Consumerism - Study Notes

Lesson summary

The producer, the consumer and the government are the three constituent elements of business, and the consumer is the most exploited of them. Though called the king of the market, the consumer is in practice a slave rather than a sovereign. Consumerism grew out of this exploitation, and laws and voluntary action now protect consumers.

16.01 Consumer

• One who consumes goods made and sold by others, or created by nature, and one who avails services such as banking, transport and insurance.
• Under the Consumer Protection Act, 1986: a person who buys goods or services for a consideration paid, promised, partly paid and partly promised, or under deferred payment.
• A person who obtains goods for resale or a commercial purpose is not a consumer; one who buys only to earn a livelihood by self-employment is a consumer.

16.02 Consumer exploitation

Adulteration examples: chemicals, chalk, urea and caustic soda in milk; stones in grains; palmolein in coconut oil; water and sugar in honey; starch in rice or wheat powder; tamarind seed in coffee powder; papaya seeds in black pepper; brick powder in chilli powder.

16.03 Meaning and definition of consumerism

• The social force protecting and aiding the consumer; an organised effort against unfair marketing practices.
• It brings back balance between buyers and sellers, since power normally favours sellers.
• The term came into existence in the early 1960s in the western world, particularly America.
• L. Massie: "Consumerism is an attempt to enhance the rights and powers of buyers in relation to sellers."

16.04 Importance of consumerism

1. Awakening and uniting consumers
2. Discouraging unfair trade practices
3. Protecting against exploitation
4. Awakening the government
5. Effective implementation of consumer protection laws
6. Providing complete and latest information
7. Discouraging anti-social activities

16.05 Origin, evolution and growth

• Origin: early 20th century America; middle class progressive women began organisations like The National Consumers League (NCL).
• India: low income, illiteracy, shortages, adulteration and black market made consumerism a defensive force.
• Causes in India: rising prices, poor product performance and service quality, product shortages, deceptive advertising and inflation.
• Ralph Nader: father of the Consumer Movement; first fought the automobile industry over safety and pollution norms.
• Britain, Sweden, Netherlands, Denmark and Kenya have stringent laws; the UN General Assembly adopted guidelines.

16.06 and 16.07 Consumer protection and its need

• The old approach of caveat emptor (let the buyer beware) has changed to caveat venditor (let the seller beware).
• Voluntary measures and law are the tools; self-regulation, consumer associations, alert consumers and State support are the means.
• Shortages, sacrificed quality and profit maximisation make consumer protection vital.

Role of business

1. Avoidance of price hike
2. Avoidance of hoarding
3. Guarantees for good quality
4. Product information
5. Truth in advertising
6. Protection from the hazard
7. Money refund guarantee
8. Consumer grievances

Role of government and consumers

• Government must enforce laws strictly; penal clauses should not be mere paper jaws.
• Consumer action councils at village level, consumer cooperatives, contact with legislators and testing laboratories in each district.
• UN General Assembly resolution of April 9, 1985 adopted guidelines for consumer protection with seven objectives.

16.08 Consumer legislation

16.09 Consumer Protection Act, 1986 (COPRA)

• Enacted in 1986, in force from 15.04.1987, amended in 1993.
• Safeguards against defective goods, deficient services and unfair trade practices; applies to all goods and services, including medical services.
• Creates no new rights or liabilities but a new forum; three-tier machinery of District Forums, State Commissions and the National Commission, plus consumer protection councils.

16.10 and 16.11 Caveat emptor and caveat venditor

• Caveat emptor: Latin for let the buyer beware; the buyer bears the risk; the rule before the Industrial Revolution. It does not permit fraud by sellers.
• Caveat venditor: let the seller beware; goods are covered by an implied warranty of merchantability and guaranteed to work for their intended purpose.