Introduction

The Consumer Protection Act, 2019 (“New Act”) received the President’s assent on August 9, 2019 and has replaced the Consumer Protection Act, 1986 (“Old Act”). The Central Government appointed[1] July 20, 2020 as the date on which the following provisions of the New Act shall come into force.

  • Section 2 [Except clauses (4), (13), (14), (16), (40)] [DEFINITIONS]
  • Sections 3 to 9 (both inclusive) [CONSUMER PROTECTION COUNCILS]
  • Sections 28 to 73 (both inclusive) [Except sub-clause (iv) of clause (a) of sub-section (1) of section 58] [CONSUMER DISPUTES REDRESSAL COMMISSION]
  • Sections 74 to 81 (both inclusive) [MEDIATION]
  • Sections 82 to 87 (both inclusive) [PRODUCT LIABILITY]
  • Sections 90 and 91 [OFFENCES AND PENALTIES]
  • Sections 95, 98, 100 [MISCELLANEOUS]
  • Section 101 [Except clauses (f) to (m) and clauses (zg), (zh) and (zi) of sub-section 2] [MISCELLANEOUS]
  • Sections 102, 103, 105, 106, 107 [MISCELLANEOUS]

Highlights of the New Act

The New Act seeks to usher in a new era of consumer protection laws and makes suitable changes to bring the law in tune with the changing times. The law has always been consumer-centric, more so with the passing of the New Act. The following, amongst other changes have been brought about in the law:

1. Extension of the law to e-commerce businesses: The New Act introduces key changes to include within its ambit e-commerce businesses and ensure recognition and regulation of online transactions between consumers and sellers/service providers as matters falling under the Act. To this effect, the definition of “consumer” has been expanded to include “offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing”[2]. The Old Act did not specifically include e-commerce transactions and this lacuna has been addressed by the New Act.

The Act refers to the prevention of unfair trade practices in e-commerce and direct selling and also deals with protection of interest and rights of consumers.[3] It has also specifically defines “electronic service provider” as a person who provides technologies or processes to enable a product seller to engage in advertising or selling goods or services to a consumer and includes any online marketplace or online auction sites.[4] The ‘electronic service provider’ is included under the definition of a product seller.[5] These online marketplaces and auction sites can now be hauled up in product liability actions under specified circumstances.[6] It will no longer be open to e-commerce platforms to take the defense that they merely act as “platforms” or “aggregators”.

2. Product liability and penal consequences: The concept of “product liability” has been newly introduced and 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 consumer due to defective product manufactured, sold or deficiency in services relating thereto. There are increased liability risks for manufacturers as compared to product service providers and product sellers, considering that under the New Act, a manufacturer will be liable in product liability action even where he proves that he was not negligent or fraudulent in making the express warranty on a product. Certain exceptions have been provided under the New Act from liability claims, for instance the product seller will not be liable where the product has been misused, altered or modified. [7]

3. Changes to pecuniary jurisdiction: While under the Old Act[8], the pecuniary jurisdiction was ascertained on the basis of “value of the goods or services and the compensation, if any, claimed”, the New Act[9] bases the jurisdiction on “value of the goods or services paid as consideration”. Thus, the old practice of forum shopping by inflating the compensation claim has been done away with and the pecuniary jurisdiction shall now be fixed based on the consideration actually paid by the consumer.

Further, the District Forum can now entertain consumer complaints where the consideration paid does not exceed INR 1,00,00,000 (INR One Crore), the State Commission can entertain disputes where such value exceeds INR 1,00,00,000 (INR One Crore) but does not exceed INR 10,00,00,000 (INR Ten Crore), and the National Commission can exercise jurisdiction where such value exceeds INR 10,00,00,000 (INR Ten Crore).

4. Changes to territorial jurisdiction and e-filing of complaints: The New Act provides flexibility to the consumer to file complaints with the jurisdictional consumer forum located at the consumer’s place of residence or work. This is unlike the earlier practice of filing the complaint at the place of purchase or where the seller resides or has its registered office. The New Act also contains enabling provisions for consumers to file complaints electronically and for hearing and/or examining parties through video-conferencing. This is aimed to provide procedural ease and reduce inconvenience and harassment for the consumers.

5. Consumer Protection Councils: The provisions relating to constitution and powers of the Consumer Protection Councils at Central and State levels are not included in the notification. However, the Rules on Composition of the Central Council, their term etc. have been notified. As per these Rules, the Central Council shall consist of upto 36 members. The objective of the Central and State Councils is to render advice on promotion and protection of the consumers’ rights under the Act.[10]

6. Central Consumer Protection Authority: The New Act introduces the establishment of a Central Consumer Protection Authority (“CCPA”) by the Central Government. The CCPA is a regulatory authority and shall be empowered to impose penalties, recall goods, cause withdrawal of services, provide refunds and investigate into matters. It shall also be responsible for protecting the rights of consumers as a class and shall further ensure that no person engages in unfair trade practices and that no misleading advertisements are made. The CCPA will have an investigation wing, headed by a Director-General, which may conduct inquiry or investigation into consumer law violations. Further, the New Act also introduces electronic mode for filing complaint for unfair trade practices or false or misleading advertisements to the District Collector, the Commissioner of the Regional Office or the CCPA.[11]

7. Mediation: The New Act provides for mediation as an Alternate Dispute Resolution mechanism, making the process of dispute adjudication simpler and quicker. The dispute can be resolved either in whole or in part. If the mediation is successful, the terms of such agreement shall be reduced in writing. Where the consumer dispute is settled only in part, the Commission shall record the settlement of the issues which have been settled and continue to hear the remaining issues involved in the dispute. If the mediation is not successful, the Commission shall continue to hear all the issues involved in the dispute.[12]

8. Strict penalties for false and misleading advertisements: The New Act has defined the term “misleading advertisement” in relation to any product or service as “an advertisement which falsely describes the product or service which gives a false guarantee and is likely to mislead the consumer as to the nature substance, quantity or quality of such product or service and conveys an express or implied representation which, if made by the manufacturer or seller or service provider, would constitute an unfair trade practice and shall also include information which is concealed deliberately”.[13]

The CCPA is empowered to impose a penalty of up to INR 10,00,000 (INR Ten Lakhs) on a manufacturer or an endorser, for a false or misleading advertisement. The CCPA may also sentence them to imprisonment for up to two years for the said offences. In case of a subsequent offence, the fine may extend to INR 50,00,000 (INR Fifty Lakhs) and imprisonment of up to five years. The CCPA can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to one year. For every subsequent offence, the period of prohibition may extend to three years.[14]

An appeal against an order passed by the CCPA can be filed before the National Commission within a period of 30 days from the date of receipt of such order.[15]

Conclusion

The New Act is certainly a welcome change for consumers. It takes those extra steps required for addressing the concerns and loopholes in the earlier law, especially relating to the increasingly popular online transactions and e-commerce where the legal rights and liabilities of the respective parties were unclear under the Old Act. There is a definite shift in the approach towards a more consumer-friendly law that not only makes it easier for a consumer to initiate consumer disputes but also enhances his or her rights and imposes additional safeguards and liabilities on manufacturers and endorsers.

Having said that, the critical area remains that of the huge backlog of consumer cases before the respective Consumer Forums and long pendency of consumer disputes for years on end. While the New Act attempts to address this issue by enhancing the pecuniary jurisdiction of all Forums, this so-called solution may prove counter-productive if the quality and strength of infrastructure and manpower at District Forums and State Commissions is not immediately enhanced by the Government. Such enhancement is necessary not only to make these Forums truly functional and effective but also prepare them for handling the fresh load of cases that will befall them as a result of the changes brought about by the New Act.