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Amendments to Consumer Protection Act- what Brand owners must know!

To modernize the law relating to consumer protection and to enlarge the scope of the existing law and make it more effective and purposeful, the Consumer Protection Act 2019 has replaced the old Consumer Protection Act, 1986.  The revamping of the Act was much needed as the provisions under the old Act, which is now 33 years old, have become outmoded. The consumer preference is now more tilted towards buying products online bringing about the drastic changes in the traditional definition of the market. With the advent of E-commerce, the consumers and brand owners are working to safeguard their interest in this new world which is susceptible to widespread distribution of counterfeit and infringing products taking cover under the anonymity of online transactions.

In this post, we discuss provisions that will have impact on brand owners and how the changes will strengthen the rights of consumers. Some of the key highlights are outlined below:

  • Product Liability:

An important provision introduced in the new Act. Under the product liability action (which can be brought before the District Commission/State Commission/National Commission), the manufacturer, service provider or product seller will have to compensate a consumer if their goods or services cause ‘harm’ which includes damage to property/ personal injury, illness or death/ mental agony or emotional distress. Thus, the product liability action has been elaborately defined under the new Act which did not find mention under the old Act. For instance, if a pressure cooker explodes due to manufacturing defect and harms the consumer, the manufacturer will be liable for the injury. Earlier the consumer would be compensated for the cooker’s cost at the consumer forum. The compensation for any damage could be sought through the Civil Court which obviously being a time consuming process was seldom pursued by consumers.

Further, the product sellers (including electronic service providers) such as Amazon, Flipkart etc. have been specifically brought under the purview of product liability provisions apart from the manufacturers or service providers as explained above. The Act defines the “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 market place and online auction sites. Thus, it can be seen that the definition has been linked with the product seller. Further, as per the relevant provision of the Act, wherein it has been conversely stated, the “product seller” includes an electronic service provider.

  • Unfair contracts:

This is another concept introduced under the new Act which proposes to protect consumers from unreasonable contracts that are unilaterally skewed towards the manufacturers or service providers. Such contracts would have such terms that cause significant changes in the rights of the consumers. This would include the following instances:

  1. Excessive security deposits for the performance of contractual obligations.
  2. Disproportionate penalty on the consumer.
  3. Refusal to accept early repayment of debts.
  4. Unilateral termination without reasonable cause.
  5. Permitting assignment of contract to the detriment of the consumer.
  6. Imposing on the consumer an unreasonable charge, obligation or condition which puts consumer to disadvantage.

It is important to mention that the cases pertaining to unfair contracts shall be heard before the State Commission or National Commission only. In other words, the State Commission or National Commission would have jurisdiction over such matters which could be attributed to the level of expertise required in contract law.

  • Unfair trade practices:

The unfair trade practices had been quite comprehensively defined under the old Act. The scope of unfair trade practices has been further expanded to include:

  1. Disclosure of personal information given in confidence by the consumer.
  2. Non-issuance of bills or cash memo or receipt for the goods sold or services rendered.
  3. A refusal to withdraw defective goods/deficient services and refund the consideration paid towards such goods/services within the period stipulated in the bills or cash memo or receipt or in the absence of such stipulated period, within 30 days of the date of notice.

Thus, the aforesaid measures have been appended to protect data of consumers, keep a tab on the transactions and making it easier to claim refunds and return the deficient goods or services.

  • Criminal liability for spurious goods:

The criminal liability has been introduced under the new Act in relation to a number of offences.

At the outset, spurious goods have been defined under the Act as “such goods which are falsely claimed to be genuine”.

Further, anyone who manufactures/stores/sells/distributes/imports any spurious goods shall be punished if such an act causes injury, grievous or death with an imprisonment term, respectively, of one year and fine, up to seven years and fine, from seven years up to imprisonment for life and fine. These provisions have been incorporated in the new Act despite their existence in the Indian Penal Code in case of sale of adulterated products etc.

  • Criminal and civil liability for false or misleading advertisement:

The criminal liability has been introduced against a manufacturer or service provider who causes a false or misleading advertisement to be made which is prejudicial to the interest of consumers. Further, heavier sanctions and fines are imposed in cases of subsequent violation.

Furthermore, the Central Authority can direct the manufacturer, endorser, advertiser or publisher to discontinue or modify any false or misleading advertisement. In addition, the Central Authority can impose a penalty of ten lakhs rupees in respect of such false or misleading advertisement by a manufacturer or endorser, which may extend to fifty lakhs for subsequent contraventions.

  • Mediation:

Under the new Act, there is a provision for referring dispute for mediation by the District, State or National Commission upon written consent being given by both parties in this regard. For the purpose of mediation, the National Commission or the State Commission or the District Commission, as the case may be, shall prepare a panel of the mediators to be maintained by the consumer mediation cell attached to it. The said provision for mediation had been missing under the old Act.

Conclusion:

Overall, the new Act envisages the digitization era and has accordingly incorporated provisions to account for the same. It will be interesting to see how the various provisions evolve. As an example, how well disposed the forums are when it comes to enforcing various consumer rights or taking strict action against unfair trade practices. The current pendency of cases at the State and National commission are already of concern. A report suggests the number of cases pending in various consumer fora is over 450,000. While enhancing of pecuniary jurisdiction may help to ease pressure on the National Forum, however, it may not be the complete answer. The government must make additional allocation towards filling vacancies and improving infrastructure etc for effective implementation of the various provisions and speedy disposal of complaints. This is all the more needed considering the expansion of scope and ambit of the new Act.