New Consumer Protection Bill recognises growing e-commerce market place

The Consumer Protection Bill, 2018, was introduced in the Lok Sabha on the last day of the recently concluded winter session. The Bill seeks to replace the Consumer Protection Act, 1986, a law more than 30 years old. Roopal Suhag, analyst at PRS Legislative Research, takes a look at some key issues tackled in the Bill.

Why was there a need for a new legislation?

A steep transformation of the consumer markets for goods and services, along with the emergence of global supply chains and rapid development of e-commerce, has necessitated the need for a new law. The shortcomings in the implementation of the 1986 Act, such as slow disposal of cases and administrative issues, led the government to introduce a consumer protection Bill in 2015.

The Bill was referred to the Parliamentary Standing Committee on Consumer Affairs. After eight months of deliberation, the Committee recommended several changes to the Bill. 

Can a manufacturer, service provider or seller be held guilty under product liability?

When a consumer suffers an injury, property damage or death due to a defect in a product or service, he/she can file a claim for compensation under product liability. The 2018 Bill outlines cases in which a product manufacturer, service provider and seller will be held guilty under product liability. The current law does not have any provision with regard to product liability. The 2015 Bill included provisions for product liability, but did not specify conditions to claim product liability from service providers.

Under the proposed law, to claim product liability, an aggrieved consumer has to prove any one of the conditions mentioned in the Bill with regard to a manufacturer, service provider and seller, as the case may be. This is an improvement from the 2015 Bill, where the consumer was required to prove all seven conditions with regard to a defective product in order to establish the liability of the manufacturer. The Standing Committee had noted that proving all these conditions would put an undue burden on the consumer, resulting in him/her not being able to claim liability in a case where even one condition is missed out. 

Does the Bill have specific provision to deal with the e-commerce market place?

Unlike its predecessor, the current Bill recognises the growing e-commerce market place. The Bill defines e-commerce as buying or selling of goods or services, including digital products over digital or electronic network. It gives the central government the power to take measures in order to prevent unfair trade practices in e-commerce. More details on how this industry will be regulated will be notified through rules after the Bill becomes a law.

How are consumers protected from misleading advertisements?

The 2018 Bill gives the Central Consumer Protection Authority the power to issue directions and penalties against false or misleading advertisements, if they are detrimental to the interest of any consumer or breach consumer rights. The penalty includes imprisonment up to two years and a fine extendable to Rs 1 million.  In case of a subsequent offence, the imprisonment and fine can be extended to five years and Rs 5 million, respectively.

The Authority may also impose a penalty on the endorser of a misleading advertisement. This penalty may extend to Rs 1 million and in case of a subsequent violation, to Rs 5 million. 

How does the Bill treat unfair contracts between consumers and manufacturers?

Unfair contracts between consumers and manufacturers under the Bill have been defined in an identical manner as in the 2015 Bill. Unfair contracts cover six terms, such as payment of excessive security deposits in an arrangement, disproportionate penalty for a breach and unilateral termination without cause. The Standing Committee had recommended that principles to determine whether a contract term is unfair should be laid down in the Bill itself. It reasoned that this would allow terms of contracts other than the specified six to be classified as unfair. The other salient provisions of the Bill include setting up mediation cells and Consumer Disputes Redressal Commissions at the district, state and national level, and penalties for manufacturing products with adulterants.