Consumer Protection Act, 2019

The Consumer Protection Act, 2019 (2019 Act) came into effect on 9th August 2019. The 2019 Act, repeals the previous consumer protection act which had been in effect since 1986 (1986 Act). This prior act had been amended from time-to-time to bring it in accordance with changes brought about by economic liberalisation, globalisation of markets and digitalisation of products and services. However, its practical implementation was far from fulfilling its desired objective of being socio-economic legislation which sought “to provide for better protection of the interests of consumers.” While using the same phrase in its preamble, the 2019 Act, has substantially enhanced the scope of protection afforded to consumers, by bringing within its purview advertising claims, endorsements and product liability, all of which play a fundamental role in altering the consumer behaviour and retail trends in the 21st century.

Objective of the new statue

The Consumer Protection Act, 2019 brings fundamental changes to the existing 1986 Act. But it also envisages a Central Consumer Protection Authority and vests too much power and control in this authority without proposing adequate administrative safeguards.

This new Act is provided for the protection of the interests of consumers and to establish authorities for timely and effective administration and settlement of consumers’ disputes. It proposes a slew of measures and tightens the existing rules to further safeguard consumer rights. It also introduces a central regulator, strict penalties for misleading advertisements and guidelines for e-commerce and electronic service providers.

What is new in the Act?

• Definition of consumer

The definition of “consumer” now include persons who engage in offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing. It provides consumers with a remedy in case of multi-level marketing. Thus, the seller at each level of multi-level marketing can be exposed to liability under this Act and not restricted to only the manufacturer of the product but all entities involved at various stages of production and marketing.

• E-commerce

E-commerce has been defined as buying or selling of goods or services including digital products over a digital or electronic network. The central government has been authorized to take measures and make rules to prevent unfair trade practices in e-commerce. In case of products being sold through online platforms, without charging any fees separately amounts to providing services needs to be ascertained.

• New grounds to file complaints

In the 2019 Act, new grounds to file complaints is introduced.

1. Introduction of Unfair Contracts 

An unfair contract has been added, which broadens the ground to file complaints and allows consumers to challenge contracts which are unfair, unilateral and unreasonable. An unfair contract has been defined to include contracts between a manufacturer or trader or service provider and a consumer, having such terms which cause a significant change in the rights of such consumer, including the following, namely:—

1. Requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or
2. 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
3. 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
4. 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
5. Imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage.

2. Expanding the definition of “unfair trade practice“

In the 2019 Act three types of additional unfair trade practices have been added which are as follows:

1. Failure or non-issuance of a bill or a cash memo;
2. Refusal to take back or withdraw defective goods or withdrawal or discontinuance of deficient services or refusal to refund the consideration amount paid within the period as stipulated in the bill or cash memo or receipt or in the absence of such stipulation, refusal to withdraw or refund goods or services within thirty (30) days; and
3. 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 the public interest.

• Product Liability

Product liability means the responsibility of a product manufacturer or product seller or product service provider, of any product or service to compensate for any harm caused to a consumer by such defective product manufactured or sold or by a deficiency in service relating to the product.

Who can be made liable?

A product manufacturer, product seller and product service are defined in the 2019 Act, and they can be made liable for product liability.

Ingredients for product liability action:

1. Product manufacturer will be liable if a product contains a manufacturing defect, or defective in design, or there is a deviation from manufacturing specifications 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. Absence of negligence or fraud in making express warranty of a product cannot be pleaded as a defence.
2. Product seller who is not a product manufacturer may be held liable if (a) he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or (b) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or (c) 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 an express warranty made by the product seller which caused the harm; or (d) 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 (e) 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.
3. A product service provider may be liable if (a) 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 (b) there was an act of omission or commission or negligence or conscious withholding any information which caused harm, or (c) the service provider did not issue adequate instructions or warnings to prevent any harm, or (d) the service did not conform to express warranty or the terms and conditions of the contract.

Certain exceptions  to “product liability” action:

1. If the products have been misused, or 
2. If the product being purchased by the employer for use at the workplace did not adhere to installation warnings or instructions, 
3. Or if the nature of the product is such that the user should have known the associated dangers, etc.

• Introduction of Central Consumer Protection Authority

Section 10 of the 2019 Act, seeks to establish a central authority, the Central Consumer Protection Authority (“CCPA”) to promote, protect, and enforce the rights of consumers against misleading advertisements and unfair trade practices. An investigative wing is envisaged to be formed under the supervision of CCPA, which shall carry out inquiries and investigations in matters relating to consumer rights, unfair trade practices and misleading advertisements.

Functions of CCPA

1. Inquiring into violations of consumer rights, investigating and launching prosecution at the appropriate forum;
2. Passing orders to recall goods or withdraw services that are hazardous, reimbursement of the price paid, and discontinuation of the unfair trade practices.
3. Issuance of directions to the concerned trader/ manufacturer/ endorser/ advertiser/ publisher to either discontinue a false or misleading advertisement or modify it;
4. The imposition of penalties, and;
5. Issuance of safety notices to consumers against unsafe goods and services and guidelines to prevent unfair trade practices
6. Spread and promote awareness and research on consumer rights and
7. Recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights

The district collectors have also been empowered to conduct such investigations that affect the interests of consumers. They can investigate or inquire at the instance of a complaint or on a reference made by CCPA. The district collectors have also been provided powers akin to CCPA’s but unlike CCPA they cannot initiate action suo moto. The establishment of a central authority and initiating action as a class comes as an additional mode of relief which can be exercised along with individual consumers filing complaints to address their grievances, thereby having two parallel proceedings.

• False or misleading advertisements

CCPA has also been empowered to take action against false or misleading advertisements. CCPA can impose a penalty of up to 10 lakhs, and up to 50 lakhs for every subsequent violation. Such a penalty can be imposed on endorsers too. However, the endorser would be exempted from any liability if he/she establishes that they undertook due diligence to verify the veracity of the claims before endorsing the same. Therefore, endorsers will also have to conduct a thorough due diligence/ research before signing up for any advertisement.

• Removal of Healthcare from definition of services

In the 2019 Act, healthcare is removed from the list of Services due to the Healthcare Amendment Act passed by the parliament. 

• Increase in the pecuniary jurisdiction of the commissions

The pecuniary jurisdiction of all three commissions has been raised in the 2019 Act. 

• Penalties

The quantum of monetary penalty, in case of noncompliance of any order of commissions, have been raised under the 2019 Act. 

• Miscellaneous Provisions

The 2019 Act, has introduced ADR mechanisms to resolve the disputes. In case there is a possibility of settlement at the stage of admission of a complaint or at any later stage, if acceptable to both parties. Mediation cells have been attached to all the three commissions i.e. district, state and national level. In the event of failure to settle the dispute, the respective commissions shall continue to adjudicate the dispute.

It allows consumers to file complaints in the district commission where they reside or work for gain. Consumers also have the option to file complaints electronically. 

Comparison between 1986 Act & 2019 Act

S.No.	Basis	Consumer Protection Act, 1986	Consumer Protection Act, 2019
1	Ambit of law	All goods and services for consideration, while free and personal services are excluded	All 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	The new Act adds three types of practices to the list,
3	Product liability	No Provision	Claim for product liability can be made against manufacturer, service provider, and seller.
4	Unfair contracts	No Provision	Defined as contracts that cause significant change in consumer rights.
5	Central Protection Councils (CPCs)	CPCs promote and protect the rights of consumers.	The new Act makes CPCs advisory bodies for the promotion and protection of consumer rights.
6	Regulator	No Provision	Establishes the Central Consumer Protection Authority (CCPA) to promote, protect, and enforce the rights of consumers as a class.
7	Pecuniary jurisdiction of Commissions	District: Up to Rs 20 lakh; State: Between Rs 20 lakh and up to Rs one crore; National:  Above Rs one crore.	District: Up to Rs one crore; State: Between Rs one crore and up to Rs 10 crore; National:  above Rs 10 crore.
8	Composition of Commissions	District: 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	Appointment	Selection 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 mechanism	No Provision	Mediation cells will be attached to the District, State, and National Commissions
11	Penalties	imprisonment between one month and three years or fine between Rs 2,000 to Rs 10,000, or both.	imprisonment up to three years, or a fine not less than Rs 25,000 extendable to Rs one lakh, or both.
12	E-commerce	No Provision	Defines direct selling, e-commerce and electronic service provider.

Conclusion

The 2019 Act is a positive step towards reformation and development of consumer laws in today’s digital world. Technology has progressed a lot in these years and while the older act tried to keep updated with small amendments here and there. The repeal of the older act and the establishment of the 2019 act was much needed.