All that you need to know about the new consumer protection law

CONSUMER PROTECTION AMENDMENT ACT

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With the growth of online marketplaces, and India’s growth as a consumer economy, the government brought into law a new Consumer Protection Bill, 2019, replacing the earlier Consumer Protection Act, 1986. This Bill has been passed by both the Houses of the Parliament and received the President’s assent on August 9, 2019. However, it is to be noted that the said law will come into effect on the date which will be notified by the Central Government. Such notification is yet to be issued and for practical purposes, Consumer Protection Act, 1986 is still in force till a notification enforcing the new law comes into existence.

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Introduced by the Union Minister of Consumer Affairs, the rules under the new legislation shall be framed within three months after due consultation with states. The objective is to protect the rights of the consumer. The following questions cover the key points as laid down by the new law.

Who is a Consumer?

A consumer under the CPA includes a person who buys goods or services in exchange for a consideration. It excludes goods bought as part of a resale arrangement or goods or services bought for commercial purposes. Most importantly, it includes transactions through all modes (online/offline/electronic/teleshopping). This implies that you can sue vendors on online portals for any defective product or erroneous service.

What are the rights of a consumer under the CPA?

The CPA enumerates six basic rights of all consumers:

(i) The right to be protected against the marketing of goods, products or services which are hazardous to life and property.

(ii) The right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices.

(iii) The right to be assured, wherever possible, of access to a variety of goods, products or services at competitive prices.

(iv) The right of the consumer to have his/her grievances heard and redressed at proper and appropriate forum.

(v) The right to seek redressal against unfair trade practices or restrictive trade practices or unscrupulous exploitation of consumers; and

(vi) The right to consumer awareness.

What are the changes brought about by the new CPA?

The biggest change brought about by the new Act is the establishment of a Central Consumer Protection Authority (CCPA). The Authority, besides being tasked with promoting consumer protection, shall also have the power to enforce consumer rights.

The Central Authority shall consist of a Chief Commissioner and such number of other Commissioners as may be prescribed by rules framed by the Central government, to be appointed by the Central Government. The headquarters of such Central authority will be in the National Capital Region of Delhi.

The Chief Commissioner shall have the powers of general superintendence, direction and control in respect of all administrative matters of the Central Authority.  But no exact time frame has been provided in the bare text of the bill for the setting up of the CCPA.

The CCPA will have an investigation wing headed by a Director-General. This wing would have the power to conduct inquiries on matters relating to violations of consumer rights, unfair trade practices, and misleading advertisements. It has been given the power to investigate violations of the law and launch prosecution at the appropriate forum. It also has the power to recall goods or withdraw services of a hazardous nature. The power of search and seizure granted to this Authority is probably unprecedented.

How are misleading advertisements treated under the new Act?

Firstly, the Act clearly defines what constitutes an endorsement: as any message or depiction “which makes the consumer believe that it reflects the opinion, finding or experience of the person making such endorsement”.

Having recognised that, the Act empowers the CCPA to hold an endorser of a particular commodity personally liable in the event of such misleading advertisements. It does so keeping in mind the fact that the common public is quite possibly bound to get swayed by the expressions of opinion by reputed personalities.

Therefore, the CCPA can impose a penalty of ₹10 lakh on not just the concerned manufacturers or traders, but also the endorsers themselves. In addition, the endorser could be prohibited from endorsing any product for a period of one year (for the first offence), and for three years (for subsequent contraventions).

The Act also prescribes increased fines and even imprisonment for the manufacturer for misleading endorsements (a higher term for subsequent ones). However, it exempts the advertiser from personal liability in situations where the advertiser has shown reasonable efforts to verify the genuineness of the product advertised.

Do the consumers enjoy any new rights under the provisions of the Act?

Apart from the six declared rights (the rights to safety, information, choice, representation, redressal and consumer education), the Act also grants several unsaid rights to consumers.

If one has a complaint that relates to the violation of consumer rights/unfair trade practices/misleading advertisements, which adversely affects a large number of consumers, then the complaint can be forwarded in writing or electronically to the district collector, or the commissioner of regional office, or the CCPA.  Such complaints may lead to filing of a single case on behalf of all the perturbed consumers. For instance, if company A sold defective goods to a large number of consumers, they can all get together and file a single complaint which would address their common grievances before the aforementioned authorities. The right to protect consumers as a class is thus granted by such provisions. This could, for the first time, pave the way for potential class action suits.

The Commission may even allow a complaint to be heard through video conferencing. Also, no commission may reject a complaint without hearing the complainant.  The commission has been given the power to decide, whether to admit or reject a complaint. However, this power has to be exercised within 21 days of receiving the complaint. If the commission fails to reject the complaint within this stipulated time period, the complaint is automatically admitted. A consumer has the right to know why his/her complaint was rejected.

Does the Act have provisions for Product Liability?

The Act, for the very first time, recognises product liability as a core area of focus for consumer protection. It refers to the liability of a manufacturer, service provider or seller to compensate a consumer for harm or injury caused by any defect in goods or deficiency in services. Example?

The liability for manufacturers is stricter as compared to that of service providers or traders since the Bill provides for product liability even if they are able to prove that they were not negligent or fraudulent in making the express warranty of a product.

What about unfair contracts? Is there something which protects consumers from such terms?

The Act grants the State Commission original jurisdiction to entertain complaints against ‘unfair contracts’, where the value of goods or services paid as consideration does not exceed ₹10 crore. The Standing Committee Report recommended having the ‘right to terminate unfair contracts’ as a separate consumer right. The Bill defines unfair contracts as contracts that have such ‘terms which cause significant change in the rights of such consumer’.

How does the Act seek to deal with e-commerce?

What can be seen as a welcome signal for emerging consumer trends in India are the provisions relating to e-commerce. The Bill defines e-commerce terms such as ‘direct selling’ and ‘electronic service provider’. The amended definition of a ‘consumer’ recognises transactions conducted through all modes, whether offline or online, through electronic means, teleshopping, multi-level marketing or direct selling.

The Central Government would now prescribe rules for preventing fraud and unfair trade practices in e-commerce and direct selling.

How would disputes be resolved under the Act? Has any alternative been presented to the consumers?

The Act provides for the establishment of consumer mediation cells to be attached to each District and State Commission and the National Commission. A consumer mediation cell may have as many members as prescribed by the state government for district/state commission and the central government for the national commission. The mediation cell has the responsibility to produce a report quarterly before the commission that it is attached with, whether district, state or central.

The district, state or the central commission with which it will be attached will have the responsibility of constituting a panel of mediators for the mediation cell.

Consumer disputes could be referred to these cells if they are deemed fit for settlement by the concerned Commission, upon admitting a complaint. The said move could be helpful in reducing the burden faced by these Commissions and increasing time-and-cost-efficiency. However, the finality of mediation decisions and their validity needs to be clarified before they can serve as efficient dispute resolution mechanism.

 Where can a consumer complaint be filed? Would it be in the jurisdiction of the seller or the buyer?

The Bill allows for District and State Commissions to now exercise territorial jurisdiction in the place where the complainant resides or is employed.

This step benefits consumers since jurisdiction earlier used to depend upon the seller’s place of work. In that sense, it seems like a step aimed at greater consumer convenience.

At the same time, it makes matters simpler on the question of jurisdiction in e-commerce transactions, since it is particularly difficult to ascertain the place of business of firms operating over the Internet, owing to the scattered nature of their operations.

Does the Act also change the monetary threshold required to file a complaint?

The Bill also amends the pecuniary or monetary jurisdiction for each component of the dispute redressal mechanism. Pecuniary essentially means `being related to money’. It sets out the monetary limits or thresholds up to which courts or adjudicating authorities can entertain claims.

The District Commission, which earlier dealt with claims not exceeding ₹20 lakh, can now entertain complaints where the value of goods and services does not exceed ₹1 crore. Similarly, the State Commission can entertain claims between ₹1 crore and ₹10 crore (earlier it was between ₹20 lakh and ₹1 crore). Complaints exceeding ₹10 crore would fall under the purview of the National Commission. The hierarchy in the appeal structure for consumer disputes remains the same.

What are the changes regarding filing of complaints?

The CPA, unlike its predecessor, permits consumers to file complaints with the jurisdictional consumer forum which is situated at the place of residence or work of the consumer. Earlier, such complaints could be filed only at the place of purchase of the goods or services. In addition, CPA also allows filing of complaints electronically and hearing/examination of parties through video-conferencing.

What are the different bodies being set up under the new Act?

Consumer Disputes Redressal Commissions (CDRCs) will be constituted at the district, state, and national levels. Complaints may be filed with CDRCs pertaining to: (i) unfair or restrictive trade practices; (ii) defective goods or services; (iii) overcharging or deceptive charging; and (iv) the offering of goods or services for sale which may be hazardous to life and safety.

Will the new Act finally solve the problems traditionally faced by Indian consumers?

That is something which is entirely dependent upon how aware the consumers are. The present Act does nothing new towards making consumer education an enforceable legal right. While the CCPA will have the charge of ensuring promotion, protection and enforcement of consumer rights, it comes down to how well the provisions of the Act are disseminated amongst consumers. An informed citizenry will better enable them to avail of the intended benefits of the Act.