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IN A SNAPSHOT
Given the exponential growth in the consumer market, digitization, and the unanticipated change in the modus of receiving and consuming goods and services, a revamp of the consumer protection laws was inarguably inescapable. On 20th July 2020, the Central Government notified the Consumer Protection Act, 2019, (“CPA, 2019”) which had previously received the President’s assent on 9th August, 2019. This new Act has replaced the dated Consumer Protection Act of 1986. The Act has broadened its scope by making it inclusive of some key aspects which were not dealt within the 1986 act. These can be summarized as follows:
Inclusion of Online/Digital Transactions: By changing the definition of the word consumer to include consumers who purchase goods or services through online and offline transactions, hence including e-commerce transactions.
Pecuniary Jurisdiction alterations: The pecuniary jurisdictional limits of the three commissions have been revised under the new Act. The limits lie at Rs. 1 Crore, Rs. 10 crores and Rs. 100 crores at the district forum, state, and National commissions, respectively.
Flexibility through E-filing: Under the new Act, complaints can be filed electronically with the jurisdictional forum the consumer comes under thus enhancing flexibility. The new Act has changed the earlier system of filing complaints at the place of purchase or where the seller has its registered office and therefore being more consumer oriented in its approach.
Central Consumer Protection Authority: The new Act provides for the establishment of the CCPA as a regulatory body with powers to order for investigations, look into consumer law violations, recall products, file class action suits etc.
Product Liability – With this provision, the new Act brings the product manufacturer, service provider and seller within its ambit in a claim for compensation. The definition of product seller has also been widened to include e-commerce platforms.
Unfair Trade Practices – The 2019 Act has also increased the scope of unfair trade practices to include sharing of confidential personal information.
Misleading Advertisements – The new Act has laid down several penalties on propagating misleading advertisements about products or services. The CCPA can impose a fine or sentence the manufacturer to imprisonment for such false or misleading advertisements.
Alternate Dispute Resolution – The 2019 Act has included the option of availing the services of a mediator for dispute adjudication as an ADR method.
All of these key highlights are dealt with in detail below, there are several facets to these new changes and inclusions which is explained in depth in the article below. The above mentioned is a summary of the major changes that have been introduced in the Consumer Protection Act, 2019, (“CPA, 2019”)
ANALYSIS OF KEY HIGHLIGHTS
Online transactions included: The definition of a consumer under Section 2(7) has been expanded to include an explanation for the term “buys any goods” and “hires or avails any service”. The explanation clarifies that the said terms include offline as well as online transactions made through electronic means. Therefore, the Act specifically includes e-commerce transactions in its ambit. Along the same vein of assimilating with technology, the CPA, 2019, also allows for e-filing of complaints to the relevant authorities under Section 17. Similarly, the Act also allows for appearance of parties through video conferencing under Section 38(6).
Authorities
a) Central, State and District Consumer Protection Councils: Chapter II (Sections 3-9) envisages the establishment of a three-tiered Consumer Protection Council at the Central, State and District level assuming advisory roles for the purpose of the promotion and protection of consumers’ rights under the CPA, 2019.
(b) Central Consumer Protection Authority: The Act, under Section 10, envisages the establishment of a Central Consumer Protection Authority (“Central Authority”) whose aim is to “regulate matters relating to violation of rights of consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of public and consumers and to promote, protect and enforce the rights of consumers as a class.” The Central Authority is headed by a Chief Commissioner as appointed by the Central Government. It has the power to conduct preliminary inquiry on receipt of consumer complaints or even on its own motion to ascertain whether a prima facie case exists. Apart from its power to pass an order for discontinuation of unfair practices or reimbursements, it may also order for a recall of goods or withdrawal of services.
Pecuniary Jurisdiction The CPA, 2019 has increased the earlier pecuniary limits of the District, State and National Commissions. District Commission has jurisdiction over those complaint where the value of the goods and services paid as consideration does not exceed Rs. 1 crore, for State Commission the amount is fixed as Rs. 10 crores and for the National Commission, a complaint can be filed only if the value exceeds Rs. 10 crores.
Class Action Suits The CPA, 2019, protects the rights of consumers as a class of people. A complaint can be made to the Central Authority, District Collector or Commissioner of a Regional office regarding such violations, who are placed with the responsibility of protecting the rights of such consumers as a class.
Unfair Contracts CPA, 2019 now allows a consumer to file a complaint against unfair contracts which are defined under Section 2 (46). These are those contracts which include terms that cause significant change in the rights of a consumer and include, requiring excessive security deposit from consumer for performance of contractual obligations, imposing disproportionate penalties on breach of contract by consumer, unilateral termination of contract without reasonable cause etc.
False or Misleading Advertisements The CPA, 2019 takes a strong position against the parties disseminating false or misleading advertisements. Misleading advertisements is defined under Section 2(28) which in relation to any product or service means an advertisement which falsely describes, gives false guarantee, misleads consumers, conceals information regarding a product or service. The Central Authority has been given the power to issue directions to discontinue such false or misleading advertisements. Additionally, the Central Authority can also penalize the offenders up to Rs. 10 lakhs. A progressive step taken by the legislators under CPA, 2019, is to place the onus on endorsers of such false and misleading advertisements. Meaning, that an endorser has to necessarily exercise due diligence to verify the veracity of the claims made in the advertisement. If an endorser fails to do so, apart from monetary penalty, s/he can be restricted from endorsing any other product or service for a period up to a year and up to three years in case of subsequent contraventions.
Product Liability Chapter VI of the CPA, 2019 has finally taken the leap to encapsulate product liability claims in its umbrella. While earlier, consumers sought recourse through contract and tort law for defects in products, now they have a streamlined aid in the form of Chapter VI. Product liability, defined under Section 2 (34), highlights the responsibility of a product manufacturer or seller to compensate a consumer for any harm caused to on account of such defective product. Sections 84-87 under Chapter VI further detail the provisions in this regard. Section 84 delineates the liabilities of a product manufacturer which include liability on account of manufacturing defect, non-conforming to the express warranty, failure to contain adequate instructions of correct usage to prevent harm or any warning regarding improper usage etc. It is pertinent to note that the absence of negligence or fraudulent intention would not absolve the manufacturer from its liability, thereby imposing a strict duty of care upon such manufacturer. The liability of a product service provider who is included in the scope of a product seller by virtue of Section 2(37)(b) is expressed under Section 85. A product service provided can be liable for product liability if the service provided was (i) faulty in quality, nature or manner of performance; or (ii) there was an act of omission or commission or negligence or conscious withholding of any information which caused harm; or (iii) the service provider did not issue adequate instructions or warnings to prevent any harm; or (iv) the service did not conform to express warranty or the terms and conditions of the contract. Lastly, under Section 86, a product seller, not being a product manufacturer shall be liable if (i) he has exercised substantial control over the designing, testing, manufacturing, packaging or labeling of a product that caused harm; or (ii) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or (iii) he has made an express warranty of a product independent of any express warranty made by a manufacturer and the product failed to conform to such warranty; or (iv) the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or (v) he failed to exercise reasonable care in assembling, inspecting or maintaining such product. Certain defences, in the form of exceptions to liability, are accorded to the product seller, service provider and manufacturer under Section 87. These exceptions essentially give statutory legitimacy to the defences that have been used in product liability claims. Naturally, if at the time of harm, a product was modified, misused or altered, liability would be exempted. The other defences largely relate to necessary warnings and instructions having been given to the consumer regarding the usage and application of the product. Interestingly, a failure to warn is also exempted from liability in case the dangers are obvious or commonly known or ought to have been known in consideration of the characteristics of the said product.
Mediation CPA, 2019 provides an alternative dispute resolution mechanism of mediation in cases where it is deemed reasonable. For the promotion of mediation, the CPA, 2019 also prescribes the setting up of Consumer Mediation Cells at the State and Central level. Such Mediation Cells is to contain certain empanelled mediators who are recommended by the selection committee consisting of the President and a member of the State or National Commission, as the case may be. A District Commissioner has the authority to refer the parties to settlement through mediation at the time of the first hearing of the complaint. To give finality to the process of mediation, no appeal lies from any order passed pursuant to a consensual settlement reached between the parties.
Power to Review In recognition of the issues surrounding the absence of the power to review by the District and State Commissions in the previous Act, the CPA, 2019 has accorded the power of review to all three bodies i.e. District, State and National Commission under Sections 40, 50 and 60 respectively. The reviewing power is granted to remedy any error apparent on the face of the record, either on its own motion, or on an application preferred by a party.