The consumer in the marketplace: why rules are needed

Detail

1. Who is a consumer?

• People take part in the market in two roles. They are producers when they make goods or work in farms, factories or offices. They are consumers when they buy things.
• Consumer (NCERT sense): a person who buys final goods and services for their own use.

• Final goods are goods bought for final use, not to be used up in making something else or to be resold. Bread bought to eat is a final good. Flour bought by a bakery is an intermediate good.

• Consumer (legal sense, CPA 2019): a person who buys any good or avails a service for a consideration (a payment, or a promise to pay) [4].

• It covers offline and online buying, teleshopping and direct selling [4].
• It excludes a person who buys goods for resale or for a commercial purpose [4]. This matches NCERT's "for their own use" idea.

2. Unfair trade practices: how sellers exploit buyers

• Unfair trade practice means any dishonest or deceptive method a seller uses to sell goods or services at the buyer's cost.
• NCERT examples:
• Under-weighing: giving less than the weight or measure that was paid for.
• Hidden charges: adding charges that were not mentioned before.

• Adulterated or defective goods: selling impure, mixed or faulty items.

• Worked example (why small cheating adds up):

• A shopkeeper sells sugar at ₹45/kg but gives only 950 g for each "1 kg".
• Loss to one buyer = 50 g × ₹45/1000 g = ₹2.25. That is too small for most people to fight over.
• Gain to the seller from 1,000 customers a day = ₹2,250 a day, or about ₹8.2 lakh a year.

• Lesson: the loss is spread thin across many buyers, but the gain is concentrated in one seller. So buyers rarely complain, and rules are needed.

• Legal definition, CPA 2019, Section 2(47): "unfair trade practice" includes [2][3]:

• false claims about a product's standard, quality or grade;
• selling old goods as new;
• claiming sponsorship, approval or benefits that the product does not have;
• misleading warranties or guarantees;
• misleading claims about price;

• running down (disparaging) a competitor's goods or services.

• Additions under CPA 2019 (scaffold): the Act widens the list to include false claims about a product, hoarding, refusing to take back defective goods and refusing to give a bill (cash memo).

3. Why markets become unfair: market power of large producers

• Market power means one seller or a few sellers can influence price, quality or information in the market, so buyers have little choice.
• An unequal contest:
• Producers are few, rich and powerful.
• Consumers buy in small amounts and are scattered across many places.

• So a single consumer has little bargaining power and cannot easily act with others.

• How big companies manipulate the market:

• They have huge wealth and reach.
• They can pass false information through the media to shape what buyers believe.

• The buyer cannot easily check the claim → wrong choice → loss to health or money.

• The seller's attitude: when a buyer complains, the seller often says, "If you didn't like what you bought, please go elsewhere." In other words, the seller acts as if their duty ends once the sale is made.

• Class 9 link (The Price Puzzle): "markets do not always work fairly."
• Markets share out goods by ability to pay, not by need.
• Markets can slide into monopoly (a single seller controlling the supply).

• The full theory of market failure is in market-structures-competition.

• Class 7 link (Understanding Markets): the government has a role in checking quality. Examples are quality marks such as ISI and Agmark.

4. The same logic in other chapters: weak parties need rules

Class 10 compares consumers with other weak parties who cannot protect themselves alone:

• Unorganised-sector workers: they accept low wages and unsafe conditions because they have no bargaining power. So they need labour laws.
• Borrowers and moneylenders: informal lenders can trap borrowers in debt. A farmer like Swapna may be forced to sell her land to repay. So we need rules on credit and formal lending.
• The environment: firms can pollute because clean air has no price. So we need environmental rules.
• The common thread: when one side has much more power or information than the other, the market alone does not give a fair result. Rules and institutions have to fill the gap.

5. Misleading advertising

• Misleading advertising (NCERT): passing false information through the media to attract buyers.
• Legal definition, CPA 2019, Section 2(28): an advertisement that [2][3]:
• (i) falsely describes a product or service; or
• (ii) gives a false guarantee, or is likely to mislead consumers about its nature, substance, quantity or quality; or
• (iii) makes a direct or indirect claim that would count as an unfair trade practice if the seller made it; or
• (iv) deliberately hides important information.

• Correction: the scaffold places this definition in "Section 7". The definition is actually in Section 2(28) of the Act [2].

• NCERT case 1: baby milk powder

• For years, a company sold baby milk powder worldwide as "the most scientific product", better than mother's milk.

• It took years of struggle to make the company admit the claim was false.

• NCERT case 2: cigarettes

• It took a long battle and court cases before manufacturers accepted that smoking causes cancer.

• Laws and codes that grew out of such cases:

• WHO International Code of Marketing of Breast-milk Substitutes:
  • adopted on 21 May 1981 by the 34th World Health Assembly through resolution WHA34.22 [10][11];
  • developed jointly by WHO and UNICEF [10];
  • adopted as a recommendation under Article 23 of the WHO Constitution. It is not a binding treaty, so countries must make their own national laws to enforce it [11];
  • it covers the marketing of breast-milk substitutes, feeding bottles and teats [10].
• India's Infant Milk Substitutes (IMS) Act 1992: bans the promotion of baby food.
• COTPA 2003: bans tobacco advertising and makes health warnings compulsory.
• ASCI (Advertising Standards Council of India, 1985): the advertising industry's own self-regulatory code (the industry polices itself, with no legal penalty).
• CPA 2019: gives misleading advertisement a legal definition (Section 2(28)) and a legal penalty [2][4].
• Guidelines on Prevention of Misleading Advertisements and Endorsements for Misleading Advertisements, 2022: issued by the Centre under CPA 2019 [9].

6. What the law does now: CPA 2019 machinery

• Timeline:
• The Consumer Protection Bill, 2019 was introduced in the Lok Sabha on 8 July 2019.
• It was passed by the Lok Sabha on 30 July 2019 and by the Rajya Sabha on 6 August 2019 [4].

• It replaced COPRA 1986.

• Six consumer rights in the Act [4]:

• protection against hazardous goods and services;
• the right to be informed about quality, quantity and price;
• access to a choice of goods at competitive prices;
• the right to seek redress against unfair trade practices;

• plus the rights to be heard and to consumer awareness (the full list is in the parent note).

• Central Consumer Protection Authority (CCPA):

• an executive agency that came into existence on 24 July 2020 [6];
• its core job is to prevent and regulate false or misleading advertisements [6];

• it can investigate violations, order recalls of unsafe goods, order refunds, and start class actions (cases on behalf of a whole group of consumers) [4][6].

• Penalties for misleading advertisements [4]:

• First offence: fine up to ₹10 lakh and jail up to 2 years for manufacturers or endorsers.
• Repeat offence: fine up to ₹50 lakh and jail up to 5 years.

• Endorsers (for example, celebrities): can be banned from endorsing for 1 year, and for 3 years for a repeat offence.

• Enforcement record:

• CCPA had issued 325 notices for violations of consumer rights, misleading advertisements and unfair trade practices, with penalties of ₹1.19 crore (as of December 2024) [7].

• In the coaching sector, CCPA issued 45 notices and fined 19 coaching institutes ₹61.60 lakh for misleading advertisements (December 2024) [8].

• Product liability: manufacturers and service providers must compensate consumers harmed by defective goods or deficient services [4].

• Three-tier Consumer Disputes Redressal Commissions (CDRCs): these are courts for consumer cases. The value limits below are called pecuniary jurisdiction (which commission hears a case depends on how much was paid).

Commission	CPA 2019 original [4]	Current, Jurisdiction Rules 2021 [5]
District	up to ₹1 crore	up to ₹50 lakh
State	₹1 crore – ₹10 crore	₹50 lakh – ₹2 crore
National	above ₹10 crore	above ₹2 crore

• Why the limits were cut in 2021: too many cases were piling up in the District Commissions [5].
• Worked example: a buyer pays ₹75 lakh for a flat and the builder delays handing it over. The complaint now goes to the State Commission, because ₹75 lakh is between ₹50 lakh and ₹2 crore. Under the original 2019 limits, it would have gone to the District Commission [5].

7. Adulteration

• Adulteration: mixing cheaper or harmful substances into goods, especially food and edible oil. Examples include water in milk or cheap oil mixed into mustard oil.
• It plays two roles in this topic:
• it is an unfair trade practice;

• together with shortages and hoarding, it triggered the Indian consumer movement in the 1960s. That movement led to COPRA 1986 (see Section 2 of the parent note).

• Hoarding: holding back stock to create an artificial shortage and push up prices.

Prelims Hooks

• Consumer (CPA 2019): a person who buys goods or avails services for consideration, online or offline. It excludes buying for resale or commercial purpose [4].
• "Misleading advertisement" is defined in Section 2(28) of CPA 2019. "Unfair trade practice" is in Section 2(47). (Trap: the definitions are not in Section 7.) [2]
• CCPA: came into existence on 24 July 2020. It is an executive agency, not a court. Its core job is regulating misleading advertisements [6].
• Misleading ad penalty: ₹10 lakh and 2 years for a first offence; ₹50 lakh and 5 years for a repeat offence. An endorser can be banned for 1 year, or 3 years for a repeat [4].
• Current pecuniary jurisdiction (2021 Rules): District up to ₹50 lakh; State ₹50 lakh–₹2 crore; National above ₹2 crore [5].
• WHO Breast-milk Substitutes Code: 1981, resolution WHA34.22, WHO + UNICEF. It is a recommendation under Article 23, not a binding treaty [10][11].
• Match the pairs: IMS Act 1992 → baby-food promotion; COTPA 2003 → tobacco ads; ASCI 1985 → self-regulation (not a statutory body).
• Trap: a consumer buys final goods for own use. A trader buying for resale is not a "consumer" under the Act.
• Triggers of the Indian consumer movement (1960s): adulteration, shortages and hoarding.

Mains Points

• Unequal power and information: consumers who are scattered and buy in small amounts face sellers who are few, rich and control the media. Each buyer's loss is small, while the seller's gain is large and concentrated (see the ₹2.25 vs ₹8.2 lakh example). So market self-correction fails, and statutory regulation (CCPA, CDRCs) is justified. This links to GS-III themes of market failure and competition.
• From caveat emptor to seller responsibility: caveat emptor means "let the buyer beware". Indian law has moved away from it:
• COPRA 1986 gave consumers courts for after-the-fact redress;
• CPA 2019 added preventive regulation through the CCPA, product liability and endorser liability.

• This is a GS-II topic on statutory and regulatory bodies.

• Self-regulation vs statutory regulation: ASCI's code depends on the industry's goodwill. Global codes like the WHO Code of 1981 need national laws such as the IMS Act to have force. CCPA fines, such as ₹61.60 lakh on coaching institutes (2024) [8], show enforcement becoming real. But total penalties of ₹1.19 crore (as of December 2024) [7] are small compared with ad budgets, so it is fair to ask whether they deter.

• Access to justice: the 2021 cut in pecuniary limits [5] was meant to reduce backlog, but it shifts load to State Commissions. Pendency and slow disposal still weaken the "right to redress" for ordinary consumers.