Representative image of Ola Electric scooters.
Credit: Reuters Photo
Ola Electric’s shares slid 6% on Tuesday, after it received a Show Cause Notice from the Central Consumer Protection Authority (CCPA) on violation of consumer rights, misleading advertisements and unfair trade practices, late on Monday.
The company informed the exchanges that it will respond to the CCPA within the stipulated 15 days.
This action was taken by the federal body after it received a surge with thousands of complaints.
Ola’s shares on Tuesday dropped by over 6% and opened below Rs 90. However, they recovered losses 5% higher. The shares of the company also dropped on Monday by more than 8% following a social media spat between founder Bhavish Aggarwal and a comedian.
“To garner the market share, companies sometimes give fanciful promises but whether the service element is good or not determines if the company survives. They must come up with some kind of a robust answer, otherwise, they are definitely looking at a fine, loss of goodwill, and maybe some other punishment if it is found to be very serious because the number of complaints is very big, ” said, Sunil Kumar, Head of Department, School of Law, Lovely Professional University.
Compensation might also be given to consumers, he added.
In September this year, Ola Electric also saw a drop in sales by 10.31% month-on-month despite having the highest number of sales for electric two-wheelers, as per data by Federation of Automobile Dealers Associations.
As per the Consumer Protection Act (CPA) 2019, post-hearing and with sufficient evidence showing consumer rights violation, the central authority may pass orders including recalling of goods or withdrawal of services which are dangerous, reimbursement of the prices of these goods or services to their purchasers, and discontinuation of unfair practices.
If the authority feels there are misleading advertisements, those advertisements may be discontinued or modified. Penalties may extend to two years imprisonment and Rs 10 lakh, explained Anirudh Krishan Gandhi, Partner Designate at Saraf and Partners. For every other subsequent offense, the punishment may extend up to 5 years and 50 lakh rupees.
“These actions may be taken depending on the grievances and evidence collected,” Gandhi added.
“For the long-term impact not to be there, they will have to ensure that the service issues are resolved,” said Arun Kejriwal, Founder, Kejriwal Research & Investment Services.
Ola Electric did not respond to queries sent by DH on the matter till the time of publication.