CONSUMER PROTECTION BILL, 2018
NUTSHELL
The advent of globalization coupled with
modern business methods has had a significant impact on consumer experience in
India. Presently, consumer interest is safeguarded under a three decade old
Consumer Protection Act, 1986 ("Act"). The Act, despite being
amended thrice in 1991, 1993 and 2002, struggles to effectively protect
consumers from business malpractices such as misleading advertisements, is
unable to curtail protracted litigations and lacks presence of an effective
regulator for addressing issues concerning consumers at large. Nowadays, apart
from regular issues concerning faulty products and services, consumer exposure
has also extended to unsolicited telemarketing and e-commerce. Tactful marketing
by persons tend to mislead consumers and, therefore, there is need for a
dedicated regulator to protect consumer interests and educate them on their
rights. Enabling suo moto action by a regulator against errant persons would be
one such positive step, as under the Act, a consumer has no choice but to
initiate proceedings before the competent consumer forum for redressal of their
grievances. In order to address these issues and others, the Consumer
Protection Bill, 2018 ("Bill") was tabled in the lower house
of the Indian Parliament - the Lok Sabha on January 5, 2018, to substitute the
Act with a new one.
Its relative impact on consumers,
manufacturers and service providers.
1. Creation of a
Central Consumer Protection Authority
The Bill proposes to establish a Central
Consumer Protection Authority ("CCPA" or "Regulator")
for specifically addressing matters concerning unfair trade practices and
misleading advertisements by persons, and protecting and facilitating
enforcement of consumer rights. If this Bill becomes law, a complaint could be
filed directly to the CCPA, in writing or through e-mail, regarding issues that
are prejudicial to the interests of "consumers as a class". Though
the Bill does not define the phrase, we understand "consumers as a class"
to mean persons having common grievances against the same party and seeking
similar reliefs from such defaulting party. This implies that the Regulator
shall not entertain any individual consumer complainants, who shall continue to
have recourse to the appropriate consumer forum. The Regulator is also mandated
to take a comprehensive approach and engage with individuals who are experts in
the field of consumer welfare, medicine, food safety and public
affairs. This in turn could benefit both consumers and businesses alike,
as these experts with their sector-wise in-depth knowledge and experience can
effectively assist CCPA in resolving consumer issues affecting consumers as a
class, whenever specific expertise is necessary for adjudication of a complaint.
However, it is presently unclear whether such experts would be chosen from the
industry, government, or both.
Powers to be
vested in the CCPA include investigating into unfair trade
practices prevailing in the market, referring complaints received by it to
the district, state or national consumer commissions ("Consumer Forums"),
intervening in matters before Consumer Forums, issuing safety guidelines for
unsafe goods or services and advising governments on consumer welfare measures.
For purposes of conducting such inquiries and investigations into complaints of
unfair trade practices and/or misleading advertisements by persons, an
investigation wing shall assist the CCPA. Pursuant to an investigation, the
Regulator shall upon receiving incriminating findings against a person can
order (i) recall of goods or withdrawal services, (ii) reimbursement of price
of goods or services, and/or (iii) discontinuation of practices, which are
harmful to consumers. We believe that powers in CCPA to investigate shall act
as a deterrent to persons engaged in unfair trade practices and misleading
advertisements, and would minimize consumer exposure to such practices.
However, we view CCPA's power to modify, or prohibit and/or levy penalties
against defaulting persons to overlap with the jurisdiction of Consumer Forums
on matters where consumers as a class are seeking similar reliefs against the
same defaulting party, and specifically pertain to claims for reimbursement for
defective products, discontinuation of unfair trade practices, recalling of
products and modifying or discontinuing misleading advertisements. Here, we
foresee potential for a conflict of subject matter jurisdiction between the
Regulator and Consumer Forums.
Lastly, CCPA will
also have the flexibility to refer a complaint received by it to another
regulator, if it is of the opinion that such complaint is not within the realm
of its jurisdiction and would be best addressed by the appropriate
regulator. For instance, in a matter concerning spurious beverages, the
Regulator can instead refer these complaints to the food safety regulator, i.e.
Food Safety and Standards Authority of India.
2. PRODUCT
LIABILITY
Until now, product liability had not been
defined in any Indian statute, and is introduced through the Bill for the first
time. "Product liability" entails situations when product
manufacturers, sellers or service providers are held liable for compensating a
consumer because of harm caused to the latter due to their defective products
or deficient services. The Bill aims to make persons who are product
manufacturers, sellers and service providers, liable for product liability
claims. A product manufacturer can be held liable, if its product has: (i) a
manufacturing defect, or (ii) a design defect, or (iii) deviated from
manufacturing specifications, or (iv) not conformed to express warranties, or
(v) otherwise failed to provide adequate instructions for the consumer's
benefit and use of the product or service. We anticipate the inclusion of a
"design defect" to be used by complainants to file frivolous product
liability claims against persons. For instance, a bus manufacturer could be
held liable, if its bus seat design excludes handle bars near the seats,
thereby causing a passenger to fall off the seat when the bus took a sharp
turn. How Consumer Forums will differentiate between necessary safety norms and
requisite product designs is something which one cannot predict at the moment.
Typically, the
onus to prove a defect is on the complainant. But, what happens when a product
liability claim involves sophisticated technology products? Would the onus
still be on the complainant or the product manufacturer, seller or service
provider? This is relevant as a consumer may not be in a position to prove
defects in such products. However, there is a safety value which states that
the manufacturer will have strict liability for defects in products
manufactured by it, even if it proves that it was not negligent and had
exercised due diligence. Of course, this is bound to make manufacturers,
sellers and service providers jittery and more vulnerable than before thereby
compelling them to be extra vigilant in conducting internal quality control
checks and manufacturing audits. Needless to say that this is a pro-consumer
measure, which will enable consumers obtain timely relief.
3. MISLEADING
ADVERTISEMENTS AND ENDORSEMENTS
Misleading advertisements were never defined
in the Act, which did create ambiguity around what is a misleading
advertisement. The Bill now provides a definition and states that a misleading
advertisement includes an advertisement which (i) falsely describes a product
or service, or (ii) gives false guarantees that mislead consumers about a
product or service, or (iii) convey representations, which if made by the
manufacturer, seller or a service provider would constitute unfair trade
practice, or (iv) deliberately conceals important information. Further, any
false or misleading advertisement released by manufacturers or service
providers that is prejudicial to consumer interests shall be punishable with
imprisonment upto two years and/or fine upto INR 10 lakhs or both. This is
also a first as the Act never provided penal consequences for misleading
advertisements. In our view, introduction of criminal prosecution for
misleading advertisements will positively compel persons to release
advertisements with caution and within contours of the prescribed legal
framework.
The impact of product endorsers or brand
ambassadors on consumers is well-known. This makes their inclusion in the Bill
both important and relevant. However, once again the Bill does not define an
"endorser". It is unclear whether an endorser would be confined only
to film and television personalities or could also include social media
influencers. The Bill states that an endorser shall also be equally liable with
a product manufacturer which is novel. Section 21(2) of the Bill empowers CCPA
to impose a penalty upto INR 10 lakhs on an endorser, if it concludes that an
advertisement by him or her, is misleading the consumers. However, an endorser
would be exempt from such penalty if he can prove, that he or she exercised
reasonable care and due-diligence to authenticate claims made in such
advertisement. But, as every endorser would have different financial
capacities (an actor or an influencer) and would charge differently for an
advertisement, the Bill should have instead pegged the penalty to a certain
percentage of the total endorsement fee received by an endorser, which would be
an effective deterrent. We see imposition of penalties on endorsers to cause
them to renegotiate their endorsement agreements, to include an indemnity from
their employer or product manufacturer, in order to protect themselves should a
consumer claim that an advertisement was misleading.
4. TERRITORIAL
JURISDICTION
Under the Act, a complaint can be filed
before a Consumer Forum, where (i) the opposite party resides or carries on business
or has a branch office or works for gain, or (ii) any of the opposite parties,
if more than one, actually reside, carry on business or have a branch office or
works for gain, provided the permission of the consumer forum is procured or
where the opposite party does not reside or works for gain acquiesce to the
jurisdiction of a consumer forum, or (iii) the place where the cause of action
wholly or partly arises. The Bill adds to the territorial jurisdiction of
Consumer Forums by stating that a consumer can now file complaints before a
consumer forum where he or she resides or works for gain. Indeed, this
simplifies the consumer grievance redressal process from an aggrieved
consumer's perspective. But, will give consumers an opportunity to indulge in forum
shopping.
5. PECUNIARY
JURISDICTION
Typically, inflated claims are filed before
the national commission, whose pecuniary jurisdiction is fixed at INR 1 crore
and above, which ultimately burdens it with pendency of cases. To address this
issue, the Bill has amended the pecuniary jurisdiction of district commission
which now does not exceed INR 1 crore, the state commission exceeds INR 1
crore, but does not exceed INR 10 crore and national commission exceeds INR 10
crore. Such increase in pecuniary jurisdiction can pose challenges for members
of district and state commissions, as they may not have the requisite
experience and expertise to deal with large and complex matters, unlike the
national commission. It is pertinent to note that though the Bill allows the
state and national commissions to take assistance of experts in matters
involving larger consumer interests10, with an increase in the
pecuniary jurisdiction, it will also be necessary for the district commissions
to have such access to expert advice.
Thanks
Dr. Zulfiqar Ali Khan, M.L.,M.Phil(Law),Ph.D
Advocate
Supreme Court of India
MB: 9884102961
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