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Dual Pricing Ban in India –Initiatives Taken by Government

Ashish M. Shaji

| Updated: Jul 08, 2017 | Category: GST

bans dual pricing

Dual pricing is the practice of setting prices at different levels. Dual pricing may be used to accomplish a variety of goals, such as to gain entry into a market by offering unusually low prices to buyers or as a method of price discrimination.

Further, certain companies in the market charge a higher MRP for their product in certain spaces, like malls, airports, and hotels. Here we will discuss about the evolution of Dual pricing and the initiatives taken to Ban Dual Pricing by the government.

Few examples of Dual Pricing

Let us look at few examples to understand how companies use dual pricing strategy to their advantage.

  • The ticket for visiting Taj Mahal (one of the Seven Wonders of the World, located in Agra), is different for Indian citizens and different for foreign visitors.
  • AIRLINE Industry is a prime example of Dual Pricing. Companies offer lower prices if you book your flight tickets well in advance. The demand for this category of customers is elastic and varies inversely with price. As time passes the flight fares start increasing exponentially to get high prices from the customers whose demands are inelastic. This is how companies charge a different fare for the same flight tickets. The differentiating factor here is the time of booking and not nationality or any other factor.
  • Cold drink or aerated water produced by a company was sold at different prices at malls, cinemas and airports.

Initiatives were Taken by Government to Ban Dual Pricing

To stop such practices government has directed new mandates that all packaged products must be sold at MRP regardless of the location of sale from January 1, 2018.

The new mandate will ban dual pricing practice when it comes into effect on January 1, 2018.

This directive comes from the Union ministry of consumer affairs after the Legal Metrology Organisation, Food, Civil Supplies and Consumer Protection Department of Maharashtra (LMO[1]) appealed against the absence of rules preventing retailers and manufacturers from increasing the MRP of packaged goods at premium locations.

Furthermore, the new legal norms also require manufacturers to prominently display vital information such as ‘date of manufacture’ and ‘expiry date’ by increasing the size of letters and numerals on the commodities.

However, displaying the date of manufacture or packaging of a commodity has not been made mandatory for e-commerce business platforms. Subject to certain conditions, they will not be held liable for any errors in declaring such information.

The LMO has reportedly issued notices to companies like Coca-Cola, Red Bull, Flipkart, and Amazon to ensure their compliance.

Effect of Ban on MRP Dual Pricing

All packaged commodities like bottled water are covered under sec 2(l) of the Legal Metrology Act, 2009.  Every packaged commodity also has to comply with the provisions of Rule 6 of the Legal Metrology (Packaged Commodities) Rules, 2011.

As per Rule 6, the following mandatory information has to be declared on the package for the benefit of the consumer.

Effect of Ban on MRP Dual Pricing
  • Name & Address of the manufacturer/packager/ importer;
  • Net quantity of product (in case of the unit for litre, the letter ‘L’ will be used to indicate quantity);
  • The manufacturing date of the commodity;
  • The retail sale price of the commodity;
  • Dimensions of the commodity, if relevant;
  • Consumer care contacts.

The Union ministry of consumer affairs decided to ban dual pricing. It’s a practice through which sellers charge a higher MRP for their products in certain spaces like malls, airports, and hotels.

The department of consumer affairs said it adopted a balanced approach after wide consultations.

The government has also ordered that the size of letters and numerals in the declaration should be increased to make it easier for consumers to read.

The LMO cracked the whip on high profile manufacturers for charging a higher MRP at malls, upmarket restaurants, hotels, and airports.

It was observed that the quality, quantity, and weight of these products were exactly the same as the ones sold by common Kirana stores at a lower price.

Cases where Dual pricing was allowed

The amendment made to the Legal Metrology Act prohibits dual pricing. However, it was enforced in the light of different exit gates like conformity with law, larger national interest etc.

The controversial evolution of this law pertaining to dual pricing may be well understood as below:

  • In the case of Pallavi Refractories vs. Singhreni Colleries, dual pricing was held to be in accordance with the law as it served larger public interest.
  • In the case of Hindustan Coca-Cola Beverages vs. Siddharth Manchanda and others, it was observed that the guilty party took advantage of law and justified its acts of selling the same commodity under different MRPs as nowhere it was mentioned that there can’t be a dual fixation of prices.
  • The apex court in a case had upheld dual pricing in hotels and restaurants as the court stated that a consumer enters the premises of a hotel or a restaurant to enjoy the ambience of the place and in the process even if he or she ends up buying a bottle of water, it’s not just a sale of good but it’s a combined sale of goods or service which is outside the scope of LMA, 2017.

Conclusion

Cases of dual pricing have been prevalent in India but there have been steps taken to check such practices. The regulations pertaining to this have come through a long way, through various judgements, which indicates to us that the intention of the legislature to put a ban dual pricing is to protect the interest of the consumers. 

Read our article: Simplified and New GST Returns from April 2020

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Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on criminal and corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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