‘Caveat Emptor’ is Latin for ‘Buyer Beware’, a doctrine that forms an integral part of trade transactions. Whilst the Government of India (‘GOI’ or ‘Government’) constantly attempts to protect the interest of consumers, unethical business practices eventually find their way thereby exploiting the consumer’s interests. The recently enacted Consumer Protection Act, 2019 (‘the Act’) which took effect on July 20, 2020 involves some major policy changes that the Government has undertaken to safeguard the interests of the consumer. The Act seems to shift the focus from ‘Caveat Emptor’ to ‘Caveat Venditor’ or ‘Seller Beware’

The electronic commerce industry has, over the past few years seen an upward trajectory growth and the need to protect its large consumer base has been long overdue. Digitisation of shopping has provided convenience to a point where consumers can purchase products and make payments with a click on their phone. The Government of India has identified the changing patterns and demand for society and modified the Consumer Protection Act to make it inclusive and bring e-commerce transactions within its purview. It also introduces mediation as a means of “Alternate Dispute Resolution” (‘ADR’) and introduces the concept of ‘product liability’. There are a number of other developments that have been introduced in the Act which have been highlighted in this article.

The Consumer Protection Bill, 2019 was passed by the Parliament on August 6, 2019 and published in the Official Gazette on August 9, 2019. The Consumer Protection Act, 2019 accordingly took effect from July 20, 2020.

Salient features of the Act

• Widening of the definition of ‘Consumer’: The Act expands the definition of ‘consumer’ to include persons who purchase goods or hire services via offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing. Whilst the Indian e-commerce industry is expected to surpass the US and become the second-largest e-commerce market in the world by 2034[1], bringing online transactions within the purview of the Act will ensure that this is not done at the cost of the consumers.

• Establishment of a Central Consumer Protection Authority (CCPA): The CCPA established under the Act is the Central Authority responsible for regulating matters involving violation of consumer rights, unfair trade practices and false or misleading advertisements. It can take up these matters suo moto, on the basis of a complaint received or upon direction received from the Central Government.

• Increase in the Pecuniary Jurisdiction of the Authorities:

*Under the Consumer Protection Act, 1986; the District Commission was referred to as District Forum

• Digital filing of Consumer Complaints: The Act now enables aggrieved consumers to undertake e-filing of complaints with the respective judicial forum. This advancement in the grievance procedure will speed up the complaint filing process which prior to the Act involved physical filing of the complaint with the jurisdictional District Forum where the seller carries on business or where the cause of action arose (i.e. the place where the purchase took place). It would also ensure that the filing can be done at any hour of the day since it is an online procedure. The Act does not do away with the process of physical filing of complaints, but merely supplements it with e-filing.

• Concept of ‘Product Liability’: Product Liability has been defined under the Act as a responsibility of a product manufacturer or seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services. The Act enlists various occasions on the occurrence of which the product manufacturer or seller or product service provider would be liable in a product liability action. Since ‘product seller’ is defined to include persons involved in placement of products, the ground commonly taken by e-commerce websites that they merely act as ‘platforms’ or ‘aggregators’ will now not be tenable as a defence. Although there are increased risks for the product manufacturers, sellers and service providers, the Act prescribes certain exceptions in which product liability claim would not arise.

• Widened definition of ‘Unfair Trade Practices’: The definition of unfair trade practices has been widened to inter-alia include practices of non-issuance of bills or cash memo for goods sold or services rendered; refusal to take back defective goods or withdraw deficient services and provide refund thereof within the requisite time and disclosure of personal information of a consumer that has been given to the seller or service provider in confidence.

• Introduction of ‘Unfair Contract’: The Act has introduced the concept of ‘unfair contract’ as a contract which could have certain terms that could bring about a significant change in the rights of a consumer. The definition is inclusive of certain terms like excessive security deposits to be made by the consumer, imposition of any unreasonable charge, obligation or condition which could put the consumer to a disadvantage or permitting a party to terminate the contract unilaterally in the absence of a reasonable cause.

• Introduction of Mediation as a medium of Alternate Dispute Resolution: While there is a great backload of consumer cases lying unresolved, the introduction of mediation as a method of ADR could accelerate the process of resolving disputes. Under the Act read with Consumer Protection (Mediation) Rules, 2020, a mediation cell is to be attached to every district and state commission. Additionally, the Act also carves out some matters of grave importance which cannot be referred to mediation which inter-alia include matters pertaining to medical negligence resulting in grievous injury or death, matters relating to prosecution for criminal and non-compoundable offences and matters involving public interest.

Conclusion

The Consumer Protection Act, 2019 replaces the three-decade long Consumer Protection Act of 1986. The increased penalty and stricter liability for violating the consumer’s interests surely have the potential to curb unethical business practices. Whilst the changes brought about by the Government are commendable vis-à-vis introduction of mediation, product liability and inclusion of e-commerce, the enforcement of the Act and its practical applicability can only be determined after it passes the test of time.

[1] India and Analysis 2020, Indian Ecommerce Industry Analysis <https://www.ibef.org/industry/ecommerce-presentation#:~:text=The%20E%2Dcommerce%20market%20is,reach%20220%20million%20by%202025.&gt; [Accessed 23 July 2020]

ABOUT THE AUTHOR

Komal Shah

Komal Shah has completed her graduation in LLB from Government Law College, Mumbai and secured an LLM in International Business Law from Queen Mary University, London. She has an All India Rank 3 in Company Secretary Course and has a Bachelors in Accounting & Finance.  She can be reached at komal.shah2694@gmail.com.