Time to crackdown on predatory pricing before it becomes a marketing fad

No heckles are raised when airport shops extract their pound of flesh or taxi aggregators go in for frequent surge pricing even at an unearthly hour of six in the morning. But if tomato price jump from Rs 20 to Rs 40 per kg, all hell breaks loose. This is how our mind has been seasoned to. I therefore applaud Biden for making an effort to stop the open loot.

At a time when price ‘unbundling’ is becoming a norm in India like elsewhere, the US President Joe Biden has announced a crackdown on “those hidden surcharges too many businesses use to make you pay more.”

“It’s wrong. It’s wrong,” President Biden said, adding: “Research shows that without realising it, folks can end up paying as much as paying 20 per cent more because of hidden junk fees than they would have paid if they could see the full price upfront and compare it with other options.”

In India, the Directorate General of Civil Aviation (DGCA) had in February 2021 permitted airlines to unbundle certain services from their prices.

Citing the global trends, when for example allowing for surge pricing for cab aggregators, airlines and now the train services, it has become so easy to go by what the private companies come up with. Since ministers and the bureaucrats don’t pay from their own pockets for air travel (or need to order a cab when in office) they have little or no idea of the difficulty or the hardship that the common people undergo.

No wonder, a recent news report had shown that Indigo airlines’ food and beverage (F&B) division had earned more profit than Domino pizza outlets. In the days to come, with some airlines mulling over the need to ask passengers to pay for the baggage they check in, I wouldn’t be surprised if the airlines end up earning more profits from charging for checked-in baggage than the total revenue arising from freight trains.

Some years back, European airline Ryanair had floated the idea of asking consumer to pay a price for using the toilet on board. The idea was kept in abeyance following strong consumer resentment. If the airline had not gone back on its proposal, and the other airlines too had picked it up, the revenue from toilet use alone could easily surpass the earnings from Sulabh Sauchayala.

This is what happens when policy makers are first party to the decision making (when they are in office) that allows for junk prices or at times allow exorbitant prices to be extracted at the airports, and then express a shock when they have to pay from their own pocket.

This is best illustrated by citing the case of former finance minister P Chidambaram, who was horrified when he ordered for a cup of tea at Chennai airport (in 2018). In a tweet, he said “Offered hot water and tea bag, price Rs 135. Horrified, I declined.”

In September 2022, during a stopover at the Chennai airport, I also had tweeted: “Rs 231 for a cup of filter coffee. I don’t know why people still complain of higher food prices.”

The point I am trying to make is no heckles are raised when airport shops extract their pound of flesh or taxi aggregators go in for frequent surge pricing even at an unearthly hour of six in the morning. But if tomato price jump from Rs 20 to Rs 40 per kg, all hell breaks loose. This is how our mind has been seasoned to.

I therefore applaud Biden for making an effort to stop the open loot. Whatever the private companies may say, a crackdown is required to stem the illegal tide, and free customers from paying predatory prices. While the top leadership is keeping its eyes shut, it is the common people who continue to suffer. But then there are always powerful moneyed lobbyists who are paid to justify the illegal trade that companies profit from.

Take the case of the US. No sooner did Biden order a regulatory crackdown at the erring companies, a screaming news headline in Washington Post reported how from airlines to ticket sellers, companies were fighting back to keep junk fees to protect their rising profits. Many travel writers have already started justifying the need for price unbundling saying this helps keeps the baseline ticket prices low. But in reality, I don’t see the air ticket prices low; invariably the prices rising with every passing day as the date of travel gets nearer, and that too with no additional advantages for the increased fare. Domino effect, as it is called, has seen air ticket prices increasing by an average of 25 per cent.

Similarly, banks too are in the race to expand the services for which consumers can be forced to pay. Keeping the minimum balance in banks, as most Indian banks prescribe, is actually a tax on the poor.

“When people request basic information about their accounts, bag banks cannot charge them massive fees or trap them in endless customer service loops,” says the US Consumer Financial Protection Bureau chief Rohit Chopra. The need is to put an end to these surprise fees that banks charge.

The excessive credit card fees for instance are another loophole that the banks take advantage of. In the US, the plan is to reduce the excessive card fees by 75 per cent. Wonderful, I must say. I have always wondered why the Reserve Bank of India (RBI) or other central banks in developed countries failed to check the exploitatively high excessive credit card fees.

More the emphasis on digital economy, the more will be the evidence of predatory pricing.

In an article in Dainik Bhaskar the other day, it was reported that some companies have even started charging for word count on the internet. The list of such junk prices or unbundling of prices is rather long, and tells us that it is turning out to be an organised business. Beer companies charging extra for the glass in bars on weekends, and paying extra for ketchup is now increasingly becoming the norm.

Junk prices are the outcome of a junk policy. Unless policy makers wake up to the threat, predatory pricing is becoming a marketing trend that will perhaps require an international effort to put an end to the malpractice.

But before that, each country must crackdown on stopping the unbundling of prices or junk prices. Let us get back to the era of fixed prices with no hidden costs attached.

(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)