GST, Outsourcing

Dual Prices – Bans and Details in India

What is 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.

Few examples of Dual Pricing

Let us look at an example 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 the time passes the flight fares start increasing exponentially to get high prices from the customers whose demands are inelastic. This is how companies charge the different fare for the same flight tickets. The differentiating factor here is the time of booking and not nationality or any other factor.

Initiatives were taken by Government

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 bring an end to this dual MRP 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) 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 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.

  • Name & Address of the manufacturer/packager/ importer
  • Net quantity of product (in case of unit for litre, the letter ‘L’ will be used to indicate quantity)
  • Manufacturing date of the commodity
  • Retail sale price of the commodity
  • Dimensions of the commodity if relevant
  • Consumer care contacts

The Union ministry of consumer affairs on decided to ban the ‘dual’ MRP policy, 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.