit facilities, transportation facilities etc. are included here.
On the basis of functions performed and socio-psychological benefit provided, buying

motives are classified as operational product motive and socio-psychological product
motives. Operational product motives refer to the satisfaction derived from the function or
physical utility of the product. More efficiently the functions are performed, and more are the
functions performed, better are the chances of product being purchased.
Socio- psychological motives are different from operational motives. Here the consumer buys
the product because of the prestige attached to it. The product here is, evaluated on the basis
of its social status and prestige. It must satisfy the psychological need of the buyer of having
a product which is perceived high by the society.
2. Patronage Motive:
Patronages motives refers to those motives which make a consumer buy from a particular
shop.
Many time consumers have reasons to buy the goods from a particular shop only. The
patronage of that shop attracts him. Patronage motive may also be classified as emotional
patronage motive and rational patronage motive.
Many times the buyer buy goods from a specific shop for reason not clear to them also. Such
motives are called emotional patronage motives. Here the reason for buying from that shop is
purely subjective. Each buyer may have his own personal reason. On the other hand rational
patronage motive are the logical reason that a consumer has for buying the goods from a
particular shop only.
Here the consumer is aware of advantages of that shop in terms of wide variety of goods,
wide selection, good quality, easy availability, good behaviour of salesman, after sale
services etc. and therefore he is attached to the shop. Thus, we see that motives have
significant influence on the consumer behaviour. A marketer should therefore develop a clear
understanding of the product and patronage buying motives before he goes to attract the
customers and develop their loyalty.
Doctrines of Caveat Emptor and Caveat

Venditor
Lord Wright commented long back in 1935: The “old rule” of caveat emptor had been
superseded by caveat venditor, such change being “rendered necessary by the conditions of
modern commerce and trade”
Let the buyer beware is not a phrase that judges use very often nowadays. The age-old rule of
caveat emptor rule, which has its origin in common law, has over the times undergone major
changes. As the rule was being given a concrete shape, its exceptions also grew with time.
This article however, seeks to analyze the gradual death of the rule of caveat emptor and its
replacement with a rule, which has subsequent origin i.e. caveat venditor (Seller beware).
This analysis would center around the balancing point of the necessity of disclosure of
information by the seller on one side and implications of reasonable inspections done by the
buyer on the other.
The History: Caveat Emptor (When it originated)
As one would trace by its origin, the philosophy behind the rule of caveat emptor was
basically the reliance placed by the buyer on his own skill or judgment. It is based on the
fundamental premise that once a buyer satisfies himself as to the suitability of the product for
his use, he would subsequently have no right to reject the same. The rule of caveat emptor, as
it prevailed at the times of its origin, was quite rigid.
If one peruses through the English Sale of Goods Act, 1893, it is not only noticeable but quite
evident that the seller’s duties as to disclosure requirements when a product is sold was
minimal. Buyer’s examination of the goods was considered over and above any duty upon the
seller to provide information. Concepts like ‘fitness of goods’ and ‘merchantability’, which
could be used to shift the burden as to quality and fitness on the seller, were not encouraged.
Another strong proposition, which was present in the act, was in the form of Section 11(1)(c),
which mandated that in cases where there was sale of ‘specific’ goods, the buyer could not
reject the goods on any ground.
Thus it can be noted that the law being bent in the favor of the seller, and in those times, one
could not even contemplate a corresponding rule, which would put the burden on the seller
(caveat venditor).
The Fallacy & The Need For Change
The approach, which was being adapted when the rule of caveat emptor prevailed in its
absolute form, was later characterized as one detrimental to the development of trade and
commerce. It is submitted that their lordships were quite correct in saying so because; caveat
emptor in its absolute from would certainly be detrimental to the buyer’s cause, because till
then, the element of ‘reasonable’ examination was not introduced. Therefore a scenario
wherein a buyer would not have any recourse against a seller who has in spite of being aware
of a latent defect (one which cannot be detected by reasonable examination) not informed the
buyer about the same, would certainly not encourage commercial transactions.
Another sound reason, which can be thought of for the dilution of the rule of caveat emptor,
is to provide adequate protection to the buyer who buys the good in good faith, which case
laws put as, ‘reliance on the skill and judgment of the seller’. Thus in order to give proper
recognition to the relationship between the buyer and the seller and to generate a scenario
wherein commercial transactions are encouraged by the means of proper checks, the rule was
subsequently diluted.
The Dilution Process & Origin of Caveat Venditor
For the reasons stated above, the rule of caveat emptor, as far as judicial precedents goes, for
the first time suffered a blow by the case of Priest v. Last wherein for the first time, the
reliance placed by the seller for the purposes of buying a ‘hot water bottle’ was taken into
account for the purposes of allowing the buyer to reject the goods. This decision was the first
traceable decision in common law which gave importance to the reliance placed by the buyer
on the seller’s skill and judgment. This proposition of law, however is a settled principle of
law today.
The Priest decision however, was just a beginning of what could certainly be termed as the
diminishing process of the rule of caveat emptor. Where in this decision, the purpose was
expressly mentioned and then taken into account, the courts in subsequent cases, opined that
the need/purpose of the contract would be evident from the nature of the contract , or might
be known to the seller from the course of negotiations between the parties. Thus express
mention of the purpose behind a purchase of goods was no longer considered a requisite for
proving reliance on the skill and judgment of the seller, which signified a further shift of law
in favor of the buyer.
This imposition of obligations upon the seller was also not a smooth process in itself. If one
refers to the decisions like that of the House of Lords in the case of Ashington Piggeries Ltd
v. Christopher Hill Ltd, where on one hand the majority opined that a generalized purpose
should be shoehorned within the meaning of a particular purpose thereby meaning that when
the buyer purchases food-stuff meant for animals, he need not mention specifically the type
of animals he would feed with the food-stuff. On the other hand the dissenting opinion of
Justice Diplock, while rejecting the majority opinion, clearly said that ‘the swing from caveat
emptor to caveat venditor had gone too far.’ Another decision, which goes with the opinion
of Justice Diplock, is the decision of New Zealand Court of Appeal in the case of Hamilton v.
Paparika wherein the court refused to accept the contention that a water supplier supplying
water to horticulture farms should ensure that its water would not harm a specific crop i.e soil
less cherry tomato. The court opined that since the water was serving the generalized purpose
in the given case, so any particular purpose should have been communicated to the seller and
he could not have known the same by implication.
It is submitted that the valid argument which can be construed out of these case laws is that
concerning the variation between the nature of the particularized purpose and the generalized
purpose.’ But this has an equally sound counter-argument, which is that it should be
incumbent upon the seller to specify that his product, which is sold for a generalized purpose
would not suit a particular purpose. Or that the product would have to be used in a particular
manner in order to serve a particular purpose. This counter-argument is where one can trace
the origin of caveat venditor i.e. the need for disclosure on the seller’s part.
Caveat Venditor: Development of the Seller’s Obligation
With its origin being traced in the need for disclosure of information for the purposes of
facilitating the reason for purchase of the buyer, gradually this rule has gained prominence
and the obligations of the seller have been given proper shape along with various statutes and
case laws limiting the rule of caveat emptor to ‘reasonable examination’. Examples like beer
contaminated with arsenic , milk-containing typhoid germs are good enough to establish that
courts have been generous enough to exempt the buyer from the duty to examine the goods
where the defects could not have been traced in ordinary circumstances.
Another major debate which arises from the above obligation of the seller to make proper
disclosure is concerning cases where the seller himself does not come to know of the defect.
Where on one hand a learned scholar on sale of goods Benjamin has opined that the seller
cannot take the excuse of himself not being aware of the defect in goods. Case laws like
Harlingdon & Leinster Enterprises Ltd v. Christopher Hull Fine Art Ltd on the other hand
suggest that where the buyer himself has more expertise in a given field than the seller, it
would be wrong to suggest that the buyer could have the right to reject the painting sold to
him on account of not being of the original painter (this proposition was also rejected in the
dissent of Justice Smith in the same case).
It is however submitted that Benjamin’s opinion in this regard should be taken as over and
above the mandate of judicial precedents, because when the buyer places reliance on the skill
and judgment of the seller, the fact that the seller does not possess the same can nowhere be
held as a justifiable excuse. Therefore a duty does lie by law on the seller to be aware of the
conditions of the goods being sold and making the buyer aware of the same. The various tests
for merchantable quality of goods also go on to indicate the same when they emphasize on
the ‘full knowledge’ of the buyer as to the quality of the goods.
The first test which was accepted by the law commission was the the statement of Justice
Dixon in Australian Knitting Mills v. Grant:
# (The goods) should be in such an actual state that the buyer fully acquainted with the facts
and, therefore, knowing that hidden defects existed and not being limited to their apparent
condition would buy them without abatement of the price obtainable for such goods if in
reasonably sound order and condition and without any special terms.
The second test was the ‘usability test’ by the Law Commission comes from the verdict of
Lord Reid in the case of Kendall & Sons v. Lillico & Sons Ltd. :
# What subsection (2) now means by ‘merchantable quality’ is that the goods in the form in
which they were tendered were of no use for any purpose for which goods which goods
which complied with he description under which these goods were sold normally to be used,
and hence not sellable under that description.
On the basis of the above two tests, the Law Commission came up with its own test for
merchantable quality, stating that, ‘‘Merchantable Quality’ means that the goods tendered in
performance of the contract shall be of such type and quality and in such condition that,
having regard to the circumstances, including the pricing and description under which the
goods are sold, a buyer with the full knowledge of the quality and characteristics of the
goods, including knowledge of any defects, would, acting reasonably, accept the goods in
performance of the contract.
It is submitted that from the above mentioned three tests for merchantable quality, it can said
that if the goods are supposed to be termed as those of merchantable quality, the buyer having
‘full knowledge’ about them, would ‘acting reasonably’ buy the same. Therefore the seller’s
duty to make the buyer aware of all the defects in the goods being sold and all the
information relating to the usage of the goods. This obligation of the seller, it is submitted,
should be irrespective of his own knowledge and skill, because what matters is not what he
has but what he is expected to have.
Conclusion
Therefore it can be concluded from the above analysis that the rule of caveat emptor is dying
a slow death and is being taken over by the subsequent rule of caveat venditor, the change
being attributed to a more consumer oriented market wherein commercial transactions are
being encouraged. Such a change, it is submitted will not only help create an appropriate
balance between the rights and obligations of the seller and the buyer. But it should be noted
that if this trend of change is taken too far, we might end up in retarding transactions due to
the approach then becoming extremely pro-buyer who might misuse the protection under law.
Concept of Consumers Sovereignty

One of the important characteristics of capitalism is the existence of economic freedom,
which implies not only freedom of enterprise but also consumer sovereignty. After World
War II, incomes rose and people began to enjoy more goods and services. Instead of
eating three square meals a day at home, families began to go to restaurants once in a
while.
In the 1980s consumers wanted more and more restaurants and fast-food outlets flour-
ished. In the 1980s, people chose to be spend more time at home with their families; the
demand for restaurants decreased and was replaced by a demand for food delivered to
the home.
By emphasising delivery various fast-food outlets, like Stopover Pizza Hut, Big Boy,
White Castle, Berger King Hot Breads and above all McDonall’s, become very
successful. However the star of this story is not a particular shop or outlet but the
consumer. In a market system, if consumers are willing and able to pay for more
restaurant meals, more restaurants appear. If consumers are willing and able to pay for
food delivered to their homes, food is delivered to their homes.
Why does the consumer wield such power? The word of the game for business is profit,
and the only way business can make a profit is by satisfying consumer wants. The
consumer, not that business firm or the government or its planning apparatus, ultimately
determines what is to be produced.
A firm that produces something that no consumers want will not remain in business very
long. Consumer sovereignty refers to the authority of consumers to determine what is
produced through their purchases of goods and services. It dictates what goods and
services will be produced. See Fig. 6.
In a free market, or private enterprise economy, all the factors of production are owned
by private individuals and the decisions of what, how and for whom are made uncon-
sciously by the interaction of the market forces. Here we assume that consumers are
rational and always attempt to maximise the utility they receive from their incomes, and
that entrepreneurs are also rational and always attempt to maximise their profits.
Given these assumptions, consumers are free to purchase whatever they wish in the
market place. This is sometimes expressed as ‘consumer votes’ in the sense that they
will spend more of their incomes (votes) on goods they prefer (favour).
As the demand for these goods increases their prices will rise, making them more
profitable and entrepreneurs seeking greater profit will respond by entering into
production of these goods thereby increasing their supply.
Hence, more of these goods for which consumers have expressed a preference are pro-
duced Production is, therefore, said to respond to the ‘price signals’ which indicates
those goods which should be produced, and consumer sovereignty is said to prevail
over the market.
However the concept of consumer votes should not be equated with any concept of
‘fairness’ in the accepted sense; in a market economy some people have more ‘votes’
than others, and if this is seen as a problem then it is one of income distribution not the
price mechanism in itself.
In short, the term ‘consumer sovereignty’ refers to the power of consumers to determine
what is produced, since they are the ultimate purchasers of goods and services. In
general terms, if consumers demand more of a good then more of it will be supplied.
This implies that producers are ‘passive agents’ in the price system, simply responding
to what consumers want However, in certain kinds of market (notably, monopoly and
oligopoly) producers are so powerful vis-a-vis consumers that it is they who effectively
determine the range of choice open to the consumer.
1. Revised Sequence:
In a modern economy the traditionally held view of firms responding to a unidirectional

flow of instruction from consumers in the market place (i.e. consumer sovereignty) may
be inappropriate due to the existence of large firms. And J.K. Galbraith suggests that in
a market economy large corporations may have the means and ability to influence
consumers’ market behaviour just as much as consumers affect corporate market
behaviour. In perfectly competitive markets the traditional theory (the ‘accepted
sequence’) may still be valid, but in an oligopoly or monopoly it is no longer valid.
2. Advertising:
In fact, the concept of consumer sovereignty in the modern economy has been
challenged by several writers, in particular by Galbraith. Galbraith argues that consumer
sovereignty is a myth and that the large corporations are in fact sovereign as they are
able to create wants and impose them upon consumers by the use of advertising (which
is a technique of demand manipulation).
Even if this overstates the case it is at least probable that advertising distorts consumers’
preferences. Opponents of this viewpoint show examples where consumers have
resisted the attempts of large corporations to manipulate their preferences, in particular
the failure of the Ford Motor Company to make the Edsel model in the 1950s or of
India’s Standard Motor Co. to launch the car model Standard 2000 in a big way. Rather
the model is a big failure.
3. Merit Goods:
Merit goods are an important category of allocation in which the government is involved.
Merit goods are those goods of which consumers will not purchase enough unless
forced by the government to do so. Safety features in cars and scooters (such as
helmets, or seat belts) national health care and education are examples.
Most governments not only offer free public education, but in some countries
governments require that people between certain ages attend schools. This is a very
normative idea. Everyone has his own ideas about what other people ought to consume.
4. Income Redistribution:
A modern economy does not rely exclusively on the market mechanism to settle the ‘for
whom’ question. The government redistributes market incomes by taxing the rich and
giving income transfers to the poor. Those income transfers include not only cash
benefits (e.g., unemployment compensation or old-age pension,) but also in-kind
benefits like food, public housing and free education. As a result of this government-
directed redistribution, the poor end up with a larger share of output than the market
alone would provide.
Basic 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.
Unit-2
Measures for Consumer Protection in
India
Important Methods of Consumer Protection:
The important ways for consumer protection are:

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
Voluntary Organisation of Consumers to Protect their Rights:

consumer rights.
ways:

them.
products.
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.
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.
Basic Provisions of the Consumer

Protection Act (CPA) 1986
The Consumer Protection Act 1986 was passed by the Indian Parliament to protect
consumer rights and to redress consumer complaints and resolve consumer disputes.
Every individual is a consumer of goods and services and expects a fair deal against unfair
exploitation.
This Consumer Protection Act applies to the whole of India except the State of Jammu and
Kashmir and covers all goods and services purchased by the consumers and to all sectors —
private, public and cooperative. The objective of the Act is “to provide for better protection
of the interests of consumers and for that purpose to make provisions for the establishment of
Consumer Councils and other authorities for the settlement of consumer disputes and for
matters connected therewith”. It protects the consumers from unfair trading or unfair trade
practices.
It is important to note that the Indian Consumer Protection Act is a social welfare legislation
and has been designed to avoid technicalities, procedural delays, procedural requirement,
court fees and costs.
The Consumer Protection Act, 1986 provides for the following rights to the
consumers:
(a) Right to be heard and to be assured that consumers’ interests will receive due
consideration at appropriate forum;
(b) Right to seek redressal against unfair trade practices or unscrupulous exploitation of
consumers; and
(c) Right to consumer education.
The Consumer Protection (Amendment) Act 1993 adds the following consumer
rights:
(d) The right to be assured wherever possible, access to a variety of goods and services at
competitive prices;
(e) The right to be informed about the quality, potency, purity, standard and price of goods
(or services as the case may be) so as to protect the consumers against unfair trade practices;
and
(f) The right to be protected against the marketing of goods (and services) which are
hazardous to life and property.
Organizational Set Up For Consumer

Protection under CAP 1986
Redressal Agencies:
We explain below the various authorities set up under the Consumer Protection Act 1986.
Consumer Protection Councils:
The Act provides for setting up a Central Consumer Protection Council by the Central
Government and State Consumer Councils by each state of India. The Central Consumer
Protection Council shall consist of (1) the Minister in Charge of Consumer Affairs in the
Central Government who shall be its chairman and such number of other official or non-
official members representing such interests as prescribed.
It is required by the Act that Central Consumer Protection Council will meet as and when
necessary. However, at least one meeting of the Central Council must be held every year. The
objects of the council are to protect the rights of consumers and promote their interest as
listed above from (a) to (f).
The State Consumer Councils to protect consumer rights as per amendment in the Act in
1993 will consist of (1) the Minister in Charge of Consumer Affairs in the State Government
concerned and members of other officials and non-officials representing such interests as may
be prescribed by the State Governments. As in the case of the Central Council, the objects of
State Councils will be to protect the rights of consumers as listed above from (a) to (f) within
the State.
Consumer Disputes Redressal System:
Under the Consumer Protection Act 1986 three-tier consumer disputes redressal system at the
District, State and National levels has been set up.
Thus the Act provides for establishing the following consumer redressal agencies:
1. District Consumer Forum in each district of a state set up by the State Government.
2. State Consumer Commission in each state set up by each State.
3. National Consumer Commission set up by the Central Government.
Composition of Consumer Redressal Agencies:

According to Consumer Protection Act 1986 each District Consumer Forum set up in each
district of a State shall consist of a person who is or has been or is qualified to be a district
judge. This person will work as president of the district consumer forum.
Two eminent members who have adequate knowledge and experience and have the ability in
dealing with problems concerning law, commerce, economics, accountancy, industry, public
affairs or administration and one of whom shall be a lady member, especially who is a social
worker.
A District Forum has the jurisdiction to deal with the complaints where the value of good or
service and the compensation claimed, if any, does not exceed Rs. 20 lakh (as per amendment
in the Act in 2002). A complaint by consumers will be filed in a District Forum in case when
the opposite party or each of the opposite party if there are more than one resides or carries
on business within the district concerned at the time of filing the complaint or any one of the
party (if there are more than one) residing or carrying on business in the district at the time of
the filing of the complaint if the district forum grants permission for this.
The State Consumer Commission shall consist of:
(1) A person who is or has been a judge of a high court appointed by the State Government,
(2) Two other members of high standing and eminence who have adequate knowledge or
experience concerning the problems relating to law, commerce, economics, industry, public
administration etc. one of whom shall be a woman.
The State Consumer Commission as per the amendment of the Act in 2002 shall have the
jurisdiction to entertain complaints where the value of goods or services and compensation
claimed if any exceeds Rs. 20 lakh but is not more than Rs. 1 crore.
The State Consumer Commission will also entertain appeals against the orders of District
Forums within the State. Besides, the State Consumer Commissions have been authorized to
call for the records and give appropriate orders in case of any consumer dispute pending
before the District Forum within the State or has been decided by it if the State Commission
finds that a District Forum has exercised a power not vested in it by the Act or has failed to
exercise a power or jurisdiction vested in it or acted illegally in exercise of its powers.
The National Consumer Commission will consist of:
(a) A person who is or has been a judge of the Supreme Court and is appointed by the Central
Government in consultation with Chief Justice of India. He will also work as president of the
national commission,
(b) Four other members of eminence having good knowledge or experience and ability to
deal with the problems relating to commerce, economics, law, industry, public affairs or
administration and one of whom shall be a woman.
National Consumer Commission has the jurisdiction:
(1) To entertain complaints where the value of goods or services and compensation claimed if
any is, according to Amendment Act 2002, one crore or more;
(2) National Commission is authorized to hear appeals against the order of any State
Consumer Commission;
(3) The Central Commission has the right to call for the records from the State Commissions.
It is important to note that all forums, commissions appointed under the Consumer Protection
Act are in substantial matters not different from the ordinary civil courts. They are quasi-
judicial tribunals created to render speedy justice
Remedial Action:
It may be noted that a complaint to a redressal agency may be filed by:
(a) An individual, consumer;
(b) Recognized consumer association,
(c) More than one consumers who have the same interest; and
(d) The State or Central Government. The complaint to a redressal agency must be in relation
to goods sold or delivered or service provided to the complainant.
If the redressal agency is convinced that any of the allegations in the complaint filed before it
is true, it shall issue an appropriate order to the opposite party.
This order may be any of the following types:

1. To remove the defect if found to be true by the appropriate laboratory from the good in
question;
2. To replace the defective goods with the new goods of the same type free from the defects;
3. To return to the complainant price of the defective good or charges paid by him;
4. To pay the compensation to the complainant as may be decided by the redressal agency for
the loss suffered by him;
5. To remove the defects or deficiencies in the service rendered to the individuals;
6. To stop the unfair or restrictive trade practice or give undertaking not to repeat in future;
7. Not to supply hazardous goods;
8. To withdraw the hazardous goods being offered for sale; and
9. To give adequate costs to the parties in question.
Penalties:
The Consumer Commissions are authorized to impose penalties on trader or person against
whom complaint is made if he fails to comply with the order of the redressal agency. The
penalty or punishment may involve imprisonment for a period not more than 3 years or a fine
of not more than 10 thousand rupees or both.
The Consumer Protection Amendment Act 2002:

The Consumer Protection Act 1986 held great hopes for the helpless consumers who have
been denied fair deal by the unscrupulous producers or traders. In the implementation of
Consumer Protection Act 1986 some deficiencies in the Act were noticed. Therefore, some
important amendments were made in the Act by Consumer Amendment Act 2002. With this
amendment all the redressal agencies (District Forums, State Consumer Commissions and
Central Consumer Commission) have been given the powers of a judicial magistrate of a first
class for trial of offences within their jurisdiction, subject of course to the right of appeal
from a lower redressal agency to a higher one.
The important changes made by the Consumer Protection Amendment Act 2002 are the
following:
1. Both MRTP Act and Consumer Protection Act deal with unfair and restrictive trade practices.
Amendment made in Consumer Protection Act in 2002 has clarified that the expression ‘restrictive
trade practices’ will also include delay in supply of goods or services and rise in prices in the mean
time.
2. Provisions regarding unfair trade practices have been made more stringent. It is now
provided that if the representations contained in an advertisement for the sale or supply of a good
or service are misleading, the advertiser can be held responsible for taking corrective steps at his
own cost apart from other obligations.
3. The District Forums would be able to deal with cases involving the payment of compensation
of Rs. 20 lakhs against the pre-existing Rs. 5 lakhs. Similarly, the State Consumer Commissions can
now deal with cases involving compensation up to Rs. 1 crore while National Consumer Commission
can deal with cases involving compensation of Rs. 1 crore or more instead of pre-existing Rs. 25
lakhs.
4. In the event of the death of the complainant, amendment in the Act in 2002 now provides
for substitution of his legal representatives. Surviving legal representatives can file a complaint or
get substitution in place of the existing one.
5. In regard to goods hazardous to life or safety of the public, traders supplying goods will be
liable if it can be proved that the supplier could have known with due care that the goods or services
supplied were hazardous to the public. Besides, liability of suppliers of spurious products and
services is made clear in the Amendment Act 2002.
6. An important amendment relates to the meaning of expression ‘manufacturing’.
Manufacturing has now been defined to include merely assembling parts of goods made by others
or putting one s own mark on any good manufactured by others.
7. Amendment Act 2002 makes the restrictive trade practices more stringent by including
under it trade practice which tends to the manipulation of price or the conditions of delivery of
goods or affect the flow of supplies of goods in the market in a manner that imposes undue costs or
restrictions on the consumers. Restrictive trade practice also includes delay in the delivery of goods
beyond the period agreed to by the traders or delay in providing services when such delay is likely to
lead to rise in their prices.
8. According to an important provision in the 2002 Amendment Act, in trading or commerce of
goods or services misleading or deceptive conduct of traders or suppliers would be treated as unfair
trade practice. Those who make misleading or false representation luring consumers to buy goods or
services would fall within unfair trade practice and would be held liable. Under the Consumer
Protection Amendment Act 2002 the consumers who are lured to enter into such a contract would
be entitled to get the damages.
Similarly, Amendment Act 2002 also covers the unfair treatment to the consumers who have
suffered by being lured in the schemes offering gifts, concessional prices or some items free
of charge depending on the official results of a particular scheme. This amendment provides
remedy to the consumers who might be unfairly treated in such schemes by requiring the
promoter to disclose proper information regarding the results of a scheme by appropriate
timely publication of results in newspapers, etc.
Proposed Amendments in Consumer Act, 2010:

The Cabinet has given clearance to the proposed amendments to the Consumer Protection
Act which is likely to be passed by the parliament in winter session of 2010. These
amendments seek to make the consumer protection law more responsive to consumer
complaints through quicker disposal of cases. The proposed amendments have widened the
scope of the law, specified time limit for quicker disposal of cases and rationalized
qualifications for appointment of members of consumer forums at the state and national level.
Evaluation of Consumer Protection Act:

Consumer Protection Act with amendments made in it in 2002 is a quite comprehensive piece
of legislation that seeks to protect the consumers against unfair and exploitative practices of
manufacturers. Consumer awareness in India is now fast growing. As a result, the number of
complaints by the end of 2002 before District Forums had been about 14 lakhs, that before
State Commissions 2 lakhs and that before National Commission about 21,000 all of which
amount to the total of about 162,100.
It is important to note that Consumer Protection Act is additional law protecting consumers
but not a derogation of any other laws which protect consumers. Services or goods provided
by those dealing in information technology, electronic commerce (E-Commerce) are also
liable under the Consumer Protection Act apart from the Act governing Telecommunication
Regulatory Authority of India (TRAI) which regulates not only transactions between
competing providers of telecommunication services but also regulate them to protect
consumer interests.
Similarly, the Consumer Protection Act is in addition to MRTP Act which also tries to protect
the interests of consumers by controlling monopolistic and restrictive trade practices.
According to G.L. Sanghi, “The tribunals created under the Consumer Protection Act are in
substantial matters not different from the ordinary civil courts. They are quasi-judicial
tribunals created to render inexpensive and speedy justice. They provide additional remedies
through the newly created forums”.
A Comprehensive Act:
The Consumer Protection Act is quite a comprehensive legislation. Under the Consumer
Protection Act not only manufacturers and suppliers of goods but also of such services as
insurance providers, medical treatment, lending and recovery of bank loans also come within
the purview of the Act. A few such important cases are worth explaining.
Consumer Protection Act and Medical Practitioners:

The applicability of Consumer Protection Act to medical practitioners is a highly complicated
issue and the case relating to it went even up to the Supreme Court of India. In defence of
medical practitioners it was argued that their services are excluded category being services
under “Control of Personal Services”. Supreme Court rejected these arguments and brought
medical practitioners, hospitals and nursing homes where services are rendered for valuable
consideration under the purview of Consumer Protection Act.
Doctors and hospitals committing medical negligence have therefore become liable and
damages for medical negligence can be claimed from them. Though this has created fear and
concern among medical practitioners and private hospitals but this will help in preventing
medical negligence on the part of doctors and hospitals.
It has been widely reported in the media about medical negligence, for example, of operating
a wrong eye, removing a kidney of a person without his consent, leaving screw, scissors and
a towel in the abdomen of a patient, giving a wrong injection leading to the death of a patient.
For all these acts of negligence compensation can be claimed from doctors and hospitals and
also penalties can be imposed on them.
In an important case Supreme Court held that a medical practitioner may be liable if there
was a negligence in respect of diagnosis and/or treatment given to a patient provided it can be
demonstrated that the negligent act was not based on reasonable and responsible information
as to the kind and quality of treatment.
Insurance Companies and Consumer Protection Act:

One of the important categories where Consumer Protection Act has been usefully applied is
the claims against insurance companies. Many insurance companies (including public sector
insurance companies) often deny medi-claims to the insurers on one pretext or the other.
Generally insurance companies deny claims for damages to the insurers that they did not
disclose the pre-existing disease they were suffering from at the time of getting insured. In
many cases consumer commissions have rejected the arguments of insurance companies and
have awarded damages to the insurers and require insurance companies to fulfill their
contractual obligations.
In a recent case of accident claim the United India Insurance Company denied to pay the
damages on a car which met with an accident on the ground that it was being plied without
the ‘fitness certificate’ as required under the Motor Vehicles Act. In this case in Nov. 2007,
National Consumer
Commission held that the insurance companies, if the terms of the policy were not breached,
cannot refuse to entertain claims on the pretext that the insured violated some other laws or
conditions “as the insurance is a matter of contract between the two parties.”
Recovery of Bank Loans and Consumer Protection Act:

The wide applicability of Consumer Protection Act can be understood from the recent
judgment of the State Consumer Commission of Delhi which slapped a fine of Rs. 55 lakhs
on ICICI Bank for trying to recover a vehicle loan by hiring musclemen. The goons of
recovery agent of the bank forcibly dragged out a youth from the car, beat him up with iron
rods and left him bleeding and drove away with the vehicle. Justice J.D. Kapoor, president of
the commission, said, “We hold ICICI Bank guilty of the grossest kind of deficiency in
service and unfair trade practice for breach of terms of contract of hire-purchase/loan
agreement by seizing the vehicle illegally.”
Conclusion:
In view of the above usefulness and wide applicability of Consumer Protection Act, Mr. G.L.
Sanghi is right in concluding, “In each and every area involving sale of goods and services
for valuable consideration a consumer stands protected. The polarity of this law is unlimited.
Its machinery is effective and awesome to the delinquent trader with solace to the consumer.
As experience grows further improvements will un-doubtetedly make this remedy more and
more useful”.
Procedure of filling Complaint and relief

available under CPA 1986
With the economic development, the buying capacity of the consumers has increased along
with the choices of products and services in the market. The consumer is now more aware of
their rights than they were ever before. The Consumer Protection Act, 1986 of India
protects the rights of the consumers in India and also has a mechanism to address the
customer complaints. So how does one go about filing a complaint under the consumer
protection Act, 1986? Here is a guide for you.
Consumer
The act clearly defines the term, Consumer. According to the act, a consumer in India is any
person who:-
1. Buys any goods;

2. Hires any services;
3. Uses goods with the approval of the buyers;
4. Hires services with the service provider’s approval;
5. Uses the goods to earn livelihood or self-employment;
6. Uses the services to earn livelihood or self-employment;
Who can file a complaint?
According to the Consumer Protection Act, 1986, any person who is a consumer who bought
a product or service, fully or partially paid for his use is a consumer. Since the Consumer
Protection Act, 1986 extends to the whole of India, any consumer can file a complaint to the
consumer forum in India.
Steps to file a complaint
1. Drafting the complaint petition– In a precise manner, a complaint needs to be drafted with
the facts and proofs such as any bills, receipts, documents. Three copies need to be made of the
complaint and filed with an affidavit. The complaint also needs to be served to all the parties
involved.
2. After the drafting, the complainant has to choose the court depending on the value of the
consideration.
To ensure the rightful and speedy resolution of all the consumer complaints, the Consumer
Protection Act, 1986 has a three-tier redressal system on which it operates.
The three layers of the redressal system are:
1. The District Forum at District Level: The jurisdiction of this forum entertains complains of
value equal to or less than INR 20 Lacs.
2. State Commission at the state level: The jurisdiction of this forum entertains complains of
value equal to or less than INR One crores.
3. National Commission at National level: The jurisdiction of this forum entertains complains
of value more than Rs. 1 Crores.
Each of these forums has to provide the resolution within thirty days failing to which the
consumer can escalate the complaint to the next commission.
3. After choosing the court, the statutory fees are to be deposited while filing the complaint.
4. If one is not satisfied with the verdict of these forums, they have an option to apply for a
revision to the honorable Supreme Court of India.
The complaint can be filed within two years of buying or using the service.
Consumer courts may grant one or more of the following reliefs:
A) Repair of defective goods.
B) Replacement of defective goods.
C) Refund of price paid for the defective goods or service.
D) Removal of deficiency in service.
E) Refund of extra money charge.

F) Withdrawal of goods hazardous to life and safety.
G) Compensation for the loss or injury suffered by the consumer due to negligence of the
opposite party.
H) Adequate cost of filing and pursuing the complaint.
I) Grant of punitive damages. Their grievances in an effective and simple manner.
Unit-3
Competition Act: Provisions Relating to
Consumer Protection
Besides the basic necessities of food, clothing, and shelter, we consume a variety of things in
our daily lives such as cell phones, digital cameras, soaps, perfumes, cosmetics, among other
things. Thus, all of us are consumers in the literal sense of the term. When we buy things
from the market as a consumer, we expect value for money, i.e., quality, quantity, right price,
information about the mode of use, etc. However, there may be instances where a consumer
is cheated.
In such cases, most of us do not know whom to approach to seek redressal. Moreover, a

majority of us also are unaware of our “rights” as a consumer and often hesitate to complain
or even stand up to unfair practices. We also don’t have the recourse of costly litigation to
seek justice and we continue to bear such injustice.
This is where consumer forums, which can help you seek justice against unfair practices
without incurring exorbitant litigation costs, come in.
The below article provides basic information about the Consumer Protection Act, 1986, its
advantages for consumers, basic rights of the consumers, and consumer redressal forums
among other things.
Consumer Protection Act, 1986
The Consumer Protection Act, 1986, was enacted to provide a simpler and quicker redressal
to consumer grievances. The Act seeks to promote and protect the interest of consumers
against deficiencies and defects in goods or services. It also seeks to secure the rights of a
consumer against unfair trade practices, which may be practiced by manufacturers and
traders.
The agenda of a consumer forum is to provide relief to both parties and discourage long
litigation. In a process called ‘informal adjudication’, forum officials mediate between the
two parties and urge compromise.

The Act applies to all goods and services unless specifically exempted by the Union
Government and covers all sectors, whether private, public, or cooperative.
This Act has provided a machinery whereby consumers can file their complaints. These
complaints will then be heard by consumer forums with special powers so that action can be
taken against erring suppliers and possible compensation is awarded to the consumer for the
hardships he/she has undergone.
The consumer, under this law, is not required to deposit huge court fees, which earlier used to
deter consumers from approaching the courts. The rigors of court procedures have been
replaced with simple procedures as compared to the normal courts, which helps in quicker
redressal of grievances. The provisions of the Act are compensatory in nature.
Please remember, consumer courts provide redress only in cases of products or services
for personal use; defects in products used for commercial purposes are not entertained.
Basic rights of consumers include:
1. Right to be protected against marketing of goods and services that are hazardous to life and
property
2. Right to be informed about the quality, quantity, standard, and price of goods or services so
as to protect the consumer against unfair trade practices
3. Right to receive assured access, wherever possible, to a variety of goods and services at
competitive prices
4. Right to be heard and to be assured that consumers interests will receive due consideration
at appropriate forums.
5. Right to seek redressal against unfair trade practices.
6. Right to consumer education

Consumer redressal forum
Under the Consumer Protection Act, every district has at least one consumer redressal forum,
also known as a consumer court. Here, consumers can get their grievances heard. Above the
district forums are the state commissions. At the top is the National Consumer Disputes
Redressal Commission in New Delhi.

A written complaint to the company is taken as proof that it has been informed. The
complaint must be backed by copies of bills, prescriptions, and/or other relevant documents,
and should have a deadline. Consumers can also complain through a consumer organization.
Claims of less than Rs5 lakh should be filed with a district forum, claims of Rs5-Rs20 lakh
with the state commission, and claims of more than Rs20 lakh directly with the National
Commission.
To file the complaint:
 The complaint should be filed within two years of buying the product or using the service
 It needs to be in writing. Letters should be sent by registered post, hand-delivered, email, or
fax. Do not forget to take an acknowledgment
 The complaint should mention the name and address of the complainant and the
person/entity against whom the complaint is being filed. Copies of relevant documents must be
enclosed
 The consumer must mention details of the problem and the demand on the company for
redressal. This could be a replacement of the product, removal of defect(s), refund, or compensation
for expenses incurred, and for physical/mental torture. The claims, however, need to be reasonable
 You should preserve all bills, receipts, and proof of correspondence related to the case.
Avoid using voice mail or telephone because such interactions are normally difficult to prove
 The complaint can be in any Indian language, but it is better to use English
 There is no compulsion to hire a lawyer. The main cost consists of correspondence and
traveling to the consumer forum for the hearing
 Maintain a complete record of the emails and documents sent and received
Appeal
An appeal is a legal instrument which enables persons dissatisfied with the findings of a
consumer court to approach a higher court to present his case and seek justice. In the context
of consumer forums:
1. An appeal can be made with the state commission against the order of the district forum
within 30 days of the order, which is extendable for further 15 days (Section 15)
2. An appeal can be made with the National Commission against the order of the state
commission within 30 days of the order or within such time as the National Commission allows
(Section 19)
3. An appeal can be made with the Supreme Court against the order of the National
Commission within 30 days of the order or within such time as the Supreme Court allows (Section
23)
Penalties
The consumer courts (district court, state commission, and National Commission) are given
vast powers to enforce their orders. If a defaulter does not appear in court despite notices and
reminders, the court may decide the matter in his absence. The forum can sentence the
defaulter to a maximum of three years’ imprisonment and impose a fine of Rs10,000. Forums
can issue warrants to produce defaulters in court. They can use the police and revenue
departments to enforce orders.
Consumer rights need to be protected since services are availed based on trust and faith, and
thus, it’s a necessity to keep a check on the service providers for the sake of service recipient.
Role of Voluntary Consumer

Organizations
consumer rights.
ways:
them.
products.
Formation and Registration of Voluntary

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

them.
products.
Business Self-Regulations
The important ways for Consumer Protection are:

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
Consumer awareness: Role of Media and

Government
Consumer awareness refers to the knowledge consumers have about products or services
and their rights as consumers. At the basic level, this means developing an awareness of
products or services, and understanding the rights a consumer has regarding a malfunctioning
product. As consumer awareness increases, the consumer may become familiar with ways in
which to use a product or service, the benefits or drawbacks of a specific product or service,
or reviews or recalls of a product or service. In large part, this awareness comes through the
media, both by advertising and through news stories about products or services.
Media Formats
The types of media which can influence consumer awareness are more numerous than ever.
Older media platforms, including newspapers, radio and television, are still available but
have lost popularity since the advent of the Internet. Within the category of Internet media, a
consumer finds respected sites such as web versions of print newspapers and government
websites alongside opinion-based sites such as blogs and message boards. Advertising exists
on nearly all media platforms, whether print, television or Internet, further bombarding the
consumer with information that may or may not be accurate.
Effects
As consumers turn more frequently to Internet sources for purchase advice, they’re able to
keep up with recent developments faster than ever. This means, for instance, that companies
have the ability to use Internet media to distribute news of product recalls almost as soon as
they know a recall is necessary. It also means that unfounded information can be distributed
before reliable journalists have a chance to confirm it.
Responsibility
Journalists have the responsibility to practice the same ethics when publishing online that
they use for print media, including double-checking facts and reporting without bias. Even
though online media may seem less permanent than print, it actually reaches more consumers
in a shorter time. Consumers have the responsibility to ensure any website they take advice
from practices journalistic standards rather than simply publishes opinions. Government
websites or online versions of print publications are good starting sources.
Considerations
Since online publishing is still new to many journalists in 2010, journalists are moving
through a transition period as they learn to balance the techniques used for newspaper
reporting with the new demands of Internet media. For example, in previous times, when a
journalist found an error printed in one of his newspaper stories, he would run a correction in
the next edition. Online, he has the opportunity to change the fact in the story, but he may be
left wondering whether he needs to point out the change. Adding links to stories is another
gray area, as journalists have to decide how much responsibility they bear for the accuracy of
the websites they link to.
GOVERNMANT ROLE
he word consumer is self-explanatory and the literal meaning is “one who consumes”. But, as
against a customer in the market place, a consumer has a wider and broader meaning. In
traditional theory, the consumer is considered to be well-informed about costs, price and
quality of goods. But in the real world, things are different.
Consumer can be defined as an individual who purchases and uses products and services in
contrast to manufacturers who produce the goods or services and wholesalers or retailers who
distribute and sell them. This includes the user of such good or service, but not one who
obtains the good for resale or commercial purposes. It covers transactions through all modes
including offline, online through electronic means, teleshopping, or multi-level marketing.
Changing Indian consumer in a globalised era

When India opened its economy to the global marketplace in the early 1990s, many
multinational corporations rushed in to pursue its middle-class consumers—an estimated 200
million people—only to confront low incomes, social and political conservatism, and
resistance to change. It turned out that the Indian consumer was a tough one to figure out and
win over.
Globalisation and liberalisation of trade and business has resulted in many products and
services being available to the consumers. Growth in economy has resulted in increase in the
purchasing power of the middle class, which is the largest segment of the population. This
has necessitated the protection of the consumers and promotion of responsible consumer
movement in the country.
Customer is king; protect the king

Several laws have been passed by the Indian government to protect consumers and uphold
their rights—like the Prevention of Food Adulteration Act, 1954, The Essential Commodities
Act, 1955, Bureau of Standards Act, 1986, among others. The most important one, however,
is the Consumer Protection Act 1986, which is set to undergo a major revamp. The new
Consumer Protection Bill, 2018, was introduced by Ram Vilas Paswan, Union minister for
consumer affairs and food and public distribution, in the Lok Sabha on January 5.
Talking about the new bill, Prime Minister Narendra Modi said, “Consumer protection was in
line with the government’s resolve of building a new India. New consumer protection act was
in the making which would lay out stricter guidelines on advertisements, to ensure people are
not misled. Stringent provisions have been proposed against misleading advertisements. A
Central Consumer Protection Authority with executive powers will be constituted for quick
remedial action. The government prioritising consumer protection is in line with our resolve
of a new India. We will change it to consumer prosperity on the way ahead.”
Some points to note about the new Bill, which was approved by the Cabinet in December
2017, are:
 The Bill enforces consumer rights, and provides a mechanism for redressal of complaints
regarding defect in goods and deficiency in services.
 Consumer Dispute Redressal Commissions will be set up at the district, state and national
levels for adjudicating consumer complaints.
 The Bill establishes a Consumer Protection Authority to investigate into consumer
complaints, issue safety notices for goods and services, and pass orders for recall of goods and
against misleading advertisements.
 If a consumer suffers an injury from a defect in a good, he may file a claim of product liability
against the manufacturer. The consumer must establish seven conditions in order to prove such a
claim.
 The Bill classifies four contract terms as ‘unfair’—(1) payment of excessive security deposits;
(2) disproportionate penalty for a breach; (3) unilateral termination without cause; (4) one which
puts the consumer at a disadvantage.
 The Bill empowers the central government to supervise the functioning of, and issue binding
directions to the district, state and national consumer dispute redressal commissions. These could
affect the independence of these quasi-judicial bodies.
 The District Commission, a quasi-judicial body, may be headed by a District Magistrate, who
is part of the executive. This could violate the principle of separation of powers between the
judiciary and executive.
 The National Commission, headed by a judicial member and comprising at least 15 technical
or judicial members, will examine complaints on questions of law. This could contradict a Supreme
Court judgement that questioned the competence of such technical members.
 In order to claim product liability, a claimant must establish four kinds of defects in product,
the injury caused from it, and that it belonged to the manufacturer. The claimant must also establish
that the manufacturer had knowledge of such a defect. It may be argued that the conditions to
establish a product liability claims are unreasonable.
 The Bill defines the product liability to include defects in goods and deficiencies in services.
However, the conditions to be proven to claim product liability do not include conditions for
services. It is unclear how a consumer can claim product liability for deficiency in services under the
Bill.
The consumer has to be aware of his rights and play a key role. The success of consumerism
is a strong function of consumer awareness and to avoid exploitation, consumer must become
knowledgeable. Many constitutional provisions have been made by government to protect the
consumers. There is a great need to make them aware of their rights and responsibilities.
Unit-4
Recent Developments in Consumer
Development Movement
Scholars most commonly view the modern consumer movement in India from two perspectives –
that of consumer activism and that of business self-regulation. There is tradition in India which says
that consideration for consumer rights began in the Vedic Period, and in these narratives, laws
encourage merchants to practice honesty and integrity in business. Most discussion about India’s
consumer activism starts with a description of the Indian independence movement. At this time
Gandhi and other leaders protested taxation of basic consumer products, such as during the Salt
March, and encouraged people to make their own goods at home, as with the Khādī movement to
promote spinning thread and weaving one’s own textiles. These actions were to raise awareness
that consumer purchase decisions fund the source of India’s political control.
Gandhi promoted the idea that businesses have a trustee role in being responsible to the customers,
workers, shareholders, and their community. In particular, Gandhi said that “A customer is the most
important visitor on our premises. He is not dependent upon us. We are dependent upon him. He is
not an interruption in our work – he is the purpose of it. We are not doing him a favor by serving
him. He is doing us a favor by giving us the opportunity to serve him”. United States consumer
advocate Ralph Nader called Gandhi “the greatest consumer advocate the world has seen” for
advancing the concept that commercial enterprise should serve the consumer and that the
consumer should expect to be served by business. Vinoba Bhave and Jayaprakash Narayan, two
great proponents of Gandhi’s philosophy, and V. V. Giri and Lal Bahadur Shastri, contemporary
Indian president and prime minister, similarly expected the business community to regulate itself as
an expression of responsibility to contribute to society. These ideas were developed by some
business leaders. In July 1966 in Bombay some people founded the Fair Trade Practice Association,
which was later renamed the Council for Fair Business Practice. This is now seen as a sincere effort
toward promoting business self-regulation, despite consumer activists’ criticism that self-regulation
would not provide sufficient protection to consumers.
From the perspective of consumer activism, the Planning Commission backed the foundation of the
Indian Association of Consumers in 1956 in Delhi to be a national base for consumer interests. For
various reasons, it was not effective in achieving its goals. Other organizations were established in
the 1960 in various places in India but none were effective in achieving community organization.
Leading on past failures, in Bombay in 1966 nine female homemakers founded the Consumer
Guidance Society of India (CGSI) which remains one of India’s most important consumer
organizations. The most powerful consumer organization in India is the Consumer Education and
Research Center (CERC), founded in 1978 in Ahmedabad as part of the “social action litigation
movement“. At that time in society, courts started recognizing social workers and public interest
groups as consultants on behalf of individuals or classes of people whose rights had been violated
but who could not easily speak for themselves. Since its founding CERC has become among the most
successful consumer organizations of the developing world in terms of its achievements of litigating
on behalf of consumers. The Consumer Protection Act of 1986 was mostly a result of intensive
lobbying by CERC and CGSI.
In 1991 the Economic liberalisation in India radically changed the Indian marketplace by opening
India to foreign trade and foreign investment.
Sources of Consumer information

Transparent information about the terms and conditions associated with the product or service can
facilitate a plenty of regulatory requirements to redress the consumer related grievances. Primarily,
complete information will level the information asymmetries, improve consumer’s decision- making
capability vis-à-vis the seller’s complex knowledge about the product they are selling.
Consumer information also harmonises and solve consumer problems, create awareness and guide
their Behaviour. Another important objective that is achieved by informing the consumer is impact
on Competitive policy. This will enable the traders and service providers to give greater information
to consumers about their product, educate them about the product quality and other specifications.
In addition to the compliance to the legal obligations, the business firms also have their planned,
tactical and important business- related reasons behind informing the consumer.
The business organisation ensure consumer’s expectation management by equipping them with
certain knowledge about the commodity. Many times, business face disincentive by providing
information to the consumers, as it might harm the marketability and attractiveness of their product.
This indicate the power gained on being an informed consumer. The economic analysis indicates
that information asymmetry to consumer is a major ground for market failure, causing the consumer
to make irrational decisions. Thus, unbiased information can solve the market problems by
equipping the customers with appropriate information and thereby ensuring healthy market
practices.
Consumers derive their information from multiple sources. The following are the sources from
where a consumer gathers the desired knowledge about the product:
 Governments issue public information for the consumers

 Regulatory authorities, review and testing services and comparison sites
 Social networks (friends, family, children, acquaintance etc.)
 Suppliers of the products or services.
 The media
Consumer derives information from a variety sources, each source illustrating its own interest, skills
and resources. However, it is essential for the consumers to recognize their personal interests and
make a judicious decision.
Customer know-hows
4. Know who you are dealing with: Don’t do business with any company that won’t provide its
name, street address, and telephone number.
5. Protect your personal information: Share credit card or other personal information only
when you’re buying from a company you know and trust.
6. Take your time: Resist any urge to “act now” despite the offer and the terms. Once you turn
over your money, you may never get it back.
7. Read the small print: Get all promises in writing and review all the documents carefully
before you pay any money or sign a contract.
8. Never pay for a “free” gift: Throw away any offer that asks you to pay for a gift. If it’s free or
a gift, you shouldn’t have to pay for it. Free is free.
9. Know the risks before you spend your money:When it comes to investments, every
potentially high-profit investment is high-risk. That means you could lose your investment – all of it.
Role of Advertising Council of India
Consumer Protection
In India, as in several advanced economies, there is only one body for Self-Regulation in
Advertising – the ASCI, which is concerned with safeguarding the interests of consumers
whilst monitoring/guiding the commercial communications of Practitioners in Advertising on
behalf of advertisers, for advertisements carried by the Media, in their endeavours to
influence buying decisions of the Consuming Public.
The Advertising Standards Council of India (ASCI) established in 1985 is a voluntary self-
regulatory council, registered as a not-for-profit Company under section 25 of the Indian Cos.
Act with the objective of ensuring that all advertising should be legal, decent, honest and
truthful along with a sense of social responsibility to the consumer and to the rules of fair
competition.
The sponsors of the ASCI, who are its principal members, are firms of considerable repute
within industries in India, which comprise of advertisers, media, and advertising agencies and
other professional or ancillary services connected with advertising practice. The ASCI is not
a Government body, nor does it formulate rules for the public or for the relevant industries.
It has adopted a Code for Self-Regulation in Advertising. It is a commitment to honest

advertising and to fair competition in the market-place. It stands for the protection of the
legitimate interests of consumers and all concerned with advertising – advertisers, media,
advertising agencies and others who help in the creation or placement of advertisements. As
the Code becomes increasingly accepted and observed pro-actively, three things will begin to
happen.
1. Fewer false, misleading claims

2. Fewer unfair advertisements
3. Increasing respectability
This only means more freedom for an agency to practise their craft or carry on their business
effectively. As a member of ASCI, one can mould the course of Self-Regulation and
participate in the protection of healthy, effective advertising. One can have a say, through the
Board of Governors, in the further development of the Code and future appointments to the
Consumer Complaints Council (CCC). Membership of the ASCI (open only to Firms) entitles
one to appoint nominee to discharge one’s function as a member, including standing for
election to the Board of Governors and voting at general meetings.
ASCI encourages the public to complain against advertisements which they consider to be
false, misleading, offensive or unfair. All of these complaints are evaluated by an
independent Consumer Complaints Council (CCC).
Objectives of ASCI:
The main objects to be pursued by the Company on its incorporation are:

To monitor administer and promote standards of advertising practices in India with a view to.
1. Ensuring the truthfulness and honesty of representations and claims made through
advertising and safeguarding against misleading advertising.
2. Ensuring that Advertising is not offensive to generally accepted norms and standards of
public decency.
3. Safeguarding against the indiscriminate use of advertising for the promotion of products or
services, which are generally regarded as hazardous to society or to individuals or which are
unacceptable to society as a whole.
4. Ensuring that advertisements observe fairness in competition and the canons of generally
accepted competitive behaviour.
5. To codify adopt and from time to time modify the code of advertising practices in India and
implement, administer and promote and publicize such a code.
6. To provide facilities and machinery in the form of one or more Consumer Complaints
Councils having such composition and with such powers as may be prescribed from time to time to
examine complaints against advertisements in terms of the Code of Advertising practices and report
thereon.
7. To give wide publicity to the Code and seek adherence to it of as many as possible of those
engaged in advertising.
8. To print and publish pamphlets, leaflets, circulars or other literature or material that may be
considered desirable for the promotion of or carrying out of the objects of the Company and
disseminate it through any medium of communication.
Consumer Complaints Council:
The Board of Governors shall appoint Consumer Complaints Council, the number of
members of which shall not be more than twenty one. Out of these 21 members, 12 are from
civil society and nine from advertising practitioners. The CCC decides upon the complaints
within a period of 4 to 6 weeks.
The Consumer Complaints Council shall examine and investigate the complaints received
from the consumers and the general public, including the members of the Company,
regarding any breach of the Code of Conduct and/or advertising ethics and recommend the
action to be taken in that regards.
Power of the Consumer Complaints Council:
1. Each Council shall be entitled to receive complaints from the Board of Governors, the
Consumers, the general public and members of the Company.
2. Each Council shall enquire, investigate and decide upon the complaints received by it within
the framework of the Code of Conduct adopted by the Company.
3. All the decisions of each Council shall be by simple majority, in writing and may specify the
action to be taken in respect of the offending advertisement.
ASCI propagates its Code and a sense of responsibility for its observance amongst
advertisers, advertising agencies and others connected with the creation of advertisements,
and the media.
ASCI encourages the public to COMPLAIN against advertisements with which they may be
unhappy for any reason and ensures that each complaint receives a prompt and objective
consideration by an impartial committee Consumer Complaints Council (CCC) which takes
into account the view point of the advertiser, and an appropriate decision is communicated to
all concerned. ASCI endeavours to achieve compliance with its decisions through reasoned
persuasion and the power of public opinion.
The Role and Functioning of the ASCI & its Consumer Complaints Council (CCC) in dealing
with complaints received from consumers and industry, against ads which are considered as
false, misleading, indecent, illegal, leading to unsafe practices, or unfair to competition, and
consequently in contravention of the ASCI code for self-regulation in advertising.
If an ad is to be reviewed for its likely impact on the sensibilities of individual viewers of TV,
or readers of press publications, it is required to convey to the advertiser concerned, the
substantial issues raised in the complaint, in the exact context of the specific ad, as conveyed
by the perception of the complainant, and to elicit the appropriate response by way of
comments from the advertiser.
Only then will the CCC of the ASCI, be in a position to deliberate meaningfully on the issues
involved, and to arrive at a fair and objective conclusion, which would stand the scrutiny of
all concerned with the right to freedom of expression, and the freedom of consumers to
choose the products /services made available to them in the marketplace.
For this it is required to have a clearly readable copy or clipping of the ad under complaint,
with full particulars of name and date of publication, or a printout of an ad or promotion on a
website or in case of a T.V. Commercial (TVC), the channel, date and time or programme of
airing, and a description of the contents of the TVC, along with a hard copy of the complete
complaint preferably signed by the complainant.
The ASCI receives and processes complaints against ads, from a cross section of consumers,
the general public and Industry, in the interests of all those who rely on advertising as a
commercial communication, and this covers individuals, practitioners in advertising,
advertiser firms, media, ad agencies, and ancillary services connected with advertising. As a
policy ASCI does not disclose the identity of the complainant to the advertiser.
In the case of complaints which were upheld by the CCC during the past year, over 80% of
such ads have been withdrawn or modified appropriately by the advertisers or ad agencies
involved, and the concerned media have also confirmed that they would not carry such
offending ads/TVC.
ASCI’s Mission:
ASCI has one overarching goal- to maintain and enhance the public’s confidence in
advertising. ASCI seeks to ensure that advertisements conform to its Code for Self-
Regulation which requires advertisements to be:
1. Truthful and fair to consumers and competitors.

2. Within the bounds of generally accepted standards of public decency and propriety.
3. Not used indiscriminately for the promotion of products, hazardous or harmful to society or
to individuals particularly minors, to a degree unacceptable to society at large.
The Advertising Standards Council of India (ASCI) became more powerful after a recent
Government notification in The Gazette of India: Extraordinary {Part II – sec. 3(i)}, on 2
August 2006 by which TV commercials must abide by the Advertising Standards Council of
India (ASCI) code. The amendment made in Cable Television ‘Networks (Amendment)
Rules, 2006 now states that “(9) No advertisement which violates the Code for Self-
Regulation in Advertising, as adopted by the Advertising Standards Council of India (ASCI),
Mumbai for public exhibition in India, from time to time, shall be carried in the cable
service”. Since recent statistics
(source: http://www.indiantelevision.com/mam/headlines/y2k6/aug/augmam52.htm) suggest
that in as many as 85 per cent of the complaints were upheld against TV advertisement. ASCI
has now sought the support of the associations concerned such as Indian Broadcasting
Foundation (IBF) to persuade TV channels to adhere to ASCI’s code as well as implement
the decisions of its CCC in this regard. Many of the advertisers/channels have confirmed In
writing to have forthwith complied with the decisions of CCC, either by withdrawing or
modifying appropriately the subject advertisements

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Unit-1

Concept and Types of Consumer

Generally, consumer means an individual only; however, consumers will consist of a

Importance (Significance) of Consumers:

The importance of consumers in different avenues is discussed below:

(i) Encourage Demand:

(ii) Create Demand for Various Products:

(iii) Increase Demand for Consumer Goods:

(iv) Enhance Service Diversification:

Types (Kinds) of Consumers:

According to the nature of consumption, consumers are of following types:

(i) Direct Consumers:

(ii) Consumers by Exchanging Products:

(iii) Modern Consumers:

Need for Consumer Protection

Consumer means any of the following persons:

Consumer protection is needed because of following:

Approaches to Consumer Protection

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

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

Voluntary Organisation of Consumers to Protect their Rights:

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

The consumer cooperatives protect the consumers in the following ways:

Government Role in Consumer Protection:

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,

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

Consumer Buying Motives

Types of Buying Motives:

Another classification of motives which is widely accepted is by Ramaswamy and Nama

It can be further classified as:

1. Emotional product motives

On the basis of functions performed and socio-psychological benefit provided, buying

Doctrines of Caveat Emptor and Caveat

The History: Caveat Emptor (When it originated)

The Fallacy & The Need For Change

The Dilution Process & Origin of Caveat Venditor

Caveat Venditor: Development of the Seller’s Obligation

Concept of Consumers Sovereignty

In a modern economy the traditionally held view of firms responding to a unidirectional

Basic Consumer Rights

The following are the important consumer rights:

1. The Right to be heard:

2. The Right to safety:

3. The Right against exploitation:

4. The Right to be informed:

5. The Right to choose:

6. The Right to get redress:

The important ways for consumer protection are:

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

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

Voluntary Organisation of Consumers to Protect their Rights:

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

The consumer cooperatives protect the consumers in the following ways:

Government Role in Consumer Protection: