Consumer Protection Act 2019 – Tracing the Business Perspective

Last Updated at: May 29, 2020
Consumer Protection Act 2019 - Tracing the Business Perspective
In a landmark judgement delivered on February 6th, 2020, the Supreme Court held that beneficiaries of insurance policies are ‘consumers’ under the Consumer Protection Act. The court said they will be deemed consumers even if they are not parties to the contract of insurance.


In order to keep up with changes in consumer behaviour and selling trends introduced by technology, the Consumer Protection Act 2019 provides for several new regulations. Most of these provisions are centred around increased protection of consumers, easing procedural and jurisdictional norms, providing for more stringent liability and offering a more diverse and all-encompassing definition of a consumer. Now, all goods and services, including telecom and housing construction, and all modes of transactions (online, teleshopping, etc.) have been included under its ambit. In this post, we highlight the possible ramifications of this change in the e-commerce industry and businesses in general.

What are unfair contracts under the Consumer Protection Act, 2019?

While the term ‘unfair’ may have different contextual interpretations, if a consumer’s rights are significantly changed, or a situation of unnecessary hardship is created by a seller, it may be called an unfair contract. The concept of unfair contracts has been introduced for the first time under this act. Thus, the purview extends to individual contracts that may be negotiated between a specific buyer and seller. The following clauses may constitute an unfair contract -requiring excessive security deposits; imposing a disproportionate penalty for a breach in contract; refusing to accept early repayment of debts; terminating the contract without reasonable cause; transferring a contract to a third party to the detriment of the consumer without his consent; or imposing unreasonable charge or obligations which put the consumer at a disadvantage. Thus, sellers will have to take precautions and modify any pre-existing conditions in standard contracts to not jeopardise the consumer. It is the National and the State Commissions that have been given the power to declare such terms unfair and therefore void.

Unfair and Restrictive Trade Practices – New Additions

While a restrictive trade practice includes the imposition of unnecessary conditions such as a mandatorily tied-in purchase, an unfair trade practice has a wider ambit and included an array of malpractices such as making false claims about features of the product, selling sub-standard goods, manufacturing spurious goods, adulteration in food products. Under the new bill, non-issuance of the invoice, disclosing personal information of consumer to a third party and refusal to accept unused goods by the seller if the return is made within 30 days of purchase is also classified as an unfair trade practice.

A newly created body, the Central Consumer Protection Authority has been given power to routinely publish guidelines for manufacturers, sellers and distributors and its directives will have to be followed in this regard. Considering the increase in consumer grievances attributable to e-commerce platforms, the central government may prescribe rules for preventing unfair trade practices in e-commerce and direct selling.

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Complaint Disposal and Alternate Dispute Resolution Mechanism

The Commissions will attempt to dispose of a complaint within three months if the complaint does not require analysis or testing of commodities. If analysis and testing are required, the complaint will be disposed of within a period of five months. Moreover, under the new act, special mediation cells will be attached to the District, State and National Commissions.

More stringent Penalties for Offenders

If a person does not comply with the orders of the District, State or National Commissions, he may face imprisonment up to three years, or a fine not less than Rs 25,000 extendable to Rs one lakh, or both. For non-compliance of an order issued by the CCPA, one may face imprisonment of up to six months, or a fine of up to Rs 20 lakh, or both.

Penalty for misleading advertisements and endorser’s liability

It had been observed that many celebrities were roped in by big brands to endorse tall claims which products often failed to meet. For false and misleading advertisements, a penalty of up to Rs 10 lakh may be imposed on a manufacturer or an endorser. For a subsequent offence, the fine may extend to Rs 50 lakh.  The manufacturer can also be punished with imprisonment of up to two years, which may extend to five years in case of every subsequent offence. The CCPA can also prohibit the endorser of a misleading advertisement from endorsing any particular product or service for a period of up to one year, thus putting the responsibility on endorsers for the veracity of their claims. For every subsequent offence, the period of prohibition may extend to three years.

Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.