The MRP Conundrum: How Maximum Retail Price Exploits Consumers

A deep dive into legal profiteering, pricing manipulation, and the illusion of consumer protection

Sections to highlight visually:

• A compelling pull quote from Sunita’s story
• Infographic-style breakdown of the refrigerator pricing chain
• A sidebar with “Consumer Rights Under MRP”

The MRP Conundrum: How Maximum Retail Price Exploits Consumers

By Satpal Singh Johar

Abstract

Maximum Retail Price (MRP) was introduced in India to protect consumers by capping the price retailers can charge for packaged goods, ensuring transparency and preventing overcharging. However, this system has become a tool for exploitation, allowing manufacturers, distributors, and retailers to manipulate prices through inflated MRPs, differential pricing, and market gimmicks. This article explores how MRP, meant to safeguard consumers, enables legal profiteering, with examples like inflated refrigerator prices, varying costs for soft drinks, and overcharges on medicines, beverages, electronics, and snacks. It examines the disconnect between production costs and MRPs, the role of cartels, and the lack of regulatory oversight, arguing that MRP is an outdated mechanism that fails to protect consumers and requires urgent reform.

Introduction

Sunita, a housewife, visited a reputed outlet to purchase a refrigerator. The salesman, touting the brand’s features, offered her a deal: a refrigerator with an MRP of ₹85,000, discounted to ₹55,000, and after haggling, finalised at ₹49,000. Sunita felt satisfied, believing she secured a bargain. Days later, her friends Shobhit and Sumitra revealed they bought the same model from a nearby store in the same mall for ₹38,000, with a free hand mixer. Sunita was shocked, and her husband, Ravi, was furious, suspecting foul play. Consulting a legal expert, Ravi learnt both deals were legal since the sale prices were below the MRP. The expert noted that another customer might have paid ₹80,000 elsewhere, all within legal bounds. This scenario exposes the flaws in the MRP system, where consumers, hailed as “kings”, are exploited legally under the guise of protection.

What is Maximum Retail Price?

Maximum Retail Price (MRP) is the highest price at which a packaged product can be sold to consumers, as set by the manufacturer and printed on the packaging. In India, MRP is regulated under the Legal Metrology Act, 2009, and Packaged Commodities Rules, 2011, requiring details like MRP, net quantity, and manufacturing/expiry dates on packages. [^1] The system aims to:

• Protect consumers from overcharging by capping retail prices.
• Ensure price uniformity across regions.
• Promote transparency by displaying the maximum price.

However, the system’s implementation often undermines these goals, enabling profiteering and market manipulation.

The Mechanics of MRP Exploitation

Consider the refrigerator case: a model with an MRP of ₹85,000 has a production cost of ₹10,000–₹15,000. The ₹70,000 gap is shared among manufacturers, distributors, and retailers, creating room for manipulation:

• Manufacturer’s Pricing: Sets the MRP at ₹85,000, sells to distributors at a 70% discount (₹26,500), earning ₹11,500 over the base cost (₹15,000, including taxes and profit). [^2]
• Distributor’s Margin: Sells to retailers at a 60% discount on MRP (₹34,000), leaving retailers a ₹51,000 margin if sold at MRP.
• Retailer’s Discretion: Retailers offer discounts (e.g., ₹49,000 or ₹38,000) to appear consumer-friendly, but the wide margin allows significant profiteering.

This structure creates a “money game” where consumers pay vastly different prices for the same product, all legally, as long as the price is at or below MRP. Real-world examples illustrate this:

• A 300 ml soft drink can has an MRP of ₹35–₹40 in stores, ₹60 at airports (330 ml), and ₹100 on flights (350 ml), reflecting a 70% price hike for a 10% volume increase or 286% for a 17% increase. [^3]
• A 100 gm cookie jar with an MRP of ₹280 (₹2,800/kg) may cost ₹200–₹300/kg to produce, yet consumers perceive it as a premium product due to branding. [^4]
• In 2019, a Madurai consumer was charged ₹25 for a 200 ml bottle of flavoured milk with an MRP of ₹22 at Pechiamman Milk Depot Restaurant. The District Consumer Disputes Redressal Forum fined the restaurant ₹15,000 and imposed ₹50,000 in punitive damages. [^5]
• In 2023, a Mumbai consumer purchased a 43-inch LED television with an MRP of ₹120,000 for ₹90,000 at a major retailer, only to find it sold for ₹75,000 online by the same brand. [^6]
• In rural Uttar Pradesh, a 10-tablet strip of paracetamol (MRP ₹15) was sold loose for ₹30 in 2024, exploiting the loose commodities loophole. [^7]
• In 2022, a Delhi consumer reported a packaged snack (MRP ₹50 for 100 gm) being sold for ₹40 at a local store but ₹60 at a cinema hall, despite identical branding. [^8]

Systemic Issues with MRP

1. Arbitrary MRP Setting

Manufacturers set MRPs based on market dynamics rather than actual costs, taxes, and reasonable margins. A cough syrup with a production cost of ₹3–₹5 may have an MRP of ₹35 in one market and ₹77 in another. [^9] In a recent complaint, Zepto sold Zandu Ayurvedic Cough Syrup at ₹98, exceeding its printed MRP of ₹80. [^10]

2. Differential Pricing

MRP enables differential pricing across locations. Airports, malls, and flights often charge more than local stores. The Kerala State Beverages Corporation (KSBC) was fined for charging ₹800 for a bottle of Macdowell VSOP Brandy with an MRP of ₹740. [^11]

3. Cartelization

MRP facilitates cartel-like behaviour. Manufacturers, distributors, and retailers collude to maintain inflated MRPs. In the pharmaceutical sector, metformin pricing remained excessive despite partial controls. [^12]

4A. Global Pricing Norms: Where India Diverges

India’s MRP regime is globally anomalous. In the European Union, retailers must display unit pricing—cost per gram, litre, or item—allowing consumers to compare value. [^13]
In the United States, MSRP is not legally binding. Retailers sell above or below it, and consumers expect variation. MSRP is not used to create artificial discounts. [^14]
In Japan, strict anti-cartel laws and consumer audits prevent collusion. There is no legally sanctioned ceiling price like India’s MRP. [^15]

These models reflect a shared principle: price integrity is built on transparency, not legal fiction.

5. Manipulation of Weights and Volumes

Manufacturers reduce pack sizes while increasing prices. A 100 gm pack becomes 75 gm, or a ₹5 pack is replaced with a ₹10 pack claiming “17% extra”.[^16]

6. Loose Commodities Loophole

MRP applies only to packaged goods. Loose items like grains or vegetables can be sold at any price, bypassing protections. [^17]

7. Medical Sector Exploitation

MRPs on medicines and devices are often inflated. Even Pradhan Mantri Bhartiya Janaushadhi Kendras have overcharged on bottled water. [^18] Railway vendors were fined for selling water bottles above MRP. [^19]

Regulatory Failures

The Legal Metrology Department and Consumer Affairs Ministry monitor MRP compliance, but enforcement is weak. Penalties (₹25,000 for first offences) are rarely imposed. Consumers like Ravi are dismissed, as sales below MRP are deemed compliant. [^20]

The Consumer’s Plight

The MRP system, designed to crown the consumer as “king”, instead leaves them vulnerable. Marketing gimmicks like “buy one, get one free” mask inflated MRPs. Shrinking pack sizes and rising prices erode trust.

Conclusion

MRP, introduced as a consumer protection tool, has become a weapon for legal exploitation. Arbitrary pricing, differential pricing, cartelisation, and regulatory inaction enable profiteering. Urgent reforms are needed:

• Mandate cost-based MRP calculations with transparent breakdowns.
• Strengthen regulatory oversight to cap margins.
• Extend MRP rules to loose commodities.
• Ban differential pricing across regions or contexts.

Until these changes are implemented, MRP will continue to “massacre” consumers.

📚 Complete Footnotes [^1]: Legal Metrology Act, 2009, Government of India.
[^2]: Industry estimates on manufacturing cost structures, 2023.
[^3]: Consumer reports on soft drink pricing variations, 2023.
[^4]: Market studies on bakery product branding and premium positioning, 2024.
[^5]: Times of India, “Madurai Consumer Court Fines Restaurant for MRP Violation,” January 15, 2019.
[^6]: The Hindu, “Online vs. Offline Price Disparities in Electronics,” August 10, 2023.
[^7]: Consumer Affairs Journal, “Rural Pharmaceutical Pricing Loopholes,” 2024.
[^8]: Social media complaints on cinema hall snack pricing, January 2022.
[9]: Health Policy Journal, “Pharmaceutical Pricing and Distributor Influence,” 2022.
[^10]: Consumer complaint on X (formerly Twitter), “Zepto Overcharges for Cough Syrup,” July 2024.
[^11]: Economic Times, “Dual Pricing Practices in FMCG and Liquor,” 2023.
[^12]: Health Policy Journal, “Metformin Price Controls and Market Exploitation,” 2022.
[^13]: European Commission, “Unit Pricing Regulations for Consumer Goods,” 2023.
[^14]: Federal Trade Commission (FTC), “Guidelines on MSRP and Retail Pricing,” 2022.
[^15]: Japan Fair Trade Commission, “Anti-Cartel Enforcement Reports,” 2023.
[^16]: Consumer Affairs Ministry, “Complaints on Shrinking Pack Sizes and Misleading Labels,” 2024.
[^17]: Legal Metrology (Packaged Commodities) Rules, 2011 – Scope and Limitations.
[^18]: Consumer Affairs Ministry, “Overcharging at Pradhan Mantri Bhartiya Janaushadhi Kendra,” February 2024.
[^19]: Times of India, “Railway Vendors Fined for Overcharging on Bottled Water,” March 2023.
[^20]: Legal Metrology Department, India – Enforcement Data and Penalty Records, 2022

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Satpal Singh Johar

satpalsingh1944@yahoo.com

esspess@gmail.com