Liability For Misleading Advertisements, Celebrity Endorsements : Key Features Of Consumer Protection Bill Passed By Parliament [Read Bill]

The Rajya Sabha on Tuesday passed the Consumer Protection Bill 2019, which seeks to wholly replace the Consumer Protection Act 1986.

The Lok Sabha had cleared the Bill unanimously on July 30.

Union Minister for Consumer Affairs, Food and Public Distribution Ram Vilas Paswan who tabled the Bill said that a new law for strengthening consumer rights was necessary in view of the modern day challenges.

The Bill with 109 clauses seeks to establish a national level regulator -Central Consumer Protection Authority- to deal with consumer complaints on a proactive measure. The present law does not have a regulator.

Also, the Bill contains key provisions dealing with class actions, product liability, misleading advertisements, liability for celebrity endorsements etc. The Bill also addresses new age developments like e-commerce, direct selling, tele-marketing etc.

The highlights of the Bill are :-

Central Consumer Protection Authority(CCPA)

CCPA is a national level regulator dealing with matters relating to violation of rights of consumers, unfair trade practices and false or misleading advertisements which are prejudicial to the interests of public and consumers. Chapter III of the Bill contains provisions regarding CCPA.

CCPA deals with the rights of consumers as a class. It will have an investigation wing headed by a Director General and has powers of search and seizure.

The District Collector is empowered to report to the CCPA regarding mass consumer complaints in the concerned jurisdiction.

It has power to order recall of goods which are dangerous, hazardous or unsafe and to direct discontinuation of practises which are unfair and prejudicial to the interests of consumers. Based on inquiry reports, the CCPA has power to file complaints before the relevant Consumer Dispute Redressal Forum.

It also has the power to impose penalties on manufacturers and celebrity endorsers for misleading advertisements.

Misleading advertisements

The Bill contains provisions to deal with misleading advertisements.

'Misleading advertisements' are defined under Clause 2(28) as advertisement, which—

(i) falsely describes such product or service; or

(ii) gives a false guarantee to, or is likely to mislead the consumers as to the nature, substance, quantity or quality of such product or service; or

(iii) conveys an express or implied representation which, if made by the manufacturer or seller or service provider thereof, would constitute an unfair trade practice; or

(iv) deliberately conceals important information.

Misleading advertisements can attract penalty upto rupees ten lakhs from the CCPA under Clause 21. It is also an offence punishable with with imprisonment for a term which may extend to five years and with fine which may extend to fifty lakh rupees as per Clause 89.

Liability of celebrity endorsers

The Bill addresses the liability of endorsers.

"Endorsement",is defined under Clause 2(18) to mean:-

(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;

The endorser can be levied with penalty up to rupees ten lakhs by the CCPA for false and misleading advertisements, under Clause 21.

However, the endorser will not be liable if he has exercised due diligence to verify the veracity of the claims made in the advertisement regarding the product or service being endorsed by him.

Product liability

The Bill incorporates a special chapter-Chapter VI- to deal with 'product liability'.

As per Clause 2(34) "product liability" means the responsibility of a product manufacturer or

product 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 relating thereto;

According to 2(22), "harm", in relation to a product liability, includes—

(i) damage to any property, other than the product itself;

(ii) personal injury, illness or death;

(iii) mental agony or emotional distress attendant to personal injury or illness or damage to property; or

(iv) any loss of consortium or services or other loss resulting from a harm referred above.

But it will not include any harm caused on account of breach of warranty conditions or any commercial or economic loss, including any direct, incidental or consequential loss relating thereto;'

A product liability action may be brought by a complainant against a product manufacturer or a product service provider or a product seller, as the case may be, for any harm caused to him on account of a defective product.

It can be brought against even the product seller in certain circumstances like seller exercising substantial control over designing, packing, testing, manufacturing etc, or seller altering or modifying the product. The seller will also be liable if he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product while selling such product.

Expanded definition of 'deficiency'

The Bill expands the definition of 'deficiency' in Clause 2(11) to include :-

(i) any act of negligence or omission or commission by such person which causes loss or injury to the consumer; and

(ii) deliberate withholding of relevant information by such person to the consumer;

Enhanced pecuniary jurisdiction

The limits of pecuniary jurisdiction has been expanded in the following manner :-

District Forum :- Rs.One Crore from Rs. Twenty Lakhs

State Commission :- Rs. Ten Crores from Rs. One Crore

National Commission :- Above Rs. Ten Crores from Rs.One Crores

The Bill also mandates the Consumer Fora and Commissions to explore mediation possibilities before adjudicating the complaint.

Offences

The Bill makes violation of consumer rights punishable offences and has Chapter VII dealing with them .

As stated above, misleading advertisements are made punishable.

The Bill also addresses the menace of adulteration, by making manufacture, sale, storage of products mixed with adulterants punishable offences.

Cognizance of offence can be taken by a court only on a complaint filed by CCPA.

The Bill also contains expanded definitions for "unfair trade practise" and "unfair contracts" under Clauses 2(47) and 2(46) respectively.

The Central Government is empowered to make rules to regulate direct selling, multi-level marketing, e-commerce, tele-shopping etc.

Click here to download the Bill

Read Bill