Consumer protection law keeps up with times

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.

This update was prepared by Remfry & Sagar.