This article is written by Harsha Jeswani, a student of National Law Institute University, Bhopal.

Need for a new consumer protection law

Recently, the Consumer Affairs Minister, Mr. Ram Vilas Paswan, introduced the Consumer Protection Bill, 2015, which is likely to replace the old Consumer Protection Law of 1986. The 1986 Act was introduced to protect the consumers from the unfair trade practices and to redress their disputes by establishing various consumer councils. However there were certain lacunas present in the said Act. The Act did not provide for any remedy to the web consumers. A consumer can bring an action against the seller only in the place where the transaction took place. The new bill on the other hand, aims to fill the gaps by widening the scope and ambit of the old law and bringing about radical changes in order to ensure speedy and inexpensive justice to aggrieved consumers.

One of the significant features of the new bill is to bring the online consumers under the gamut of the Act as there is no dedicated Act for e-commerce.  The decision came after the Maggi Controversy which resulted in growing concern over the safety of consumers. Further, due to expansion of e-commerce and online shopping in India, consumers these days have also become exposed to new forms of unfair trade and unethical business practices. There has been an increased use of internet these days for purchasing purposes. Transactions taking place over the internet are bereft of interaction between the buyer and the seller, as a result of which the former is unable to inspect the quality of the goods offered to him. Fraudulence in online payments is also common.  Therefore the need was felt for protecting the consumers against these technological challenges and to allow for a ‘territory free’ legal action against any goods or service provider.

India is experiencing a robust growth in its e-commerce sector which is expected to be worth more than $16 billion by the end of this year. This new bill therefore recognises the growing complexity of the business landscape with the expansion of e-business across India.

Salient features of the new bill

The salient features of the new bill include establishment of an independent executive agency, the Central Consumer Protection Authority (CCPA), which will serve as a regulatory body to take care of the rights of the consumers. The authority will have a right to recall the products and cancel the advertisements in case of misleading advisements. It will also be empowered to commence class action lawsuits against companies that are evading the statutes of the law and it will now, also, cover Indian e-commerce portals. The new bill confers power on the authority to initiate action against the manufacturers on its own unlike the old Act where the consumer is required to file a case before the court to initiate proceedings.

The new bill is proposed on the lines of institutions in USA and European countries which provide that a consumer protection law should derive its basis from the contract law and the law of sale of goods without which the law of consumer protection tends to be confusing and conflicting. Describing standard form contracts to be ‘of comparative modern origin’, Lord Diplock, in the 1974 judgment in Schroeder Music Publishing Co Ltd. v. Macaulay,[1]  complained that the corporations being stronger effectively confronted the customer with a condition to accept the goods with all the terms, or reject them altogether. Lord Denning, another reformer, corrected that the customer was not even given the freedom of ‘take it or leave it.’ Instead, he was simply given a form and told: ‘sign here’. And if things went wrong, the corporation would shift the burden on the consumers for having accepted the goods with full knowledge of the terms imposed.[2]

Therefore, in order to protect the interests of the disadvantaged party, the British courts recognised the principle of contract law by virtue of which the weaker party could avoid the contract if a party to the contract committed a fundamental breach. UK incorporated this principle in case of consumer contracts also by enacting the Unfair Terms in Consumer Contracts Regulations, 1999 wherein an unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.

However, the earlier consumer protection law of India did not recognise this aspect in case of consumer contracts. The 2015 bill has incorporated the above principle by introducing a ‘product liability’ clause which mandates that if product/services causes personal injury, death or property damage, the authority will take action against defaulting manufacturers or service providers.[3]  Thus by introducing this clause the new bill protects the interests of the online consumers as well who enter into a contract with sellers of online stores to purchase the products without having any means to sample and test the products and services that they are purchasing.

The Bill also fixes product liability upon the manufacturer for any defect in the product if such a product inflicts any damage, personal injury or results in a death of the consumer. In certain cases, the seller could also be held liable for the same. The Bill limits the ability to claim damages on account of mental agony only to cases where personal injury is actually caused. Furthermore, the Act envisages consumer complaints to be resolved expeditiously within three to five months.

The concerned forum is also authorised to cancel unfair terms and conditions in a contract to protect the exploitation of the consumers by traders/service providers. The bill therefore recognises that there is no place for unfair contract terms in consumer contracts.[4] This necessarily means that a contract is binding but not the unfair terms in it. If, however, the cancellation of such unfair terms goes to the root of the contract, the contract would be held void.

It is often contended that Indian consumers face a variety of threats when shopping online due to the shortcomings in the Consumer Protection Act, 1986. The use of internet for purchasing products, the online mode of payment, and such other digital activities raise a number of issues with regard to consumer protection. The new bill proposes to cover all such shortcomings by acknowledging the new consumer trends emerging through the e-commerce platform. Various aspects of e-commerce which are often considered as unethical such as misleading advertisements to consumers, online multi-level marketing, direct selling practices and many other potentially unethical business practices which might mislead or exploit consumers are specifically targeted by the new legislation. Direct interventions and class actions by the regulatory authority for consumers with grievances will therefore now increase the cost of doing business for some companies. E-commerce businesses must particularly take note of the “product liability” section of the bill. If the amendments are passed, action will be taken against manufacturers that sell products and services which cause death, damage or injury to the consumers. The bill provides for a mediation option that can be used by both parties as an alternative dispute resolution mechanism to ensure speedy and inexpensive justice.

For the said purpose, the National, State or district forum will be entitled to mediate a dispute between the parties. The State Government is empowered to establish District Consumer Mediation Cell attached to the District Commission in each district of the State and a Consumer Mediation Cell attached to the State Commission.[5] The new law provides for punishment up to life imprisonment in certain cases of food poisoning. Thus the 2015 bill incorporates stringent punishment against the incidents of fraud and cheating.

Another noteworthy feature of the 2015 bill is the provision of cooling off. The new bill gives the right of cooling off in consumer contracts. Ordinarily the rule is that once a contract is made, it is final and binding on all the parties. But the cooling-off clause gives right to a consumer to return the goods purchased by him within the specified time period and get the payment back if the goods are not in conformity. Many countries recognise this rule. In UK, the Consumer Credit Act, 1974 allows a 14 days cooling-off period in consumer credit.[6] Canada also recognises the law on cooling off which varies from state to state depending on the type the contracts.[7]

India on the other hand did not specifically provide for any provision for cooling- off period except in insurance contracts. The rule was once a contract is entered into between the parties it is final and its sanctity must be preserved. However, the government of India made efforts to introduce exceptions to this general rule particularly in e-commerce transactions where the consumer is very often at disadvantaged situation since he does not get a chance to see the goods or ascertain services. Also consumers in India are often misled by the unfair and false advertising. The consumer buys product by placing his reliance on the advertisements. It is only after he makes purchase, the consumer realises that he has been misled by the false advertisement. Even in case of electronic contracts, it is only after the consumers receives the delivery of the products, he realises that the said products are not in conformity with the goods which were displayed in the online stores and were ordered by him. Many a times, the consumer however was able to set aside the contract but the retailer will refuse to entertain his complaint by shifting the blame on the manufacturer who issues the advertisements. Therefore in this background, there was a need in India for introducing the concept of cooling-off in every consumer sales contract.

The 1986 Act did not have any clear provision for cooling-off. It only talked about ‘reasonable length of time’ but did not define what constitutes reasonable. This gave wide discretion to retailers to set their own ‘reasonable length of time’, which could be as little as nine days in extreme cases. Therefore, in order to obtain a balance between the rights of the consumer and the inconvenience caused to the trader, the Consumer Protection Bill, 2015 provides for a cooling-off period of 30 days. This period enables the consumer to cancel the contract within the prescribed limit in case of any hardship caused to him due to any misrepresentation on the part of the seller. Similarly the interests of the seller is also taken into account as the trader is not required to provide service till the cooling off period is over. Similarly, it also protects the interests of those persons who buy digital content such as e-books, or online films and music by giving them the option of replacement in case the downloads does not work, but not a refund.  Thus, it can be said that the 2015 bill provides for a comprehensive framework to look after the interests of the consumers.

Concerns

Despite all these amendments the Consumer Protection Bill, 2015 is facing criticism on many aspects. Some argue for a separate Act that should regulate e-commerce transactions as present in UK and Europe. These people believe that since e-commerce transactions differ in certain respects from an ordinary contract, therefore there is need for separate law in order to effectively deal with the issues of e-commerce. The activists of consumer protection bill believe that the new bill is likely to make process of consumer grievance redressal more complex and burdensome. Moreover, the equivalent powers which are granted to the proposed authority will overlap with that of the judiciary which is not only undesirable but may also lead to greater complexities. The draft bill also provides for mediation as a mechanism to resolve the disputes. Introduction of such a provision is likely to frustrate the ends of the justice on account of further delaying the process of settlement. Also, provisions pertaining to appointment of mediators could act as a breeding ground for corruption leaving the weaker party helpless. The complexity and regulations are further increased due to setting up of a Consumer Authority and no clear provisions to simplify the conduct of cases in the courts. Further the bill should clearly lay down the products and services which qualify for commercial purpose as it still remains a grey area.

Conclusion

Addressing these issues is therefore incumbent upon the government if it really wishes to make the new bill successful. The cabinet has already approved the Consumer Protection Act for e-commerce as a clean bill of health and will soon become a matter of discussion in the parliamentary sessions. Time is ripe for the bill to be become the new consumer protection law which is specially designed for the digital India.

[1] [1974] 1 WLR 1308.

[2] Levison v. Patent Steam Carpet Cleaning Co. Ltd., (1977) 3 All ER 498.

[3] See Section 72(1) of the Consumer Protection Bill, 2015.

[4] See Section 2(42), the Consumer Protection Bill, 2015.

[5] See Section 63(1), the Consumer Protection Bill, 2015.

[6] The Consumer Credit Act, 1974.

[7] Akhileshwar Pathak, E-Retailing and the Consumer Protection Bill, 2015: Drawing from the European Union Consumer Directives, Indian Institute of Management Ahmedabad-380 015, India.