Figure this out. How many product recalls can you remember in India? Honda, Nokia and Mattel, immediately come to mind, but few else. Interestingly, all three involve multinational brands, and in all cases, the recall was part of a global strategy. Now, its no one?s case that most products and brands sold in the country are of impeccable, six-sigma quality, with nary a chance of malfunction. So why is that Indian consumers only get to catch the tail of the global ?product recall? trickle, and almost never an India-specific one, from an MNC and Indian brands alike? Is it that our laws on consumer safety are too vague, or is it a factor of the relative under-developed state of our consumer markets?
Says NK Jain, Secretary and CEO, The Institute of Company Secretaries of India, ?We don?t have a provision for recall under the Indian Consumer Protection Act, 1986.? He points to the fact that goods in India are under a guarantee or a warranty limiting the extent of liability of the seller to merely replacement of the product with a new one or removing the defects in the product. Under the law, the seller is under obligation to address each aggrieved consumer on a case-to-case basis, with no provision for a recall of an entire range that maybe defective/faulty or unsafe. The provision contained in Section 14 of the Consumer Protection Act, 1986, grant the consumer the right to receive the value of the goods purchased, along with any damages suffered as a consequence of use of defective goods. Further, sale of defective goods is deemed to be an unfair trade practice under Section 36A of the erstwhile MRTP Act, 1969. Under the extant law, MNCs having a place of business in India have to be registered under the Indian laws and as such the Indian laws are equally applicable to them, enabling an Indian consumer to take the MNC to court.
Given that a recall involves huge stakes both in terms of the brand image and the money involved, it needs to address bigger issues at all levels ?the government, consumer and industry. As Jessie Paul, author of No Money Marketing, explains, ?It?s imperative to evaluate its impact on each stakeholder, not just the end consumer. The company needs to reassure investors about its ability to generate sales, the government that it is in earnest, and employees and consumers that it did not do it knowingly.? Low incidence of product recalls in India point to Indian marketers lackadaisical attitude towards shouldering this responsibility. Until a problem is a bit too acute, or unless there is a problem that is brought to the notice by an external regulator, most companies gloss over safety issues.
Brand expert Harish Bijoor says the fundamental difference between developed country markets and India lies in the mindset. ?Global companies prepare for the best and equally prepare for the worst. Most Indian companies prepare only for the best of times. India is still to evolve a marketing mindset that puts a premium on perfection and concern for public safety.?
Another critical factor in the recall dynamics globally is the thriving ?recall insurance? market. Typically provided as an add-on to a ?product-liability insurance policy?, the ?recall? rider covers the expenses incurred by a company to manage the recall and the cost of replacing/repairing the defective parts and can be taken to cover recall internationally or in a particular region. In India though, just a handful of insurers such as ICICI Lombard and Tata AIG offer ?recall insurance?. Interestingly, the public sector biggies?The New India Assurance Company and The National Insurance Company?specifically exclude damages arising out of product recalls from their product-liability policies.
Says Rahul Aggarwal, CEO, Optima Insurance Brokers, ?The premium is linked to the global experience the insurers have had with the product category, company and geography.? Auto recall policies are more expensive compared to a refrigerator recall policy. A company with a history of recalls pays a bigger premium, and it?s obviously in regions where consumers and/or the civil society is more litigious.
?There is no awareness or pressure in the Indian market for recalling a defective product. The number of people who even know about product recalls is far and few,? says Roopa Vajpeyi, Editor, Consumer Voice, a consumer affairs magazine, pointing to lacunae in consumer awareness and empowerment in the country.
Consumer rights activist Pushpa Girimaji, however, puts the ball back squarely in the government?s court; ?Unless we have the right laws, consumer activism can do nothing. We do not have the fundamental systems in place for a recall.? She cites the example of the US, which has a strong consumer protection mechanism in place.
In the US, the Consumer Product Safety Commission (CPSC) and National Highway Traffic Safety Administration have a 24-hour helpline where consumers can report defects and register their complaints. The CPSC website posts all brands that have been recalled along with their background and performance, enabling a potential consumer to check the details and then buy a product. Every consumer product carries information regarding expectations and deliverables. ?Also, in case of an injury owing to the defective product the amount of compensation is huge in the US, which acts as deterrent for manufacturers in peddling low-quality products. For Indian manufacturers there is no such fear factor, because the system does not aid the consumer,? says Girimaji. Since India does not have a CPSC-like databank, even suspect quality international brands, banned elsewhere, find a free market in the country.
