Consumer Protection Act, 2019 : Ushering of a New Caveat Venditor Paradigm

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The Parliament cleared the landmark Consumer Protection Bill, 2019 which aims to protect and strengthen the rights of consumers by establishing authorities for timely and effective administration and settlement of consumers’ grievances. The Bill was passed by the Lok Sabha on 30th July, 2019 and was passed by Rajya Sabha today through a voice vote. The Bill will replace the more than three decades old Consumer Protection Act, 1986.

The Bill, originally introduced in January 2018 in the last winter session of Parliament, seeks to replace the three-decade-old Consumer Protection Act, 1986, which was amended thrice but is still found wanting in tackling the challenges posed by online transactions, and tele-marketing, multi-level, and digital marketing.

OBJECTIVES OF NEW STATUTE

  • ease the overall process of consumer grievance redressal system
  • a better mechanism to dispose consumer complaints in a speedy manner
  • help in disposal of large number of pending cases in consumer courts across the nation

WHY A NEW BILL?

New Act was a long pending legislation and all the recommendations of the Parliamentary Standing Committee were incorporated in the bill except for five recommendations. The pressing need the Act is formulated are as follow:-

Consumer markets have undergone huge transformation since the enactment of the Consumer Protection Act in 1986.

  • Presence of increasingly complex products and services in the marketplace.
  • The emergence of global supply chains, rise in international trade and the rapid development of e-commerce.
  • New delivery systems for goods and services and have provided new opportunities for consumers.
  • Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices.
  • Misleading advertisements, tele-marketing, multi-level marketing, direct selling and e-tailing pose new challenges to consumer protection and will require appropriate and swift executive interventions to prevent consumer detriment.

NEW FEATURES

  1. SIMPLIFIED DISPUTE RESOLUTION PROCESS
    • Pecuniary Jurisdiction enhanced to-
      • District Commission –Up to Rs1 crore
      • State Commission- Between Rs1 crore and Rs 10 crore
      • National Commission –Above Rs.10 crore
    • Deemed admissibility after 21days of filing
    • Empowerment of Consumer Commission to enforce their orders
    • Appeals only on question of law after second stage
    • Ease of approaching consumer commission
    • Filing from place of residence
    • E-filing
    • Videoconferencing for hearing
  1. CENTRAL CONSUMER PROTECTION AUTHORITY (CCPA)

While the sector regulators essentially serve as standard setting bodies and seek to ensure an even playing field between Government and other stakeholders. It is an Executive Agency to provide relief to a class of consumers. Swift executive remedies are proposed in the bill through CCPA

  • The CCPA will be empowered to promote, protect and enforce the rights of consumers as a class
  • CCPA would make interventions to prevent consumer detriment arising from unfair trade practices.
  • The agency can also initiate class action, including enforcing recall, refund, return of unsafe products, goods and services and impose penalties.
  • It will regulate matters related to violation of consumer rights, unfair trade practices, adulteration of products and misleading advertisements.
  • Provisions for deterrent punishment to check misleading advertisements and
  • Authority will have power to impose a penalty on a manufacturer or an endorser of up to 10 lakh rupees and imprisonment for up to two years for a false or misleading advertisement.
  • Presently Consumer only have a single point of access to justice, which is time consuming. Additional swift executive remedies are proposed in the bill through Central Consumer Protection Authority (CCPA)
  1. MEDIATION
  • An Alternate Dispute Resolution (ADR) mechanism
  • Reference to Mediation by Consumer Forum wherever scope for early settlement exists and parties agree for it.
  • Mediation cells to be attached to Consumer Forum
  • No appeal against settlement through mediation
  1. PRODUCT LIABILITY

A manufacturer or product service provider or product seller to be responsible to compensate for injury or damage caused by defective product or deficiency in services

The Basis for product liability action will be:

  • Manufacturing defect
  • Design defect
  • Deviation from manufacturing specifications
  • Not conforming to express warranty
  • Failing to contain adequate instruction for correct use
  • Services provided are faulty, imperfect or deficient

NEW REMEDIES FORMULATED

  • envisages simplified dispute resolution process, has provision for Mediation and e-filing of cases
  • exclusive law dealing with Product Liability. A manufacturer or product service provider or product seller will now be responsible to compensate for injury or damage caused by defective product or deficiency in services. Product liability provision to deter manufacturers and service providers from delivering defective products or deficient services.
  • The Bill also enables regulations to be notified on E-commerce and direct selling with focus on protection of interest of consumers.
  • a provision for class action law suit for ensuring that rights of consumers are not infringed upon.

OLD LAW V/S NEW LAW

FEATURES19862019
1.      Ambit of lawAll goods and services for consideration, while free and personal services are excludedAll goods and services, including telecom and housing construction, and all modes of transactions (online, teleshopping, etc.) for consideration. Free and personal services are excluded.

 

2.      Unfair trade practices (Defined as deceptive practices to promote the sale, use or supply of a good or service.)Includes six types of such practices, like false representation, misleading advertisements.Adds three types of practices to the list,(i) failure to issue a bill or receipt; (ii) refusal to accept a good returned within 30 days; and (iii) disclosure of personal information given in confidence, unless required by law or in public interest.

 

Contests/ lotteries may be notified as not falling under the ambit of unfair trade practices.

3.      Product liabilityNo provision.Claim for product liability can be made against manufacturer, service provider, and seller.
4.      Unfair contractsNo provision.Defined as contracts that cause significant change in consumer rights. Lists six contract terms which may be held as unfair.
5.      Central Protection Councils (CPCs)CPCs promote and protect the rights of consumers. They are established at the district, state, and national level.The new Bill makes CPCs advisory bodies for promotion and protection of consumer rights. Establishes CPCs at the district, State and national level.
6.      RegulatorNo provision.Central Consumer Protection Authority (CCPA) to promote, protect, and enforce the rights of consumers as a class.

 

7.      Pecuniary jurisdiction of CommissionsDistrict: Up to Rs 20 lakh;

State: Between Rs 20 lakh and up to Rs one crore;

National:  Above Rs one crore.

District Commission –Up to Rs1 crore

State Commission- Between  Rs1 crore and Rs 10 crore

National Commission –Above Rs.10 crore

8.      Composition of CommissionsDistrict: Headed by current or former District Judge and two members.

State:  Headed by a current or former High Court Judge and at least two members.

National:  Headed by a current or former Supreme Court Judge and at least four members.

District:  Headed by a president and at least two members.

State:  Headed by a president and at least four members.

National:  Headed by a president and at least four members.

9.      AppointmentSelection Committee (comprising a judicial member and other officials) will recommend members on the Commissions.No provision for Selection Committee.  Central government will appoint through notification.
10.  Alternate dispute redressal mechanismNo provision.Mediation cells will be attached to the District, State, and National Commissions.
11.  PenaltiesIf a person does not comply with orders of the Commissions, he may face imprisonment between one month and three years or fine between Rs. 2,000 to Rs. 10,000, or both.If a person does not comply with orders of the Commissions, he may face imprisonment up to three years, or a fine not less than Rs 25,000 extendable to Rs one lakh, or both.
12.  E-commerceNo provision.Defines direct selling, e-commerce and electronic service provider. The central government may prescribe rules for preventing unfair trade practices in e-commerce and direct selling.

 

ISSUES WITH THE BILL:

  1. The fundamental problem of protracted and complicated litigation remains unaddressed.
    • The bane of consumer forums constituted under the Consumer Protection Act of 1986 is unresolved. Instead, it provides an alternative to the consumer forums, in the form of mediation.
    • The Bill does provide for a regulator, but there is no proper focus on the duties of the regulator.
  1. Definition of Consumer is not clear
    • Even the definition of ‘consumer rights’ in the Bill is not simple and straight forward, so that consumers at least know what their entitlements are.
  1. Conflict of Interest
    • By not imposing judicial qualifications like in the Act of 1986 for members of the redressal body, the Bill indirectly allows the appointment of non-judicial members to the district/state and national commissions. Conflict of interest could arise when government nominees hear cases involving a government entity.

WAY FORWARD:

  1. Cases should be resolved in 90 days.
  2. Consumer education and proper awareness of building measures.
  3. Lessons to be learnt:- Several countries like Canada, Estonia have devised advertisement regulations for unhealthy foods targeted at children
  4. Countries such as the UK, Ireland and Belgium have specifically banned celebrity endorsement of unhealthy foods. The impact of such restrictions has been reported to be significant.
  5. However, certain issues such as the appointment of mediators to settle disputes are contentious as this would lead to arm-twisting of the weaker parties and may encourage corruption.
  6. The advertising code presently being followed by the Advertising Standards Council of India (ASCI) should be given legal backing. It recommended that a provision may be incorporated in the Bill to the effect that the misleading advertiser is compelled to issue a corrective advertisement.

India is likely to cross China’s population by 2024 and consumerism is growing fast. With the passage of the Consumer Protection Bill in Parliament, consumer rights are set to receive a massive boost. The new regulations put more responsibility on companies for misleading advertising and faulty products.

 
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