The Malaysian economy is based on the market economy. In a market economy there are two key players – the seller and the buyer (consumer). (We will talk about the third player – the government later).
In the market, the seller of the product or service has one primary motive – to make a profit. In the market, in making a purchase the consumer has a different motive – to be satisfied with his product/service as well as to get value for money. For the limited resources (money) that the consumer has, he wants to get the best value for his money. Thus there are two different motives between the seller and the buyer – one seeking profit and the other seeking satisfaction and value for money.
In a market without consumer protection, the market will run on the principle of caveat emptor meaning “let the buyer beware”. The buyer purchases and if anything is wrong with the product or service or if the consumer is not satisfied, it is the consumer’s fault. The buyer is free of all responsibilities – he does not need to refund, repair, replace or to compensate the consumer. The consumer bears the fullest burden of responsibility for his purchase.
While the motives between the seller and the buyer are different, there is also another very significant difference – the difference of the information that the buyer and the seller has (what is often referred to as information asymmetry) of the product or service.
First example, a buyer wants to buy a pair of shoes. The seller selling the pair of shoes may know that the shoes he is selling is worth much less than they appear to be (maybe cheap imitations that would deteriorate rapidly). If the buyer does not know this, he will be willing to buy the shoes for something at or above the minimum price for higher quality shoes; thus the consumer will become worse off, rather than better off. In actual fact, if the buyer had the same facts as the seller, he would have been able to buy the shoes from a different honest seller at a lower price. The seller of course benefits, as he is able to attain a higher price than if he had disclosed the actual information. The consumer is at a disadvantage as the seller possesses important information than the buyer.
This is a clear illustration of information asymmetry – the seller has more information of the product than the buyer. The seller can thus use this information to get a higher price or sell a lower quality product at a higher price. The buyer who lacks this information will end up paying a higher price than the shoes are actually worth.
Information asymmetry in the market disadvantages the consumer.
One important issue is certainly that without accurate information on the product, consumers may end up paying higher prices for lower quality products. But there are many other issues and challenges consumers face in the market. The list below are some of the concerns that relate to the question, “do consumers need protection?’
Safety
Food
In buying fish or other fresh fruits, vegetables or meats, how fresh are these products? You may be willing to pay a higher price for a fresh fish compared to one that has been in the refrigerator for 6 months. The consumer does not know the true freshness. Of course there are many tips such as for fish checking under the gills for “fresh” blood, or the texture of the flesh may give some indication – yet it may or may not be accurate information of the freshness. Of course there are also techniques to make it look “fresh” by the seller. The seller know the true freshness of the fish, but he will insist to the consumer “it is fresh and has just arrived from the fishing village”. The buyer then buys based on his “experience” and maybe the seller’s promises. But in real fact the buyer really does not know.
Is the food purchased safe? Has extensive pesticides been used to prevent pests? Or have other chemicals been used to make the fruit ripen faster or keep it “fresh” for a longer time? Are these chemicals safe for human consumption? Even the seller may not know, but somewhere along the food chain, the farmer may know and probably will never inform the consumer that he has used dangerous pesticides to protect his crops. The food may be unsafe.
Electrical products
Are the electrical products that you purchase safe or does it possess a risk that the user could get electrocuted? Does it “save energy” as it claims it does?
Toys
Are the toys your children play with safe? Can it cause injury? Or worse still contain chemicals that can has no visible short term signs but can affect the long term physical or mental health of your child?
Misleading advertisements
The advertisement promises to reduce your weight by 5 kilograms in 4 weeks? Does it work? Is it safe? If after paying hefty sum for a package it does not work, what can you do?
There is also another issue here – unfair contracts. At the time of signing up of the package you probably had to sign a contract. What many consumers will do is they will sign without fully reading or fully understanding the terms? When then the treatment does not work, then they realise that in the contract they had signed, one of the terms is that “the selling centre cannot be held responsible if the treatment fails”. An example of unfair contract.
Making informed decision
Many products contains labels that are supposed to help consumers make decisions. Yet often these labels containing the ingredients are rarely read by consumers as they are difficult to understand? In fact the very fact that there must be a label is because there are laws that state that food and medical products must state the contents. Yet how accurate are they? How many consumers actually read these labels in making purchasing decisions?
Medicines and Supplements
Are the medicines we take effective? Are they safe? If they are effective what are the long-term effects?
Many of us take supplements to improve our health? Do they indeed contain the stated active ingredient (example for Vitamin C – 1000 mg of ascorbic acid). How effective are they in delivering the health they promise?
After sales service
You have just purchased a new car. On the third day, you hear a weird rattling sound in the engine? How assured are you that the seller will correct that fault? If the problem persists, can you get a new car?
Insurance or other financial product
When you are purchasing your insurance, you often rely on the purchase of your policy on what the agent advises you? What if after 10 years of paying premiums, and you need to make a claim you suddenly realise that you are not eligible for a benefit that the agent had promised you? Or maybe he never mentioned to you that while promoting the benefits of the policy he was selling failed to mention the limitations of the policy?
Complaints redressal
Whenever you purchase a product or service, and you are not satisfied and the seller refuses to address your complaint, is there anywhere you can go for your complaints to be addresses?
Certainly the above is not a comprehensive list of situations that consumers face. But I am certainly sure that you as a consumer have faced at least some of the above situations or at least asked yourself some of the questions posed.
Thus I would like to say with the strongest emphasis that CONSUMERS DO NEED PROTECTION.
This protection is fundamentally through the third party in the economy – the government. The government through policies, laws, enforcement agencies, redressal mechanism, ombudsman and other mechanisms, provide a framework for consumer protection.
