Price the label or label the price – Pricing of food and beverages at hotels and restaurants (July 2016, Issue 1)

July 12, 2016, by Tanvir Quader

Under the Essential Articles (Price Control and Anti-Hoarding) Act 1952, the Government can fix the maximum prices at which essential articles may be sold by a retailer, wholesaler or any other person and for this purpose can fix different prices for different areas of the country.[1] The Government can also, under the Essential Commodities Act 1957, control the prices at which any essential commodity may be bought or sold in any area[2]. “Essential commodities” includes, among others, foodstuffs, paper, petroleum, drugs and medicines, cycles, infant foods, etc. Interestingly, even cigarettes are included within the definition of essential commodities. Of course, the Government has the power to declare other articles and commodities as “essential” under the relevant Acts.


Rule 20(2) of the Bangladesh Standards of Weights and Measures (Packaged Commodities) Rules 2007 (“the 2007 Rules”) states that no retail dealer or other person including manufacturer, packer and wholesale dealer shall make any sale of any commodity in packaged form at a price exceeding the retail sale price thereof. “Retail dealer” means a dealer, including a wholesale dealer, who directly sells commodities in packaged form to the consumer[3] and “retail sale price” means the maximum price at which the commodity in packaged form may be sold to the ultimate consumer.[4] This provision is enforceable through section 40 of the Consumer Rights Protection Act 2009 (“the 2009 Act”), which prohibits the selling or offering of any goods, medicine or service at a higher price than fixed under any law or rule for the time being in force. Being a criminal offence, the prescribed punishment for violation of section 40 is imprisonment for a maximum period of one year or a maximum fine of Taka fifty thousand, or both.


The law is apparently quite clear on two points. Firstly, anyone who directly sells commodities in packaged form to the ultimate consumer is a retailer for the purposes of the 2007 Rules. Secondly, under the 2009 Act, retailers must not sell any commodity in packaged form above the label price, i.e. the stated maximum retail price, if so fixed under any law or rule.


An important question that arises in this regard is whether hotels and restaurants fall within the definition of “retailers” and if so, do these legal provisions apply to their situations verbatim. On a literal interpretation, the answer would tend to be yes. However, literal interpretations often bring out absurd results and the courts have accepted time and again that the law was not promulgated to create absurdity. Therefore, let’s assess the merits of the other side of the coin.


In order to not fall foul of the pricing laws, hoteliers and restaurateurs can perhaps opt for either of two options. First, one could de-package the commodity and sell it in a non-packaged form so as not to fall within the purview of the 2007 Rules. This route, admittedly, is somewhat weak in that the substance over form doctrine may trump the facade and enable the law to bite nonetheless.


On the other hand, the wording of the law that can be toiled around with is “sell”. One could argue that the consumption of articles of food or drinks in hotels and restaurants does not constitute a simple “sale” or “transfer” of these commodities by the hotelier or restaurateur to its customers since the customer does not enter a hotel or a restaurant simply to make a purchase of these commodities but to enjoy the ambience available therein and incidentally order any article for consumption. After all, the hotelier or restaurateur has spent considerably, if not a hefty amount, to seek to give a unique atmosphere for the customers to enjoy. Hence, it would follow, at least arguably, that in such a scenario, charging prices for commodities in packaged form such as beverages, mineral water, etc. above the label price printed on the packaging during the service of customers in hotels and restaurants does not violate section 40 of the 2009 Act.


It may so happen that upon the complaint of a consumer, a hotel or a restaurant may receive a notice from the Department of National Consumer Rights Protection for selling packaged commodities at prices higher than the label price and may be asked to explain its position. While such a hotel or restaurant may attempt to argue the points as outlined above, it is quite likely that the Department will remain unconvinced. In that case, the only avenue open to such a restaurant or hotel would be to move a writ petition before the High Court Division of the Supreme Court of Bangladesh on the above and other grounds, if applicable.


Written by Tanvir Quader, Partner 


† Disclaimer: The opinions and comments expressed in this Blawg are not to be regarded or construed as legal advice by and from Vertex Chambers or any of its members. It is highly advisable that any person should seek independent legal advice before relying on any of the contents of this Blawg.

[1] Section 3(1) of the Essential Articles (Price Control and Anti-Hoarding) Act 1952.
[2] Section 3(2)(a) of the Essential Commodities Act 1957.
[3] Rule 2(f) of the 2007 Rules.
[4] Rule 2(e) of the 2007 Rules.