LEGISLATIVE NOTE. No. 4/LN/Ref/March 2018 THE CONSUMER PROTECTION BILL, 2018

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1 MEMBERS' REFERENCE SERVICE LARRDIS LOK SABHA SECRETARIAT NEW DELHI LEGISLATIVE NOTE For the use of Members of Parliament NOT FOR PUBLICATION No. 4/LN/Ref/March 2018 THE CONSUMER PROTECTION BILL, 2018 Prepared by Dr. Ranbir Singh, Additional Director and Smt. Vandana Chauhan,, R.O. of Lok Sabha Secretariat under the suupervision of Smt. Kalpana Sharma, Joint Secretary and Dr. P.J. Antony, Director. The Legislative Note is for personal use of the Members in the discharge of their Parliamentary duties, and is not for publication. This Service is not to be quoted as the source of information as it is based on the sources indicated at the end/in the context.

2 THE CONSUMER PROTECTION BILL, 2018 INTRODUCTION Consumer markets for goods and services have undergone profound transformation since the enactment of the Consumer Protection Act, The emergence of global supply chains, rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services and have provided new options and opportunities for consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices. Therefore, to modernise the existing Act and to address the myriad and constantly emerging vulnerabilities of the consumer, the Consumer Protection Bill, 2018 has been introduced by the Union Minister of Consumer Affairs, Food and Public Distribution, Shri Ram Vilas Paswan, in Lok Sabha on 5 January The Bill seeks to replace the existing Consumer Protection Act, 1986 and to provide for protection of the interests of consumers and to establish authorities for effective administration and timely settlement of consumers' disputes. (For Objects and Reasons, See Annexure-I). The Bill contains eight chapters and 107 clauses. KEY FEATURES OF THE BILL Central Consumer Protection Authority (CCPA): The Consumer Protection Bill, 2018 provides for the establishment of an executive agency, the Central Consumer Protection Authority (CCPA) to promote, protect and enforce the rights of consumers; make interventions when necessary to prevent consumer detriment arising from unfair trade practices and to initiate class action including enforcing recall, refund and return of products. This fills an institutional void in the regulatory regime extant. The CCPA will have an investigation Wing, headed by a Director- General, which can conduct enquiry or investigation. It can enquire or investigate any violation of consumer rights suo motu or on a complaint received from the

3 -2- Central Government in an appropriate forum as the case may be. The CCPA can also issue directions against false or misleading advertisements. Consumer Disputes Redressal Commission (CDRC): The Bill provides for provision for establishing a Consumer Disputes Redressal Commission at the District, State and National level. Various provisions aimed at simplifying the consumer dispute adjudication process provided in the Bill are as follows: i). Enhancing the pecuniary jurisdiction at the District level to Rs. 1 crore, at State level to Rs. 10 crore and at the National level, the amount exceeding Rs. 10 crore or upto thrice the limit of such value respectively; ii). An appeal can be filed against the District CDRC Order in the State CDRC and against the State CDRC Order appeal can be filed in the National CDRC. Appeals against the orders of the National Commission can be filed in the Supreme Court. iii). Every order of the District Commission, State Commission and the National Commission shall be enforced in the same manner as the decree of a Civil Court. Failure to comply with the orders of the Commissions would lead to an imprisonment of minimum one month that can be extended upto three years and a fine of not less than Rs. 25,000 to Rs. 1 lakh or both. iv). Increase in the minimum number of the Members in the State Consumer Disputes Redressal Commission to facilitate fast disposal of complaints; v). Power to review their own orders by the State and District Commission; vi). Constitution of Circuit Benches to facilitate faster disposal of complaints; vii). Enabling provisions for consumers to file complaints electronically; and, viii). Consumer may file a complaint in a District Commission within the local limits of whose jurisdiction he resides or personally works for gain. Product Liability: Provisions for product liability action on account of harm caused to consumers due to a defective product or by deficiency of service is initiated under

4 -3- the Bill which will apply to every claim for compensation. The liability of a product manufacturer arises if the product contains a manufacturing defect or design defect or deviates from the manufacturing specifications or does not conform to the express warranty or does not contain adequate usage instruction. Even the mere seller of a product may be held liable if he has exercised substantial control over the designing, testing, labelling, etc,. Similarly a service provider shall be liable if the service provided by him was faulty or deficient in quality performance or did not conform to the terms mentioned in the warranty. Penalties: In case of failure to comply any direction issued by the Central Authority, an imprisonment of upto 6 months and a fine upto 20 lakh rupees or both would be imposed. Misleading Advertisements: Any manufacturer or service provider who gives false or misleading advertisements will be punished with imprisonment of upto 2 years and a fine of upto 10 lakh rupees. For any subsequent offence, the punishment may be increased upto 5 years and fine upto 50 lakh rupees. It also provides for prosecution of celebrities, who endorse products with misleading claims. They are also liable to be fined. Adulteration of Product: The Bill provides for graded punishment and fine to a person who himself or by any other person on his behalf, manufactures, sells, stores, distributes or imports any product containing an adulterant with provision for suspension and cancellation of the license. The punishment may be extended to life imprisonment and upto a fine of 10 lakh rupees depending on the seriousness of the harm caused.

5 -4- Consumer Mediation Cell: The Bill introduces a clause for establishment of consumer mediation cell as an Alternate Dispute Resolution Mechanism. Consumer Mediation Cell will be attached to the Redressal Commission at the District, State and at the National level. Unfair Trade Practice: Unfair trade practice means a trade practice which may include any of the following: (i) making a false statement regarding the quality or standard, sponsorship, warranty/guarantee of a good or service; (ii) selling of goods not complying with the particular standards; (iii) manufacturing of spurious goods or adopting deceptive practices; (iv) not issuing a receipt for a good or service sold; (v) refusal to withdraw or refund goods or services within the period stipulated in the Bill or within a period of 30 days; (vi) disclosing personal information provided by a consumer to any other person, etc. Unfair Contract: Unfair Contract means 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 the following: (i) payment of excessive security deposits, (ii) payment of a disproportionate penalty for a breach in contract, (iii) refusal to accept early repayment of debts, (iv) right to terminate the contract without reasonable cause, (v) transfer of a contract to a third party to the detriment of the other party, without that party s consent, or (vi) imposing of any unreasonable charge or obligations which put the consumer at a disadvantage.

6 -5- Inclusion of Online Products : Transaction made through any mode, inclusive of but not limited to, offline, online through electronic mean, teleshopping or direct selling or multi level marketing are being covered under the provisions of the Bill. In brief, the Bill provides for several provisions aimed at simplifying the consumer dispute adjudication process of the Consumer Disputes Redressal Agencies, inter alia, relating to enhancing the pecuniary jurisdiction of the Consumer Disputes Redressal Agencies; increasing minimum number of Members in the State Consumer Disputes Redressal Commissions and provisions for consumers to file complaints electronically. REFERENCE: The Consumer Protection Bill, 2018( df)

7 Annexure STATEMENT OF OBJECTS AND REASONS The Consumer Protection Act, 1986 was enacted to provide for better protection of the interests of consumers and for the purpose of making provisions for the establishment of consumer protection councils and other authorities for the settlement of consumer disputes, etc. Although, the working of the consumer dispute redressal agencies has served the purpose to a considerable extent under the said Act, the disposal of cases has not been fast due to various constraints. Several shortcomings have been noticed while administering the various provisions of the said Act. 2. Consumer markets for goods and services have undergone drastic transformation since the enactment of the Consumer Protection Act in The modern market place contains a plethora of products and services. The emergence of global supply chains, rise in international trade and the rapid development of e-commerce have led to new delivery systems for goods and services and have provided new options and opportunities for consumers. Equally, this has rendered the consumer vulnerable to new forms of unfair trade and unethical business practices. Misleading advertisements, telemarketing, multi-level marketing, direct selling and e-commerce pose new challenges to consumer protection and will require appropriate and swift executive interventions to prevent consumer detriment. There is, therefore, a need to amend the Act to address the myriad and constantly emerging vulnerabilities of the consumers. In view of the above, it is proposed to repeal and re-enact the Act. 3. The Consumer Protection Bill, 2018 provides for the establishment of an executive agency to be known as the Central Consumer Protection Authority (CCPA) to promote, protect and enforce the rights of consumers; make interventions when necessary to prevent consumer detriment arising from unfair

8 trade practices and to initiate class action including enforcing recall, refund and return of products, etc. This fills an institutional void in the regulatory regime extant. Currently, the task of prevention of or acting against unfair trade practices is not vested in any authority. This has been provided for in a manner that the role envisaged for the CCPA complements that of the sector regulators and duplication, overlap or potential conflict is avoided. 4. The Bill also envisages provisions for product liability action on account of harm caused to consumers due to a defective product or by deficiency in services. Further, provision of Mediation as an Alternate Dispute Resolution Mechanism has also been provided. 5. The Bill seeks to achieve the above objectives. NEW DELHI; The 23rd December, RAM VILAS PASWAN