FLUX OF FAKE GOODS
Will the new Consumer Protection Act make any difference?
Brand India is under threat. From life-saving drugs to LED bulbs and FMCG products, the market is flooded with fake and unsafe goods that don’t comply with quality, price or safety norms. Many don’t carry even such mandatory information as manufacturers’ names, production and expiry dates. Prices are not printed. They are often pasted separately on packs. While the latest study revealing malpractices in India’s fast-growing LED bulb market by internationally-acclaimed research firm Nielsen is practically mind-boggling, a KPMG report earlier on the counterfeit FMCG market showed how easy it is to fake and market branded products in India. The Nielsen report said 76 per cent of LED bulb brands don’t comply with safety norms. Counterfeit and smuggled products now account for more than a fifth of the FMCG market. Going by the FICCI-KPMG report, the size of the counterfeit FMCG market at the end of 2014 stood at Rs 68,000 crore. This was around 65 per cent of the total market of counterfeit products, which was worth Rs 1.05 lakh crore. This market has grown by at least 10 per cent over the last two years. At the end of 2014, the overall FMCG market in India was valued at Rs 3.2 lakh crore.
The FMCG market has dramatically changed in the past two years, following vigorous marketing by manufacturers of Ayurvedic products. The top lines of major FMCG players, in urban areas, barring ITC, failed to grow as per market expectation. However, the counterfeit market is showing growth as law enforcement remains weak and fraudsters freely make inroads into the market. Big FMCG companies are known to work closely with law enforcement authorities to bring fraudsters to task. Hindustan Unilever, Godrej Consumer, Dabur and Emami are said to be engaging with the police and government at regular intervals to conduct raids and seizures. They take counterfeiting very seriously as fake products passed off as genuine brands cause a loss of business for the original manufacturers. Some firms also work with private detectives. The KPMG report said the loss to the exchequer as a result of FMCG counterfeiting is around Rs 27,500 crore, annually. The lack of coordination between law enforcement authorities and awareness deficiency among consumers are considered to be a big challenge.
The latest Nielsen report on light emitting diode (LED) bulbs sold in India’s $1-billion market said three- fourths of these bulbs do not comply with the government’s consumer safety standards. Based on a study of 200 electrical retail outlets across major cities like Mumbai, Hyderabad, Ahmedabad and New Delhi in July, Nielsen found not only these products are spurious and riskier, but also the fact that the highest number of violations had taken place in the national capital itself. “The spurious and non-branded LED products are a serious threat to not just the organised and compliant market players but also to the government’s key programs like Make in India,” the report said. The Nielsen findings showed that 48 percent of LED bulb brands had no mention of manufacturer’s address and 31 percent did not have manufacturer’s name. The market is flooded with smuggled China-made products. “They (spurious products) also impact government’s tax revenue collections... defeat investment objectives and go against the ‘ease of doing’ business philosophy,” the Neilsen report said.
The situation in the drugs and pharmaceuticals market is equally alarming, if not more since several of the branded products comprise life-saving drugs. Some of these drugs are not only spurious or fake but also substandard. According to reports, one in every seven Indian drugs is substan- dard. Even reputed brands fail to meet quality standards. Experts believe that more lucrative routinely prescribed drugs are at higher risk of failing quality standards as study published in the December 2015 issue of Journal of Applied Pharmaceutical Science, concluded, after testing 32 samples of diclofenac sodium, a popular painkiller. Another study, published last year in the International Journal of Pharmacy and Pharmaceutical Sciences, evaluated 46 samples of amoxicillin trihydrate, a fast-moving antibiotic, had a similar view. “We found a substandard medicine incidence of 15.62 per cent for diclofenac sodium and 13.04 per cent for amoxicillin trihydrate,” said Ahmed Nawaz Khan, study co-author and assistant professor, Department of Pharmacy, Jaypee University of Information Technology, Solan.
The Central Drug Standard Control Organisation (CDSCO), the official regulatory authority, however, thinks that only around 4.5 per cent of drugs in the market are substandard. Independent studies by researchers totally disagree. They say the size of substandard medicines in the market could be well over 15 per cent. According to WHO, these data have serious implications on health in a country where 58.20 per cent of the total health expenditure is an out-ofpocket cost burden on people. In India, medicines alone account for nearly 77 per cent of health spending.
Unfortunately, the Department of Consumer Affairs and its investigative agencies seem to have little control over the situation. The existing Consumer Protection Act 1986 has become practically obsolete. For the last three years, the government is trying to replace the act with a new one. The bill, aimed at strengthening the consumer protection mechanism, is ready for placement in Parliament by the minister, Ram Vilas Paswan. It will enforce consumer rights and provide a redressal mechanism for complaints regarding defect in goods, including fake and substandard products, and deficiency in services. The main objective of the bill is to establish a mechanism for consumer protection.
It proposes to have Consumer Dispute Redressal Commissions at the district, state and national levels. Also, it seeks to form a Consumer Protection Authority to investigate consumer complaints. However, neither the major producers nor discreet consumers are sure if the new act, when passed, will radically change India’s multi-billiondollar fake and unsafe consumer goods’ market. (The views expressed are strictly personal.)
The FMCG market has dramatically changed in the past two years, following vigorous marketing by manufacturers of Ayurvedic products. However, the counterfeit market is showing growth as law enforcement remains weak and fraudsters freely make inroads into the market