Review on Consumers Protection Act, 2018

Samriddhi Foundation, with an attempt to evaluate the Consumer Protection Act and analyze whether the mentioned policies act as restrictions to entrepreneurship, prepared a policy brief on Consumer Protection Act, 2018. While the legislation was passed in the previous year, some of the policies mentioned in the act created skepticism among entrepreneurs and distorted market mechanism. These could result in inexplicable consequences in the economy by hindering innovation and competition, or encouraging black/informal markets, which could work against the benefit of entrepreneurs, consumers and the economy as a whole.

The policy brief identified six issues in the act that could hamper growth in Nepalese economy. They were related to:

  • Quality Control
  • Price Control
  • Profit Margin Fixation
  • Supply Regulation
  • Centralized Consumer Protection Council
  • Inspection Mechanism

For enabling wider discourse on the identified issue, Samriddhi organized a consultation meeting named, ‘Review of Consumer Protection Act, 2075’ on 27th of September, 2019. The main purpose behind the consultation was to receive feedback and additional inputs from various experts concerned with consumer protection as well as entrepreneurship promotion. The meeting was moderated by _________ and attended by various stakeholders including, personnel from retailer’s association, entrepreneurs, consumer right activists, officers from Federation of Nepalese Chamber of Commerce (FNCCI), lawyers and most importantly, parliamentarians form the Industry, Commerce, Labor and Consumer Interest Parliamentary Committee.

The consultative meeting was a huge success as the valued counsel provided great input on the identified issues. The retailer’s association members and entrepreneurs deliberated over how the clauses mentioned in the existing act created huge barriers for entrepreneurs and other actors in the economy. They informed everyone about the unseen barriers that strict and tight policies like price control and inapplicable quality standards create. For example, they mentioned that for quality regulation it would have easier if the act mentioned that the entrepreneurs should produce goods of certain minimum standard. However, it mentions that it should follow the regulations related to infrastructure and production process. However, Nepalese industries, especially small or medium sized firms could not comply to such infrastructure standards and thus many industries had to be closed down. They were agitated by the fact that the act provided huge benefits to large firms as entry of small firms in the sector were very difficult due to infrastructure standards and price controls.

Similarly, members from FNCCI, entrepreneurs and retailers also mentioned the negative impact that the discretionary power to monitoring officers have created. They revealed that while it was important to inspect the market, the inspection scenario of Nepal did not punish the wrong doers. It instead was promoting corruption as monitoring officers have become more susceptible to taking bribes. Thus, the power granted to these officers created a loophole though which bad business practitioners remained in the market. Additionally, it made small sized businesses more vulnerable in front of state authorities. These stakeholders were also highly dissatisfied about the fine imposing mechanism and punishments incorporated in the act, and were considered as irrational.

Other examples on how the act ignored the benefits that consumers would receive from increased productivity through entrepreneurship and competition were also presented. Additionally, the entrepreneurs constantly reminded the stakeholders about the greater benefits that consumer would receive if they could operate freely in the economy.

The meeting also consisted of stakeholders who opposed the idea of providing freedom to entrepreneurs and believed that consumers would be protected only through strict regulations on businesses. They also mentioned that price controls and fixation on profits were required for stabilizing the price hikes.

The members from parliamentary committee were very supportive and we hope that they raise these issues in the parliament meeting.