Consumer Affairs Ministry Releases Draft Consumer Protection Rules For Public Comments

The government has released draft rules under the Consumer Protection Act, 2019 to regulate e-commerce, direct selling of goods and mediation in consumer disputes, among others.

The Act, which was notified in August, aims to enhance consumer rights in a digital economy, expand the scope of grievances one can seek relief against, ease the process of filing complaints against a seller and frame rules around the establishment of district and state dispute redressal commissions.

The Ministry of Consumer Affairs, Food and Public Distribution is seeking public and stakeholder comments on the rules till Dec. 2.

Here's a look at the draft rules:

E-Commerce Rules

The 2019 Act defines e-commerce as buying or selling of goods or services including digital products over a digital network. It aims at preventing unfair trade practices and protecting the interests and rights of consumers in electronic commerce. Now, the government has released draft rules for this purpose.

The rules for e-commerce set out the conditions governing setup and running of e-commerce business, liability of e-commerce entities for non-compliance with applicable laws and regulations, liability of sellers and operational guidelines that an e-commerce entity must adhere to for handling of consumer grievances.

The rules specify that every e-commerce entity in India must become a registered legal entity under the rules in India within a period of 90 days from the publication of the final rules by the central government. The requirement also applies to electronic service providers, which include online marketplaces or auction sites.

With an aim to curb deep discounts and predatory pricing among businesses, the draft rules prohibit an e-commerce entity from influencing price of goods and service or adopt any unfair or deceptive practices.

The rules mandate an e-commerce entity to prevent unfair advertising by ensuring that the advertisements are consistent with the actual characteristics of goods. With the increasing concern around data privacy, the rules put the onus of protecting “personally identifiable information” of a consumer on the e-commerce platform.

Rules For Direct Selling Of Goods

Prior to the passage of the 2019 Act, direct selling and multilevel marketing were regulated under various guidelines issued by state governments and the central government. Now, the regulation of these activities has been brought under the ambit of the Ministry of Consumer Affairs, Food and Public Distribution.

The rules define direct selling as marketing, distribution and sale of goods or provision of services directly to the consumer otherwise than through a permanent retail location. Every direct-selling entity must be a registered legal entity in India.

The rules prohibit a direct-selling entity from making any misleading or deceptive recruiting practices for prospective and existing direct sellers. In order to establish and protect the rights of a direct seller and distributor, the rules require a direct-selling entity to enter into a direct-selling contract with them.

Such contract, as per the rules, must contain fair terms and provide for a reasonable cooling-off period—a period when a seller can terminate the agreement without being subjected to penalty.

Rules For Mediation In Consumer Disputes

To reduce the pendency of cases at the dispute redressal commissions, the 2019 Act emphasised on alternative dispute resolution including mediation. The Act defines mediation as “the process by which a mediator mediates consumer disputes”. The ministry has now released the rules framing the details of a mediation process.

A district commission may direct parties to settle disputes by mediation if it thinks that a consumer dispute has elements which can be resolved through such process. Mediation, however, is not mandatory and parties can opt out of such mediation process.

The rules envisage establishment of a mediation cell comprising of mediators nominated by the national council which would help disputing parties to arrive at a compromise through its procedure. The rules keep the following matters out of the scope of mediation:

• Medical negligence resulting in death or grievous injury
• Cases involving serious and specific allegation of fraud, forgery, impersonation etc.
• Cases involving prosecution for criminal and non-compoundable offenses.

Except certain instances, the rule prohibits parties under an ongoing mediation to resort to any judicial or arbitral proceedings for the same dispute or matter.

Consumer Disputes Redressal Commissions

The 2019 Act envisaged a three-tier structure by providing setting up of a consumer dispute redressal commission at the district, state and national level. The commissions will exercise jurisdiction on consumer complaints based on the value of the goods or services paid as consideration.

The draft rules specify that the National Commission—the apex body under the 2019 Act—will be based out of New Delhi and also lays down the procedure to be adopted by the national, state and district commissions for hearing of appeals and complaints filed by consumers.