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The New Consumer Protection Bill – What’s in store? - Part-II
Nishant Shah, Partner, Economic Laws and Practice
Pranav Pagaria, Senior Associate
Sachin Jain, Associate Manager
The New Consumer Protection Bill – What’s in store?
The Consumer Protection Bill, 2019 ("Bill"), which got passed in the Lok Sabha on 30 July 2019 and in Rajya Sabha on 06 August 2019 to substitute the three decade old Consumer Protection Act, 1986 ("the Act") was a need of the hour for the country which is being significantly making a mark on the global map. As mentioned in conclusion to PART I of our article, we have herein below analysed some of the new concepts introduced by the Bill.
A. Misleading Advertisements and Endorsements
Our Constitution provides for the fundamental right to freedom of speech and expression which allows an individual to speak or share through various media, their thoughts and ideas. However, this right comes with the obligation to use it responsibly. Many times we are bombarded with false or misleading advertisements, right from fairness creams with guaranteed “fair skin in four weeks” to “taller, stronger and sharper” children.
While the Consumer Forums dealt with the subject matter of misleading advertisement in the past by adjudicating complaints filed by consumers on the subject matter, but as the term is not defined in the Act, it creates room for subjectivity and varied interpretations by authorities.
The Bill for the first time provides a definition and states that a misleading advertisement includes an advertisement which:
(i) falsely describes a product or service; or
(ii) gives false guarantees that mislead consumers about a product or service; or
(iii) convey representations, which if made by the manufacturer, seller or a service provider would constitute unfair trade practice; or
(iv) deliberately conceals important information.
Misleading advertisement by Manufacturer / Service Provider – an offence under the Bill
Any false or misleading advertisement released by manufacturers or service providers that is prejudicial to consumer interests shall be punishable with imprisonment upto five years and/or fine upto INR 50 lakhs or both.
...This is also a first as the Act never provided penal consequences for misleading advertisements. Introduction of criminal prosecution for misleading advertisements is expected to compel manufacturers / service providers to release advertisements with caution and within the contours of the prescribed legal framework.
Liability of product endorsers
The Bill not only for the first time provides for penal implications on the advertiser, but also extends it to the endorser. Product endorsers exercise direct and immediate influence on the consumer and propel them to use / consume endorsed products. This makes their inclusion in the Bill atmost relevant. However, the Bill does not define an "endorser". It is therefore susceptible to varied interpretations.
The Bill states that an endorser shall also be liable along with the product manufacturer, which is novel. The Bill empowers the Regulator to impose a minimum penalty of INR 10 Lakhs which may extend upto INR 50 lakhs on an endorser, if it concludes that an advertisement by him or her, is misleading the consumers. It may also prohibit such endorser from making endorsement in respect of any product or service for a period which may extend to three years.
However, an endorser would be exempt from such penalty if he can prove, that he or she exercised due diligence to authenticate claims made in such advertisement. It is imperative to note that there is no prescription in the Bill on how the due diligence should be carried out, making it subjective.
Such imposition of penalties on endorsers is expected to cause them to consciously select endorsements in compliance with the regulations and also as a protective measure seek to relook into their endorsement obligations.
B. Product Liability
Product liability as a concept, though exists in other international jurisdictions (such as USA, UK etc), was not conspicuous under an Indian statute, and is introduced through the Bill for the first time.
..."Product liability" covers situations when product manufacturers, sellers or service providers are held liable for compensating a consumer for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.
The Bill brings the product manufacturers, sellers and service providers under the lens by making them liable for product liability claims.
A product liability complain can be filed in case the product has manufacturing defect, defective design, deviation from the manufacturing specification, non-conformity with express warranty, etc
A product manufacturer shall be liable in a product liability action even if he proves that he was not negligent or fraudulent in making the express warranty of a product
Similarly, complain against a service provider can be filed in cases of imperfect or inadequate or deficient quality, nature or manner of performance of service, non-conformity of express warranty, etc. A product reseller can also be made liable for product liability in certain specific scenarios detailed in the Bill.
This clause is bound to make manufacturers, sellers and service providers extra vigilant in ensuring their products, services meet the test of the expectations under these regulations. Needless to say that this is a pro-consumer measure, which will enable consumers obtain timely relief.
C. Unfair contracts
As the name suggests, the term “Unfair contracts” is to be read in the context of protecting consumer against contracts with manufacturer, trader or service provider which can cause significant change in the rights of the consumer such as requiring excessive security deposit, disproportionate penalty imposition, refusing to accept early repayment of debt on imposition of penalty, etc.
Inclusion of this regulation seems to have been influenced by jurisdictions such as Europe where the terms of unfair contracts are governed by EC Directive 93/13/EEC issued in the year 1995.
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Unbalanced contracts which unarguably swing in favour of businesses have been in vogue prominently in sectors such as Real Estate, Financial Services, etc; As the Act does not provide any remedy at this juncture, consumer(s) grapple with such undue terms and are bound by them. The Bill now provide for protection of such consumer(s) to seek appropriate remedy on this front.
D. E-Commerce
Taking cognizance of the impact of digital economy on the modern-era businesses, the Bill paves way for formal inclusion of guidelines regulating e-commerce sector to protect consumer interest.
The non-territorial nature of electronic commerce throws up newer confronts to consumer protection in India and the move to regulate e-commerce sector in the Bill therefore is a remarkable steppingstone towards modernisation of the law.
E-commerce Guidelines for Consumer Protection 2019" ("Draft Guidelines") released by the government for public comments, aim to prevent fraud, unfair trade practices and protect the legitimate rights and interests of consumers against E-tailers from influencing pricing, adopting unfair promotion methods or misrepresenting the quality of goods and services. The Draft Guidelines will further boost consumer protection initiatives under the Bill.
E. Mediation
The Bill proposes that if a consumer forum upon admitting a complaint anticipates that a settlement between parties is possible, then it may instead refer parties to mediation as per the stated procedure rather than adjudicate the dispute itself. To give an impetus to mediation, the Bill authorizes both central and state governments to establish consumer mediation centres, which shall be attached to the Consumer Forums. The Act did not provide parties recourse to mediation and directed them only towards Consumers Forums for dispute resolution. Consumer disputes may, at times, arise over trivial issues, which can be resolved by mediation thereby reducing the burden on consumer forums and increasing time and cost efficiencies.
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F. Territorial jurisdiction
Under the Act, a complaint can be filed before a Consumer Forum, where (i) the opposite party resides or carries on business or has a branch office or works for gain, or (ii) any of the opposite parties, if more than one, actually reside, carry on business or have a branch office or works for gain, provided the permission of the consumer forum is procured or where the opposite party does not reside or works for gain acquiesce to the jurisdiction of a consumer forum, or (iii) the place where the cause of action wholly or partly arises.
The law relating to jurisdiction has been tested in Indian court of law and there have been varied decisions. District Forums have expressed adverse opinions with respect to jurisdiction to accept complains in case of online transactions.
The Bill adds to the territorial jurisdiction of Consumer Forums by stating that a consumer can now file complaints before a consumer forum where he or she resides or works for gain. Indeed, this simplifies the consumer grievance redressal process from an aggrieved consumer's perspective and will make the process of filing complain seamless and convenient for the consumer. It will have a converse effect on the businesses as they are likely to face consumer complaints in every part of the country, which certainly is an onerous obligation. There is a need to address this concern. Also, provisions for consolidation of same / similar complaints in different parts of the country, before a single redressal forum may go a long way to facilitate businesses.
Conclusion
While the Bill is definitely a step in the right direction and shall strengthen consumer rights and sentiment in the foreseeable future, it is imperative that businesses critically evaluate every facet of their operations to ensure that there is due cover from any possible allegation under the Bill.
...While it may not be possible to restrain a consumer from filing a complaint, a justifiable explanation or a Company policy redressing such complains may go a long way in facilitating businesses to overcome the concerns likely to emanate from the Bill.