We often purchase commodities like soap, ice-cream, Haldiram’s Bhujia or any other pre packed commodities, and many of us have encountered situations where the price of a commodity varies across different regions of our country or many a times in different shops prices vary of identical commodities. Sometimes, we suspect that differences in quantity might account for the price variation, but this is not always the case. In this article, I will discuss the classic cases involving this conundrum, exploring its legal validity under the Legal Metrology Act, 2009, and examining what the law and the courts say about the dual pricing of pre-packaged commodities.
The Legal Metrology Act, 2009 (“LMA Act”) was enacted to establish and enforce standards of weights and measures, regulate trade and commerce in weights and measures, and govern other goods sold or distributed by weight, measure, or number. It replaced the Standards of Weight and Measures Act, 1976, and the Standards of Weights and Measures (Enforcement) Act, 1985. Recent advancements in technology and changing market dynamics necessitated amendments to the LMA Act and the Legal Metrology (Packaged Commodities) Rules, 2011 (“LMA Rules, 2011”). A significant amendment was the introduction of Rule 18(2A) via the Legal Metrology (Packaged Commodities) Amendment Rules, 2017. This rule prohibits manufacturers, packers, or importers from declaring different Maximum Retail Prices (“MRP”) on identical pre-packaged commodities through restrictive or unfair trade practices as defined under the Consumer Protection Act, 2019 (“CPA”).
This article aims to analyze the legal stance on dual pricing under the current regime, highlighting the necessity for a nuanced approach by regulators under the LMA Act. Often, enforcement of Rule 18(2A) is done mechanically without considering market conditions and the multiplicity of platforms for product sales, which involve various factors such as geographical locations and associated costs.
Legal Position on Dual Pricing:
Dual pricing refers to the practice of selling identical pre-packaged commodities at different MRPs by a manufacturer, importer, or packer. Initially, the LMA Act did not regulate dual pricing as it primarily focused on standards of weights and measures. However, the Legal Metrology (Packaged Commodities) Amendment Rules, 2017, introduced Rule 18(2A) to address this issue. This rule prohibits different MRPs on identical pre-packaged commodities if the practice involves:
- Restrictive trade practices, defined under Section 2(41) of the CPA as practices that manipulate price or conditions of delivery or affect the flow of supplies, imposing unjustified costs or restrictions on consumers.
- Unfair trade practices, defined under Section 2(47) of the CPA as any misleading statement or representation regarding the price at which products are generally sold in the relevant market.
Scope and Ambit of Rule 18(2A):
To understand Rule 18(2A) of the LMA Rules, 2011, it’s essential to consider relevant provisions of the LMA Act:
- Section 2(l) of the LMA Act defines “pre-packaged commodity” as a commodity placed in a package, without the purchaser being present, containing a pre-determined quantity.
- Section 18 of the LMA Act mandates declarations on pre-packaged commodities, including standard quantities, particulars, and retail sale prices.
Rule 18(2A) and Identical Pre-Packaged Commodities:
For Rule 18(2A) to apply, the pre-packaged commodities must be identical. The term “identical” implies that the commodities must be exactly the same in every detail, including weight, colour, ingredients, and packaging. Minor differences in these aspects might still categorize the commodities as “identical,” attracting the rule’s prohibition.
However, if there are significant distinctions between the pre-packaged products, different MRPs might be justified. For instance, variations in quality and quantity across different regions may warrant different MRPs.
Dual Pricing is Not Absolutely Prohibited:
The Supreme Court, in Pallavi Refractories v. Sangarenni Collieries Company Limited, upheld the legality of dual pricing, stating that no law prohibits dual pricing if based on reasonable classification for different customer types. Rule 18(2A) does not impose an absolute bar on dual pricing but restricts it if it leads to restrictive or unfair trade practices.
Manufacturers, packers, or importers can justify differential MRPs if accompanied by sufficient justification, provided it does not involve unfair or restrictive trade practices.
Analysing Case Studies
PepsiCo India Holdings Pvt. Ltd. v. Adithya Banavar & Ors:
In another significant case, the Karnataka State Consumer Disputes Redressal Commission adjudicated Pepsico India Holdings Pvt. Ltd. v. Adithya Banavar & Ors, analyzing provisions of the LMA Rules, 2011 in conjunction with the Central Excise Act, 1944 (“CE Act”). This case pertained to different MRPs for the same product within the same State. The appellants argued that different pricing was permissible under Section 4A of the CE Act, contending it allowed for variations based on excise duties and geographical areas. However, the respondents argued that such variations within the same State constituted unfair trade practices under the LMA Rules, 2011.
The Commission observed that “the CE Act governs excise duties and not retail pricing, affirming that different MRPs for the same quantity and quality of goods within the same city (Bangalore) without relevance to excise duty would amount to unfair trade practices.” This decision highlights the interpretation of dual pricing regulations concerning geographical variations and applicable laws.
Hindustan Unilever Limited Vs Inspector of Legal Metrology:
A notable case of dual pricing is currently pending in the Gauhati High Court: Hindustan Unilever Limited Vs Inspector of Legal Metrology. The prosecution was initiated based on a complaint filed by the respondent, the Inspector of Legal Metrology, Guwahati. The petitioner, Hindustan Unilever Limited (HUL), is a public limited company and a manufacturer of “Kwality Walls Crunchilicious Butterscotch” and “Kwality Walls Majestic Kesar Pista” ice creams.
As per the prosecution, the complainant took samples of Crunchilicious Butterscotch (net volume of 375 grams/700 ml) and Majestic Kesar Pista (net volume 370 grams/700 ml) from a retail sale counter on 25.06.2019. The allegation was that there were differences in MRPs in the said two pre-packaged commodity samples, violating Rule 18(2A) of the Legal Metrology (Packaged Commodities) Rules, 2011, read with Section 18(1) of the Legal Metrology Act, 2009.
Specifically, in the pre-packaged sample of Kwality Walls Crunchilicious Butterscotch, two MRPs were mentioned: Rs. 139/- for the Northeast Region and Rs. 129/- for the rest of India. Similarly, in the pre-packaged sample of Majestic Kesar Pista, the price for the Northeast Region was Rs. 165/- and for the rest of India, it was Rs. 155/-.
The HUL’s defence argues that the allegation of dual MRPs is misconceived under Rule 18(2A) of the LMA Rules, 2011. To attract Rule 18(2A), the differences in price must appear in two identical pre-packaged commodity samples. The HUL contends that had two different MRPs occurred in two identical pre-packaged samples of Kwality Walls Crunchilicious Butterscotch, the breach of Rule 18(2A) would have been valid. Additionally, Rule 18(2A) is applicable only if the manufacturer adopts any unfair or restrictive trade practices as defined in the Consumer Protection Act, 1986. They further argue that referencing Section 18(1) of the LMA Act, 2009 in the complaint is also incorrect, as two different prices for two different regions in the same pre-packaged commodity sample does not breach Rule 18(2A).
Penalty for Contravention of Rule 18(2A):
The LMA Act does not explicitly provide penalties for violating Rule 18(2A). However, Rule 32 of the LMA Rules, 2011, prescribes a fine of INR 5,000 for any rule contravention not explicitly punished. Continuous contraventions might attract higher penalties, potentially extending to INR 1,00,000.
Section 49 of the LMA Act imposes penalties for company offenses, including reputational damage by requiring the company to publish its lapse. Additional compensation and litigation costs may be imposed by consumer forums.
Ensuring Compliance and Avoiding Penalties:
To avoid penalties and ensure compliance, manufacturers, packers, and importers should:
- Verify Product Identity: Ensure that pre-packaged commodities with different MRPs are not identical in every detail.
- Provide Justification: Maintain sufficient justification for differential MRPs, highlighting variations in weight, size, quality, or quantity.
- Transparent Declarations: Make clear and transparent declarations on the packaging to help consumers identify differences between products.
- Monitor Market Practices: Regularly review market practices and align them with the latest legal requirements and consumer protection norms.
Conclusion
The issue of dual pricing under the Legal Metrology Act, 2009, and the Legal Metrology (Packaged Commodities) Rules, 2011, presents a grey area in the regulatory framework. While Rule 18(2A) aims to prevent unfair trade practices, its enforcement must consider market conditions and justifiable cost variations across different regions. Manufacturers, packers, and importers should ensure transparent practices and provide sufficient justification for differential MRPs to avoid penalties and safeguard their reputation. This grey area allows manufacturers to set their benchmarks, potentially leading to a dominant position over consumers. The statutory allowance for price justification gives manufacturers the power to decide prices, leaving consumers with little choice but to accept the pricing or not purchase the commodity. Such a scenario could potentially lead to market exploitation, emphasizing the need for more precise regulations and vigilant enforcement to balance the interests of both manufacturers and consumers.
In an era where consumer awareness is increasing and social media can amplify issues quickly, adhering to legal metrology regulations with a clear understanding of the nuances is crucial for businesses. This approach not only ensures compliance but also fosters consumer trust and long-term business sustainability. The need for clearer guidelines and rigorous enforcement is paramount to protect consumer rights while allowing manufacturers reasonable flexibility. Balancing these interests will ensure a fair market environment and promote trust between consumers and businesses, ultimately benefiting
Author Bio
