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Legal Capsule by Economic Law Practice

Consumer Protection Act, 2019: Changing Consumer Law Landscape in Changing Times

The Consumer Protection Act, 2019  (new CPA) is set to replace the three-decade old 1986 enactment (old CPA). This has been introduced against the backdrop of various consumer-centric initiatives of this government and a spurt in consumer-centric actions/notices from the authorities. Given the above context, it will be pertinent for businesses having any B2C interface, to take note of the significant changes introduced under the new CPA, which this article
attempts to discuss.

  • Unfair Contract
  1. Unfair contract is widely defined to cover any contract having such terms which cause “significant change in the rights of such consumer”. It also specifically includes situations such as excessive security deposits/penalties, unilateral terminations and unreasonable charges being levied.
  2. While the Supreme Court has under the old CPA (in the matter of Pioneer Union)  granted relief in case of one-sided contracts (between a builder and flat purchaser in that case), the new CPA provides for a separate cause of action in case of “unfair contract”. This clearly indicates the mindset of the government to regulate even contractual arrangements between private parties, in instances where one of the parties is a consumer and his/her rights are being impacted.
  • Product Liability
  1. Through this concept, liability is cast on the (original) product manufacturer (apart from the product seller and product service provider) in case of a manufacturing defect/design deficiency etc. Under the old CPA, actions are taken primarily against traders or service providers – who typically would have an interface with the ultimate consumer.
Importantly, there is a “strict liability” being cast, where the product manufacturer/seller/service provider  will be held liable even if he proves that he was not negligent or fraudulent in making express warranty of the product.
  • Misleading Advertisement
  1. As of today, advertisements are governed by the Advertising Standards Council of India (ASCI), which is a self-governing/non statutory body, and which has the authority to stop misleading advertisements. Under  the new CPA, a separate body i.e. the Central Consumer Protection Authority (CCPA) has been given the statutory powers to issue specific orders in relation to misleading advertisements. [More details on  the  CCPA in the subsequent paragraph].
  2. The new CPA also casts liabilities on the endorsers of a misleading  advertisement. For this reason, endorsers may now require back-to-back indemnity from the business/advertisers.
  • The new CPA recommends the establishment of a new authority called CCPA, which will be headquartered in New Delhi, though could have regional offices across the country.
  • This body will perform multiple roles – it can investigate cases (equipped with its own investigation wing), pass necessary orders against offenders and also advise as regards  best practices.
  • It is set up to look into three things specifically – enforcement of “consumer  rights”  (which  is  now a separately defined term), unfair trade practice (which is an omnibus concept covering wide nature of wrongful  actions),  and  misleading advertisements (which has been discussed above).
  • Importantly, the CCPA can take actions on its  own, without a complaint being filed by any consumer, in case it feels that rights  of  consumers as a class/public interest is being impacted. Under the old CPA, there is no such regulator/body having the powers to take suo moto    actions. Individual consumers have to Fight their own battles, and many would shy  away from incurring such additional  costs. Now, the CCPA is set  to fight battles on behalf of the  consumers,  and  this would give an added reason for business to be cautious and compliant.
  • While dealing with a particular issue, should it deem fit, the CCPA can also notify other regulators (e.g. Competition Commission  of  India, TRAI) who may also be concerned  about the relevant issue. The new CPA specifically recognizes that action under the new CPA is additional to actions under other statutes.
  • Keeping in mind the changing times,  “consumer” is defined to specifically include instances of sale done online, or through direct marketing, tele-shopping etc.
  • “Advertisement” is defined to include those made on the internet, websites, etc. and thus “misleading advertisement” would be understood accordingly.
  • The concept of “unfair trade practice” now also includes sharing of personal data given in confidence by the customer and is perhaps the most direct legislation regulating this sphere of personal data as of now (since the Data Protection Bill is still in the bill form). 
  • Critically, the new CPA will also regulate “e-commerce” and “electronic  service providers” (who advertise/promote sales of suppliers). However, the exact regulatory regime is unclear given that the relevant e-commerce rules have not yet been notified.
  • A praiseworthy and welcome change is the introduction of mediation in the litigation route. The District Forums, before hearing the case (and if both parties agree), can suggest mediation, which can give an additional opportunity for parties to settle the case amicably.
  • In the case of filing appeals, under the old CPA, the amount of  pre-deposit  to  be  made was capped to a nominal amount. Under the new CPA, however, it is fixed at 50% of the amounts awarded – this may result in significant increase in litigation costs.

The new CPA is no doubt a marked transformation from the old CPA and results in various areas of exposures for businesses to be prepared for. While the rules are yet to be notified which would hint on the exact extent of regulation – especially as regards the manner in which the CCPA will function and rules governing e-commerce entities – one can easily expect a rise in consumer protection related litigation, with the added possibility of multiple regulators being involved in a particular issue and with all modes of its operation (online/offline) being liable to questioning. Thus, it is crucial that businesses do a complete health-check of their contracts, offers, processes, advertisements etc. to ensure compliance under the new CPA and adequately justify the positions taken.

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