Introduction – Objective of Consumer Protection Act, 2019
Consumer Protection Act, 2019 (hereafter referred to as the New Act or CP Act, 2019) has come into force effective July 20th, 2020. The 2019 act replaces the erstwhile Consumer Protection Act, 1986. There has been enormous transformation in the business and commerce space in the last three decades. The emergence of e-commerce, digital payment gateways and global supply chains have led to easy access to large variety of goods and services across the globe for consumers. This modernization has also rendered the consumer vulnerable to newer forms of unethical and unfair trade practices. E-Commerce has posed newer set of challenges that required the legislative intervention to enact the laws keeping in mind consumer interest in the modern trade and market conditions. With the objective of protection of the interest of the consumers and timely and effective settlement of consumer disputes the Act of 2019 majorly covers the shortcomings in the 1986 Act.
In this Article, we discuss on the key highlights of the new Consumer Protection Act 2019 that has come into force effective July 20th, 2020 as compared to 1986 Act, the key takeaways for consumers as well as online businesses (specifically the E-Commerce companies).
Key Highlights of the Consumer Protection Act, 2019
Inclusion of E-Commerce Online Businesses and Service Providers –
The new Act has widened the definition of ‘Consumer’. The goods bought or services hired now includes both offline transactions and online transactions through electronic means or teleshopping or direct selling or multi-level marketing.
This has been the biggest change in the Act and has widened the scope of the application of the Act to all forms of business channels whether offline i.e. physical brick-and-mortar shops or online e-commerce stores, multi-channel as well as hybrid models (Buy online Pick Up in store).
Expansion of Jurisdiction –
Territorial Jurisdiction of District Commission:
The CP Act 2019, has introduced the institution of complaint at the District Commission where the complainant resides or personally works. This is in addition to the place of residence or place of business or place of branch office of the opposite party or the place where cause of action arose provided by the CP Act, 1986. This fundamentally makes the preferred place of the institution of complaint as the place of residence or place of work of the aggrieved person.
Pecuniary Jurisdiction:
As per the revised pecuniary limits in CP Act, 2019:
- District Commission can entertain consumer complaints where the value of goods or services paid as consideration does not exceed Rs. 1 Crore (earlier value of good bought and services availed in 1986 Act was up to Rs. 20 Lakhs).
- State Commission can entertain consumer complaints where the value of goods or services availed paid as consideration exceeds Rs. 1 Crore but does not exceed Rs. 10 Crores (earlier value of goods bought or services availed in 1986 Act was between Rs. 20 Lakhs and Rs. 1 Crore).
- National Commission can entertain consumer complaints where the value of goods or services paid in consideration exceeds Rs. 10 Crore (earlier value of goods bought or services availed in 1986 Act was above Rs. 1 Crore).
An important aspect of this change in the pecuniary limits is the determination of the jurisdiction based on the ‘Paid Consideration’ and not on the value of goods bought or services availed. The law settled earlier in the Ambrish Kumar Shukla Judgement1 while referring to CP Act, 1986 provided the determination of the jurisdiction under the 1986 Act based on the value of the goods bought or services availed including compensation. However, with the CP Act, 2019, there has been substantial change in the determining provision. It now refers to the ‘Paid Consideration’ for buying the goods or availing the services by the complainant for deciding the pecuniary jurisdiction in the consumer matters.
This has recently been clarified in an order by National Commission in the case of Pyaridevi Chabiraj Steels2 where NCDRC has clarified on the interpretation of the CP Act 2019 Section 58 (a) (i) stating that the sole criterion of determination is the value ‘Paid as Consideration’ and not the total value of goods and services.
…it is amply clear that for determining the pecuniary jurisdiction of the District Commission, State Commission or National Commission the value of the goods or services paid as consideration alone has to be taken and not the value of the goods or services purchased/ taken.
NCDRC in PYARIDEVI CHABIRAJ STEELS PVT. LTD vs. NIC LTD. & ORS. 2
This has a far reaching impact on certain types of cases like Insurance and Property matters where the initial consideration paid is less than total value of the goods and services. For example, the Insurance Premium as discussed in the case of Pyaridevi Chabiraj Steels2 determined the pecuniary jurisdiction and not the losses or the insurance value claimed. Another ramification of this change will be huge increase in the volume of cases to be handled by the District Commissions. The State and National Commission will primarily play the role of Appellate bodies as large number of cases will fall out of their original jurisdiction. The cascading effect will be on the endeavor to decide the complaint within a period of 3 months from the date of receipt of notice by the opposite party, as stated under the CP Act, 2019.
Applicability – New Grounds
The CP Act, 2019 expands the definition of ‘Unfair Trade Practice’ and introduces the ‘Unfair Contract’ definition. Some of these follow from various pronouncements by the Consumer Forums under the previous act.
Unfair Contract:
‘Unfair Contract’ definition covers the contracts between Manufacturer, Trader or Service Provider on one hand and a consumer on the other hand, having such terms which cause significant change in the rights of the consumer.
This covers the contracts that include:
- excessive security deposits for performance of contractual obligations
- unreasonable penalty to consumer disproportionate to the loss occurred due to breach of contract
- refusal to accept early repayment of debts on payment of applicable penalty
- entitling a party to terminate such contract unilaterally without reasonable cause
- assignment of contract to the detriment of other party
- unreasonable charge, obligation or condition to the disadvantage of consumer
Basically these cover the one sided contracts or unconscionable contracts wherein the parties do not have the proportionate bargaining power.
Unfair Trade Practices:
Under the Unfair Trade Practices, the CP Act 2019 now includes:
- non-issuance of bill or cash memo or receipt for the goods or services
- refusal to return defective goods or withdrawal of deficient goods or services along with refund to consumers
- disclosure of personal information of consumer to 3rd party unless such disclosure is in accordance with provisions of any law (this is in consonance with the provisions of Information Technology Act, 2000 and the forthcoming Personal Data Protection Bill, 2019 that is currently under review by a Joint Parliamentary Committee)
E-Filing of Complaints –
The procedure for filing of complaints under the CP Act 2019 also includes the electronic filing of complaints at the forum having jurisdiction to try the complaint. This also provides for hearing or examination of parties through video conference where an application is made in this regard. This is a big step towards streamlining the procedure for the benefit of litigants.
Establishment of Central Consumer Protection Authority –
The CP Act, 2019 provides for establishment of Central Consumer Protection Authority or CCPA – a regulatory authority to safeguard the interests of public and consumers and for enforcement of the rights of consumers as a class. CCPA has been established vide notification dated 24th July 2020. CCPA comprises of a Chief Commissioner and other commissioners and is headquartered at New Delhi.
Investigation Wing of the CCPA shall be headed by a Director General for the purpose of conducting inquiry or investigation under the CP Act, 2019.
A complaint relating to violation of consumer rights or unfair trade practices or false or misleading advertisements prejudicial to the interests of consumers as a class may be filed under the provisions of the new CP Act, 2019. This has the flavor of class action law suits prevalent in the western jurisdictions of the world.
CCPA has wide powers under the Act and can initiate investigation upon complaint or suo motu, can intervene in proceedings before the District, State and National Commissions, recall hazardous or dangerous products or services, order reimbursement of price of goods or services recalled, cancel licenses and penalize for false or misleading advertisements.
Product Liability Concept & Penal Consequences –
The CP Act, 2019 introduces the concept of Product Liability. This covers the action for any harm (injury or damage) caused by a defective product manufactured by a product manufacturer or services by a service provider or sold by a product seller (includes E-Commerce Platforms). The Act provides for Strict Liability on the Product Manufacturer in case of defective goods or products that do not conform to the express warranty causing harm to the consumer even if he was not negligent or fraudulent in making the express warranty of the product. The Act also provides for Liability for Product Service Provider and Product Seller and provides for exceptions for action against product seller and manufacturers like cases where the product was misused, altered or modified, or usage against the instructions, usage of product under alcohol etc.
Misleading Advertisements – Penalties on the Manufacturer as well as the Endorser –
The CP Act, 2019 sets the liability for product endorsers or the brand ambassadors along with the product manufacturers in the cases of false or misleading advertisements that are prejudicial to the interest of consumers or in contravention of consumer rights. Apart from the directions to discontinue such advertisements, the CCPA may impose a penalty of up to Rs 10 Lakhs on the manufacturer or endorsers in such cases. The penalty further extends to Rs 50 Lakhs in case of subsequent contraventions. The CCPA may prohibit endorser from endorsing for any product or service for up to 1 year. For subsequent contravention the bar extends up to 3 years.
The Act also considers false or misleading advertisements as an offence and provides for punishment for up to two years for manufacturers or service providers in such cases along with fine of Rs 10 Lakh. Subsequent offence attracts a punishment of up to five years’ imprisonment along with fine of Rs 50 Lakhs.
There have been numerous cases in the recent past wherein celebrity endorsements have been used as a ploy to dupe unsuspecting individuals. Plethora of complaints have been filed in the cases of investments schemes or properties endorsed by celebrities or cases of hazardous or harmful products etc. The CP Act, 2019 ensures that the celebrity endorsers take onus of their actions and exercise due diligence before taking up any such engagement with the manufacturers.
Criminal Liability under the Act
Non compliance of CCPA directions and false or misleading advertisements have been considered as an offence to be tried upon receiving a complaint by Central Authority. Criminal Liability has also been imposed for Manufacturing, Selling, Storing or Distributing or Importing Adulterated goods or Spurious good with higher degree of punishment for cases where consumers have suffered injury, grievous hurt or death. The punishment varies from imprisonment of six months along with fine, for cases where there has been no injury to imprisonment of not less than seven years, which may extend to life imprisonment along with fine, for cases which have resulted in death of a consumer. These provisions have been incorporated with stricter punishment than the provisions related to adulteration contained in IPC. The degree of liability is similar to the liability of offences related to adulteration contained in the Food Safety and Standards Act, 2006.
Alternate Dispute Resolution Provisions –
The Act provides for establishment of a consumer mediation cell attached to each of the District Commission, the State Commission and the National Commission. Mediation as an ADR mechanism is effective step in fast tracking the adjudication process wherever feasible. This will help in speedier resolution and reduction in pendency of cases. There shall be no appeal against settlement through mediation.
What are the key takeaways for Consumers?
The Consumer Protection Act, 2019 is a welcome step for consumers as adequate measures have been taken to safeguard their interests and also to enforce their rights while addressing the shortcomings of the earlier Act. Inclusion of E-Commerce Platforms and Sellers under the ambit of Consumer Protection Act, protection against unfair trade practices and unfair contracts, class action claims, product liability action, protection against misleading advertisement and penalties against spurious and adulterated goods are certain actions that protect against emerging vulnerabilities of the consumers as well as provide effective redressal mechanisms to consumers. Introduction of mediation is an effective step in providing speedier disposal of cases and amicable resolution amongst the parties.
What are the key takeaways for Manufacturers, Traders, Service Providers, E-Commerce Platforms and Sellers?
The Consumer Protection Act, 2019 provides for stricter provisions for the manufacturers, traders, service providers and E-Commerce platforms. Considering the provisions of the Act, there is a need for specific emphasis on effective redressal mechanism within the organizations. The organization policy objective should be to increase customer relationship engagement as well as to strive for maximum FCRs (First Call Resolutions) in case of complaints by customers. Organizations should also focus on maintaining digital and electronic footprints of the product lifecycle and customer touchpoints, to present as evidence in case there is a dispute. Alternative Dispute Resolution mechanism should be explored for faster and amicable disposal of cases.
Regulatory Compliance under the Consumer Protection Act, 2019
Considering the penalties and liabilities provided in the CP Act, businesses must be vigilant of the legal and regulatory compliance requirements. Consumer Protection E-Commerce Rules, 2020 apply to all e-commerce platforms including marketplaces and inventory based models, online sellers, single or multi brand online channels or multi-channel retail businesses. The Rules provide for duties as well as liabilities for the online businesses in India. It is important for the businesses to take appropriate measures and legal advice for ensuring regulatory compliance and to mitigate the risks associated with non-compliance.
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- Ambrish Kumar Shukla v. Ferrous Infrastructure Pvt. Ltd., 2016 SCC Online NCDRC 1117
- M/S. Pyaridevi Chabiraj Steels Pvt. Ltd. v. National Insurance Company Ltd. & Ors. Consumer Case No. 833 OF 2020 NCDRC
Note: Read the key scenarios in which consumer can file a complaint under the Consumer Protection Act, 2019 here.