The Parliament of India has passed the Consumer Protection Bill 2019 on 06.08.2019 by replacing the Consumer Protection Act, 1986, which aimed at providing timely and effective administration and settlement of consumer disputes and ancillary matters. The new Act of 2019 received the assent of the President of India and got published in the official gazette on 09.08.2019 and the same came into force on the date it was notified by the Central Government. However, the date of enforcement of New Act, 2019 has yet not been announced, but it is expected soon to be annuounced.
The Government instead of bringing an amendment in the 1986 Act, enacted a new Act altogether so as to provide 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, tele-shopping, direct selling and multi level marketing in addition to traditional methods. The new Act, 2019 proposes a slew of measures and tightens the existing rules to further safeguard consumer rights.
KEY HIGHLIGHTS OF THE CONSUMER PROTECTION ACT, 2019
1. E- commerce transactions are also now the part of New Act
The old Act, 1986 was silent regarding e- commerce transactions. But the definition of “Consumer” under the 2019 Act includes all those who buys any goods for consideration or avails/hires any service either through offline mode or online mode, involving electronic means, teleshopping, direct selling or multilevel marketing. The proposed guideline for E-Commerce firms entails deadline to effect refund request, mandate e- trailers to display picture details of sellers supplying goods and services on their websites and moot the procedure to resolve consumer complaints. The E- commerce companies will also be required to ensure that personally identifiable information of customers are protected and should not directly or indirectly influence the price of the goods or services and maintain a level playing field.
2. Establishment of Central Consumer Protection Authority (CCPA)
The New Act proposes the establishment of a regulatory authority known as Central Consumer Protection Authority (CCPA) under section-10 of CPA, 2019 with wide powers that aimed to protect, promote and enforce the rights of consumers qua misleading advertisements and unfair trade practices as a class. The CCPA will have an investigation wing, headed by a Director General, which may conduct enquiry or investigation into consumer law violations.
The CCPA has been granted wide powers to take suo moto actions against violators. It can initiate preventive action against deceptive trade practices prevailing in the market, can pass direction to recall products which do not adhere to the standards prescribed by the regulatory authorities, can order reimbursement of the price of goods/ services; cancel licenses; and file class action suits, on behalf of multiple consumers which makes it an effective tool to curb mass violation of consumer interest. The formation of this Central authority will ensure prompt action and all unethical trade practices can be curbed on preventive basis.
There was no separate regulator in the Consumer Protection Act, 1986
3. Strict Norms for Misleading Advertisement
The New Act, for the first time introduces the definition of misleading advertisement which covers all those information that is deliberately concealed. The CCPA has been showered with the power to take action and impose penalty against misleading and false advertisement as well as against any endorser of such advertisement. The CCPA may impose a penalty of Rs.10 Lakhs for first violation and up to Rs.50 Lakhs on every subsequent violation on a manufacturer or an endorser. In addition, under the New Act false or misleading advertisement published by manufacturers and service providers is now also considered a criminal offence and such manufacturer or endorser may be sentenced to imprisonment for up to two Years.
Endorsement of goods and services, normally done by celebrities, are also now covered within the ambit of 2019 Act. In fact an additional onus has been placed on endorsers, apart from manufacturers and service providers, to prevent false or misleading advertisements. In such cases it become 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.
Thus the Seller at each level of multi- level marketing can be exposed to liability under CPA, 2019 and not restricted to only the manufacture of the products but all entities involved at various stages of production and marketing.
4. Amendments in the Pecuniary Jurisdiction
Revised pecuniary limits have been fixed under the New Act. These limits are far higher than the limits set by the previous act. Accordingly, the District Commission (earlier referred to as District Forum) can now entertain consumer complaints where the value of goods and services paid does not exceed rupees one crore which was limited to the value not exceeding rupees twenty lakhs in the Old Act, 1986.
The State Commission can now entertain consumer complaints where the value of goods and services paid does not exceed rupees ten crores which was limited to the value not exceeding rupees one crore in the Old Act ,1986. The National Commission can exercise jurisdiction where such values exceeds rupees ten cores but in the Old Act, 1986, the National Commission can exercise jurisdiction where such values exceeds rupees one cores. The increase in the pecuniary jurisdiction of all three commissions is an encouraging step as it should attract lesser number of claims in appellate commission to an extent thereby ensuring swifter disposal of cases.
5. Complaints can be registered through Online mode also
The New Act provides flexibility to the consumer to file complaints with the jurisdictional consumer forum located at the place of residence or work of the consumer, this is unlike the current practice of filing it at the place of purchase or where the seller has it’s registered office address. The New Act also contains enabling provisions for consumer to file complaints electronically and for hearing and/or examining parties through video–conferencing. This aimed to provide procedural ease and reduce inconvenience and harassment to the consumers.
6. Lets understand “Product Liability” under CPA,2019
The New Act has introduced the concept of “product liability” in Chapter-(i), and made it a new ground for filing a complaint which is one of the most significant addition to this act. The concept is incorporated under Section 34 of CPA, 2019 and brings within its scope not only the product manufacturer, product service provider but also the product seller to compensate for any harm caused to a consumer by defective products. However, who can be made liable under the CPA, 2019, is provided under different sections of Chapter VI of the Act, 2019.
Under Section-84, a Product manufacturer will be liable if product contains a manufacturing defect or defective in design; or there is a deviation from manufacturing specification; 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; or fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage.
Under Section-85, a Product service provider may be liable if;-
i. 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
ii. there was an act of omission or commission or negligence or conscious withholding any information which caused harm; or
iii. the service provider did not issue adequate instructions or warnings to prevent any harm; or
iv. the service did not conform to express warranty or the terms and conditions of the contract.
Under Section-86, a Product Seller who is not a product manufacturer may be held liable if;-
i. he has exercised substantial control over the designing, testing, manufacturing, packaging or labeling of a product that caused harm; or
ii. he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or
iii. 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
iv. 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
v.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 while selling such product.
CPA, 2019 while defining a ‘product’ has specifically excluded human tissues, blood, blood products and organs. CPA, 2019 also lists down certain exceptions to “product liability” action, such as, that the product seller will not be liable if at the time of the product has been misused, altered or modified or if the product being purchased by the employer for use at the workplace did not adhere to installation warnings or instructions, or if the nature of the product is such that the user should have known the associated dangers, etc.
7. Addition in the clause of “Unfair Trade Practice”
The Consumer Protection Act, 2019 had broaden the definition of “Unfair Trade Practice” by adding three (3) more type of Unfair Trade Practice (which was six in number under the Consumer Protection Act, 1986). The additions are as follows:
i)”not issuing bill or cash memo or receipt for the goods sold or services rendered in such manner as may be prescribed”;
ii) ”refusing, after selling goods or rendering services, to take back or withdraw defective goods or to withdraw or discontinue deficient services and to refund the consideration thereof, if paid, within the period stipulated in the bill or cash memo or receipt or in the absence of such stipulation, within a period of thirty days”;
Before ascertaining whether it amounts to unfair trade practice, it becomes 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’.
iii) ”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”.
However, the provision fails to give any clarity whether information can be shared if consent is taken from the consumers.
8. A New Addition- “Unfair Contract”
Under The Consumer Protection Act, 1986, a complaint could be filed only if an unfair trade practice or a restrictive trade practice was adopted by any trader or service provider. Now in New Act, 2019 “Unfair Contract” has also been added which further broadens the ground to file complaints and allows consumers to challenge contracts which are unfair, unilateral and unreasonable.
Unfair contract has been defined to include contracts 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 the following, namely:—
i. requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or
ii. imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or
iii. refusing to accept early repayment of debts on payment of applicable penalty; or entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or
iv. permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or
v. imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage.
Contractual terms which specify excessive security deposits, provide for unilateral termination or assignment without consent of other party are among the several grounds which render a contract unfair. The 1986 Act did not provide consumers with a single forum against such contracts.
Cases relating to unfair contracts can only be heard by the State and National Commission
9. New Mechanism Inserted- “Alternate Dispute Resolution”
The New Act, 2019 now provides for settlement of disputes by way of Alternate Dispute Resolution mechanism, in case there is a possibility of settlement at the stage of admission of complaint or at any later stage, if acceptable to both parties, making the process of dispute adjudication simpler and quicker. A mediation cell will be attached to each District, State and National Commission and its regional Benches for quick resolution. This will help with the speedier resolution of disputes and reduce pressure on consumer courts.
Legal provision regarding the Mediation was absent in the Consumer Protection Act, 1986
10. Is Healthcare still a service under the New Act?
The CPA 2019 in its current form does not explicitly specify healthcare in the list of services listed in the definition of ‘service’, though the New Act, 2019 does not contradict the finding of the Supreme Court in the case of Indian Medical Association v. VP Shantha (“VP Shantha Case”) where the Hon’Ble Court held that patients are consumers as long as they are making some form of payment for the medical service rendered and had also read healthcare into the definition of services.
The statutory interpretation and judicial enunciation are wide open in the context of the Indian Medical Association vs. VP Shantha (“VP Shantha Case”) decided by Hon’Ble Supreme Court in 1996 also necessitated to be interpreted de novo. However, it is unclear whether the VP Shantha Case will continue to apply once the CPA 2019 comes into force or not as stiff opposition from the medical fraternity is also coming which expressed their apprehension that the CPA, 2019 would be misused against them.
Everything exists with some pros and cons, and the same applies on the New Act also. On one side it is being appreciated and on the other side it is being criticised in some corners of the retail industry as the compliance costs of the already cash strapped e-commerce sector is bound to swell. However, time will depict the true aspects of the changes brought about by the New Act, 2019, but at present it can’t be ignored that CPA, 2019 is a positive and welcome step towards reformation and development of consumer laws in the light of dynamically changing socio-economic developments. The Act aims to transform the jurisprudence pervading consumer protectionism from caveat emptor (let the buyer beware) to caveat venditor (let the seller beware). The New Act, 2019 attempted to ease and fasten the process of consumer disputes by this or the other ways and undoubtedly this new Act treats the Consumer like a king. It has widened the reach of consumer protection regime in India.