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“A brand is nothing but an expression of the customer’s loyalty and trust.”
– Phil Dusenberry
The need to identify and reflect upon consumer rights has long been recognized by the business world and legislation around the world. It was in the mid-1990s when the 35th US President John F. Kennedy pushed congress to enact a legislation to protect basic consumer rights and since then, the world became a better place for consumers and we have come a long way. Since then, countries and specifically India has seen a paradigm shift in the principles of consumer protection from ‘Caveat Emptor’ (let the buyer beware) to ‘Caveat Venditor’ (let the seller beware).
The previous Consumer Protection Act, 1986, in about thirty-five years of its existence has made tremendous efforts to protect and uplift the consumers. However, despite this, businesses continued to exploit the consumers in their own tactful way by taking advantage of the loopholes in the act and it therefore, called for some serious reforms. The Consumer Protection Act, 2019 which was notified by the Central Government on 20th July, 2020, overhauls the decades old regime by introducing a number of changes to strengthen and empower the consumer and at the same time, keeping a check on the manufacturers and sellers. The changes, as discussed below, are likely to have a long term impact on the market structure and the consumer behavior in India.
(Credits: Jagran Josh)
Expanding the Scope of ‘Consumer’
The act of 2019 amended the previous definition of ‘Consumer’ and an explanation has been added to it stating that the act applies to online consumers as much as it applies to the offline consumers. The act of 1986 did not specifically cover online transactions within its ambit and the lacuna has been suitably addressed by this new act. Therefore, any person who ‘buys any goods’ and/ or ‘hires or avails any service’ for consideration, from online or offline modes, through electronic means, tele-shopping, direct selling or multi-level marketing will fall under this wide definition of Consumer. However, the definition will not include those persons who obtain goods for the purpose of resale or for any other commercial purpose.
E-commerce Transactions
By expanding the scope of the definition of consumer, the act now applies to e-commerce transactions as well. On 23rd July, the Central Government notified the Consumer Protection (E-commerce) rules, 2020 (‘rules’) in order to regulate and govern the e-commerce entities that are involved in marketing and providing goods and services to consumers via the online platform.
The rules have given a wide definition of an ‘e-commerce entity’ to mean any person who owns, operates or manages digital or electronic facility or platform for e-commerce. It also includes an inventory e-commerce entity and a marketplace e-commerce entity within its ambit. These rules are applicable to all entities around the world that are offering goods and services to consumers in India. The rules have introduced a number of compliance measures for these entities such as the appointment of a Nodal officer or a compliance officer; displaying complete details of sellers; establishing a grievance redressal mechanism for consumers. Further, in order to facilitate informed decision making by consumers, the rules require entities to provide certain information related to goods and services such as information related to payment and security, warrantee and guarantee, return, refund, exchange, delivery and shipment, grievance redressal, etc.
The rules have also made it mandatory for e-commerce entities to acknowledge the receipt of all complaints from the consumers within 48 hours of receiving it and redress the same within one month from the date of receipt.
The New Regulator - Central Consumer Protection Authority
With the objective to promote, protect and enforce the rights of consumers, the act provides for setting up of a regulator- the Central Consumer Protection Authority (‘CCPA’) as a medium for consumers to file complaints on matters relating to violation of consumer rights, unfair trade practices and false or misleading advertisements. In order to properly discharge the functions of the act, the CCPA will consist of a Chief Commissioner and such other number of commissioners as may be prescribed. An investigation wing is set to be established under the CCPA, headed by a Director General and certain other members whose primary function would be to conduct inquiries or investigations into consumer complaints. The authority has been vested with wide powers under the act such as the power to order recall of goods or withdrawal of services which are hazardous, dangerous or unsafe; power to order reimbursement of prices of goods or services so recalled to the consumers; power to take suo-moto actions; power to issue directions against false and misleading advertisements; and power to order discontinuance of practices that are unfair and prejudicial to consumers’ interests. The CCPA can also impose penalties and order ‘search and seizure’.
Dispute Redressal Structure
The new act has retained the three-tiered redressal structure of its erstwhile act however, the pecuniary jurisdiction has been revised. The District Forum, which has now been renamed as District Consumer Disputes Redressal Commission can now entertain complaints where the value of goods or services is upto Rs. 1 crore; State Commission for where the value exceeds Rs. 1 crore but is less than Rs. 10 crores; and the National Commission for where the value exceeds Rs. 10 crores. Additionally, no filing fee will be charged for cases upto Rs. 5 lakhs. However, it has to be kept in mind that the act shall not have a retrospective effect, i.e. the cases that have been filed under the erstwhile act of 1986 will remain with the forum they were filed with and this revised pecuniary jurisdiction shall not have any bearing on those cases.
These Consumer Dispute Redressal Commissions (‘CDRC’) entertain complaints regarding overcharging or deceptive charging of goods and services; unfair and restrictive trade practices; sale of hazardous or defective goods and services amongst other things. The act has also introduced provisions to keep a check on the CDRCs by giving administrative control over District Commission to State Commission and over State Commission to the National Commission.
As an additional measure to help the consumers, the act allows to institute complaints within the territorial jurisdiction of CDRCs where the complainant or the consumer resides or works for gain, contrary to 1986 act wherein a complaint had to be filed with the commission within the territorial jurisdiction of which the opposite party resided or carried on business. Moreover, the consumers can now electronically file complaints and even the hearing and examination of parties could be done through video-conferencing.
Further, to fasten and simplify the dispute resolution process for consumers and lessen the burden for CDRCs, the act has introduced an alternate dispute resolution mechanism in the form of Mediation. The CDRCs may refer a dispute for mediation when they see a scope for the same and if the parties agree to it. For this, Mediation cells are to be established and attached to these CDRCs.
Product Liability
The new legislation has taken another important and significant step to strengthen the consumers by introducing the concept of product liability. This means that the product manufacturer, product service provider and product seller can be held liable for any damage or harm caused to consumer by using the goods or services provided by them, and they can be asked to pay compensation in this regard. This may even lead to suspension of license of person(s) being held responsible for the same. The newly introduced concept will make sellers and manufacturers more vigilant about the product or service they are providing to the consumer making it almost impossible for them to escape liability in such a case. Prior to this act, consumers had to rely on civil courts under various other statutes to enforce such a claim against sellers and manufacturers.
According to a report published by Razorpay, digital transaction in India grew by a whopping 338% from 2018 to 2019. Keeping in mind the technological advancements in the society and the fact that consumers are moving towards a ‘Digital India’, this act can definitely be said to be a step in the right direction. With consumers relying more and more on digital platforms to fulfill their day to day needs, to name a few- food (Zomato & Swiggy); housing (Housing.com & Magicbricks); travel (Ola & Uber) and shopping (Amazon & Flipkart), this consumer protection act and specifically the inclusion of e-commerce within its ambit, definitely comes in handy to the consumers.
Further, the act has introduced increased penalties and stricter liabilities for any violation of consumer rights and it therefore, will act as a deterrent against unfair and malpractices against the consumers. Additionally, the act aims to solve the problems of delay in grievance redressal and manufacturers escaping liability and this will automatically help in minimizing the unethical business practices adopted by businesses. Given the changes brought by the act, it is time for businesses to be more mindful of the way they conduct their business operations as the act has pushed for consumer to be treated as the ultimate King.
Harsh Kumra is a fourth year student at Amity Law School, New Delhi (GGS IP University). He has previously interned with various law firms including Anand & Anand, Kochhar & Co. and Desai & Dewanji.