Critical Evaluation of Consumer Rights with reference to the Consumer Protection Act of 2019

Posted on : December 10, 2020
Author : AGA Admin

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Introduction

It was in the early years of the 20^th century, precisely in the year 1914, when the American writer, journalist and political commentator wrote that the days when the consumers had the time, information and equipment to “candle every egg, test the milk, inquire into the shoddy or find out whether the newspapers are lying.” [i] Business processes and organisations across the globe since 1914 have undergone unparalleled changes. There has been a transformation in the production and sales techniques creating a market situation where consumer protection laws are no longer a discretionary rule but an absolute requirement. The methods of marketing which have developed since the twentieth century have almost made the consumer’s ability to judge the genuineness of a product claims redundant – further escalating the need for a law.

The term consumerism emerged in the 1960s and was viewed as a set of social forces which aimed to create pressures on business entities in order to ensure marketplace practices which were sound to the consumer’s interests. Consumerism found its legal and statutory foundations in the Consumer Protection laws and policies which aimed at regulating the products or services, methods or standards of manufacturers, sellers and advertisers in the interest of buyers. These laws and regulations could be institutional, statutory or embodied in a voluntary code pledged to by industry players.[ii] It is the consumer organisations which unified the stance on “consumer dissonance” which meant the doubts, discontent, disenchantment and disappointment that consumers had after the purchase of products.

The first aspect of the social rationale behind consumer protection laws lies in the fact that unfair discrepancies in the marketplace were increasingly becoming common and statutory enactments were required to curb these unfair activities. Some of the unfair activities due to which consumerism gained vigour were as follows:

• Misbranding: Products were presented or branded in clear violation of statutory requirements and were generally false or misleading for the consumers.
• Spurious products: These products were claimed to be genuine but were actually not so. The duplication was such that the fake product used to bear the name of the original product, its packaging, graphic, colours, designs and even the same name and address of original manufacturer.
• Unsafe products: Products which were hazardous to human life and property also needed to be controlled.
• Planned obsolescence: Products were intentionally planned, designed or built in a such a way that the useful life of the product was reduced and the design was frail which soon made the product obsolete.
• Adulteration: Adulteration in general terms is such the practice of adding another substance to the original product which leads to a loss in its quality.
• Fictitious pricing: In marketing practices, fictitious pricing implies that a reduction in prices has been announced to increase sales while in reality there has been no reduction in the prices at all.
• Price collusion: In terms of economics, collusive behaviour in pricing means that two or more business entities work together to influence a market price for their own advantage and at the customer’s disadvantage.
• Deceptive packaging: Customers can be misled on various fronts on account of deceptive packaging – which may include quantity, size, shapes, content etc.
• False and misleading advertisements: Advertisements are the main form of communication between a company/brand and the consumer. Unproven, false or misleading information may be communicated to the consumer about a particular product or service which can be problematic for the consumer himself.
• Defective warranties: Warranties of the product may be designed in such a manner that the frailest part of a product may fall outside the warranty. Further, the terms and conditions of the warranty can pose a hurdle for the customer.
• Hoarding: Products may be hoarded by the manufacturers or the retailers/sellers in order to reduce their supply in the market and only supply when the prices rise due to the market forces.
• Profiteering: While business and commercial practices are founded on the concept of profit, profiteering refers to the processes which make or seek excessive, illegal or unfair profits.
• Black Marketing: Black marketing in its very essence takes place outside the purview of the government. More often than not, laws are broken.
• Short Weights and Measures: In the commonplace markets like vegetable and grocery “mandis” weights may be faulty, depicting a higher weight for lesser quantity.

These practices are the most conventional practices which were undertaken by producers of goods and services. However, with the descent of the information age, newer forms of unfair means have come into existence – like cyber-crimes, faulty plastic money, fraudulent e-commerce websites, lapse of consumer data privacy etc.

The second aspect of the social rationale behind consumer protection laws lies in the fact that the consumers need to be empowered. Consumer protection laws are required because

• These laws would empower the consumers to have access to the basic needs of life.
• Consumers need to be protected from hazards to their life and safety which may be posed by spurious goods and adulteration among others.
• The consumers need to have access to information which is adequate enough for them to make choices which are best suited to their needs, individually as well as at a societal level.
• Consumer education, whether formal or informal, could be encouraged through consumer protection laws.

Therefore, to sum it up, when the consumers purchase goods and services they should be entitled to acquiring correct and impartial information. So as to make choices which are based on their own interest, utility and satisfaction rather than the profit motives of the businesses. Hence, consumer protection laws help increase welfare in society by working in accordance to the interests of the consumers and holding businesses accountable.

To a certain extent, businesses are also helped by consumer protection as the businesses that are known to treat consumers fairly will gain a good reputation and become more sought after. This increases their profitability and competitiveness which will also lead to economic growth in the long run. Consumer protection contributes to dynamic and effective markets for businesses to grow.[iii] Innovation, which has now become one of the most important factors of economic development, is also encouraged by consumer protection – hence the social rationale is not limited to consumer welfare alone but to economic development and standard of living as well.

The Need for a New Act

On 9^th August 2019, the Consumer Protection Act, 2019 received assent from the President of India and was notified in the Official Gazette by the Government of India. Thereafter, vide Notification dated 15.07.2020, the Ministry of Consumer Affairs, Food and Public Distribution notified major provisions of Consumer Protection Act 2019, and declared 20^th July 2020 to be the appointed date for the coming into force of Consumer Protection Act 2019.

The primary driving factors behind the enactment of the new Consumer Protection Act which repealed its three decade old namesake, were the advent of digital technologies, internet, and rapid penetration of e-commerce, smart phones and cloud technologies.[iv] The very nature of business modes has changed which have had an adverse impact on consumer interest and has made them more vulnerable to the unfair trade practices. The framework which had existed before including the 1986 Act and the guidelines of the Consumer Affairs Ministry had proven to be inadequate to address these issues

 

Salient Features of the Consumer Protection Act 2019[v]

Definition of a Consumer – Section 2 (7)

A consumer is defined as a person who buys any good or avails a service for a consideration. It does not include a person who obtains a good for resale or a good or service for commercial purpose. Commercial purpose does not include use by a person of goods bought and used by him/her exclusively for the purpose of earning his livelihood by means of self-employment. It covers transactions through all modes including offline and online through electronic means, teleshopping, multi-level marketing or direct selling. It does not include anyone obtaining goods or availing services without consideration.

 

Enshrining of the Rights of Consumers – Section 2 (9)

Various rights of the consumers have been enshrined in the Act. These rights as present in the Act are as follows:

1. The right to be protected against the marketing of goods, products or services which are hazardous to life and property;
2. 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;
3. The right to be assured, wherever possible, access to a variety of goods, products or services at competitive prices;
4. The right to be heard and to be assured that consumer’s interests will receive due consideration at appropriate fora;
5. The right to seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and
6. The right to consumer awareness

New and Expanded Definitions – Section 2

The Consumer Protection Act 2019 has a number of new additions in the definitions clause which were not existing in the previous legislation, some of the existing definitions have been further expanded. Present below is a list of new and expanded definitions – it needs to be mentioned that this is not an exhaustive list but merely a set of examples.

New Definitions	Expanded Definitions
·         Advertisements ·         Design ·         Unfair Contract ·         Product Liability ·         E-Commerce	·         Consumer ·         Person ·         Complainant ·         Consumer Rights

 

 

Provision for E-Commerce – Section 2(7), Section 2(16), Section 94

As one of the driving factors for the introduction of the new legislation was the emergence of e-commerce as dominant player in the retail sector.  Therefore, the Act has specifically made mention of e-commerce and provided for its definition. E-commerce portals have been creating various hardships for the consumers. The inclusion of these portals within the scope of the Act is believed to greatly help the needs of the customers.

Central Consumer Protection Authority – Section 10

Undoubtedly, one of the prime features of the Consumer Protection Act 2019 is the provision for the establishment of the Central Consumer Protection Authority (CCPA) which would act as a central regulatory authority for consumer protection. The CCPA shall have an investigative wing which would be led by a Director-General for conducting enquiries or investigation in matters relating to consumer rights violations, unfair trade practices and advertisements which are allegedly false or misleading. The Act lays down the qualifications of Chef Commissioner and other Commissioners along with their methods of recruitment. The appointments and terms of office of the CCPA would be decided by the Central Government.

The powers and functions of the Central Consumer Protection Authority are as follows:

(a) To protect, promote and enforce the rights of consumers as a class, and prevent violation of consumers’ rights under this Act;

(b) To prevent unfair trade practices and ensure that no person engages himself in unfair trade practices;

(c) To 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) To ensure that no person takes part in the publication of any advertisement which is false or misleading..

Other crucial aspects of the CCPA are as follows:

• Inquiry into violation of consumer rights: The CCPA will have the power to inquire or investigate into matters relating to violations of consumer rights or unfair trade practices suo motu, or on a complaint received, or on a direction from the central government.

• Product recall: With regards to product recall or withdrawal of services, there were no prior rules in India. It was only in the case of food products, that taking into account health and nutrition reasons, certain products may be required to be removed from the shelves. Provisions relating to product recall have been introduced in the Consumer Protection Act 2019. Product safety is not only important to the consumers but also to the producers – recall greatly affects the reputation and goodwill of the company hence must be avoided by keeping products up to the standard and safe.

• Misleading advertisements: One of the biggest behavioural changes sought to be brought about by the CPA, 2019 is with respect to authenticity and accountability attached to advertisements. CCPA has been empowered to take actions against false or misleading advertisements. CCPA can impose a penalty of upto Rs. 50 lakhs, on the manufacturer or endorser, subject to multiple / subsequent contraventions. Similarly, it may impose a ban on endorsing any products / services upto 1 year, extendable to 3 years. However, the endorser of a product / service, would be exempted from any liability if he / she establishes that they exercised due diligence to verify the veracity of the claims made in the advertisement before endorsing the same. [vi] Further, in case of misleading advertisements stringent punishments have been laid out with penalty upto Rs. 10 lakhs.

Ministry of Consumer Affairs, Food and Public Distribution has established the Central Consumer Protection Authority on 23rd July 2020, as a body corporate having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued.

Critique of Legal Regime

 

The Consumer Protection Act 2019 moves leaps and bounds ahead of its three decade old predecessor. However, it is not without its own shortcomings. In order to arrive at a truly holistic picture about the statute, it is not enough to note just the positives. Due considerations should also be extended to the shortcomings of the law –

• One of the novel features of the Act is the statutory recognition which has been given to mediation as a procedure for dispute resolution. While this is a momentous and welcome change, a drawback is that no time period has been provided for the settlement though mediation – which can prove to be a major setback for this change. The lack of a stipulated time period may become a cause of unnecessary delay in the disposal of complaints. Another factor which mitigates the efficacy of mediation as a tool is the fact that the decisions reached through mediation are open for appeal, thus any decision may end up being contested.

 

Further points of disadvantage are as follows: [vii]

• One of the major legal battle under 1986 Act was about the inclusion of medical service under the purview of the Act. The new Act does not specifically include the term medical service under the definition of Service. This opens possibilities for further litigations.
• The Act includes ‘Telecom Service’ under the definition of Service. The Telecom Regulatory Authority of India Act, 1997 uses the term telecommunication service and provides a wider definitions which encompasses all the related matters also. It is to be noted that, when the 2019 Act uses only ‘Telecom Service’ its coverage become very narrow and may exclude internet, cellular and other related services.
• Another imperfection in the Act is that, it does not refer to educational services. Since under 1986 Act a large number of conflicting judgements were there dealing with different educational services, it was expected that the 2019 Act will clarify and specifically include those educational services which can be treated as a consumer service under the purview of the Act.
• Any complaints about unfair contracts can be filed only to State Commission or National Commission. This condition imposes a hurdle to individual consumers as approaching District Commission is more convenient and easy for them.

 

As the CCPA came into action on 20^th July 2020, it was observed that a great many significant sections of the law have remained un-notified. This greatly diminishes the positive aspect of the law because it cannot make a difference to the consumers if laws do not come into force.

 

The various provisions which are yet to be notified include: [viii]

• Provision of CCPA’s investigation wing headed by the Director General
• Many provisions relating to the liabilities and penalties of the product manufacturers, misleading advertisers who endorse products and services without being doing their due diligence

 

Consumer protection has now been accepted to be a necessary means for economic development and almost as intrinsic as a human right. The laws for consumer protection have developed over centuries  – the orientation of these laws which were primarily just aimed at avoiding fraud now cover a much larger ambit of consumer satisfaction and safety. It can be we accepted that the days of caveat emptor have been left behind. However, the goal should not be to move towards caveat venditor where the seller has to “beware” of the consumers, rather an efficient marketplace has to be established where the needs of the consumers and the producers are catered to either by the invisible hand of the market or by the anvil of the regulator. Globally, various bodies have been created to ensure that the consumers’ rights are upheld and they are not subject to misdeeds by the producers and sellers. Nevertheless, it is important that the laws and conventions gain vigour of their own and are adequately implemented by the respective statutory authorities or regulatory bodies. Timely implementation of these laws and speedy adjudication are key to the success of Consumer Protection.

 

Megha Singh

M.A. Regulatory Governance

Tata Institute of Social Sciences Mumbai

 

(The write-up is part of an assignment on Social Rationale of Regulation for evaluation)

 

 

[i] Winn , Jane . Consumer Protection in the Age of the ‘Information Economy’. Hampshire : Ashgate , 2006.

[ii] Ahmad, Tabrez. “Concept of Consumerism in India: Judicial Attitude.” 2011.

[iii] ASEAN CCP. Why is Consumer Protection Important. 2015. https://www.aseanconsumer.org/cterms-consumer-protection/why-is-consumer-protection-important (accessed November 2020).

[iv] Kapoor , Sheetal. “Consumer Protection Act,2019: A new Milestone n Empowering Consumers .” Yojana, 2019.

[v] Consumer Protection Act 2019

[vi] Malik, Dhruv, and Hafeez Patanwala . Consumer Protection Act 2019 – A New Challenge to Indian Businesses? . August 17, 2020. http://www.lawstreetindia.com/experts/column?sid=454.

[vii] Pillai, Anish. “Promises and Nuances of Consumer Protection Act, 2019: A Birds Eye View.” 2020.

[viii] Hindu Business Line . “Consumer Protection Act kicks in from July 20, but may lack bite.” The Hindu , 2020.