CBSE CLASS 12 BUSINESS STUDIES

CHAPTER – 12
CONSUMER PROTECTION

MEANING

• Consumer protection refers to protecting the consumer against anti‐ consumer trade practices by the
producers or sellers.
• caveat emptor, which means “Let the buyer beware”
• caveat venditor which means “Let the seller beware”
• Consumers are be exposed to risks due to exploitative and unfair trade practices like defective and
unsafe products, adulteration, false and misleading advertising, hoarding, black-marketing etc.

IMPORTANCE OF CONSUMER PROTECTION

(A )From Consumer’s point of view

1. Consumers Ignorance: Majority of consumers are not aware of their rights and reliefs available to
them as a result of which they are continuously exploited. In order to save consumers from exploitation,
consumer protection is needed.

2. Unorganized Consumers: In India consumers are still unorganized and there is lack of consumer
organizations, which would act in their interests.

3. Widespread Exploitation of Consumers: Consumers are exploited on a large scale by means of

various unfair trade practices and consumer protection is required to protect them from exploitation.

(B) From the point of view of Business

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1. Long term Business Interest: It is always in the interest of the business to keep its customer
satisfied. Global competition could be won only after satisfying customers. Satisfied customers lead to
repeat sales and thus helps in increasing customer base of the business.

2. Business uses Resources of Society: Every business uses the resources of the society and thus it is
their responsibility to work in the society’s interest .

3. Social Responsibility: A business has social responsibilities towards various groups like owners,
workers, government, customers etc. Thus, customers should be provided with quality goods at reasonable
prices.

4. Moral Justification: It is the moral duty of any business to act in favour of consumer’s interest &
avoid any form of exploitation & unfair trade practices like defective & unsafe products, adulteration, false
and misleading advertising, hoardings, black marketing etc.

5. Government Intervention: If a business engages in any form of unfair trade practices then
government takes action against it, which will adversely affect the goodwill of the company.

LEGAL PROTECTION TO CONSUMERS

CONSUMER PROTECTION ACT, 1986 (CPA, 1986)

Set up to protect and promote consumers interests through a speedy and inexpensive redressal of
grievances. Recognizes consumer rights and safeguard their interests.
A three-tier redressal agency to address consumer grievances, has been set up constituting of District
Commission , State Commission and national commissions.
Scope of the act:
It is applicable to all types of undertaking:

• Large and small scale

• Private, public and co-operative sector
• Manufacturer or trader
• Firms supplying goods as well as services

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  CONSUMER RIGHTS

Consumer Protection Act, 1986 has provided six rights to the consumers, which are as follows:

1. Right to Safety:
Consumer has the right to be protected against products, & services which are hazardous to health & life.
E.g. ISI certification for electronic items.

2. Right to be Informed:
Consumer has right to have complete information about the quality, quantity, purity, standard and price of
product and service before buying it so as to protect himself against the abusive and unfair practices.

3. Right to make choice:

Consumer has a right to choose any product out of the available products as per his/ her own interests. The
producer or retailer should not force the customer to buy a particular brand only.

4. Right to be heard or Right to representation:

According to this right Consumer has the right to file a complaint to be heard in case of dissatisfaction with
goods or services (use of grievance cell) and represent himself to advocate his interest.

5. Right to Seek Redressal:

Consumer has the right to get relief in case the product or service falls short of consumers expectations
or is dangerous. The consumer may be provided with replacement/removal of defect or compensation
for any loss.

6. Right to consumer education:

Consumer has the right to acquire knowledge and to be well informed throughout life. He should be made
aware of his rights and reliefs available to him in case of the product or service falls short of his exceptions.
The Govt. of India has included consumer education in the school curriculum and is making use of mass
media to make consumers aware of their rights.

 CONSUMER RESPONSIBILITIES

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A consumer has to follow certain responsibilities while purchasing, using and consuming goods.

1. Consumer must Exercise his Right:

Under Consumer Protection Act the consumer is granted various rights such as right to safety,

right to choose, etc. The consumer must select the product according to his preferences, he

must file a complaint if he is not satisfied with the quality of product.

2. Cautious Consumer:

1. The consumer should not blindly believe on the words of seller. He must insist on getting
full information on the quality, quantity, utility, price etc. of the goods or services.

3. Filing Complaints for the Redressal of Genuine Grievances:

Most of the time consumer ignores the loss he suffers on purchase of defective good or service

but this attitude of not filing complaint encourages the corrupt businessmen to supply low

standard or defective goods and services. The consumer must file a complaint even for a small

loss.

4. Consumer must be Quality-Conscious:

The problems of supply of substandard goods, adulterated products and duplicate products

can be solved only when consumer himself stops compromising the quality of product. While

purchasing the goods or services consumer must look for quality marks such as ISI mark,

Agmark, ISO, Wool Mark, etc.

5. Do not be carried away by Advertisements:

The consumer must compare the actual use of product with the use shown in advertisement

and whenever there is any discrepancy or difference it must be brought to the notice of

sponsor of advertisement and insist to stop showing exaggerated qualities.

6. Insist on Cash Memo:

To file a complaint the consumer needs the evidence of purchase, and cash memo is the

evidence or proof that consumer has paid for the goods or service. A seller is bound to give a

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 cash memo even if buyer does not ask for it. To file a complaint and get compensation the

consumer must ask for cash memo.

7. Form consumer societies which could play an active part in educating consumers and

safeguarding their interest.

8. Respect the environment; avoid waste littering and contribution to pollution.

9. Discourage black marketing, hoarding and choose only legal goods and services.

10. Be aware of variety of goods and services available in market.

 WAYS AND MEANS OF CONSUMER PROTECTION

1. Self Regulation by Business: Firms, which gives importance to corporate social responsibility,
follow ethical standards and practices in dealing with their customers.

2. Business Associations: FICCI and CII have laid down their code of conduct which lay down for
their members the guidelines in their dealings with the customers.

3. Consumer Awareness: A well-informed consumer would be in a position to raise his voice against
any unfair trade practices .

4. Consumer Organisations: It plays an important role in educating consumers about their rights and
providing protection to them.

5. Government: The government protects the interests of the consumers by enacting various
protective measures.

Who Can File A Complaint Under CPA, 1986

A complaint before the appropriate consumer forum can be made by:

Imran Sami ( M.Com., M.B.A., B.Ed. )

1. Any consumer.

2. Any registered consumer association.

3. The central or state government.

4. One or more consumers on behalf of numerous consumers having same interest.

5. A legal heir or representative of a deceased consumer.

6. A complaint under Section 2 (b) of the Consumer Protection Act 1986

 REDRESSAL AGENCIES UNDER CONSUMER PROTECT ACT

For the redressal of consumer grievances the act provides a three–tier machinery as:

1. DISTRICT COMMISION

District commision are set up in each district by the state concerned. The important features are:
(a) It consists of a President and two members, one of whom should be a woman, duly appointed by State
Govt.
(b) The value of the goods or services in question, along with the compensation claimed, does not
exceed Rs. 1 crore
(c) On receiving the complaint, the district commision shall refer the complaint to the opposite party
concerned and send the goods or sample for testing in a laboratory.
(d) In case the aggrieved party is not satisfied with the district forums order, they can appeal before
state forum within 30 days of passing an order.

2. STATE COMMISSION

It is set up in each state by the government. The salient features are:

Imran Sami ( M.Com., M.B.A., B.Ed. )

(a) Each commission consists of a president and at least 2 members appointed by State Government
and one should be a woman.
(b) The value of the goods or services along with the compensation claimed, exceeds Rs. 1 crore but
does not exceed Rs. 10 crore.
(c) On receiving the complaint, the state commission can also refer the complaint to opposite party and
send the goods for testing in laboratory.
(d) The state commission after being satisfied can order the opposite party to either replace or repay or
pay compensation. In case the aggrieved party is not satisfied, they can appeal before national commission
within 30 days of passing an order.

3. NATIONAL COMMISSION
It is setup by Central Govt. The provisions of act are:

(a) It consists of a President and at least 4 members appointed by Central Government, one of them
should be a woman.
(b) All complaints are pertaining to goods and services along with the compensation value of more than
Rs. 10 crore can be filed with national commission.
(c) On receiving the complaint, the national commission can also refer it to opposite party and send
goods for testing.
(d) The National Commission has the power to issue orders for replacing the product and to pay the
compensation for the loss etc.

Basis District comm. State Commission National Commission

Composition It consists of a It consists of a It consists of a

president and two president and two president and four
other members. other members. other members.

Who can be A working or retired A working or retired A working or retired

a President judge of District judge of High Court. judge of Supreme
Court. Court.

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 Appointment The president is The president is The president is
of President appointed by the appointed by the state appointed by the
state government on government after central government
the recommendation consultation with the after consultation with
of the selection chief justice of the the chief justice of
committee. High Court. India,

Jurisdiction In 2019, it had In 2019, it had In 2019 it had

jurisdiction to jurisdiction to jurisdiction to
entertain complaints entertain complaints entertain complaints
where the value of when the value of where the value of
goods or services goods or services goods or services
does not exceed Rs 1 exceeds Rs 1 crore exceeds Rs 10ncrore.
crore. and does not exceed
Rs 10 crore.

Appeal Any person who is Any person who is Any person who is
against aggrieved by the aggrieved by the order aggrieved by the order
orders order of District of State Commission of the National
Forum can appeal can appeal against Commission can
against such order such order to appeal against such
to State Commission National Commission order to Supreme
within 30 days and within 30 days and by Court within 45 days
by depositing Rs depositing Rs 35000 and by depositing 50%
25000 or 50% of the or 50% of penalty of penalty amount but
penalty amount amount whichever is only cases where value
whichever is less. less. of goods or services
exceeds Rs 1 crore can
file appeal in Supreme
Court.

RELIEF AVAILABLE

• Remove defect in goods and deficiency in services.

• Replace defective goods with a new one with no defects
• Refund price paid
• Pay a reasonable amount of compensation for any loss or injury suffered.
• Pay punitive damages in appropriate circumstances.
• Discontinue unfair/restrictive trade practice
• Not to offer hazardous goods and services for sale
• Withdraw hazardous goods from sale
• Cease manufacturing hazardous goods

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• Pay an amount to consumer welfare fund (not less than 5%) to be utilized in the prescribed manner
• Issue corrective advertisement to neutralize the effect of misleading ads.
• Pay adequate costs to parties.

Role of Consumer organizations and NGO’s

1. Educating the general public about consumer rights

2. Publishing periodical & other publications to educate consumers.
3. Providing legal assistance to consumers by providing legal advice etc.
4. Filing complaints in appropriate consumer courts on behalf of consumers.
5. Encouraging consumers to take on action against unfair trade practices.
6. Taking an initiative in filing cases in consumer courts on behalf of consumers.

Some of the important consumer organisations and NGOs engaged in protecting and promoting
consumers’ interests include the following.
(i) Consumer Coordination Council, Delhi
(ii) Common Cause, Delhi
(iii) Consumer Education and Research Centre (CERC), Ahmedabad
(iv) Consumer Protection Council (CPC), Ahmedabad
(v) Consumer Guidance Society of India (CGSI), Mumbai
(vi) Mumbai Grahak Panchayat, Mumbai
(vii) Karnataka Consumer Service Society, Bangalore

(viii) Consumers’ Association, Kolkata

(ix) Consumer Unity and Trust Society (CUTS), Jaipur

Best of Luck

Imran Sami ( M.Com., M.B.A., B.Ed. )