Consumer Protection Act 2019 Ushers In More Benefits For Consumers

With a view to enhance consumer rights in a digital economy, expand the scope of grievances consumers can complain against and ease the process of filing complaints, the government has introduced the Consumer Protection Act, 2019. The new law, notified on Aug. 9, repeals the three-decade old Consumer Protection Act, 1986.

Why A New Law?

New modes of business like telemarketing, direct selling, multilevel marketing and e-commerce—which were not envisaged three decades back—have made consumers more vulnerable to unfair trade practices. The existing legal framework—the 1986 Act, rules, guidelines and circulars issued by the Consumer Ministry—had failed to address these emerging issues. Earlier, direct selling and multilevel marketing were regulated through guidelines issued by state governments and the consumer affairs ministry. The new Consumer Protection Act brings these activities in its fold.

Besides expanding the scope of grievances that consumers can complain against, the new framework also gives the regulator suo motu powers. The 1986 Act had a three-tier structure which could be utilised by an aggrieved consumer for adjudicating any complaint. However, it did not provide for a regulator which could initiate or intervene on a preventive basis. For instance, direct product recalls or withdrawal of services which are dangerous or unsafe, directing discontinuation of unfair practices or reimbursement of the price of recalled goods and services to the consumers.

The authority may:

• Direct recall of food products, which are not in adherence with the standards prescribed by the food safety authority and other regulators in India. Nestle India Ltd. had to recall its popular product Maggi after a ban was imposed by the Food Safety and Standards Authority of India.
• Direct recall of vehicles in the automobile sector on account of faulty spare parts or manufacturing defects. Currently, automakers recall products based on a voluntary industry protocol. Recently, Maruti Suzuki Ltd. recalled vehicles on account of faults in their fuel systems.
• Amway, a direct seller in India had to recall its tablets and products under the Nutrilite brand pursuant to directions issued by the food regulator.

By proposing the establishment of a Central Consumer Protection Authority, the Consumer Protection Act, 2019, creates a regulatory structure on a par with advanced global jurisdictions like the U.S. and U.K.

Seeking redressal of disputes in a consumer court is an expensive and long-drawn process, and there was a need for a central authority that can take actions on a preventive basis, Bejon Misra, board member and consumer policy expert at
Consumer Online Foundation, told Bloomberg Quint.

"The Central Consumer Protection Authority can initiate preventive action against deceptive trade practices prevailing in the market or may direct recall of unsafe food items which do not adhere to the standards prescribed by the regulatory authorities. Unethical trade practices can also be curbed on a preventive basis,” said Misra.

The formation of this central authority will also ensure prompt action in cases where the state governments fail to deal with consumer issues. Misra pointed to a Right to Information application filed by the Consumer Online Foundation to say that the state governments haven’t been doing enough to protect consumers as the budget allocation for it is often clubbed with food and civil supplies department.

New Problems, New Remedies

Changing business models can create new sets of problems for consumers. For instance, who is a seller on an online marketplace—the actual seller of goods or the website platform? The Consumer Protection Act, 2019, through regulations that are yet to be notified, will specify that. Additionally, by introducing the concept of product liability and protection against unfair contracts, the new framework expands the scope of grievances that consumers can complain against.

Product Liability: A consumer can claim compensation under a product liability action for a ‘harm’ caused to him due to deficiency in a product or service. Although, under the 1986 Act, the district, state and national commissions could allow claims as a result of mental agony, what qualified as ‘harm’ wasn’t specified. The 2019 Act provides a statutory ground to consumers by defining harm and injury to include stress and mental agony.

A product liability action will lie against the manufacturer if its product has manufacturing or design defects or if it deviates from manufacturing specifications or express warranties, said Swathy Satyamurti, director of operations at Consumers Association of India.

Unfair Contracts: A contract between a manufacturer or trader and consumer will be deemed to be unfair under the Consumer Protection Act, 2019, if it causes a significant change in rights of a consumer. Contractual terms which specify excessive security deposits, provide for unilateral termination or assignment without consent of other party are among the several grounds which render a contract unfair. The 1986 Act did not provide consumers with a single forum against such contracts.

For instance, in 2018, homebuyers of DLF Ltd.’s residential project in Gurgaon had complained to the Competition Commission of India, alleging that DLF imposed unfair and arbitrary contractual terms in the buyer’s agreement. But the CCI had dismissed the complaint on grounds that DLF wasn’t dominant in the relevant market. Such homebuyers can now seek relief under the new Act as it allows protection against unfair contracts.

Cases relating to unfair contracts can only be heard by the State and National Commissions. Experts pointed to lack of expertise at district commissions as a reason for this stipulation.

False and Misleading Advertisements: Under the new law, a consumer can file a complaint with the Central Consumer Protection Authority against any advertisement which gives or conveys false description of a product or service or contains a representation constituting an unfair trade practice etc. The authority can direct the Director General—its investigation wing—to investigate complaints against misleading advertisement by any person if a prima facie case is established against the advertiser.

In a complaint for misleading advertisement for an unfair trade practice that involves false guarantee or warranties, the new law said the burden of proof will lie upon the person raising a defense that the guarantees were based on adequate and proper test.

The new law not only expands the universe of grievances, it also makes it easier for consumers to file them. The 2019 Act emphasises on speedier adjudication of complaints by allowing electronic filings and notices by an aggrieved consumer. There was no provision for e-filing under the 1986 Act.

Jurisdictional Changes

Jurisdiction under the 2019 Act will be decided on the basis of ‘value of goods or services paid as consideration’ by the consumer. The threshold for pecuniary jurisdiction of the commissions are:

• District Commission: Rs 1 crore.
• State Commission: Rs 1 crore to Rs 10 crore.
• National Commission: Exceeding Rs 10 crore.

Enhancement of jurisdiction amounts at all levels reflects the escalation in commodity prices in the last 30 years, Ashim Sanyal, chief operating officer of Consumer Voice, told Bloomberg Quint, adding this will help consumers as now, matters up to Rs 1 crore can be addressed by district courts which are most accessible to consumers.

A consumer can approach the District, State or National Consumer Dispute Redressal Commission for :

• Initiating a product liability action against a product manufacturer, seller or product service provider for the harm caused due to any defective product manufactured or sold or due to deficiency in services relating to the product.
• Consumer disputes for defect in goods supplied.
• Unfair trade practice in sale of goods or provision of services.
• Violation of consumer rights.

Violation of rights of consumers as a class and complaints against misleading advertisements can only be reported to the Central Consumer Protection Authority. The new law allows consumers having the same interest to file a complaint with the Authority.

Class action suits were already allowed under the 1986 Act, too but, in effect, it was largely incumbent on the consumers to organise themselves into a class and courts were required to recognize such a class, Vaibhav Kakkar, partner at L&L Partners, explained.

While the provisions under the new law are beneficial, there is room for improvement in the implementation of the Act and its enforcement, Satyamurti said.

Much more needs to be done to ensure the accountability of public services and utilities like transport systems or municipalities, Misra pointed out. Similarly, in the aviation sector, too, consumer rights are being neglected.

Structure-wise, the recruitment process of members for the district, state and national commissions is worrying, Sanyal said. The 2019 Act said the qualification criteria and term of office of these members will be notified via rules. “This may lead to favoritism, political interference and quality compromises,” Sanyal said. Further, the new law has failed to address the issue of pendency as well, he said.