In December 2017, in a discussion in the Rajya Sabha, Vice President M. Venkaiah Naidu mentioned his experience with purchasing a counterfeit weight loss medicine for which he paid money but never received any medicine. Subsequently, then Consumer Affairs Minister Ram Vilas Paswan promised that a new law on consumer protection would be tabled[1], and the same was introduced as a bill in the Lok Sabha on July 8, 2019. The Consumer Protection Act, 2019[2] (“Act”) came into effect on August 09, 2019 repealing the Consumer Protection Act, 1986 (“1986 Act”).
The new Act seeks to address the issues governing consumer protection in light of the rise of online consumers, online stores and retailers and the dynamically changing socio-economic developments. The Act seeks to tighten the rules prevailing around consumer protection and increases measures to safeguard consumer rights, substantially enhancing the scope of protection provided to the consumers. Key highlights of the Act are enumerated below:
- Consumers and electronic service providers: The references to ‘buying goods’ and ‘avails services’ in the definition of a ‘consumer’ include transactions in all modes and stages of the sale process, whether offline or online through electronic means, teleshopping, direct selling or multi-level marketing. Specifically, an electronic service provider (“ESP”) has been defined to include any person providing technology services to enable a product seller to engage in advertising or selling any goods or services to customers.
- Definition of ‘goods’: The definition of ‘goods’ has been amended to include ‘food’ (as defined under the Food Safety and Standards Act, 2006), bringing in food delivery platforms within the domain of the Act. Further, while ‘telecom’ has been added to the definition of ‘services’ to bring telecom service providers within the purview of the Act, such inclusion has not been worded as ‘Telecommunication service’ as defined under the TRAI Act.
- Filing of Complaints: Consumers have been granted the flexibility to file complaints with the jurisdictional consumer forum located at the place of residence or work of the consumer. This is a big departure from the 1986 Act wherein the jurisdiction for complaints was the place of purchase or at the place of registered office of the seller. Provisions for electronic filing of complaints and hearings through video conferencing have been introduced.
- CCPA: A regulatory authority known as the Central Consumer Protection Authority (“CCPA”) has been proposed under the Act. The CCPA will have wide powers for enforcement of provisions under the Act, such as taking suo-moto actions, order reimbursement of the price of goods/services, recalling products, canceling licenses and filing class action suits.
- Product Liability: The concept of ‘product liability’ has been expanded wherein ESPs may be subject to product liability in the event they exercise control over the manufacturing, assembling, labeling or alteration process for the product causing harm to a consumer.
- Unfair Trade Practices: A broad definition of ‘unfair trade practices’ has been introduced which includes disclosure of personal information given by the consumer in confidence, unless such disclosure is made in accordance with the provisions of any other law. The definition further includes misleading electronic advertisements or refusal to withdraw defective goods or deficient services by the manufacturers and/or service providers. The concept of ‘unfair contracts’ has also been introduced as a specific cause of action to protect consumers from unreasonable contracts which lean in favor of manufacturers or service providers.
- Misleading Advertisements: Higher penalties are placed on endorsers to protect the consumers from unfair trade practices in relation to the products and services endorsed by celebrities. Thus, endorsers have an onus of conducting due diligence of a product to verify the accuracy and reliability of the claims made in the advertisement. The right to impose penalties for contravention of the Act and for misleading advertisements has been granted to CCPA and the CCPA may impose penalties of up to INR 10,00,000/- and imprisonment for up to 2 years on a manufacturer or an endorser, for false and misleading advertisements.
- Pecuniary Limits: The pecuniary limits for district forums have been revised to include consumer complaints of value of goods and services not exceeding INR 1,00,00,000/-. The jurisdiction of the state commission lies where the value of goods and services exceeds INR 10,000,000/- but does not exceed INR 10,00,00,000/-. Jurisdiction of national commission has been revised where the value of goods and services exceeds INR 10,00,00,000/-.
- Alternative Dispute Mechanisms: Mediation as an alternate dispute resolution has been introduced for faster resolution of disputes and to reduce pressure on consumer courts.
Impact on Consumers:
Given that the definition of a consumer has been expanded to include online modes of sale, consumers have been granted the flexibility to file complaints with the jurisdictional consumer forum located at the place of residence or work of the consumer. A key development in favour of consumers is the fact that if a complaint has not been admitted or rejected within 21 days, the same shall be deemed as having been admitted. This addition may assist in clearing the current pendency of consumer cases at the State and National Commission. However, the procedural implementation of the same is unclear at the moment.
Impact on E-Commerce Entities:
Keeping in mind the new definition of an ESP, online marketplaces and online aggregators could be included within the ambit of the Act. As discussed above, the Act has introduced more onerous liabilities (including product liability) and higher penalties for online marketplaces and aggregators. Some of the issues that could potentially arise include applicability of the Act to online entities outside of India that cater to Indian consumers, enforcement of the Act to online marketplaces, data consent requirements from consumers, etc.
On August 2, 2019, the Department of Consumer Affairs issued draft guidelines on E-Commerce (“E-Commerce Guidelines”)[3]. The E-Commerce Guidelines enumerate conditions which have to be complied by e-commerce entities within 90 days from the date of publication of the guidelines. Some of the key guidelines include submitting a self-declaration pertaining to compliance under the E-Commerce Guidelines, displaying complete details of sellers on their websites, maintaining a level playing field, not engaging in unfair trade practices and having a consumer grievance redressal process.
Also, Press Note 2 of 2018 issued by the Ministry of Commerce & Industry, Department of Industrial Policy and Promotion also states that e-commerce entities shall not influence the sale price of goods and services and shall endeavor to maintain a level playing field.
Recently, in Amway India Enterprises Pvt. Ltd. v 1Mg Technologies Pvt Ltd[4], Judge Pratibha Singh of the Delhi High Court stated that while e-commerce entities have greater power, with that comes greater responsibility and the requirement to ensure that existing businesses are not impacted by the growth of e-commerce, without requisite checks in place. While this judgment was in relation to restraining e-commerce platforms from selling products of online sellers without written consent from sellers, the Hon’ble Judge recognized the contribution of e-commerce in providing accessible platforms for many individuals in India to create sustainable businesses. However, at the same time, it was acknowledged that given that consumers typically purchase goods on the basis of images on the website of an e-commerce entity, there could be greater confusion in relation to genuineness of the product and the warranties in relation to the product.
By a reading of the above policies and judgments, there is an acknowledgement of the fact that e-commerce entities have to be more accountable to consumers and sellers and should consider the implication under the Act while cataloguing their products and providing descriptions on their portals.
Conclusion:
Caveat Emptor! ‘Let the Buyer beware’ no longer seems to be an adage that should be followed in today’s day and age where consumers have at their disposal more purchasing power, convenient payment mechanisms and online and offline means of purchase. The Act empowers consumers in a two-fold manner: (i) creating safeguards to target product liability and unfair trade practices which could affect consumers; and (ii) facilitating consumer dispute mechanism processes. However, the obligations on e-commerce entities have greatly increased and it would be incumbent on them to relook at the way they conduct their businesses. It would be interesting to see how the Government balances legislation against e-commerce entities while trying to safeguard consumers in a new digital age.
[1]https://www.thehindu.com/news/national/the-hindu-explains-consumer-protection-bill-2018/article25787482.ece
[2] http://egazette.nic.in/WriteReadData/2019/210422.pdf
[3] https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Guidelines%20on%20e-Commerce.pdf
[4] Amway India Enterprises Pvt. Ltd. v 1Mg Technologies Pvt Ltd, Delhi High Court (297/2018), decided on July 8, 2019
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