The Consumer Protection Act, 2019 -boon or bane
Dr Shatadru Sengupta
There is a new law enacted to which not many in industry have been sensitized. This is the Consumer Protection Act, 2019 (“the new Act”), and it replaces the existing Consumer Protection Act, 1986 (“the 1986 Act”).
The new act has many unique features, introduces new concepts not seen thus far in the Indian regulatory landscape, and is a clear break from the past. While its intentions are laudable and consumers will no doubt be empowered and benefited, there are significant risks for all consumer-facing industries, members of which will be well-advised to familiarize themselves with the provisions of the new Act and prepare to face the challenges posed by it to their current way of working.
Statement of objects and reasons of the Consumer Protection Bill, 2019
The SOAR acknowledges that there have been shortcomings in the 1986 Act, including as to the speed of disposal of cases. Furthermore, it notes that consumer markets for goods and services have undergone drastic transformation since the enactment of the 1986 Act. It goes on to say that the modern marketplace contains a plethora of products and services and that the emergence of global supply chains, rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services and have provided new options and opportunities for consumers. It cautions us that the consumer has been rendered vulnerable to new forms of unfair trade and unethical business practices. Lastly, it calls out misleading advertisements and new channels such as tele-marketing, multi-level marketing, direct selling and e-commerce, which pose new challenges to consumer protection and will require appropriate and swift executive interventions to prevent consumer detriment. Hence the need for the Bill / the new Act.
Some critical definitions
Under the new Act, the definition of “deficiency” has been expanded to include:
(i) any act of negligence or omission or commission which causes loss or injury to the consumer; and (ii) deliberate withholding of relevant information from the consumer.
Furthermore, for the first time, consumer rights have been explicitly defined, and inclusively so, as including :
(i) the right to be protected against the marketing of goods, products or services which are hazardous to life and property;
(ii) the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices;
(iii) the right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices(iv) the right to be heard and to be assured that consumer’s interests will receive due consideration at appropriate fora;
(v) the right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and
(vi) the right to consumer awareness;
Interestingly, “misleading advertisement” has now been defined for the first time and explicitly, thus : “misleading advertisement” in relation to any product or service, means an advertisement, which—
(i) falsely describes such product or service; or
(ii) gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or
(iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or
(iv) deliberately conceals important information;
Very relevant to the food industry, it may be noted that for the first time, “goods” have been defined to include food.
The new Act recognizes that many contracts or dealings or arrangements involving consumers can be one-sided or skewed against the consumer, and thus introduces the definition of “unfair contract” thus : “unfair contract” means a contract between a manufacturer or trader or service provider on one hand, and a consumer on the other, having such terms which cause significant change in the rights of such consumer, including the following, namely:—
(i) requiring manifestly excessive security deposits to be given by a consumer for the performance of contractual obligations; or
(ii) imposing any penalty on the consumer, for the breach of contract thereof which is wholly disproportionate to the loss occurred due to such breach to the other party to the contract; or
(iii) refusing to accept early repayment of debts on payment of applicable penalty; or
(iv) entitling a party to the contract to terminate such contract unilaterally, without reasonable cause; or
(v) permitting or has the effect of permitting one party to assign the contract to the detriment of the other party who is a consumer, without his consent; or
(vi) imposing on the consumer any unreasonable charge, obligation or condition which puts such consumer to disadvantage;
The new Act introduces “product liability” to mean the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.
Risks for endorsers
For the first time, endorsers of products or services can be penalized by the relevant authority. The new Act lays down that if the Central Authority is of the opinion that it is necessary to impose a penalty in respect of false or misleading advertisement, by a manufacturer or an endorser, it may, by order, impose on manufacturer or endorser a penalty which may extend to ten lakh rupees; provided that for every subsequent contravention by a manufacturer or endorser, a penalty which may extend to fifty lakh rupees, may be imposed.
Prison terms for adulteration : Very relevant to the food industry, the following punishments have been introduced by the new Act :
- Grievous hurt to consumer :Upto 7 years prison and Rs. 5 lakhs fine
- Death of consumer : Minimum 7 years to Life imprisonment, and Rs 10 lakhs fine
A relevant definition of “Adulterant” has been included in the new Act, meaning any material including extraneous matter which is employed or used for making a product unsafe. The burden of proof to prove otherwise will naturally lie on the food industry.
A new regulator-cum-enforcer
The CCPA : A new statutory authority, the Central Consumer Protection Authority, or the CCPA, is created by the new Act. The CCPA will have wide powers to regulate matters relating to violation of consumer rights, 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. It will have an Investigation Wing headed by a Director-General. The CCPA has powers as follows :
a) protect, promote and enforce the rights of consumers as a class, and prevent violation of consumers rights under this Act;
(b) prevent unfair trade practices and ensure that no person engages himself in unfair trade practices;
(c) ensure that no false or misleading advertisement is made of any goods or services which contravenes the provisions of this Act or the rules or regulations made thereunder;
(d) ensure that no person takes part in the publication of any advertisement which is false or misleading
The CCPA has further powers to do things as follows :
- inquire or cause an inquiry or investigation to be made into violations of consumer rights or unfair trade practices, either suo motu or on a complaint received or on the directions from the Central Government
- review the matters relating to, and the factors inhibiting enjoyment of, consumer rights, including safeguards provided for the protection of consumers under any other law for the time being in force and recommend appropriate remedial measures for their effective implementation
- recommend adoption of international covenants and best international practices on consumer rights to ensure effective enforcement of consumer rights
- encourage non-Governmental organisations and other institutions working in the field of consumer rights to co-operate and work with consumer protection agencies. This is particularly worrisome to industry
- mandate the use of unique and universal goods identifiers in such goods, as may be necessary, to prevent unfair trade practices and to protect consumers’ interest issue safety notices to alert consumers against dangerous or hazardous or unsafe goods or services
- pass orders for recall of goods or withdrawal of services which are dangerous, hazardous or unsafe (and also order reimbursement of prices to purchasers)
Matters of concern
The new Act empowers the Director-General (DG) with powers of search and seizure. Not unlike income tax and other tax laws, raids by the DG can be conducted on industry. The new Act provides that the CCPA may, after receiving any information or complaint or directions from the Central Government or of its own motion, (i.e. at its own discretion) conduct or cause to be conducted a preliminary inquiry as to whether there exists a prima facie case of violation of consumer rights or any unfair trade practice or any false or misleading advertisement, by any person, which is prejudicial to the public interest or to the interests of consumers and if it is satisfied that there exists a prima facie case, it shall cause investigation to be made by the Director-General or by the District Collector.
In a nutshell, therefore, industry needs to be aware of the changes brought about by this new consumer law, and by means of appropriate representations by industry associations to the relevant authorities, ensure that there is a balance between the interests of all stakeholders, be they consumers or industry, so that the noble intentions of the new Act are carried into effect without causing undue harm to industry and without diluting the ease of doing business in India.
(Dr Shatadru Sengupta is Senior Director-Legal, Hardcastle Restaurants Pvt Ltd. Views expressed are personal.)