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Consumer Protection Act 2019: Key provisions
August 1, 2019The Consumer Protection Act 2019 was passed by the Rajya Sabha on 6 August 2019 and published in the gazette on 9 August 2019. The provisions of this Act have not yet been notified to come into force. Once notified, the new Act will replace the Consumer Protection Act, 1986, which will stand repealed.
The Consumer Protection Act, 2019 (the “new Act”) addresses the emerging delivery systems of goods and services such as e-commerce, direct selling, tele-shopping, multi-level marketing, global supply chains. It also addresses new forms of unfair trade and unethical business practices, including misleading advertising and unfair contracts. Significantly, the new Act provides for a regulator with extensive powers to regulate and penalise violations of the Act and product liability action for defective products/deficient services. For the first time, terms such as product liability, unfair contracts, spurious goods, consumer rights, express warranty, injury, harm, misleading advertisement, endorsement, establishment have been specifically defined. The new Act also provides for e-filing of complaints. Consumer rights have thus been overhauled in keeping with changing economic development and commercial practices so as to empower consumers with effective remedial actions and reliefs.
The key provisions brought in by the new Act are:
Establishment of a Regulator
A Central Consumer Protection Authority (CCPA) will be established with powers to, either suo moto or on complaints/directions received from the Central Government, regulate and inquire into matters relating to violation of consumer rights, unfair trade practices, false or misleading advertisements and to enforce class actions. This may be done in the following manner:
- file complaints before the District, State or National Commissions or intervene in proceedings before these agencies;
- issue guidelines to prevent unfair trade practices or misleading advertisements;
- pass orders for recalling goods or withdrawal of services which are dangerous, hazardous or unsafe; or for reimbursement of prices of such goods or services; and for discontinuation of practices which are unfair and prejudicial to consumers’ interest.
An investigation wing within the Authority headed by a Director General will be tasked with conducting inquiries and investigations. Appeals from orders of the CCPA shall lie to the National Consumer Disputes Redressal Commission (National Commission) within thirty days from the date of receipt of such order.
Separately, Central, State and District advisory councils will be set up at each level to render advice on the promotion and protection of consumer rights.
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Strict consequences for false or misleading advertisements for manufacturer, endorser, publisher
The CCPA may, following investigation, impose a penalty on the manufacturer or endorser of a false or misleading advertisement of up to Rs. 10 lakhs and with imprisonment up to 2 years. For every subsequent contravention a penalty up to Rs. 50 lakhs with imprisonment which may extend to 5 years.
The endorser of such an advertisement may be prohibited from making endorsement of any product or service for a period of up to one year and for subsequent contravention for a period of up to three years. However, if the endorser has exercised due diligence to verify the veracity of the claims made in the advertisement, he/she shall not be penalised. The publisher or a person who is party to such publication may also be penalised for amount of up to Rs. Ten lakhs
Product Liability & Product Liability Action
Product liability has been defined to mean the responsibility of the product manufacturer or product seller of any product or service to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto. A product liability action is a complaint filed for claiming compensation for any ‘harm’ caused to due to deficiency, inadequacy in the product service or manufacturing or design defects, deviation from specifications, not conforming to warranty or lacking adequate instructions regarding correct usage. A product seller who is not a product manufacturer is also liable if he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or has altered or modified the product such that it caused harm. Exceptions have also been provided to such actions, e.g. misuse, alteration or modification of the product at the time of harm being caused or failure on part of the manufacturer to warn or instruct about a danger which is obvious or commonly known or ought to be known on account of the characteristics of the product, etc.
“Harm” in relation to product liability includes damage to property other than the product itself, personal injury, illness or death and mental agony or emotional distress resulting from such harm.
Unfair contracts and enlarged scope of unfair trade practices
“Unfair contract” has been defined to mean a contract between a manufacturer or trader or service provider on the one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer. Any complaint against unfair contracts can be filed with the State Commission or the National Commission. Six types of unfair contracts have been identified, namely,
- contracts requiring manifestly excessive security deposits;
- contracts imposing disproportionate penalty on the consumer for breach of contract;
- contracts refusing to accept early repayment of debts on payment of applicable penalty;
- contracts entitling a party to the contract to terminate such contract unilaterally without reasonable cause;
- contracts permitting or having the effect of permitting one party to assign the contract to the detriment of the other party, who is a consumer, without his consent;
- contracts imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage.
The scope of unfair trade practices has been expanded to include the following practices :
- 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;
- 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
Revised Pecuniary and Territorial Jurisdiction
The pecuniary jurisdiction of the District, State and National Commissions has been revised as below. The territorial jurisdiction will now also include the place of residence or business of the complainant in addition to that of the opposite party and the place of occurrence of the cause of action.
- District Commission – upto ₹1 crore (currently up to Rs. 20 lakhs);
- State Commission – between ₹1 crore to ₹10 crore (currently up to Rs. 1 crore);
- National Commission – above ₹10 crore (currently above Rs. 1 crore)
Mediation
Mediation has been provided as an Alternative Dispute Redressal Mechanism. A Consumer Mediation Cell will be set up for this purpose. If there is any possibility of a settlement between the parties, the District, State or the National Commission may direct the parties to give a written consent to have their dispute settled by mediation.
New penalties/punishments
The manufacturing, storing, selling, distributing or importing of products containing adulterants and spurious goods is punishable with both fine and imprisonment depending on the degree of harm, injury or grievous hurt caused ranging from imprisonment for 6 months with a fine of one lakh rupees to imprisonment for 7 years with a fine of five lakhs. Life imprisonment along with a fine of ten lakh rupees may also be awarded in cases where such act has resulted in the death of any consumer, the minimum term of imprisonment in such cases being 7 years.
On the other hand, vexatious searches and seizures by the DG or any other officer are also punishable with imprisonment up to one year or with fine which may extend to ten thousand rupees or with both.
SAM & Co comment
From a policy stance, it seems the consumer protection regime is now truly making the move from a caveat emptor position to a ‘consumer is king’ regime. As the Act gets enforced through notification at different times in different states, it remains to be seen whether various state governments and consumer fora will actively adapt to the new position of heightened liability for manufacturers, sellers and advertisers, or whether courts use their discretion to carve out exceptions in the new framework for the convenience of business owners.
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