The Delhi State Consumer Disputes Redressal Commission's decision to fine mobile phone firm Vodafone Rs 50 lakh (Rs 5 million) for offering prizes of gold coins and a Maruti SX4 as part of a promotional scheme is something all marketers in the country would do well to pay attention to.
Vodafone offered subscribers 10 gold coins a day and one SX4 as a bumper prize, but the chance of winning was restricted only to those customers who used their phone to make calls for at least 20 minutes a day.
A consumer organisation filed a case before the DSCDRC arguing that Vodafone was luring subscribers into making unnecessary calls so that they could qualify for the list of customers from whom a lucky one would be chosen.
The commission has held that this qualified as an unfair trade practice under the Consumer Protection Act, for two reasons. One, it gave the impression the customer was not paying anything for participating whereas s/he actually was paying by making more calls every day. Two, the contest/lottery was meant to promote Vodafone's business interests.
DSCDRC's calculations showed that Vodafone had earned around Rs 2 crore (Rs 20 million) extra during the period the scheme was in operation and was offering gifts worth about Rs 10 lakh (Rs 1 million), so the fine was fixed at Rs 50 lakh.
Vodafone will presumably challenge the judgement, but what is important is the implication of the consumer protection law as interpreted by the DSCDRC.
Essentially, the law appears to be outlawing any promotional schemes which seek to increase the company's business -- so, if Vodafone had offered the chance to win a gold coin and an SX4 to all its customers, the commission would not have had a problem; but since they offered it only to those who used their services for more than a certain period of time a day, and this induced others to try and get into this category, the commission said the scheme was unfair.
Since this is what most marketing companies do, almost by rote, it is important to consider its implications.
Take the case of a credit card company, say, which offers a holiday for two to one of its Platinum Card holders. What is it doing this for? Clearly to let the Gold and Silver card holders know they're missing out on something and to encourage them to become large spenders so as to qualify for a Platinum Card.
Or an airline that offers free tickets to one lucky member of its frequent flyer programme, in addition to the other benefits they get. Once again, the idea is to let others know there are great benefits to be had by flying more.
After the DSCDRC verdict, it is likely that all such schemes can be classified as unfair trade practices. Perhaps it's time to take a more realistic look at the country's consumer laws.