Home » Between The Lines » IV. Consumer Protection Act, 2019: An analysis

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Background
The Consumer Protection Act, 1986 (“Erstwhile Act”), was enacted with the sole aim of protecting the interests of the consumers and providing for the establishment of Consumer Councils and authorities for the settlement of consumer disputes and related matters. In today’s digital era, we have a myriad of goods and services that can be purchased and availed of globally, through online platforms. This spurt in digitization, has inadvertently engendered newer forms of unfair and unethical trade practices. The urgent need to combat the innate flaws of the Erstwhile Act, while continuing to safeguard consumer interests, keeping in mind the rapidly growing online consumer market, prompted the enactment of the Consumer Protection Act, 2019 (“New Act”). Carrying forward the legacy of the Erstwhile Act, the Parliament passed the Consumer Protection Bill, 2019 on August 6, 2019, after which the Presidential assent for the same was received on August 9, 2019, thereby replacing the Erstwhile Act with the New Act. The New Act has been notified and has come into effect from July 20, 2020.

Salient Features
i. Establishment of the Central Consumer Protection Authority:
The Central Consumer Protection Authority (“CCPA”), headquartered at National Capital Region of Delhi, has been established under the new regime as the Central Authority to regulate matters related to violation of rights of consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of public and consumers and to promote, protect and enforce the rights of consumers.

ii. Consumer Disputes Redressal Commissions:
The New Act provides for Consumer Disputes Redressal Commissions at the District, State and National Levels, with enhanced pecuniary jurisdiction. Under the New Act, District Forums have a pecuniary jurisdiction of up to INR 10 million. State Commissions can hear cases involving an amount ranging between INR 10 million and INR 100 million. While National Commissions have a jurisdiction of more than INR 100 million. Additionally, complaints can now be filed by consumers electronically. The New Act provides for hearings to be undertaken in a video-conferencing mode, apart from the existing in-person mode.

iii. Rights of Consumers:
The New Act aims to safeguard the following rights of consumers:

  • Right to be protected against the marketing of goods, products or services which are hazardous to life and property;
  • Right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services to protect the consumer against unfair trade practices;
  • Right to be assured access to a variety of goods, products or services at competitive prices;
  • Right to be heard and assured that consumer interests will receive due consideration at an appropriate forum;
  • Right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and
  • Right to consumer awareness

iv. Unfair Contract:
The New Act introduces a novel concept of “unfair contract” to mean a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, including, but no limited to, the following:

  • Requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations;
  • Refusing to accept early repayment of debts on payment of applicable penalty;
  • Allowing a party to the contract to terminate it unilaterally, without reasonable cause;
  • Permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent;Imposing on the consumer any unreasonable charge, obligation or condition to the disadvantage of such consumer.

v. Product Liability:
India has never had any specific legal regime to tackle the issue of product liability. Unlike various international jurisdictions like the U.S., Singapore and Australia, India has never provided for lemon laws, which ensure that consumers have an opportunity to get their defective product rectified, failing which the seller is statutorily obligated to refund them or replace the defective product. The New Act is the first such legislation that introduces penal provisions for product liability claims brought under the instant statute. The concept of product liability has been defined as “the responsibility of a product manufacturer or product seller, of any 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 thereto”. A complaint can be filed under the Consumer Disputes Redressal Commissions for claiming compensation against product liability. The New Act lays down criteria for product liability action such as existence of manufacturing defect and defective design. The New Act, additionally, provides a few defenses to a product liability action such as the product being altered at the time of harm, the complainant used the product under the influence of alcohol, and the product was legally meant to be used under supervision.

vi. Inclusion of E-Commerce under its Scope:
The augmented e-commerce transactions and resultant disputes have occasioned the inclusion of e-commerce services under the New Act. The new regime provides for tackling unfair trade practices in e-commerce to protect the interests of the consumers. Under Section 101(2)(zg) of the New Act, the Central Government, via the power conferred on it to make rules, notified the Consumer Protection (E-Commerce) Rules, 2020 (“Rules“) on 23 July 2020, in a bid to increase transparency and integrity in the e-commerce transactions. Under the scope of these Rules, the onus lies on the e-commerce entity to disclose information including, but not limited to, its legal name, contact details of customer care, name and details of importer or seller in case of foreign goods. Rule 4 of the Rules imposes duties on e-commerce entities, barring them from resorting to unfair trade practices, manipulating prices of goods and services so as to gain profits and discriminating between consumers.

vii. Mediation:
The State Government shall by notification, establish a consumer mediation cell, to be attached to the District and State Commissions of that State. The Central Government shall establish such cell to be attached to the National Commission and its regional benches. The New Act thus provides an alternate approach to dispute resolution through mediation. Via the powers conferred under Section 103 of the New Act, the Central Government brought into force the Consumer Protection (Mediation) Regulations, 2020, that has enumerated criteria for eligibility and disqualifications for empanelment as a mediator. Among other things, it mandates compulsory training for mediators.

Comparative Analysis
The following are the key differences between the Erstwhile Act and the New Act:

i. Scope of the Statute:

In light of online platforms rapidly emerging as consumer markets, the New Act under its umbrella, expressly categorizes telecom and housing construction and all modes of transactions (online, teleshopping, etc.) for consideration as ‘services’ to which the New Act applies. In the Erstwhile Act, there was no explicit mention of online services. An express inclusion of e-commerce and related aspects has been made in the New Act, unlike the Erstwhile Act, where terms like e-commerce and electronic service provider have been defined.

ii. Inclusions under Unfair Trade Practices:

The Erstwhile Act included six forms of unfair trade practices such as false representation, misleading advertisements, manufacturing and/or selling spurious goods, etc. The scope of Unfair Trade Practices has been broadened under the new regime, to additionally include failure to issue a bill or receipt, refusal to accept goods returned within thirty days and disclosure of personal information, given in confidence, unless mandated by law or in public interest.

iii. Provision for Unfair Contracts:

The New Act provides for a separate category of contracts called unfair contracts, under which six types contracts are enumerated. This bifurcation did not exist in the Erstwhile Act.

iv. Central Consumer Protection Authority:

The CCPA has been established under the new regime, as the Central Authority to regulate matters related to violation of rights of consumers. The Erstwhile Act had no such authority.

v. Consumer Disputes Redressal Commissions: Composition and Appointment

Under the New Act the Selection Committee has been abolished and members will be appointed by the Central Government. The District Forum will be headed by a president and a minimum of two members. The State and National Commissions will be headed by a president and four members.

vi. Raising the Pecuniary Jurisdiction

Under the New Act, the Consumer Disputes Redressal Commissions at the District, State and National levels have enhanced pecuniary jurisdiction, as compared to the Erstwhile Act.

vii. Mediation as a Method of Dispute Resolution:

In a first, the New Act provides for settlement of disputes by way of mediation. No such provision existed in the Erstwhile Act.

Vaish Associates Advocates View

The New Act is sure to have a lasting impact on various industrial sectors involved in e-commerce. The food industry and taxi aggregators for example, will be widely affected as an outcome of the New Act. Both classes of consumers- one who purchases or avails goods and services from online markets and one from brick and mortar stores, are equally protected under the New Act. The empowerment of consumers through the New Act will impel corporate entities to increase investments and enhance quality control, so as to avoid unnecessary litigation which could be a possible aftermath of the product liability action introduced under the new regime. This novel concept holds manufacturers, producers and sellers responsible for injury caused to consumers due to defective goods and services.

The cataclysmic circumstances brought about the COVID-19 pandemic have forced nations all over the globe, including India, to declare impending lockdowns. At testing times like these, where distancing in all forms has become the new normal, online transactions have become the new way of life. Protecting consumers who partake in these cashless transactions is of utmost priority and to further this end, the New Act plays an integral role. The inclusion of e-commerce transactions under its aegis has simplified this otherwise herculean task. Unfair trade practices like misleading the public about the price of products, or hoarding goods with the intention to sell them at a higher cost, now, extends to products sold on online platforms as well. Wrongdoers who try to fleece the consumers on various online markets like Amazon and Flipkart, will be subject to scrutiny by the CCPA. Had the current regime not made separate provisions for online transactions, the resultant lack of transparency would have posed a grave threat to consumer interests.

The aim of the New Act is to keep pace with the rapid technological advancements, catering to the current societal needs, which could not be protected by the Erstwhile Act. While the New Act has been well received, there are apprehensions about political interference in appointment of members of the Consumer Disputes Redressal Commissions. Certain service sectors such as the aviation industry, which is in urgent need of stringent consumer laws due to the flamboyant disregard for consumer rights, have been excluded from the New Act. However, apart from these minor discrepancies, the New Act has been widely welcomed due to its pro-active measures in protecting the consumers in this digital age. The paradigm shift from “Caveat Emptor” to “Consumer is King” has been realized to a great extent by the New Act.

For more information please write to Mr. Bomi Daruwala at [email protected]

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