Market doesn’t work the way the theory wants it to behave. It’s not the fault of the theory though. Because the riders involved in the perfect competition are never experienced in the real life. It’s a utopia, a perfect situation which life never throws up. As a result, there is always a lack of balance among the stakeholders in the market place. To correct the anomalies and protect the rights of every stakeholder in the market play we need laws related to the market. And consumer protection laws fall in that category.
By saying this we probably have jumped the gun. Therefore, let us retrace our steps to the beginning. A proper market assumes a fair play. Consumers and sellers/producers are the two sides of the market coin. Consumers constitute the demand side of the game and the sellers/producers constitute the supply side of it. In a perfectly competitive market a consumer always has the right to choose the best option among many. Through the process of competition price and quality tend to converge and the ones offering product at a higher price-point with inferior quality will be thrown out of the market.
This is a situation that is hardly obtained in real life. In most of the cases, producers are few in number and consumers are many. Not only that, financially producers operate from the position of strength that makes the consumers vulnerable to the ‘diktat’ of the producers as it necessarily becomes difficult for a consumer to seek redressal if the law of the land fails to protect.
In the absence of a legal system that disapproves of deviations between promise and delivery, the tendency to dupe the customers tend to harden. For example, between 2014 and 2016 there was 70 per cent leap in consumer complaints once a helpline to protect the consumers was set up. This itself points to the tendency of abusing the rights of the consumers to fair deal for reasons of reaping an easy profit in excess of what ought to be considered fair.
On the other hand, what in Economics is known as monopsonistic or oligopolistic market situation in which there are many sellers/producers and sole or a few buyers market tends to be abused from the demand side. To reap a price advantage such buyers tend to take advantage of the market situation by squeezing the price down to a level that tends to suffocate the supplier.
In a situation of this nature, a supplier is forced to accept a less than fair profit just to survive. Unfortunately, however, while from the point of view of activism, propagation of consumer rights yields more political benefits due to the sheers number of beneficiaries involved in the act the same logic for a long time didn’t apply to the suppliers in a stringent way.
It has also been tended to be assumed that business-persons will have enough financial muscle to fight their rights out. It’s only recently, however, once the MSMEs grew enough in numbers that the law makers have started to focus on the rights of the producers in terms of getting their payments in time among others.