LEGAL UPDATE | CONSUMER
PROTECTION BILL 2018
Introduction
The Lok Sabha recently passed the Consumer Protection Bill 2018 (Bill) on 20 December 2018. This Bill once promulgated would replace the Consumer Protection Act 1986 (Act). The Bill is yet to be passed by the Rajya Sabha and receive the assent of the President. Changes to the Bill can, therefore, not be ruled out. This update seeks to broadly set out the important changes proposed by the Bill when compared to the Act.
The Lok Sabha recently passed the Consumer Protection Bill 2018 (Bill) on 20 December 2018. This Bill once promulgated would replace the Consumer Protection Act 1986 (Act). The Bill is yet to be passed by the Rajya Sabha and receive the assent of the President. Changes to the Bill can, therefore, not be ruled out. This update seeks to broadly set out the important changes proposed by the Bill when compared to the Act.
- several shortcomings noticed in administering the provisions of the Act;
- new forms of unfair trade and unethical business practices brought upon by the emergence of global supply chains, rise in international trade and the rapid development of e-commerce that could make consumers vulnerable due to the challenges posed by misleading advertisements, tele-marketing, multi-level marketing and direct selling.
- Establishment of the CCPA: A Central Consumer Protection Authority (CCPA)
is to be constituted by the Central Government pursuant to the Bill.
The CCPA would regulate matters relating to violation of rights of
consumers, unfair trade practices and false or misleading advertisements
which are prejudicial to the interests of the public and consumers and
promote, protect and enforce the rights of consumers as a class. The
CCPA is given the power of investigation, search and seizure. In
addition the CCPA may issue directions and impose penalties based on its
investigation. Appeals from the decision of the CCPA lie to the
National Commission.
- Misleading Advertisements: The Bill has introduced a
concept of ‘misleading advertisements which has been defined, in
relation to a product or service, as an advertisement: (a) which falsely
describes a product or service; or (b) gives false guarantees that
mislead consumers as to the nature, substance, quantity or quality of
such product or service; or (c) conveys an express or implied
representation which if made by the manufacturer, seller or service
provider would an constitute unfair trade practices; or (d) deliberately
conceals important information. If CCPA is satisfied after an
investigation that any advertisement is false or misleading, they can
issue directions to discontinue or modify the advertisement. Further,
the CCPA can impose a penalty of up to Rs 10,00,000 (Rupees Ten Lakhs
only) on the manufacturer or endorser which can be increased to
upto Rs 50,00,000 (Rupees Fifty Lakhs only) for any subsequent
contravention. In addition, any manufacturer or service provider who
causes a false or misleading advertisement which is prejudicial to the
interest of consumers is liable to imprisonment of up to 2 (two) years
and, for any subsequent contravention, an imprisonment of up to 5 (five)
years.
- Endorsements: The Bill makes `endorsers` liable for
false or misleading advertisements as noted above. `Endorsement` has
been defined in relation to an advertisement as “(i) any message,
verbal statement, demonstration; or (ii) depiction of the name,
signature, likeness or other identifiable personal characteristics of an
individual; or (iii) depiction of the name or seal of any institution
or organisation, which makes the consumer to believe that it reflects
the opinion, finding or experience of the person making such
endorsement.” CCPA has also been given the authority to prohibit the
endorser from making endorsements for a period of up to one year and
for a period of up to 3 (three) years for any subsequent contravention.
- Product Liability: The Bill introduces ``product
liability`` which was absent in the Act. Manufacturers, product sellers
and service providers would now be liable for harm caused to a consumer
because of deficient products or services. Harm has been defined to
include (a) damage to any property, other than the product itself; (b)
personal injury, illness or death; (c) mental agony or emotional
distress; (d) any loss of consortium or services or other loss resulting
from harm mentioned in (a), (b) or (c) but does not include any harm
caused to a product itself or any damage to the property on account of
breach of warranty or any commercial or economic loss. Deficiency now
includes (i) any act of negligence, omission or commission by a person
which causes loss or injury to the consumer; and (ii) any deliberate
withholding of relevant information by such person to the consumer.
- Unfair Contract: The Bill introduces the concept of
``unfair contract`` which was absent in the Act. An ``unfair contract``
is defined as a contract between a manufacturer or trader or service
provider on the one hand and a consumer on the other, having such terms
which cause significant change in the rights of such consumer, including
(a) requiring manifestly excessive security deposits; or (b) imposing
any disproportionate penalty on the consumer for the breach of contract;
or (c) refusing to accept early repayment of debts on payment of
applicable penalty; or (d) entitling a party to terminate such contract
unilaterally without reasonable cause; or (e) permitting one party to
assign the contract to the detriment of the other party who is a
consumer, without his consent; (f) imposing on the consumer any
unreasonable charge/obligation/condition which puts such consumer at a
disadvantage. An aggrieved consumer can file a complaint on an `unfair
contract` with the relevant adjudicatory Commission under the Bill.
- Change in pecuniary jurisdiction: The Bill raises the pecuniary jurisdiction of the various Commissions as follows:
- District Commission: Claims upto Rs 1 Crore;
- State Commission: Claims upto Rs 10 Crores;
- National Commission: Claims above Rs 10 Crores.
- Mediation:The Bill introduces provisions on
mediation by providing for a consumer mediation cell to be attached to
each of the Commissions under the Bill. A complaint may be referred to
mediation with the consent of the parties if the relevant Commission
decides that there exists an element of settlement between the parties.
- E-commerce: The Bill makes provision for e-commerce and electronic communications. The Central Government is empowered to take measures to prevent unfair trade practices in this regard in a manner that may be prescribed.
The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.comfor any assistance.
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