Social media and consumer protection

Published at December 06, 2018 11:24 PM 0Comment(s)2579views

Riyaz Ahmad Kuchay

Social media and consumer protection

Although, consumer is sovereign in the sense that it is he who mostly decides what goods and services producers should produce and sell, but it is also a fact that consumer is the most vulnerable economic agent. Reasons are many. One is that there is information asymmetry in favour of producers and sellers, or businesses – businesses know more than consumers about the durability, quality, safety features, genuine price, etc of products. The second is that consumers, because of their sheer number and spread, are very unlikely to get organized formally. As a result consumers are often exploited on one ground or other. It is in recognition of this fact that governments all over the world have enacted laws in order to prevent such exploitation and protect consumer rights.

Though there are systems, institutions, mechanisms and laws to safeguard consumer rights, but consumers, particularly small in number and individual consumers, are not in a position to take full advantage of these. Reasons include time constraint, cumbersome procedures, lack of effective and quick response mechanism, etc. The result is that consumers continue to suffer.

As is the case with other situations, information technology, particular the mobile internet, provides great opportunities here too. In fact, there are more than one ways in which information technology can help protect interests of consumers. Social media platforms like Facebook, Twitter and Whatsapp can be used for consumer protection.

Every coin has two aspects. So does the social media. There are instances when social media was used effectively in a positive manner. A recent example is the use of social media in highlighting the issue of Rohangya crises. However, we have also witnessed the other side of the ‘coin’. Only a few years ago, the rumor of some adverse effects of polio vaccination spread in Kashmir through social media causing mass panic in the state.

As far as the role of social media in protecting the interests of consumers is concerned, they provide ample opportunities. The first is that social media provides consumers with a platform which can be used to get organized without any formal organization. There is no need of an office building, membership, secretary, fee, treasurer or meetings. Every consumer, in his/her own interest, can play his/her role from anywhere –home, office, bus stop, in a shop, in a restaurant, while on an outing, within the domestic territory or outside it. 

Some of the common ways a consumer gets cheated and exploited include selling duplicates in the name of originals, selling a low quality product at a very high price, providing a very unsatisfactory service, not responding when some after-sale service is required and no grievance redressal.

In all these instances, we can use social media to make businesses – small or big — to mend their ways. If business units can use social media to promote their businesses, why cannot consumers use it to ‘demote’ business of those who work against their interests and cause harm to them?

But consumers need not be of this mentality. They can make business units to mend their ways without causing any substantial financial damage to them. What consumers have to do is to make use of a simple but important principle of economics.

To motivate individuals to act in a desired manner is a key concept in modern economics. Economists have found the solution by providing incentives. The central problem of incentives, in turn, is that individuals do not bear the full consequences of their actions. If individuals are made to bear the consequences of their actions –are rewarded for their good actions and panelised for their bad ones, their actions are going to be closer to the desired outcomes.

For example, many companies need to have goods delivered. They contract with transporters, promising to pay a certain amount if the goods are delivered safely and on time to their destination. The contract might specify how much will be deducted from the total payment for each day the goods are late or for any damage that occurs while they are in transit. The agreement thus has built-in incentives for the transporters to perform adequately.

But this may not be possible always. How can a textile store owner be punished if the cloth purchased at an average price from him shows signs of damage just after ten days it was put to use? The consumer cannot go to him and ask him to replace it: most of the stores will not entertain such claims.

Then what is the solution? The solution lies in what in economics is called ‘the reputation issue’. Reputation comes from a good track record of a firm in matters of quality of its product, price it charges, service it provides to customers, the way it deals with customers etc. Reputation plays an important role in providing incentives in market economies. Reputation often works as a factor which gives business units some market power; because of the reputation business units enjoy some degree of monopoly power. Another merit of reputation is the higher sales a firm experiences: a firm which has more reputation compared to its rivals will certainly be able to sell more.

The result of both the consequences of reputation – higher degree of market power and higher sales, is higher level of profits which will accrue to the business unit compared to the business unit which has no or lower reputation. It is here where iron is hot and consumers can hammer it with the help of social media.

If a consumer feels cheated or is not provided a satisfactory service or is ill treaded, he or she can post same on social media. If same is the case with other consumers, they can confirm the post by liking it, commenting on it, sharing it and reacting to it. This will spread the news and more and more people will come to know about the way the business unit is doing its business.

If the business unit is acting undesirably with most of its customers, they all can post their experiences and complaints. This will provide information to the existing as well as potential customers about the undesirable actions of the business unit. If this continues for some time, the reputation of the business will suffer. When reputation of a business unit falls, its market power will also fall. Fall in reputation will also cause the decrease in its sales volume. Both the factors will result in reduction in profits.

If the business unit intends to continue with its business, it will amend its ways. If it was in business to cheat customers, its time will be over. In either case consumers will be benefited.

In addition to pure economic loss, this adverse campaign against a dishonest business unit also has some social ramifications which may compel the owners of the business unit to change their business approach. As a business unit is made a target of negative campaign, and if the campaign is supported by sufficient number of people, the social image of the owner as well as the staff is going to suffer. They will be criticised formally and informally, directly and indirectly, on face or behind the curtains by their neighbours, relatives, friends, acquaintances, business partners. It will also force the business unit to mend its ways.

The strategy has an inbuilt mechanism to prevent wrong campaigns from succeeding in causing damage to honest business units. Suppose a person has some private grudge against some honest business unit. The person may post something against the business unit. If no one else experiences the wrongdoing mentioned in the post, no one will support the complainer –the post will be ignored and it will go unheard.

However, the strategy has some limitations also. First of all the success of this strategy requires active participation of social media users in sufficient numbers. If social media users do not participate actively and in sufficient numbers, the strategy will not succeed. Second, if a business unit cheats customers selectively, may be one out of fifty, in this situation too, the victims will be unable to make some effect through the use of media. Third, the strategy is useful in changing only the future behaviour of business units. It cannot be used to make wrongdoers to compensate the victims for the loss already suffered.

Despite these shortcomings, the strategy can be very useful to some extent in controlling the damage consumers are made to suffer. The only major requirement is the active and positive participation by the community.

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