Theories Of Consumer Protection And Its Implications

KEYTAKEAWAYS

• Consumer protection can be accomplished through a variety of different means
• Methods of consumer protection adopted by a country is dependent on the culture and norms prevalent in a given country.
• UNCTAD has highlighted the following SIX Bodies which are often used to accomplish Consumer Protection goals:

1. Government Agencies,
2. Statutory/non-statutory Standards Bodies,
3. Ombudsmen,
4. Professional and Industrial Associations
5. Consumer Associations, and
6. Self- Regulation

INTRODUCTION

Consumerism is an economic theory that ties consumer demand for goods and services to success and places consumer behavior at the center of economic decision-making. Basically, the more people who buy, the better the economy will be. You become a consumer when you buy goods and services. Have you ever considered what influences your purchasing decisions? Quality, price, brand name, laws, health and safety are all important considerations.

IMPORTANCE OF MEDIA IN CONSUMERISM-

• Stop unfair trade practices.
• Provide complete & latest information.
• Discourage anti-social activities.
• Implementation of consumer protection laws.
• Protect against exploitation.
• Consumer groups can liaison between government & industry.

FURTHER DETAILS

CONSUMER PROTECTION ACT 2019

• The Consumer Protection Act of 2019 was enacted to address the flaws and limitations of the Consumer Protection Code of 1986.
• The necessity for new legislation originated from the Indian markets' significant transformation as a result of globalization and digitization, the establishment of global supply chains, the evolution of e-commerce, and multi-level marketing.
• Since the reach of markets has expanded countrywide, online marketing has overtaken the old market system.
• Other significant market advancements in recent years include the availability of a broad selection of items, simple payment options, easy access, and improved services.
• All of this has exposed consumers to unfair and unethical trading practices, necessitating the adoption of a more modern and comprehensive legal framework.
• The legislature has enacted the Consumer Protection Act, 2019 to address the technical issues confronting both traders and consumers, taking into account recent advances.
• Consumers can now file complaints at their home or office, i.e., where they work for a living, rather than at the location where the transaction occurred.
• The Act now covers all types of transactions, including offline and online transactions, e-commerce, teleshopping, and so on.
• The District, State, and National Commissions' monetary jurisdiction has been increased as follows:

From Rupees 20 lakh to Rs 1 crore; from Rs 1 crore to Rs 10 crore; and from Rs 1 crore to Rs 10 crore for the National Commission.

• Every consumer has rights under the Act, regardless of his or her income or social status.
• Central Consumer Protection Councils [CCPC] have been established at the district, state, and national levels to provide advice on consumer rights promotion and protection.
• The Investigation Wing of the CCPA, headed by a Director General, will have the authority to investigate certain infractions.
• The Central Consumer Protection Authority [CCPA] was established to promote, protect, and enforce consumer rights, and it has the authority to issue safety notices, order product recalls, prevent unfair practices, reimburse purchase prices, and impose penalties for false and misleading advertisements. The CCPA has the authority to impose penalties on advertisers, endorsers, and manufacturers for misleading advertisements.
• E-Commerce firms are required to disclose information to consumers about returns, refunds, exchanges, warranty and guarantee, and delivery etc.
• The District and State Commissions have been given the authority to review orders.
• Any funds held in the Credit of Unidentified Consumers will be transferred to the Consumer Welfare Fund (CWF).
• State Commissions are required to provide the Central Government with quarterly information on vacancies, case disposition and pendency, and other topics.
• Manufacturing, storing, selling, distributing, or importing products containing adulterants and fake goods is punishable by a fine of up to Rs 5 lakhs and a sentence of up to 7 years in jail, depending on the level of harm, injury, or grave harm caused.
• In cases where a consumer has died, life imprisonment with a punishment of Rs 10 lakh has been provided, with a minimum term of imprisonment of 7 years.
• Vexatious Searches and Seizures by the Director General or any other officer are punished by up to one year in prison, a fine of up to Rs 10,000, or both.

CONSUMERISM

Consumerism is a social and economic system that promotes the acquisition of ever-increasing amounts of goods and services. With the Industrial Revolution, and especially in the twentieth century, mass manufacturing resulted in overproduction, causing the supply of goods to exceed market demand, prompting producers to use planned obsolescence and advertising to control consumer spending. Thorstein Veblen's book The Theory of the Leisure Class, published in 1899, looked at the broad values and economic institutions that emerged along with the prevalent "leisure time" at the turn of the twentieth century. In it, Veblen "looks at this leisure class's hobbies and spending habits in terms of ostentatious and vicarious consumption and waste." Both have to do with displaying one's social standing.

WAVES OF CONSUMER ACTIVISM

• The SELF-HELP CO-OPERATIVE MOVEMENT [1830-1929] was a reaction by the working class to high prices and low-quality goods during industrialization, and it expanded around the world, including wealthy countries such as the United States and England.
• VALUE FOR MONEY IN THE SECOND WAVE CONSUMERS IN THE 1930s placed a greater emphasis on containing giant firms and enabling consumers to profit from the market through information distribution rather than damaging the market through cooperative action or political activism and lobbying. Consumer Reports has 5 million subscribers in the United States. However, due to their ability to give massive discounts, retail behemoths are giving it stiff competition.
• THE THIRD WAVE OF NADERISM [Ralph Nader, a Harvard-educated lawyer] emphasized the dangers of automobiles, which result in fatalities. In 1969, he founded the Centre for Study of Responsive Law and Project for Corporate Responsibility, which now has 29 member organizations dedicated to defending citizens against corporate behemoths.
• ALTERNATE CONSUMERS: THE FOURTH WAVE [1970-] It concentrates on the following points:

Green Consumerism, which encourages corporations to conduct environmental audits in the interest of future generations, and Fair-Trade Movement, which encourages buying from producers to revitalize co-operatives.

CONSUMER PROTECTION MOVEMENT

There has been a tendency to conflate "consumer movement" with "consumerism," which emphasizes the role of modern consumer organizations and legislators in enacting consumer protection laws and entrusting their implementation to regulators, in addition to teaching consumer policies in educational institutions and testing products and services for compliance with prescribed standards. Consumer Movement is an effort to promote consumer protection through an organized effort.

Consumer protection is linked to the following issues: consumer rights protection, the formation of consumer organizations to advocate for consumer welfare, and consumer education.Helping consumers make better decisions by providing detailed product information where public health and safety is a concern, and resolving consumer complaints and ensuring that they are enforced effectively.

THEORIES OF CONSUMER PROTECTION

Consumer protection theories include the following five:

• Expectation Theory
• Individual Pluralism Theory
• Paternalism Theory
• Commercial Nuisance Theory,
• and Negotiation Power Inequality Theory

1. EXPECTATION THEORY

• Consumers demand a fair deal from vendors in terms of pricing, quality, and safety of products and services, and if they don't, the vendor will be held liable for any harm caused to the consumer.
• Consumer satisfaction is a result of the product's perceived performance and its expectations.
• Consumers will strive to change their impressions of a product to bring it closer to their expectations if there is dissonance.
• Consumers can relieve the stress caused by the gap between expectations and product performance by altering either their expectations or their perceptions of product performance.

2. INDIVIDUAL PLURALISM THEORY

• It is a non-interventionist theory based on neoclassical rational choice theory that the market has a self-correcting mechanism.
• People make judgments based on stable and consistent preferences, and they "optimally assess and collect information, including information about the risks and possible outcomes of the actions at hand."
• The survival drive instilled in producers by the process of competition will ensure optimal resource allocation. Resources will not be squandered in the face of competition. Production and consumption will be in balance.
• The core tenet of 'capitalism' is that increasing output and consumption will improve citizens' well-being.
• Legislative action is discouraged because the market takes care of itself, unless there is a "market breakdown."
• CRITICISM: Behavioral economists criticize the theory because they believe consumers do not always act rationally and consistently.
• If aggregate transaction costs, such as information, negotiation, contracting, monitoring, and enforcement expenses, exceed the cost of the product, the market may fail to fix itself.

3. PATERNALISM THEORY

• It proposes market regulation to ensure that individual traders' actions do not hinder free trade and competition owing to information asymmetry.
• Information asymmetry affects the bargaining strength of both parties.
• Consumers typically do not have as much information about the quality of goods as the supplier, resulting in information asymmetry and a process known as "adverse selection," in which good products are pushed out of the market by lower-quality (but cheaper) products due to the consumer's inability to assess the quality of the goods.
• There does not have to be a direct link between more information and better consumer protection. Even well-informed customers sometimes make irrational decisions.
• Due to the advent of new technology, products, marketing activities, and other factors, there has been an increase in information overload.

4. COMMERCIAL NUISANCE THEORY

• It suggests market regulation to ensure that, due to information asymmetry, individual traders' activities do not obstruct free trade and competition.
• The bargaining power of both sides is affected by information asymmetry.
• Due to the consumer's inability to judge the quality of goods, information asymmetry and a process known as "adverse selection" occur, in which good items are pushed out of the market by lower-quality (but cheaper) products due to the consumer's inability to assess the quality of goods.
• More information does not have to be linked to improved consumer protection. Even well-informed clients make irrational decisions from time to time.
• There has been a surge in the use of new technology, products, marketing efforts, and other things.

5. NEGOTIATION POWER INEQUALITY THEORY

• According to this idea, in a Sales Transaction, a customer is regarded to be in a worse economic position than Suppliers due to their poorer bargaining position.
• The 'Exploitation theory,' which supported the above viewpoint, called for the necessity to safeguard customers for the following reasons:
• Buyers will be forced to pay prices set by increasingly large and powerful corporations, and
• Owing to the small amount of purchase and the comparative capacity of the latter to exploit gaps in the knowledge of the buyers due to complexities in the nature of goods and structural aspects of the markets, buyers lack the resources to check Sellers' malpractices.
• The presence of competition in modern marketplaces, as well as government action through the implementation of consumer protection laws

CONCLUSION

Consumerism is a type of social arrangement that arises from the recycling of everyday, permanent, and thus "regime-neutral" human wants, desires, and longings into society's primary driving force, a force that coordinates systemic reproduction, social integration, social stratification, and the formation of human individuals, as well as playing a key role in individual and group self-policies.The consumerism culture has made a significant contribution to the global economy's growth. But, at the same time, it has had a huge impact on people's social status. Consumerism and capitalism are frequently confused, because the latter is an economic system, whilst the former is a dominant cultural attitude. Customer capitalism, a system in which consumer demand for goods is actively increased through manipulation in order to enhance sales, is a paradigm that combines the two. The approach is based on inducing consumer demand for items that are far above what they require. Promotion of luxury commodities, new technology, and new models of old technologies are some of the mechanisms available.