THE RIGHT TO CHOICE
NATIONAL CONCLAVE ON CONSUMER ISSUES,
NEW DELHI, OCT. 12, 2012.
Evolution of Right to Choice

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Free entry into previously state controlled sectors
eg: Airlines
Technology and the internet
-Railway ticket booking, online
booking of cinema tickets
Govt. policies favouring entreprenureship
- First time entreprenuers, big retail
Impediments to Choice
1.
Lack of choices due to presence of oligopolies and cartels in an
industry
2.
Lack of information
3.
Too many choices
4.
Poor implementation of government policies and laws
5.
High switching costs – either in terms of money, time or effort.
1. Oligoploies and Cartels
Firms involved in monopolistic trade practice act against a consumer’s
Right to Choice by:
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Trying to eliminate competition from the market
Taking advantage of their monopoly and charge unreasonably high
prices.
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Being indifferent to product quality

Limit innovations and technical development

Unfair trade practices as they can act with impunity.
1. Oligoploies and Cartels
Competition Act 2002 prohibits abuse of dominant
position, forming cartels, regulating mergers and
acquisitions.
Example of monopolistic markets : Railways
2. Too much Choice
 Paradox of Choice : Prof. Barry Schwartz:
“Too much choice paralyses consumers”
 Example: Mutual Fund Market
3. Lack of Information
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Rural Consumers: Right to choice restricted by illiteracy
Out of 600,000 habitations -- clusters where the population is 100 or more - but only 30,000 have a commercial bank branch. Less than half the
population has a bank account. Only about 10% of the people have life
insurance, and less than 1% have other types of insurance. (Source RBI report
Dec2009)
Even those who have a bank account do not maintain minimum balance, so
banks don’t want to service them.
Due to lack of information the rural consumer has no choice in financial
instruments
4. Poor Implementation of Government
policies
When the mechanism of supplying a good to a consumer breaks down or the
government’s controls on quality fail, then the consumer has no choice if

The good concerned is an essential commodity

When the consumer is largely dependent on this supply mechanism
Example:
- Public Distribution System
- Adulterated goods
5. High Switching costs
 High Switching Costs can be due to documentation
and technical difficulties
Example: Mobile Number Portability
Citing “lifetime contracts”, outstanding dues or subscription to
special plans, incumbent operators are able to create hurdles for
existing users.
CUTS Study

A sample of 11,499 respondents was asked a question to
test their knowledge about the choices available to them as
consumers.
“Could you name any two products or services, for which you
have only 1-2 provider/producer/seller?”
Only 1.6% were able to correctly name products which have
only 1 or 2 producers
Overall awareness among respondents about categories
where they do not have much choice, is quite low.
CUTS Study

Sample = 11,499
“
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“Could you name any two products or service other than
telecom which should also be provided with portability?”
Only 3.4% were able to correctly name products other than
telecom which should be provided with portability
Overall awareness among respondents about this question is
very low.
CUTS Study

Sample = 11,499
“
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“Could you name at least one sector where free and
fair competition will increase benefits to the customer?”
Only 2.6% were able to name such a sector. 26% felt
there should be more competition in the oil and gas
sector to reduce fuel prices.
CUTS Study

Sample = 11,499
“
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“What are the key barriers to accessing other options
for key products and services?”
Cost of alternative products and services-16%
Transaction fee -14%
Access Time-7%
Documentation requirement – 3%
CUTS Study
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The results of the study show that consumers’ knowledge
about the Right to Choice is very low.
As very few consumers are even conscious of the fact that
many sectors do not offer choices in products, it shows that
the Indian consumer is highly tolerant of oligopolistic
practices.
More than 50% unable to even answer the question of
what barriers prevent them from switching to other
sellers.
Conclusions
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Choices available to the Indian consumer have
multiplied since the 1990s
Yet consumers tolerate monopolistic practices. Eg.
Oil and gas, railways
Rural consumers’ right to choice stymied by low
literacy levels leading to lack of awareness of
choices
Conclusions
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Urban financial markets smother the right to choice by
offering too many choices
Poor implementation of government policies : Eg: PDS
To flourish, Right to choice needs:
 - More competition
 -Less market imperfections
 Ability of consumers to take legal recourse
THANK YOU