Consumer protection law keeps up with times

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Remfry & Sagar,Consumer protection

With the Consumer Protection Act, 2019 (CPA), taking effect in July 2020, India has updated its consumer protection laws. The CPA replaces a 1986 legislation that was increasingly inadequate in coping with the legal challenges posed by changing market realities, most particularly, the rapidly growing shift towards e-commerce.

The new statute envisages the constitution of new bodies, including consumer disputes redressal commissions at district, state and national levels, to provide a full-fledged consumer complaints and disputes redressal body. Also, the government, on 23 July 2020, notified the Consumer Protection (E-Commerce) Rules, 2020, which complement the CPA in making online retailers more accountable, and their businesses more transparent.

Key changes introduced

The definition of a consumer has been broadened to include purchases made via offline and online transactions, teleshopping, direct selling and multi-marketing. Further, the definition of “unfair trade practice” is widened to include non-issuance of bills, refusal to take back defective goods, and unauthorized disclosure of a consumer’s personal information by a manufacturer or seller.

Following international jurisprudence, the new law also allows consumers to take action against unfair contracts, for example, those that demand excessive security deposits from consumers for performance of contractual obligations, or impose penalties on consumers disproportionate to any loss due to breach.

The new statute introduces the concept of product liability, the scope of which covers not only the product manufacturer or service provider, but also the product seller for a claim for compensation. Product seller is defined to include a person listing a product for a commercial purpose, thus encompassing e-commerce platforms, which previously avoided liability by claiming they were mere aggregators. A manufacturing or design defect, or non-conformity, with express warranties could lead to a claim of product liability, regardless of whether or not there is negligence and/or fraud.

The act defines misleading and false advertisements to include false descriptions of, and guarantees relating to, a product or service. It also covers information deliberately concealed from consumers. For such advertisements, a penalty of up to ₹1 million (US$13,500) is prescribed vis-à-vis a manufacturer as well as an endorser, which could be accompanied by a prison term of up to two years.

Subsequent offences would see the monetary fine go up to ₹5 million and imprisonment of up to five years.

Penalties and adjudication

A Central Consumer Protection Authority (CCPA), an alternate forum for redressal of disputes, with wide powers of enforcement, is to be established. Its investigative wing will be able to undertake conclusive fact finding, and the CCPA will be empowered to take suo moto (taken by its own accord) actions, impose penalties, order discontinuation of goods, recall unsafe goods, pass orders for reimbursement of the price of goods/services, cancel licences, and file class action suits. Non-compliance with its orders would be punishable with imprisonment extending to six months and/or a fine of up to `2 million.

Additionally, the act provides for a simplified dispute resolution mechanism, with a provision for mediation (simpler procedures and quicker resolution than traditional forums bogged by heavy caseloads) and e-filing of cases, as well as video-conferencing for hearings.

Further, consumers can now file complaints at a forum closest to their office or residence, apart from the place of purchase or the location of the seller’s registered office address.

The Consumer Protection (E-Commerce) Rules, 2020, which apply to all electronic retailers offering goods and services to Indian consumers, whether registered in India or overseas, provide that:

  • Every e-commerce entity must prominently display information such as its legal name, addresses of its headquarters and branches, and the name and details of its websites. Customer care and grievance officer contact details are to be published, and an effective dispute resolution mechanism provided for;
  • E-retailers must display details about returns and refunds (which are to be acted upon in reasonable time), exchanges, warranties and guarantees, delivery (providing breakdown of charges if pertinent) and shipment, modes of payment, as well as the country of origin of the goods being retailed; and
  • E-commerce marketplaces are to obtain undertakings from sellers to ensure that descriptions, images and other content relating to goods and services are accurate, and that they must not manipulate prices to gain unreasonable profits or discriminate between consumers.

These developments are particularly timely as ongoing restrictions in the country have led to a sharp preference for online transactions. By defining a consumer more broadly and introducing product liability under the CPA, e-commerce entities can now be held liable in consumer disputes. Until now, the provisions of the Information Technology Act have governed intermediary liability. It will be interesting to see the interplay between existing and new provisions in the days ahead.

This update was prepared by Remfry & Sagar.