The emergence of global supply chains, the rise in international trade and the rapid development of e-commerce has led to new delivery systems for goods and services and have provided new options and opportunities for consumers. However, the same has made consumer susceptible to new forms of unfair trade practice and unethical business practice.
A Consumer Protection Bill, 2018 was passed by Lok Sabha on 20.12.2018 for strengthening the rights of consumers and providing a mechanism for redressal of their complaints regarding a defect in goods and deficiency in service that would replace the Consumer Protection Act, 1986.
KEY HIGHLIGHTS OF THE BILL
- Admissibility of the complaint shall ordinarily be decided within a period of 21 days from the date on which complaint was filed.
- If the scope of the settlement of dispute exists between the parties, the forum can refer the parties to mediation.
- The complaint shall be disposed off as expeditiously as possible and endeavor shall be made to decide a complaint within a period of 3 months and within 5 months if it requires analysis or testing of commodities.
- Setting up of Central Consumer Protection Authority has the power to recall goods, reimburse purchase price paid, impose penalties for false and misleading advertisements and file class-action suit.
- Product liability against manufacturer, seller or service provider for any defect or deficiency in service.
- Comprehensible definition of unfair trade practices in case of contracts & loans and restrictive trade practice.
- Sharing personal information of consumers with any other person shall be treated as an unfair trade practice.
- The penalty for non-compliance of orders of consumer forum and commissions- Rs. 25,000/- to Rs. 1 Lakh or jail up to 3 years or both.
- Imprisonment upto 6 months or fine upto Rs. 20 lakh or both for non-compliance of Central Consumer Protection Authority order.
- False & misleading advertisement- Upto Rs.10 Lakh penalty for manufacturer or endorser. In case of a subsequent offense, the fine may extend to Rs 50 lakh. The manufacturer can also be punished with imprisonment of up to two years which may extend to five years for every subsequent offense. Ban on endorsers from advertising any product for 1-3 years.
- The Bill, 2018 has also incorporated provisions pertaining to E-commerce & electronic service provider.
- Enhancement of Pecuniary jurisdiction of Forum & Commissions are as follows-
- District Commission- Value of the goods or services does not exceed Rs. 1 Crore.
- State Commission- Value of the goods or services exceed Rs. 1 Crore but does not exceed rupees 10 (Ten) Crore.
- National Commission- the value of goods and services exceed 10 (ten) crore rupees.
ANALYSIS IN DETAIL
Establishment of a Regulator-Central Consumer Protection Authority-
- The existing Consumer Protection Act, 1986 does not provide for a Regulator. The Consumer Protection Bill 2018 provides for establishment of a Regulator called as the Central Consumer Protection Authority (hereinafter referred to as “CCPA”), which will be an executive agency to regulate matters relating to violation of rights of consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of public and consumers and to promote, protect and enforce the rights of consumers as a class.
- A complaint relating to violation of consumer rights or unfair trade practices or false or misleading advertisements which are prejudicial to the interests of consumers as a class may be forwarded either in writing or in electronic mode, to the CCPA.
Investigation-
Where CCPA is satisfied on the basis of an investigation that there is sufficient evidence to show a violation of consumer rights or unfair trade practice by a person, it may pass such order as may be necessary, including:
- Recalling of goods or withdrawal of services which are dangerous, hazardous or unsafe;
- Reimbursement of the prices of goods or services so recalled to purchasers of such goods or services; and
- Discontinuation of practices which are unfair and prejudicial to consumers’ interest,
- In addition to the above, CCPA has the power to issue directions to the concerned trader or manufacturer or endorser or advertiser or publisher to discontinue such advertisement or to modify such advertisement and penalties against false or misleading advertisements.
The penalty for Misleading Advertisement
- If the CCPA is of the opinion that it is necessary to impose a penalty in respect of such false or misleading advertisement, by a manufacturer or endorser a penalty which may extend to 10 Lakh (Ten Lakh Rupees).
- Further for every subsequent contravention by a manufacturer or endorser, impose a penalty, which may extend to 50 (Fifty Lakh Rupees).
- The CCPA can also prohibit the endorser of a misleading advertisement from endorsing any 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.
Exception to Penalty-
There are certain exceptions when an endorser will not be held liable for such a penalty such as:
- If endorser has exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by him.
- If a person proves that he had published or arranged for the publication of such advertisement in the ordinary course of his business:
Factors Determining the Amount of Penalty-
While determining the amount of penalty for any false or misleading advertisement the following factors shall be considered by CCPA:
- The population and the area impacted or affected by such offence;
- The frequency and duration of such offence;
- The vulnerability of the class of persons likely to be adversely affected by such offence; and
- The gross revenue from the sales effected by virtue of such offence.
Right to be Heard- The Central Authority shall give the person an opportunity of being heard before an order under this section is passed.
Penalties Manufacturing, Selling, Storing, Distributing or Importing Spurious & Adulterated Products-
The CCPA may also impose penalties for manufacturing, selling, storing, distributing or importing adulterated products which are as follows:
- If no injury is caused to a consumer, the penalty would be a fine of up to Rs 1 lakh (one lakh) along with imprisonment of up to six months;
- If the injury is caused to a consumer not amounting to grievous hurt, the penalty would be a fine up to Rs 3 lakh (three lakh) along with imprisonment of up to one year;
- If grievous hurt is caused, the penalty would be a fine up to Rs 5 lakh (five lakh) along with imprisonment up to seven years;
- In case of death, the penalty would be Rs 10 lakh (ten lakh) or more along with a minimum imprisonment of seven years, extendable to imprisonment for life.
Appeal from Order of CCPA- An appeal from the orders of the CCPA shall lie to the National Consumer Disputes Redressal Commission within a period of 30 days (thirty) from the date of receipt of such order.
Liability of the product manufacturer- The product manufacturer shall be liable in a product liability action if the product contains the following:-
- Manufacturing defect,
- Defective in design,
- Deviates from the manufacturing specifications or express warranty, or
- Does not contain adequate instructions for usage.
Note:- A product manufacturer shall be liable in a product liability action even if he proves that he was not negligent or fraudulent in making the express warranty of a product.
Liability of the product service provider- A product service provider shall be liable in a product liability action under following events:-
- If the service provided by him was faulty or imperfect or deficient or inadequate in quality, nature or manner of performance; or
- There was an act of omission or commission or negligence or conscious withholding any information which caused harm; or
- The service provider did not issue adequate instructions or warnings to prevent any harm, or the service did not conform to express warranty or the terms and conditions of the contract.
Liability of the Product Seller- A product seller who is not a product manufacturer shall be liable in product liability action if:
- the seller has exercised substantial control over the designing, testing, manufacturing, packaging or labeling of a product that caused harm; or
- the seller has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or
- the seller 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
- 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
- the seller 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 and such failure was the proximate cause of the harm.
Unfair Contracts- There is no provision for ‘unfair contracts’ under the present Consumer Protection Act, 1986. The Consumer Protection Bill 2018 defines “unfair contract” to mean a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause a significant change in the rights of such consumer. Six types of ‘unfair contracts’ whose clauses are as follows:-
- Requires manifestly excessive security deposits; or
- Imposing any disproportionate penalty on the consumer, for the breach of contract; or
- Refusing to accept early repayment of debts on payment of an applicable penalty; or
- Entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or
- 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
- Imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage.
NOTE- Any complaint against unfair contracts can be filed with the State Commission or the National Commission.
Unfair Trade Practices- In addition to the unfair trade practices already laid down under the present consumer protection act, there are 3 (three) more types of practices which are added to the existing list to expand the scope of unfair trade practices. These practices are as follows:
- Not issuing bill or cash memo or receipt for the goods sold or services rendered in such manner as may be prescribed;
- 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; and
- Disclosing to other person any personal information given in confidence by the consumer unless such disclosure is made in accordance with the provisions of any law for the time being in force.
Mediation- It is also pertinent to state that Consumer Protection Bill, 2018 provides exclusive provisions for reference of a dispute to Mediation as an Alternative Dispute Redressal Mechanism and provides for settling up of a Consumer Mediation Cell at District Consumer Forum, State Commission, National Commission. Pursuant to mediation, if an agreement is reached between the parties with respect to all of the issues involved in the consumer dispute or with respect to only some of the issues, the terms of such agreement shall be reduced to writing accordingly, and signed by the parties to such dispute or their authorized representatives.
- The Central Government was empowered to take such measures in any manner for the purposes of preventing unfair trade practices in e-commerce, direct selling and also to protect the interest and rights of consumers.
Provisions pertaining to E-commerce & Electronic Service Provider- The rapid development of e-commerce has led to new delivery systems for goods and services and have provided new options and opportunities for consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices. Misleading advertisements, telemarketing, multi-level marketing, direct selling, and e-commerce pose new challenges to consumer protection and will require appropriate and swift executive interventions to prevent consumer interest at large. The Consumer Protection Bill, 2018 also dealt with this subject area.
NOTE-
- “E-commerce” means buying or selling of goods or services including digital products over the digital or electronic network;
- “Electronic Service Provider” means 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.
Enhancement of the Pecuniary Jurisdiction of Consumer Commissions–
After taking the current market trends into consideration, the Bill proposes to enhance the pecuniary jurisdiction of the Consumer Disputes Redressal Agencies. Presently under Consumer Protection Act, 1986, the pecuniary jurisdiction of the District Forum is upto twenty lakh rupees and for the State Commission upto one crore rupees and for National commission when the value of goods or service and the compensation, if any exceeds one crore. However, under the new Bill of 2018 the following provisions are enacted:
Jurisdiction | Consumer Protection Act, 1986 | Consumer Protection Bill, 2018 |
District Forum/ Commission | Upto Rs. 20 Lakhs | Upto Rs. 1 Crore |
State Commission | Exceed Rs. 20 Lakhs- Upto Rs. 1 Crore. | Exceed Rs. 1 Crore- Upto 10 Crore |
National Commission | Exceed One Crore | Exceed Rs. 10 Crore |
- The District Forum shall have jurisdiction to entertain complaints where the value of the goods or services paid as consideration does not exceed one crore rupees.
- The State Commission shall have jurisdiction to entertain complaints where the value of the goods or services paid as consideration, exceeds rupees one crore, but does not exceed rupees ten crore.
- The pecuniary jurisdiction of the National Commission will be for value of goods and services exceeding ten crore rupees.
Territorial jurisdiction-
The Bill, 2018 has made changes to the territorial jurisdiction of the Dispute Redressal Agencies and includes the place of residence or business of the complainant, in addition to that of the opposite party.
CONCLUSION
The analysis of Consumer Protection Bill 2018 fairly brings to our attention that several provisions have been introduced as stated above to protect the interest of consumers at par with the emerging market trends. The Bill also envisages provisions for product liability action on account of harm caused to consumers due to a defective product or by the deficiency in services. Further, the Bill also provides power to the central government to frame rules for E-commerce and Electronic Service Provider. Moreover, provision of “Mediation” as an Alternate Dispute Resolution Mechanism has also been provided.
The Bill also provides for the establishment of an executive agency to be known as the Central Consumer Protection Authority (CCPA) to promote, protect and enforce the rights of consumers; make interventions when necessary to prevent consumer detriment arising from unfair trade practices and to initiate class action including enforcing recall, refund and return of products, etc. However, the Bill still has a long way before it sees the light of the day, but once passed, the Bill will certainly be a strong step forward towards protecting the rights and interests of consumers.
Moreover, it would be apt to state that the present bill has incorporated several provisions pertaining to the determination of liability of manufacturers, service providers, E-commerce companies, Electronic Service Provider, endorsers, hence set standards for them to be more vigilant in their commercial obligations towards their respective consumers at large.