By  Mr. Kalyan Jhabakh, Partner; Mr. Sanjay Mehta-Partner; Ms. Darshika Associate

CONTENTS

INTRODUCTION

INSIGHTS INTO THE CONSUMER PROTECTION ACT, 2019 

KEY HIGHLIGHTS OF THE CONSUMER PROTECTION ACT, 2019 

EXPANDING THE DEFINITION OF CONSUMER AND DEFINING E-COMMERCE: 

NEW ADDITIONS TO CERTAIN DEFINITIONS 

PRODUCT MANUFACTURER, PRODUCT SELLER & PRODUCT SERVICE PROVIDER 

CONSUMER RIGHTS 

ADVERTISEMENT AND MISLEADING ADVERTISEMENT: 

PROACTIVE STEPS TO CURB MISLEADING ADVERTISEMENTS: 

UNFAIR CONTRACTS 

UNFAIR TRADE PRACTICE 

CENTRAL CONSUMER PROTECTION AUTHORITY (CCPA) 

PRODUCT LIABILITY 

CONSUMER REDRESSAL FORUMS 

OFFENCES AND PENALTIES 

E-COMMERCE AND ITS RULES 

IN A NUTSHELL – ANALYSIS BETWEEN 1986 ACT AND THE NEW ACT 

CONCLUSION 

A COMPREHENSIVE ANALYSIS OF THE CONSUMER PROTECTION ACT, 2019

INTRODUCTION

• The Consumer Protection Act, 2019 (“New Act”) heralds the beginning of a new era of consumer rights in India that are in sync with new-age consumer expectations.  It carries forward the rich legacy of The Consumer Protection Act, 1986 (“1986 Act”) that was considered path-breaking at the time of its enactment, but which was unable to meet the challenges of a rapidly growing, sophisticated and inter-dependent market for goods and services.

• The 1986 Act was amended from time-to-time to bring it in accordance with changes brought about by economic liberalisation, globalisation of markets and digitalisation of products and services.  However, its practical implementation was far from fulfilling its desired objective of being socio-economic legislation which sought to provide for better protection of the interests of consumers.  While using the same phrase in its preamble, the New Act, has substantially enhanced the scope of protection afforded to consumers, by bringing within its purview advertising claims, endorsements and product liability, all of which play a fundamental role in altering the consumer behaviour and retail trends in the 21st century.

• The New Act was passed by the government on 9th August 2020 and barring a few sections the New Act was notified on 20th July 2020.  The New Act replaces the three decades old 1986 Act.  The New Act proposes a slew of measures and tightens the existing rules present in the 1986 Act to further enhance consumer welfare.  The New Act provides enhanced protection to the consumers taking into consideration the booming e-commerce industry and the modern methods of providing goods and services such as online sales, teleshopping, direct selling and multi-level marketing in addition to the traditional methods.

INSIGHTS INTO THE CONSUMER PROTECTION ACT, 2019

• Over the years, new consumer protection laws were needed owing to the drastic change in the manner of market functions.  There is a rise in international trade, global supply chains and rapid development of e-commerce.  Further, India has also witnessed the backlog of pending cases in the consumer courts.  The new market set-up has witnessed misleading advertisements, and a special check was needed on direct selling and multi-level marketing.  The New Act aims to benefit society at large.

• The New Act has brought in some major changes and provides for more protection to the consumers in primavera to the earlier 1986 Act which can be seen from the comprehensive definitions provided under Section 2 of the New Act and other new sections added therein.

KEY HIGHLIGHTS OF THE CONSUMER PROTECTION ACT, 2019

In this part of the article, the major changes made in the Consumer Protection Act, 2019 is put forth and explained in detailed.

EXPANDING THE DEFINITION OF CONSUMER AND DEFINING E-COMMERCE:

• Under the New Act, a consumer is defined as a person who “buys any goods” and hires or avails of any service” for consideration but does not include a person who obtains goods for resale or goods or service for commercial purpose.  The New Act seeks to widen the scope of this definition.  Thus, a Consumer will now mean any person who “buys any goods” and “hires any service” which shall include both online and offline transactions through electronic means, teleshopping, direct selling or multi-level marketing.  In the 1986 Act, the definition of a consumer was only limited to buying goods or services and did not specifically include e-commerce transactions.  However, this lacuna has been addressed by the New Act.

• E-commerce has been specifically mentioned and is defined as buying and selling of goods/services/digital products, online.  Further, the Central government is empowered to take appropriate measures (framing of rules, regulations, guidelines, etc.,) to prevent unfair trade practices in e-commerce and direct selling.

NEW ADDITIONS TO CERTAIN DEFINITIONS

• The New Act includes the definition of “food” as defined under the Food and Standards Act, 2006.  This has replaced the definition of “goods” under the 1986 Act.  This would help in bringing the number of food delivery platforms to come under the ambit of consumer protection.

• In order to bring the telecom services under the New Act, “telecom” has been added to the definition of “services” .  However, it would have been much better if such inclusion was added as “telecommunication service” as defined by the Telecom Regulatory Authority of India Act (TRA), rather than “telecom”.  Hence, there is still lacunae as to what exactly “telecom” would mean and include.

PRODUCT MANUFACTURER, PRODUCT SELLER & PRODUCT SERVICE PROVIDER

• “Product Manufacturer” means a person who— (i) makes any product or parts thereof; or (ii) assembles parts thereof made by others; or (iii) puts or causes to be put his own mark on any products made by any other person; or (iv) makes a product and sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains such product or is otherwise involved in placing such product for a commercial purpose; or (v) designs, produces, fabricates, constructs or re-manufactures any product before its sale; or (vi) being a product seller of a product, is also a manufacturer of such product.

• “Product Seller”, in relation to a product, means a person who, in the course of business, imports, sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains, or otherwise is involved in placing such product for commercial purpose and includes— (i) a manufacturer who is also a product seller; or (ii) a service provider, but does not include— (a) a seller of immovable property, unless such person is engaged in the sale of constructed house or in the construction of homes or flats; (b) a provider of professional services in any transaction in which, the sale or use of a product is only incidental thereto, but furnishing of opinion, skill or services being the essence of such transaction; (c) a person who— (I) acts only in a financial capacity with respect to the sale of the product; (II) is not a manufacturer, wholesaler, distributor, retailer, direct seller or an electronic service provider; (III) leases a product, without having a reasonable opportunity to inspect and discover defects in the product, under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor.

• “Product Service Provider”, in relation to a product, means a person who provides any service in respect of such product.

CONSUMER RIGHTS

Under the 1986 Act, the rights of the consumers were only found as a passing reference under the objects of the Consumer Protection Councils.  However, the New Act has defined six specific consumer’s rights including the right to:

• Be protected against the marketing of goods and service which are hazardous to life and property;

• Be informed of the quality, quantity, potency, purity, standard and price of goods or services;

• Be assured of access to a variety of goods or services at competitive prices;

• Be heard and assured that the consumer’s interest will receive due consideration at appropriate fora;

• Seek redressal against unfair or restrictive trade practices;

• Consumer awareness.

ADVERTISEMENT AND MISLEADING ADVERTISEMENT:

• Under the New Act “advertisement” shall mean any audio or visual publicity, representation, endorsement or pronouncement made by means of light, sound, smoke, gas, print, electronic media, internet or website and includes any notice, circular, label, wrapper, invoice or such other documents.

• The New Act introduces, for the first time, a definition of misleading advertisement.  Under the New Act “misleading advertisement” in relation to any product or service, means an advertisement, which— (i) falsely describes such product or service; or (ii) gives a false guarantee to or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or (iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or (iv) deliberately conceals important information”.

PROACTIVE STEPS TO CURB MISLEADING ADVERTISEMENTS:

• Considering the ever-increasing presence of media and its influence, the New Act intends to cover all kinds of audio or visual publicity and representations made in electronic media, internet and websites under its ambit.  It is a prevalent market practice to engage eminent personalities or celebrities for the endorsement of products.  Such personalities/endorsers are deployed to make advertisements which are often misleading by making unrealistic claims.  In such cases, it becomes important for the endorser to take the onus and exercise due diligence to verify the veracity of the claims made in the advertisement to refute liability claims.

• Under the New Act, the Central Consumer Protection Authority (“Central Authority”), has the power to issue directions and penalties against false and misleading advertisements.  The Central Authority is satisfied after an investigation that any advertisement is false or misleading and is prejudicial to the interest of any consumer or is in contravention of consumer rights, it may, by order, issue directions to the concerned trader or manufacturer or endorser or advertiser or publisher, as the case may be, to discontinue such advertisement or to modify the same in such manner and within such time as may be specified in that order.

• If a misleading advertisement is found to be prejudicial to the interest of consumers, then the Central Authority may impose a penalty of up to Rs. 10,00,000 (Rupees Ten Lakhs) on a manufacturer.  In case of a subsequent offence, the fine may extend to Rs. 50,00,000/- (Rupees Fifty Lakhs only).

• Separately, the New Act has also made misleading advertisement a criminal offence to publish a false or misleading advertisement for manufacturers and services providers.  If found guilty, they could be sentenced to imprisonment for up to 2 (two) years.  In case of a subsequent offence, the term of imprisonment may extend to five years.

• If a misleading advertisement is found to be prejudicial to the interest of consumers, then the Central Authority may impose a penalty of up to Rs. 10,00,000/- (Rupees Ten Lakhs only) on the endorser.  The Central Authority can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to 1 (one) year.  For every subsequent offence, the fine may extend to Rs. 50,00,000/- (Rupees Fifty Lakhs only) and the period of prohibition may extend to 3 (three) years.  However, no endorser shall be liable to a penalty if he has exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by him.

• No person shall be liable to such penalty if he proves that he had published or arranged for the publication of such advertisement in the ordinary course of his business, however, no such defence shall be available to such person if he had previous knowledge of the order passed by the Central Authority for withdrawal or modification of such advertisement.

UNFAIR CONTRACTS

• Under the 1986 Act, a consumer could file a complaint only for unfair trade practise or restrictive trade practice adopted by the trader/service provider.  However, there were numerous instances where consumers, left with little option, entered into agreements/contracts that were unilateral and arbitrary in nature, and were bound by them.

• In the present market scenario, there are several occasions where a consumer will have to accept terms and conditions for making a purchase through an online market place or while availing an online service, including a financial service.  Quite often these terms and conditions are heavily one sided protecting the interests of the vendor or the electronic service provider and the consumer will not have any chances of negotiation or bargain for the modification of the terms of such contracts.  Thus keeping in mind the present dilemma, under the New Act, Consumers can challenge contracts that are unreasonable.  Thus, “unfair contracts” has been added as a ground for filing complaints in the New Act.

• “Unfair Contract” means a contract between the manufacturer/trader/service provider and the consumer and shall be deemed to be unfair if it adversely affects the rights of the consumer and includes, (i) demand for huge payments to fulfil the contractual obligations; (ii) imposing penalty on consumer for breach of contract when the consumer has already suffered a greater loss due to the breach; (iii) refusing pre-closure of debts with applicable payment; (iv) unilateral termination of contracts without proper reasons; (v) permitting one party to assign the contract to the detriment of the consumer, without his consent; (vi) imposing inequitable conditions that affect consumers.

• All complaints against the Unfair Contracts, where the value of the goods and services paid as consideration does not exceed Rupees Ten Crores, will have to be filed before the State Consumer Dispute Redressal Commission.  Complaints with respect to such contracts where the consideration exceeds Rupees Ten Crores will have to be filed before the National Consumer Dispute Redressal Commission.

UNFAIR TRADE PRACTICE

• While 1986 Act had listed six (6) types of unfair trade practices, three (3) types of additional unfair trade practices have now been added to the list which are as follows:

1. failure or non-issuance of a bill or a cash memo;

2. refusal to take back or withdraw defective goods or withdrawal or discontinuance of deficient services or refusal to refund the consideration amount paid within the period as stipulated in the bill or cash memo or receipt or in the absence of such stipulation, refusal to withdraw or refund goods or services within thirty (30) days;

3. disclosure of consumer’s personal information to any other person unless such disclosure is made in accordance with the provisions of any law for the time being in force or in public interest.

• Before ascertaining whether it amounts to unfair trade practice, it become relevant to determine whether the goods or deficient services have been provided. The section as drafted in its current form pre-determines existence of defective product or deficient service.  Separately, even if withdrawn or discontinued, companies could still be held liable under ‘product liability’ or for ‘deficiency of services’.

• The section fails to give any clarity whether information can be shared if consent is taken from the consumers.  The reliance will have to be placed on prevalent data protection law.

CENTRAL CONSUMER PROTECTION AUTHORITY (CCPA)

• The New Act seeks to establish a Central Consumer Protection Authority (to be termed as Central Authority) that will promote, protect and enforce the rights of consumers as a class.

• The Central Authority will regulate matters relating to a violation of consumer rights including unfair trade practices, misleading advertisements, etc. that are detrimental to consumer interest.  The headquarters of the Central Authority is currently at Delhi, and it shall have regional and other offices in any other place in India as the Central Government may decide.  The Central Authority can also take up suo moto cases.

• The Central Authority shall have an Investigation Wing headed by a Director-General for the purpose of conducting inquiry or investigation under this Act as may be directed by the Central Authority.

• The district collectors have also been empowered to conduct such investigations that affect the interests of the consumer as a class under the New Act.  They can investigate or inquire at the instance of a complaint or on a reference made by the Central Authority.

• Under the provisions of the New Act, the Central Authority is mandated to carry out the following functions:

1. inquiring into violations of consumer rights, investigating and launching prosecution at the appropriate forum;

2. passing orders to recall goods or withdraw services that are hazardous, reimbursement of the price paid, and discontinuation of the unfair trade practices, as defined under the relevant provisions of the New Act;

3. issuance of directions to the concerned trader/ manufacturer/ endorser/ advertiser/ publisher to either discontinue a false or misleading advertisement, or modify it;

4. imposition of penalties, and;

5. issuance of safety notices to consumers against unsafe goods and services and guidelines to prevent unfair trade practices;

6. spread and promote awareness and research on consumer rights and

7. recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights.

• Before the implementation of the New Act, there was no single designated regulatory body that governs product safety reporting and product recall in India; however, sector-specific does envisage and provide for recall procedures for defective products.  However, if the Central Authority is satisfied on the basis of investigation that there is sufficient evidence to establish a violation of consumer rights or unfair trade practices, it may pass an order which may include:

1. Recall of goods or withdrawal of services;

2. Reimbursement of the prices of goods or services so recalled to the purchasers;

3. Discontinuation of practices which are unfair and prejudicial to consumers’ interests.

• The establishment of a Central Authority and initiating action as a class comes as an additional mode of relief which can be exercised along with individual consumers filing complaints to address their grievances thereby having two parallel proceedings.

PRODUCT LIABILITY

• There was no separate legislation governing ‘product liability’ in India, though it was addressed under 1986 Act, if parties were included within the ambit of ‘consumer’.  Insertion of “Product Liability” as a separate chapter in New Act and a new ground for filing a complaint has been one of the most significant additions in the New Act.

• Under the New Act, “Product Liability” is defined as “the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a customer by such defective product manufactured or sold or by deficiency is service related thereto”.  For the sake of clarity, product liability means the responsibility of product manufacturer or product seller, of any product or service, related to the product or service to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating to a product.  Any person is entitled to make a claim of product liability against a product manufacturer or product seller or product service provider for the defective products / services.

• Ingredients to initiate Product Liability Action:

1. Product manufacturer will be liable if product contains a manufacturing defect, or defective in design; or there is a deviation from manufacturing specifications; or does not conform to the express warranty; or fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage. Absence of negligence or fraud in making express warranty of a product cannot be pleaded as a defence.

2. Product service provider may be liable if (a) the service provided was faulty or imperfect or deficient or inadequate in quality, nature or manner of performance which is required to be provided by or under any law for the time being in force, or pursuant to any contract or otherwise; or (b) there was an act of omission or commission or negligence or conscious withholding any information which caused harm; or (c) the service provider did not issue adequate instructions or warnings to prevent any harm; or (d) the service did not conform to express warranty or the terms and conditions of the contract.

3. Product seller who is not a product manufacturer may be held liable if (a) he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or (b) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or (c) he has made an express warranty of a product independent of any express warranty made by a manufacturer and such product failed to conform to the express warranty made by the product seller which caused the harm; or (d) the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or (e) he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product.

• Exceptions to Product Liability Action: The New Act envisages certain scenarios where product liability action cannot be product against the product seller.  No liability will be fastened on the product seller if at the time of harm, the product was misused, altered or modified.

• In any product liability action based on the failure to provide adequate warnings or instructions, the product manufacturer shall not be liable, if:

1. the product was purchased by an employer for use at the workplace and the product manufacturer had provided warnings or instructions to such employer;

2. the product was sold as a component or material to be used in another product and necessary warnings or instructions were given by the product manufacturer to the purchaser of such component or material, but the harm was caused to the complainant by use of the end product in which such component or material was used;

3. the product was one which was legally meant to be used or dispensed only by or under the supervision of an expert or a class of experts and the product manufacturer had employed reasonable means to give the warnings or instructions for usage of such product to such expert or class of experts; or

4. the complainant, while using such product, was under the influence of alcohol or any prescription drug which had not been prescribed by a medical practitioner.

CONSUMER REDRESSAL FORUMS

• Territorial Jurisdiction: The New Act now provides an added advantage to the consumers by providing for filing of complaints where the complainant resides or personally works for gain as against the 1986 Act which only provides for filing of complaint where the opposite party resides or carry on business.  This would help in removing the difficulties faced by the consumers in seeking redressal of their grievances against businesses who may not have an office or branch in their state.

• Pecuniary Jurisdiction: The New Act also changed the pecuniary jurisdiction for the District, State and National Commissions, respectively.  The pecuniary limit for the District Commission has been increased to up to Rs. 1 Crore from up to Rs.20 Lakhs; for State Commission it has been increased to up to Rs. 10 Crores from up to Rs. 1 Crore; and for National Commission the pecuniary jurisdiction has been increased to over and above Rs. 10 Crores as against Rs. 1 Crore in the 1986 Act.  In addition to this, the New Act has also changed the manner for determining the pecuniary jurisdiction for filing the Complaint.  Now the pecuniary jurisdiction will be determined on the basis of the value of goods or services paid as consideration as against the New Act wherein, the pecuniary jurisdiction was determined as per the value of goods and services as well as compensation claimed. This would help in doing away the practice of inflating the compensation claimed so as to bring the complaint within the jurisdiction of State or National Commission.

• E-Complaints: The New Act also contains enabling provisions for consumers to file complaints electronically and for hearing and/or examining parties through video-conferencing.  This should reduce inconvenience for the consumers, especially the ones who are physically challenged due to ill-health or old age.

• Alternate Dispute Resolution: Another provision introduced by the New Act to ensure speedy resolution of disputes is to provide for referring the disputes to mediation.  As per the New Act, the Consumer Redressal Forum shall refer the matter to mediation on written consent of both the parties.  For this purpose, the New Act also provides for establishment of a consumer mediation cell by the respective State Governments in each District Commission and State Commission as well as at the National Commission by the Central Government.

• Penalty for non-compliance of orders: Under 1986 Act, failure to comply with orders passed by the District Forums or the State Commissions or the National Commission attracted a punishment of imprisonment for a term not less than one month, but which could extend to three years, or with fine, which was not less than two thousand rupees and could extend up to ten thousand rupees, or with both.  However, the New Act retains the same term of imprisonment for non-compliance, the fine has been increased to twenty five thousand rupees, which may extend to one lakh rupees, or both.

• Power of Review: Under the 1986 Act, the aggrieved parties did not have any recourse other than filling an appeal to the State or the National Commission to set right the errors made by the District Forum or the State Commission respectively.  However, under the New Act, the District, State and National Commissions have been vested with the power to review its own orders where an application is filed for within 30 days of passing such an order.

• Appeal against the order of District Commission: If a party is aggrieved by the order of the district commission then they may prefer an appeal to the State Commission within 45 days of receiving such order.  The State Commission may entertain the plea after 45 days if sufficient reason is given by the party.  However, minimum 50% of the amount must be paid before the State Commission will hear the appeal.

• Appeal against the order of the State Commission: If aggrieved by the decision, the aggrieved party may prefer an appeal to the National Commission within 30 days of receiving the order from the state commission.  If sufficient reason is shown then the National Commission can also entertain the plea after the thirty days.  However, a minimum 50% of the amount must be paid before the National Commission will hear the appeal.

• An appeal against the order of the National Commission: If aggrieved by the decision then an appeal does lie to the Supreme Court if made within thirty days of receiving the order.  If sufficient reason is shown then the Supreme Court can also entertain the plea after the thirty days.  However, minimum 50% of the amount must be paid before the Supreme Court will hear the appeal.

OFFENCES AND PENALTIES

• A person (by himself or through someone on his behalf) who manufactures/sells / stores/imports / distributes any product containing an adulterant will be punished with:

1. Imprisonment up to 6 months and a fine of up to 1 lakh rupees – in case of no injury to the consumer;

2. Imprisonment up to 1 year and a fine of up to 3 lakh rupees – injury not amounting to grievous hurt;

3. Imprisonment up to 7 years and a fine of up to 5 lakh rupees – in case of grievous hurt;

4. Imprisonment of not less than 7 years, which may extend to life, and a fine of not less than 10 lakhs – in case of death of the consumer.

• A person (by himself or through someone on his behalf) who manufactures / sells / stores / imports / distributes spurious goods will be punished with:

1. Imprisonment up to 1 year and a fine of up to 3 lakh rupees – injury not amounting to grievous hurt;

2. Imprisonment up to 7 years and a fine of up to 5 lakh rupees – in case of grievous hurt;

3. Imprisonment of not less than 7 years, which may extend to life, and a fine of not less than 10 lakhs – in case of death of a consumer.

E-COMMERCE AND ITS RULES

• For preventing unfair trade practices in E-Commerce, direct selling and also to protect the interests and rights of the consumers, the Central Government shall take all necessary steps and measures to ensure the same.

• The Central Government has notified the Consumer Protection (E-Commerce) Rules, 2020 to prevent unfair trade practices in e-commerce, direct selling and also protect the rights of the consumers.

IN A NUTSHELL – ANALYSIS BETWEEN 1986 ACT AND THE NEW ACT

CONCLUSION

• The Consumer Protection Act, 2019 when compared with the 1986 Act shows that it provides for greater protection of consumer interests taking into consideration the current age of digitization.

• The New Act also deals with the technological advancements in the industry, provides for easier filing of complaints and also imposes strict liability on businesses including endorsers for violating the interest of the consumers.

• The New Act prima-facie, is much more consumer-friendly than the 1986 Act as it also includes the current industry trends of e-commerce.

• Certainly the 2019 Act is a positive step towards reformation, development and enhancing consumer rights.  The real test for the New Act is in its implementation and some leeway needs to be given for it to actualize the relief for the consumers.