In Focus


Charged Beyond MRP? Move Consumer Court

When someone charges you beyond MRP, you could approach a consumer court. There’s a precedent of a vendor fined Rs 50 lakh for charging Rs 75 more on an energy drink, writes Gajanan Khergamker

In May 2013, the National Consumer Disputes Redressal Commission (NCDRC) gave a landmark judgement when it levied a fine of Rs 50 lakh on a vendor who charged a customer Rs 75 more than the MRP on an energy drink.

Earlier, in October 2009, Snack Bar, a unit of Saptagiri Restaurant at Chennai Airport, had reportedly charged a Delhi-based resident Rs 150 for a can of Red Bull when the MRP of Red Bull was Rs 75.

Not only did the NCDRC rebuke Snack Bar for having collecting double the money on a can of energy drink from consumer D K Chopra, it also berated the airport authorities who, the Commission said, were ‘working in cahoots’ with stall-owners to obtain higher rates for licences. The NCDRC also asked the stall owner to pay Rs 10, 000 to the complainant.

The complainant had filed a legal notice to the stall owner when he was charged double the amount for an energy drink in October 2009. The stall owner failed to reply to the legal notice after which, the complainant moved the District Consumer Disputes Redressal Forum (DCDRF) asking for a compensation of Rs two lakh for ‘harassment and mental agony,’ and Rs11, 000 as ‘travel and legal expenses’.

However, his complaint was dismissed. His first appeal to the State Consumer Disputes Redressal Commission (SCDRC) too was dismissed on the grounds that he had failed to prove the MRP of the product.  He later approached NCDRC. Counsel for Snack Bar said they were entitled to collect twice the MRP and submitted a letter from the deputy general manager, commercial at Chennai international airport. The letter mentioned the price of ‘imported juice/energy drink’ as Rs 140.

Questioning the logic of its classification as a juice, the Commission said ‘by no stretch of imagination can Red Bull be called an imported juice/energy drink.’ ‘Such a price list can be created any time and has exiguous value,’ said the Commission.  It further clarified that “Even if it is assumed that AAI had given permission, they are not empowered to do so. AAI cannot disturb MRP rates.” Stating a snack joint was ‘like a tea/beedi stall,’ it said a person could not be forced to pay prices which have been prescribed for restaurants. “The stall-owner has no right to misappropriate public money. It should go back to the public.” It directed the vendor to deposit the fine in the consumer welfare fund under the ministry of consumer affairs.

This is a lesson to be learned for everyone, from local grocery stores that insist on charging extra ‘cooling charges’ on milk, curd and cold drinks to cinema halls, restaurants and multiplexes that charge more than the MRP. Charging more than the printed MRP on the product is an offence.

According to the Legal Metrology Act, 2009, offenders can be made to pay a fee of up to Rs. 5,000 for the first offence and can be prosecuted and imprisoned up to six months for the second.

Bringing up the issue of overcharging, Mumbai Grahak Panchayat chairperson Shirish Deshpande had once remarked , “If 35 lakh litres of milk is traded in Mumbai daily and 70 per cent (24 lakh) of it is overcharged by Rs one, consumers are fleeced for an estimated Rs. 24 lakh daily.” That is a huge amount of untaxed money the vendors are charge illegally causing a loss not just to consumers but also to the government.

Surprisingly though, a reply to an application filed under the Right to Information (RTI) Act has revealed the legal metrology department of Tamil Nadu has not found a single case of Maximum Retail Price (MRP) violation at Tamil Nadu State Marketing Corporation (TASMAC) outlets in Chennai in four years.

In the reply that came last year in November 2013, the department said it conducted 147 raids in different TASMAC outlets across Chennai since 2009 but no one was booked for violating maximum retail price rules. The reply, however, revealed there has been an increase in number of raids conducted every year by the legal metrology department.

According to data procured through the RTI application, 11 raids were conducted in 2009-10, while 23 were conducted in 2010-11, 35 in 2011-12, 35 and 51 in 2012-13.

Till May 2013, the department had conducted 27 raids in all. According to reports, TASMAC Workers Federation has admitted most of the outlets have been charging Rs. five to 10 over and above the maximum retail price but they say it is because of the poor salary of contract workers appointed by the government.

Apparently, it is not just local grocery stores, restaurants and cinema hall that charge more than the MRP. In February 2013, Indian Railway Catering and Tourism Corporation (IRCTC) was slapped a fine of Rs 10 lakh by a consumer forum in Delhi for selling soft drinks at rates above the maximum retail price (MRP) to two customers.

The New Delhi District Consumer Disputes Redressal Forum  levied ‘punitive compensation’ of Rs five lakh each in two different cases against IRCTC, a subsidiary of Indian Railways and said, it being a government corporation, it “is not expected to be deficient in such matters and cannot come down to level of private dealers.”

“We have considered the case in the perspective of unfair and restrictive trade practices, by a government company who supplies food articles to millions of rail users who in transit cannot protest and have little choice but to avail services at whatever cost.

The IRCTC, being a government corporation, is not expected to be deficient in such matters and cannot come down to level of private dealers,” a bench presided by C.K. Chaturvedi ruled.

The forum directed IRCTC to deposit a fine of Rs 10 lakh with the Delhi State Legal Services Authority and awarded compensation of Rs 10,000 to each of the two complainants. “Keeping in view, the gravity and scale of gain by overcharging in 24x7 Railway operations all over India, we award punitive compensation of Rs five lakh to be deposited by IRCTC with Delhi State Legal Services Authority and we award compensation of Rs 10,000 (each) to complainant(s),” the forum maintained. According to the two complainants, a retail outlet of IRCTC had sold each of them a bottle of Maaza that had a printed MRP of Rs 12 as against the Rs 15 charged.

Overcharging on edible products apart, it is a common knowledge that local merchants apply a two per cent extra charge when a consumer/customer makes a payment through debit card or credit card. This too is illegal and the merchants can be fined for this. According to a Reserve Bank of India Notification, merchants are not allowed to levy this extra charge on customers. They are supposed bear these charge themselves and cannot pass it on to the customers.

The RBI notification issued in September 2013 states ‘There are instances where merchant establishments levy fee as a percentage of the transaction value as charges on customers who are making payments for purchase of goods and services through debit cards. Such fees are not justifiable and are not permissible as per the bilateral agreement between the acquiring bank and the merchants and therefore calls for termination of the relationship of the bank with such establishments. ‘…these practices/ products thwart the very principle of fair and transparent pricing of products which beholds customer rights and customer protection, especially, in the more vulnerable retail segment.

Such practices thus violate, both in letter and spirit, various provisions of our MC on Interest Rate on Advances and therefore, you are advised to strictly desist from these practices hence forth.’

On the other hand, restaurants are allowed to charge more than the MRP if the customer is provided the service/product while inside the restaurant.

In 2000, in response to the representation presented by the hospitality sector, the Union Ministry of Consumer Affairs said restaurants and hotels could levy a service charge on the MRP. But, this doesn’t apply if don’t use the services of the restaurant.

Earlier, in another case, the Maharashtra State Commission held Kamat Hotels and Dhariwal Industries guilty of overcharging. A case was filed when the complainant, who had purchased a one-litre bottle of Oxyrich water, labelled ‘specially packed for Kamat Hotels’, with an MRP of Rs 25.

In the market, the same bottle had an MRP of Rs 15. The Raigad District Forum ruled in favour of the consumer. Both Kamat Hotels and Dhariwal Industries appealed against the order.

The state commission observed that there was no difference in terms of the quality, purity, quantity, etc., between the packed drinking water sold at Kamat Hotels and at other places; the only difference was it was packed specially for Kamat Hotels.

Thus, there was no qualitative or quantitative difference which would justify the differential pricing. The labelling of the price was merely in accordance with an agreement between the hotel and the manufacturer.

The commission maintained that overcharging by ‘a private entity’ in this manner was unconscionable. Though it didn’t qualify as an offence under the Packaged Commodities Rules, discriminatory pricing to exploit consumers was an unfair trade practice.

There can’t be any justification for ‘uncontrolled’ and ‘arbitrary’ overcharging.

The Law On MRP
A 1972 Supreme Court order makes MRP applicable to retail goods. Also, The Standards of Weights and Measures Act, 1976, mandate that the price be printed on the package.

According to Section 39 of the Act – No person shall:
(a) make, manufacture, pack, sell, or cause to be packed or sold; or

(b) distribute, deliver, or cause to be distributed or delivered; or

(c) offer, expose or possess for sale, any commodity in packaged form to which this Part applies unless such package bears thereon or a label securely attached thereto a definite, plain and conspicuous declaration, as prescribed, of –

(i) the identity of the commodity in the package; (ii) the net quantity, in terms of the standard unit of weight or measure, or the commodity in the package; (iii) where the commodity is packaged or sold by number, the accurate number of the commodity contained in the package; (iv) the Unit sale price of the package; (v) the sale price of the package.”