Consumer law and the impact

Consumer Affairs Authority Chairman Sarath Wijesinghe delivering a lecture to university students in Colombo on consumer Law and its impact on November 20 outlined the basic structure of the CAA Act and invited students to study the legal and practical aspects and to work with the CAA. Here are some of the highlights from the lecture.

The CAA chairman said:

Consumer protection is a much talked about and less practised norm in Sri Lanka though in other countries: the arm of consumer protection has been greatly strengthened. Economists have always said that the consumer is supreme which would be true in a market economy where the Government intervention is minimal. But in reality, consumer is exposed to many problems.

"There are two sectors in any society. They are producers and consumers. Although all producers are consumers, all consumers are not producers. The ultimate end of production is consumption or human welfare. The market is considered inefficient if the flow of goods and services that take place under conditions of varying quality, price, existence of warranty and guarantee. Imbalance in knowledge between the producer/supplier and consumer is to the detriment of the latter."

"The consumer has a prime responsibility of protecting his rights. In most countries, especially in developed countries in the last five decades, very strong consumer protection movements have gathered momentum. Closer to us there is a good example of the Malaysian Consumer Protection Movement. Consumer problems have aggravated with the vast deteriorating environment, the vast increase in the scale of production and the emergence of Monopolies and Mergers which have strengthened the influence of the producers over the consumes."

"The actual field of consumer protection however covers a much wider area. This includes the conditions of the roads, the transportation system, air and water pollution, alcohol and cigarette smoking, sewerage, drainage and flooding, disposal of garbage and the maintenance of hygienic condition, trading and usage of drugs and narcotics and all other activities that make human life unbearable or has an adverse effect on life. Consumer protection today is aimed at improving all aspects of human life.

In other words enhancing the quality of life is the aim of all development. All consumers in Sri Lanka agree that consumer protection is essential. There is a growing awareness on the subject.

It is the fundamental duty of the Government to give due place for the consumer. Although it may be considered as a prime duty of the Governments, they are unable to act either because the proper mechanism or legal framework is not present or may be due to various conflicts of interests and priorities.

The Government is committed to protect the interest of the consumer who faces economic imbalances and as a member of the United Nations, has resolved to encourage implementation of United Nations Guidelines on Consumer Protection adopted in 1985.

"Our task is to restore the consumers a place in society. In achieving this, as the Government is a large consumer as well as a produce introduced the Consumer Affairs Authority Act, No. 9 of 2003 and established the Consumer Affairs Authority and Consumer Affairs Council," Wijesinghe said.

"The Law is fairly comprehensive in nature which seeks to achieve the objectives spelt in it, but I think the success of the law will depend upon the manner in which it is enforced and implemented. The main objectives can be broadly classified into four.

1. To protect consumers against the marketing of goods or the provision of services which are hazardous to life and property of consumers;

2. To protect consumers against unfair trade practices and guarantee that consumers interest shall be given due consideration;

3. To ensure that wherever possible consumers have adequate access to goods and services at competitive prices; and

4. To seek redress against unfair trade practices, restrictive trade practices or any other forms of exploitation of consumers by traders.

How can the protection of the Consumer be assured in the present scenario?

The effects of globalization and liberalization have been forced on consumers in the absence of proper safety nets in developing countries. Sri Lanka is no exception and we are in this category since 1977.

There has been a negative impact on the public. The need to protect the consumer is more urgent now than before and is a top priority of the present Government.

The challenges the Government faces in consumer protection are immense. Is it possible to regulate consumer prices under a deregulated and open economy? Is it possible for the Government to allow free imports and lowering prices? How would this disrupt the local production and local industry?

Therefore it is vital in Regulation of Trade to have a balancing exercise, to safeguard the consumers and local producers. How can the consumer be protected from inferior quality and unsafe products? How can the consumer be protected from the unscrupulous supplies?

"The answer is the Consumer Protection Legislation. We are in the correct direction by establishing the Consumer Affairs Authority and Consumer Affairs Council by the enactment of Consumer Affairs Authority Act, No. 9 of 2003."

"The protection of the consumer was vested in the two statutes namely, the Consumer Protection Act, No. 01 of 1979 and the Fair Trading Commission Act, No. 01 of 1987. These two statutes supplemented the Control of Prices Act, No. 29 of 1950.

Provisions of the above two statutes are considered inadequate to deal with abuses of consumer rights unprecedented during the last two decades and measures to enhance fair competition and to control harmful business and professional practices are considered necessary and urgent.

These measures include ways to oppose practices that mislead, restrict choice, and various trade barriers. It was also pointed out that the work of two disciplines, namely the Department of Internal Trade (DIT) and the Fair Trading Commission (FTC) was overlapping and that it is a burden to the State to maintain two establishments for the same purpose. This is an advanced Act from the previous ones considering the needs of the day.

"It comprises an Authority (CAA), and a Council (CAC) for appeal. It has wider powers and authority for investigation, implementation and imposition of penalty than the FTC and DIT taken separately or together. It covers both public and private sector businesses, locally or foreign owned, in-shore or off-shore, including both goods and services inclusive of professional and technical services.

This Act is an improvement incorporating shortcomings of the previous two legislations, except in the area of monopolies and mergers. The Government is planning to enact a separate legislation to deal with monopolies and mergers to meet the country's present day requirements of competition policy.

"The new Act is more responsive to the needs of the consumer as well as the trade and industry. It gives guidelines to trade and industry.

It sets out to redress the imbalance in knowledge and power between suppliers and consumers," he said.

Unique birthday present for President

A unique presentation was made to President Mahinda Rajapaksa by Sarath Wijesinghe, Chairman of the Consumer Affairs Authority to mark the President 's birthday and one year of successful completion of the Mahinda Chinthana Programme, wishing the President and the nation a peaceful and prosperous future.

Sri Lanka spends over Rs. 17,000 billion for wheat flour by helping farmers in Brazil and U.S.A. Rice has been the staple food for Sri Lankans and Asians for thousands of years.

It is freely available. It is of the highest nutritious value and promotion of rice based products will help our own farmers. We consume non-nutritious part of wheat which will lead to diseases such as diabetes, high blood pressure etc.

Our economy and culture were based on the Wewa, Dagaba, and the wet paddy fields for thousands of years and our ancestors led a healthy life and lived long. The Bread culture was introduced to us by the Portuguese in 1505, and it is time to change it to rice culture. Mahinda Chinthana has taken an initiative on this matter. The concept is very clear as stated by the President on this subject declaring his policies. Quote

"My father washed his hands from the waters flowing from the sluices of the paddy fields before signing his nomination papers. Therefore, the terminology associated with paddy farming is not alien to me. Over the past 40 years, I have been dreaming about farmer families in their own decent homes, with two wheel tractors and paddy storage facilities. I believe that I will be able to finally realize this dream." (Page 44 of Mahinda Chinthana)

Steps are being taken by Ministers Chamal Rajapaksa, S.M. Chandrasena, Prof. Tissa Vitharana, ITI and many other private organizations and NGOs to popularize and rice and based products in which programme the CAA is acting as a catalyst and a facilitator.

Brief note on "specified goods" or "specified service"

Section 18 of the Consumer Affairs Authority Act No. 9 of 2003 refers to "Specified goods" and "Specified Service". Why goods and services are specified? While the following article gives you an answer to this question, it also deals with the matters incidental thereto.

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Why specify goods or services

The CAA Law provides for the Minister to specify goods and services that may be essential to the life of the community. Once specified, a price variance of such goods or services cannot be effected until the matter has been referred to the CAA and obtain its approvals.

In the light of the Government's policy, the objective of specifying any goods or services ought to be to have some kind of supervision over unreasonable or unjustified price increases. It is also conceivable that such goods or services ought to be one that affects cost of living significantly.

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What is an unreasonable or unjustified price increase

Where there is ample competition and where supply is equal or greater than demand, prices usually tend to be related to costs of production. Any attempt to raise prices substantially beyond this level can be conceived as unreasonable or unjustified. But there are many instances where price increases take place unrelated to costs, and yet cannot be considered unreasonable.

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Where supplies are temporarily less than demand:

Even when there is ample competition, supply could drop for certain reasons such as seasonal variations, as in the case of vegetables, rice etc., or due to unforeseen factors such as droughts, crop failures, strikes etc. In such situations, price increases are not normally considered unreasonable.

So long as there is ample competition, because in a free enterprise, price is the invisible hand that regulates economic activities towards an optimal situation. Higher prices attract more investment, more production and more employment. And when production increases, prices tend to settle at the so-called reasonable levels.

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Where supplies of certain goods and services are limited due to either physical or structural limitations:

eg: Physical limitation - Gold, Gems, land and services of specialized and experienced doctors, lawyers, technicians are limited due to structural reasons.

In these cases, as the gap between demand and supply widens, the price tend to rise and such rises cannot be considered unreasonable because they represent true scarcity value.

a) Natural factors where monopoly is more economical than competition from a national point of view. eg: Railways - Here competition is not practicable because it could lead to waste and duplication.

b) Combinations and cartels where a few large firms merge together and control market.

c) Legal rights prevents new comers into the industry eg: copyrights. In these situations, they are in a position to control a substantial portion of the market thereby raise prices unreasonably. They can either raise prices abnormally or restrict supplies so that prices will rise to abnormal levels.

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What is an essential commodity

A commodity may be considered essential if it is a day to day consumer requirement and if a shortfall in its supply causes hardship to the average consumer in terms of his well-being. Any commodity can be considered essential if its price elasticity of demand is less than one. In other words if the demand does not change in proportion to the change in price.

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What ought to be the criteria for specified goods or services

1) Monopoly or oligopolistic supply.

2) Essentiability of goods and services concerned and its importance in affecting the cost of living. However, mere essentiability alone is not enough. It should occupy an important place in the day to day basket of goods of the average consumer.

For eg: rice is an essential item that affects cost of living. But yet it need not be specified since there is ample competition in the market which ensures a reasonable price both to the producer and the consumer. Thus, there emerge three main criteria that may be used as guidelines for specifying goods or services.

* That monopolistic or oligopolistic conditions exist in the supply.

* That either the commodity is an essential day to day consumer requirement, or it is an essential input (with no perfect substitute) for production of an essential consumer goods or services.

* That this is significant for cost of living considerations

It is important that all these criteria are satisfied simultaneously for each selected for specified goods or services.

In other words a commodity that does not meet all the three criteria need not be considered under Sec. 18 of CAA Act.

Data base at CAA to give instant advice

Sam Wijesinghe, former Secretary-General of Parliament, a former Ombudsman, a former Chairman of the Human Rights Commission and the Chancellor of the Open University at present, was the chief guest at two functions arranged by the Consumer Affairs Authority held on November 20.

1. Call-Centre

All those time, consumers in need have to make applications and wait for the outcome. The CAD has now introduced a new system using the modern technology to take immediate steps to feed the data base and give instant advice. This is taking place in many parts of the world. We are trying to improve the system by introducing on-live advice.

2. Auditorium

The Concept of Auditorium is practised worldwide. We will be educating the consumers, industrialists and traders with regard to their rights and duties. This will generate income and maintain cordial relationship with those involved in this field.

Having inaugurated these events Sam Wijesinghe while addressing the gathering explained the reasons as to how and why the consumers and the CAA should work together in keeping with CAA Act and the Government policy to maintain equilibrium with business community. He also cited number of examples based on his vast experiences.

Chairman CAA, Sarath Wijesinghe having introduced the chief guest to the gathering, thanked those officers who organised these events. The three Executive Directors M/s P. Baskarsinkam, Mohideen Bawa and Siritunge Silva and other Board Members were also present.

Consumer tips - 10 tips to save money

Living standards are rising and so are the Cost of Living, unemployment and worries of the future. In this situation of ever increasing demands, money saved is money earned. So plan for your future while judiciously living the present and not repeating avoidable urges of the past.

1. Live within your means: Wait until you have the money before you buy something.

2. Ignore the advertisements: Ignore advertisements that whet your appetite for stuff you don's need. If you don't go shopping, you won't spend money.

3. Take care of what you have: Simple attention to preventive health practices will save you a lot of money. Extend this principle to the upkeep of all your possessions. Think how much money you would save if you simply decided to use things even 10% longer.

4. Research Value, Quantity, Durability and Multiple use: Durability is critical for something you plan to use for the next 20 years. Also multiple use is a factor; one heavy duty pressure cooker can (and Should) replace a half dozen appliances like rice cooker.

5. Stop Using Money to Impress Other People: They are probably so lousy trying to impress you that they will not notice your efforts.

6. Make a price list: Keep track of prices on the items you buy most frequently in a small pocket notebook. Then set a goal to only buy those items when they are at their cheapest.

7. Check bulk prices: Do not assume that bulk is cheaper. Compare cost by the gram or kilogram. Don't forget to include the value of free gifts.

8. Shop Alone: If you take the kids, have them spend their allowances on extras. Or place a limit on the money they can spend on extras.

9. Free Gifts & Bulk Buying: Don't buy an item just because there's a free gift with it. Or to qualify for a scheme. Buy only those items like soap or detergent which you would use anyway.

10. Create a Balanced Budget: make a list of your monthly bills and basic needs like housing, utilities, groceries, petrol, etc. and add them up.

Now make a list of extra expenses like gifts, insurance, repairs, eating out, etc. If there's a surplus, it's great. If not, it's time to think of what to cut.

Consumer Affairs Authority Act, No. 09 of 2003 - Order under Section 18

By virtue of the powers vested by Section 18 of the Consumer Affairs Authority Act, No. 9 of 2003, Jeyaraj Fernandopulle, Minister of Trade Commerce, Consumer Affairs and Marketing Development, do by this Order, rescind the following items prescribed by Gazette Extraordinary No. 1302/24 of 20th August, 2003 as specified goods.

1. Mosquito Coils

2. Boxes of Matches