New consumer protection law truly enforces the rights of consumers – here’s how

Published: September 12, 2019 2:09:51 AM

The new consumer protection law truly reinforces the rights of the consumer. While new forms of business practices have given a plethora of options to consumer, they have also exposed consumer to vulnerabilities of unfair practices.

The Act defines a ‘Consumer’ as a person who buys any goods or hires/avails any service for consideration. This excludes a person who obtains a good for resale or for commercial purposeThe Act doesn’t spare the consumer of the need for caution, but it does require diligence on the part of the manufacturer/seller

By Pankaj Agarwal & Sagarika Chandel

The Consumer Protection Act, 2019 (Act), published in the official gazette on August 9, 2019, seeks to replace the Consumer Protection Act, 1986. Such legislative reform became essential due to changes in the marketplace, variety of options available to consumers, global supply chain and indispensability of e-commerce.

The Act defines a ‘Consumer’ as a person who buys any goods or hires/avails any service for consideration. This excludes a person who obtains a good for resale or for commercial purpose. The definition includes e-commerce transactions, thereby bringing a much-required revamp in law.

The Act introduces the Central Consumer Protection Authority (CCPA)—it will regulate matters relating to violation of consumer rights, unfair trade practices and false/misleading advertisements. It shall have an Investigative Wing headed by a Director-General that may conduct inquiry/investigation as directed by CCPA. The CCPA has been empowered to, inter alia, take suo motu actions, pass orders, impose penalty, issue guidelines in public interest.

The Consumer Dispute Redressal Commissions (CDRCs) shall exist at the district, state and national level. The Act has now increased the pecuniary limits of the commissions due to which the district commission can now entertain complaints where the value paid doesn’t exceed Rs 1 crore. For state commissions, the jurisdiction range is Rs 1-10 crore and beyond Rs 10 crore for the national commissions. The active functioning of the district commissions will increase accessibility and bring about maximum reduction in the backlog.

Another crucial change is that the Act allows filing of complaint from anywhere (including e-filing) and hearing/examination of parties through video-conferencing in district commissions. It introduces attachment of consumer-mediation cell to each CDRCs. Each cell shall maintain a list of qualified, empanelled mediators. This will aim at further reducing backlog of cases in consumer courts. A product manufacturer, product-/service-provider and a product seller are liable to compensate for any defect in the product or deficiency in services.

The definition of ‘product seller’ now includes any person who, inter alia, imports, sells, installs, repairs a products and places products for commercial purposes. As such, it appears that e-commerce platforms will fall under the wide gamut of ‘product seller’. Further, the product manufacturer is liable even if he proves he was not negligent or fraudulent in making the express warranty of a product.

Any advertisement which falsely describes the product or deliberately conceals important information or conveys an express/implied representation constitutes an unfair trade practice.

The penalty for misleading advertisement is set at imprisonment (extendable to 2 years) and fine (extendable to Rs 10 lakh). The Act also extends liability for misleading ads to the endorser. Celebrity endorsement is generally viewed as a viable option for brands to promote their products and build credibility. However, given celebrities enjoy larger-than-life cult status, such endorsers cannot merely play the role of information disseminators, and will now be required to exercise due diligence and verify claims made in the advertisement.

The Act deems a contract that hampers the right of a consumer due to its unfair conditions such as, disproportionate penalty, assignment of contract to detriment of consumer, excessive security deposit, unfair unilateral termination of contract, as an unfair contract. This will ensure that a dominant party is unable to coerce its way into unfairly profiting.

The Act truly reinforces the rights of the consumer. While new forms of business practices have given a plethora of options to consumer, they have also exposed consumer to vulnerabilities of unfair practices. With the Act, the era of ‘caveat emptor’ is giving way to that of ‘caveat venditor’. Although the Act expects a reasonable degree of caution to be observed by consumer, yet a high standard of care and diligence in trade is required from the product manufacturer/seller/service-provider.

(Agarwal is Partner, and Chandel is Associate, Shardul Amarchand Mangaldas & Co., Views are personal)

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