Consumer Protection Laws by Rajkumar S. Adukia
1
CONSUMER PROTECTION LAWS OF INDIA
BY
RAJKUMAR S ADUKIA
B. Com (Hons.), FCA, ACS, ACMA, LL.B, M.B.A, Dip IFRS (UK), Dip LL & LW, DIPR, Dip in Criminology
Email: rajkumarradukia@caaa.in
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CONSUMER PROTECTION LAWS OF INDIA
BY
RAJKUMAR S ADUKIA
B. Com (Hons.), FCA, ACS, ACMA, LL.B, M.B.A, Dip IFRS (UK), Dip LL & LW, DIPR, Dip in Criminology Email: rajkumarradukia@caaa.in
Index
1. Introduction 1.1. Who is a consumer? 1.2. Consumer Advocacy 1.3. Consumer awareness 1.4. Consumer Rights **1.5. Consumers’ Responsibilities
- Consumer Protection – International scenario** 2.1. United Nations Guidelines for Consumer Protection **2.2. Consumers International (CI)
- Historical background of consumer protection laws in India
- Consumer Protection legislations in India
- Consumer Protection Act, 1986** 5.1. History of Consumer Protection Act 5.2. Objective of the Act 5.3. Important terms under the Consumer Protection Act 5.4. Who is a Consumer? 5.5. Complaint 5.6. Unfair Trade Practice 5.7. Restrictive Trade Practice 5.8. Defective goods 5.9. Deficiency in service 5.10. Trader / Manufacturer 5.11. Hazardous goods **5.12. Procedure to file complaint
- Consumer Protection Bill, 2015
- Right to Information Act, 2005
- Overview of the MRTP Act, 1969
- Overview of the Competition Act, 2002
- Authorities / Organisations related to Consumer Protection** 10.1. Department of Consumer Affairs (DCA)
1. INTRODUCTION
―It is good to have money and the things that money can‘t buy, but it‘s good too, to check up once in a while and make sure you haven‘t lost the things money can‘t buy.‖ – George Lorimer, American editor & writer
When we buy a good or service, we rarely have adequate knowledge about its quality and safety. We are quite concerned about getting cheated. This is when the need for consumer protection arises. In the past few years, the subject of consumer protection has become a matter of increasing public concern because unscrupulous business tactics seriously affect the nation‘s well-being by contributing to social unrest and by causing undue financial distress to consumers. The consumer is the one who pays to consume the goods and services produced. As such, consumers play a vital role in the economic system of a nation. In the absence of their effective demand, the producers would lack a key motivation to produce, which is to sell to consumers. Economic activity flourishes when consumers can trust producers, but the consumer must have reasonable grounds for trust. Consumers will then value, not only quality and safety, but also the assurance of quality and safety. Therefore trust depends on assurance. Producers generally gain by providing assurance, so they seek to build, expand and project a good reputation. Producers demonstrate quality and safety and make the content of promises clear and publicly understood by means of advertisements, displays, sales assistance, labeling and packaging etc. But when some form of damage or undue hazard arises, then the trust of the consumer goes off. Generally consumer protection comes in the form of government regulations. Consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade, competition and accurate information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors. They may also provide additional protection for those most vulnerable in society.
1.1. Who is a consumer?
A consumer is defined as someone who acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing. A consumer is one who decides whether or not to buy an item at the store, or someone who is influenced by advertisement and marketing. Every time someone goes to a shop and buys a thing, they make a decision as a consumer. In the fields of economics, marketing and advertising, a consumer is generally defined as the one who pays to consume the goods and services produced by a seller (i.e., company, organization). A consumer can be a person (or group of people), generally categorized as an end user or target demographic for a product, good, or service.
Consumer means any person who - ( i ) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or ( ii ) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person; (but does not include a person who avails of such services of any commercial purpose). (Sec.2(d) of the Consumer Protection Act, 1986)
According to this definition, a person to be a consumer of goods should satisfy that –
The goods are bought for consideration. Any person who uses the goods with the approval of the buyer is a consumer. Any person who obtains the goods for resale or commercial purposes is not a consumer.
was so much demand for their goods and services. As a result, they were often able to command high prices for products of poor quality. The earliest consumer advocates to point out such abuses were called "muckrakers," and their revelations of underhanded business practices spurred the creation of several federal agencies and a flurry of legislation designed to curb some of the most serious abuses. At the same time, increased competition began to provide consumers with more choices among a variety of products of higher quality.
1.3. Consumer Awareness
The market today is flooded with very large number as well as varieties of goods and services. The number of producers and final sellers of the commodities have also increased many folds. So it has become very difficult to know as to who is a genuine producer or seller? It is practically not possible for consumers to personally come in contact with a producer or seller. Moreover in the age of advanced information technology the physical distance between consumer and producer/seller has also increased, since consumers can get their commodities at door step by booking orders over telephone or through internet etc. Similarly from among large varieties of commodities, it has become very difficult to know as to which one is genuine. People think that a product which has appeared in some advertisement must be good or the producer whose name is known through advertisement must be selling the right product. But this may not be true always. Much information is deliberately hidden in certain advertisements to mislead the consumers. Consumer awareness refers to the following: (i) The knowledge of the product purchased by the consumers in terms of its quality. For example the consumer should know whether the product is good for health or not, whether the product is free of creating any environmental hazard or not etc. (ii) The education about the various types of hazards and problems associated with marketing of a product - For example, one way of marketing a product is advertisement through newspapers, television etc. Consumers should have proper education about the bad effects of advertisement. They must also verify the contents of the advertisement. (iii) The knowledge about ‗Consumer Rights‘ - This means that, first, the consumer must know that he/she has the right to get the right kind of product. Secondly, if the
product is found out to be faulty in some manner, the consumer should have knowledge of claiming compensation as per the law of the land. (iv) The knowledge about consumer‘s own responsibilities - This implies that consumers should not indulge in wasteful and unnecessary consumption.
1.4. Consumer Rights
The purchase of goods and services entitles the consumer to certain rights which are as follows –
- Right to Safety - A consumer has the right to safety against such goods and services that are hazardous to his health, life and property. For example, counterfeit and substandard drugs; appliances made of low quality raw material, such as iron, pressure cooker, etc. and low quality food products like bread, milk, jam, butter, etc. The consumers have the right to safety against the loss caused by such products.
- Right to be informed - A consumer has the right to be provided with all the information on the basis of which he decides to buy goods or services. Such information may relate to quality, purity, potency, standard, date of manufacture, method of use, etc. of the commodity. Thus, a producer is required to provide all these information in a proper manner, so that the consumer is not cheated.
- Right to choose - A consumer has the absolute right to buy any goods or services of his choice from among the different goods or services available in the market. In other words, no seller can influence his choice in an unfair manner. If any seller does so, it will be deemed as interference in his right to choice.
- Right to be heard - A consumer has the right that his complaint be heard. This right also empowers the consumers to fearlessly voice their complaints against the defective products and the erring producer/company /seller.
- Right to seek redressal - This right provides compensation to the consumers against unfair trade practice of the seller. For instance, if the quantity and quality of the product do not conform to those promised by the seller, the buyer has the right to claim compensation. Several redressals are available to the consumer by
save electricity, gas etc. by judicious use. Consumers are also responsible for automobile pollution in town and cities. They should use public transport system and eco-friendly vehicles.
- Consumers as Managers - Consumers can unite together to provide themselves and the community at large of a locality or village some basic needs such as drinking water supply, health, education etc.
2. CONSUMER PROTECTION – INTERNATIONAL SCENARIO
The consumer organisations play a vital role in the developed countries like United States, United Kingdom, Sweden, Japan, Germany, France, Belgium etc. for protection of consumers. In developed nations, due to strong consumerism, the consumers are organized and aware of fluctuations of market price and quality of commodity. The slogan of ‗seller beware‘ is prevalent there and emphasis is given to strong consumer movement.
- United States In the United States, the rapid industrialization after the end of Civil War in 1865 led to mergers and amalgamations and to formation of trusts and cartels, which advanced a great deal by 1880s. The concentration of corporate power at such an early stage of economic development and the awareness to check the economic power promoted the passing of the first antitrust legislation as early as 1890 which came to be known as the Sherman Act. The Act declared every contract, combination in the form of trust or otherwise or, conspiracy in restraint of trade or commerce, to be illegal. Every party to any such contract, combination or conspiracy was made punishable with fine or imprisonments. While this Act was of great use in curbing the wave of mergers that had market the industrial scene of the United States towards the end of the nineteenth century of this century, there were certain monopolistic and restrictive practices to which the Act did not reach. In order to remove these infirmities, two major legislations were passed in 1914 namely the Federal Trade Commission Act, 1914 and the Clayton Act. The Federal Trade Commission Act set up new machinery, the Federal Trade Commission which shared with the department of justice the responsibility for enforcement of all anti-trust legislation. The Act prohibited unfair methods of competition. The Clayton Act was designed specially to deal with the problems of mergers and to prohibit certain types of individual conduct which were beyond the reach of the Sherman Act. Illegal attempts at circumvention of the Clayton Act resulted in passing of the Robinson Patman Act, 1936 which tightened up the law on price
illegality the agreements which had been carried into effect for preventing and lessening competition. The scope of the legislation was extended by the enactment of Combines Investigation Act, 1910 which also covered mergers, trusts and monopolies operating to the common detriment. Towards the end of World War-I there was strong public demand to check rising prices. In response to that demand the board of Commerce Act and the Combines and Fair Prices Act were passed in 1919. In 1923, a new Combines Investigation Act was passed which was amended many a times in 1951, 1962, 1960, 1969 and 1976. The scope of the Act is extended to cover resale price maintenance, prohibition of collusive, arrangements, unfair trade practices etc. The Act is directed against preventing, limiting or lessening unduly the manufacture or production of an article, or to enhance unreasonable the price thereof, to restrain or injure trade or commerce in relation to any article formation of a merger or monopoly; discrimination as between purchasers etc. Misleading advertisements and other deceptive practices were considered and the Combines Investigation Act, 1969 was codified. The Act was further amended to make the provisions of Unfair Trade Practices more stringent and effective.
- United Kingdom In the United Kingdom, the anti-monopoly legislations came immediately after the World War-II. Between 1948 and 1973 a number of statutes were passed for this purpose. These statutes were the Monopolies and Restrictive Practices Enquiry and Controls Act, 1948 amended by the Monopolies and Restrictive Practices Act, 1953, the Restrictive Trade Practices Act, 1968; the Resale Price Act, 1964; the Monopolies and Mergers Act, 1965 and the Fair Trading Act, 1973. All these legislations except the Fair Trading Act, 1973 have been repealed by the consolidating enactments, the Restrictive Trade Practices Act, 1976 the Resale Price Act, 1976 and the Restrictive Practices Court Act 1976. The Restrictive Trade Practices Act, 1976 has been supplemented by the Restrictive Trade Practices Act, 1977. The Fair Trading Act, 1973 introduced new and comprehensive legislation. It extended the scope of the existing laws on monopolies and mergers and restrictive trade practices. The Act is wide enough to cover even professions, businesses, nationalized industries and public undertaking. It envisages twin machinery for its enforcement - Director General of Fair Trading and Consumer Protection Advisory Committees. The Act seeks to
protect the consumers from Consumer Trade Practices, and Unfair Practices. It also lays down the provisions in respect of pyramid selling and similar trading schemes. It has enlarged the powers and functions of the office of Registrar of Restrictive Trading Agreements which is now merged in the office of the Director General of Fair Trading. Further the Competition Act, 1980 has been enacted to make provisions for the control of anti-competitive practices in supply and acquisition of goods, and the supply and securing of services; to provide for the investigation of prices and charges by the Director General of Fair Trading, and to make some amendments with respect to the Fair Trading Act, 1973 and the Restrictive Trade Practices Act, 1976. Apart from the aforesaid enactments, the United Kingdom has a number of other legislations to protect the interest of the consumers. The Unfair Contracts Terms Act, 1977 which has various provisions to protect the consumers from unfair terms in the standard form of contracts; the Price Commission Act, 1977 which requires that the firms with large turnover should notify price increases and periodical report on profits, and the smaller firms to keep appropriate financial records. The Consumer Protection Act; 1987 has been passed by the Parliament of Great Britain after extensive debate on the same. This is a legislation of wide range which creates both civil as well as criminal liability. This Act deals mainly with product liability, unsafe goods and misleading price indications.
- Australia In Australia, the first anti-trust legislation had been passed in the year 1906. The Australian Industries Preservation Act was based on the Sherman Act, 1890 of the United States. The Act was amended in 1911, but still it remained ineffective. In 1965, another Act was passed following the Restrictive Trade Practices Act, 1956 of the United Kingdom. Finally, the Trade Practices Act, 1974 was passed which replaced the 1965 Act. The Trade Practices Act, 1974 provides very strong legislative measures to promote efficiency and competition in business, to control restrictive trade practices and to protect the consumers from unfair trade practices. It prohibits contracts, arrangements and understandings in restraint of trade, monopolization exclusive dealings; resale price maintenance, price discriminations; and mergers. It also prohibits, misleading or deceptive conduct; false representations; offering gifts and prizes with the intention of not providing them; bait advertising referral selling;
In 1983, draft guidelines for consumer protection were submitted to ECOSOC in response to its request. Following extensive discussions and negotiations, the Guidelines were adopted by consensus resolution of the United Nations General Assembly on 9th^ April 1985. They have since been amended by the addition of a new section on sustainable consumption on 26th^ July
The UN Guidelines complement the United Nations Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, both instruments contributing to global efforts to promote consumer welfare by protecting consumers against, inter alia, anti-competitive behaviour by firms and undertakings. The two instruments also place particular emphasis on the need to protect the interests of developing countries.
The United Nations Conference on Trade and Development (UNCTAD), which is the subsidiary body of the UN General Assembly that holds responsibility for consumer protection and competition policy, states that the Guidelines "take into account the interests and needs of consumers, particularly those in developing countries‖.
Objectives of the Guidelines
The UN Guidelines are articulated around eight main objectives namely –
(a) To assist countries in achieving or maintaining adequate protection for their population as consumers; (b) To facilitate production and distribution patterns responsive to the needs and desires of consumers; (c) To encourage high levels of ethical conduct for those engaged in the production and distribution of goods and services to consumers; (d) To assist countries in curbing abusive business practices by all enterprises at the national and international levels which adversely affect consumers; (e) To facilitate the development of independent consumer groups; (f) To further international cooperation in the field of consumer protection; (g) To encourage the development of market conditions which provide consumers with greater choice at lower prices; (h) To promote sustainable consumption.
General Principles The UN Guidelines embrace an approach that encourages countries to design their consumer protection policies in accordance with the needs of their own populations and economic, social and environmental circumstances, rather than a universal approach based on harmonization of laws and policies across all countries. The UN Guidelines provide a framework of principles to assist countries in the development of their legislations and policies and are intended to meet seven key legitimate needs for consumers: (a) The protection of consumers from hazards to their health and safety; (b) The promotion and protection of the economic interests of consumers; (c) Access of consumers to adequate information to enable them to make informed choices according to individual wishes and needs; (d) Consumer education, including education on the environmental, social and economic impacts of consumer choice; (e) Availability of effective consumer redress; (f) Freedom to form consumer and other relevant groups or organizations and the opportunity of such organizations to present their views in decision-making processes affecting them; (g) The promotion of sustainable consumption patterns.
Guidelines The following guidelines should apply both to home-produced goods and services and to imports – (a) Physical safety (b) Promotion and protection of consumers‘ economic interests (c) Standards for the safety and quality of consumer goods and services (d) Distribution facilities for essential consumer goods and services (e) Measures enabling consumers to obtain redress (f) Education and information programmes (g) Promotion of sustainable consumption
2.2. Consumers International (CI)
3. HISTORICAL BACKGROUND OF CONSUMER PROTECTION LAWS IN
INDIA
The concept of consumerism was active even in the ancient period. As per the Arthshastra of Kautilya, it was the duty of Superintendents to put the Government product in the market under favourable conditions and to supervise their sales at reasonably rates. Businessmen who cheated or interfered generally with the normal functioning of the market prices were open to heavy punishment. Similarly, Narada and Brahaspati have also laid down numerous laws and regulations to safeguard the interest of buyers and sellers. Similarly, Mahatma Gandhi attached great importance to what he described as ―Poor Consumer‖ who according to him, should be the principal beneficiary of the consumer movement. Therefore, the consumer protection jurisprudence of India as understood and developed in modern times owes its genesis to the ancient period and the concept of providing protection to consumers through laws relates back to the time immemorial.
Consumer protection laws during ancient period In Kautilya‘s Arthshastra, the laws of that time relating to weights and measures are depicted. Similarly Yajanvalkya had also given views on weights and measures in Yajanvalkya- Samhita. The provision about adulteration in Arthshastra has been also made. Manu Smriti contains the views on adulteration and punishment therefore. Yajanvalkya expresses his views of adulteration. Main provisions of ―Yajanvalkya -Samhita‖ are with regard to transaction of sale and purchase. ―Yajanvalkya‖ took into account such hard conditions and framed rules for the protection of purchaser providing him some time to judge the utility of purchased goods and permitting him to return the goods in case the goods were found unsuitable to his needs. The sale of sample is also regulated by ―Yajanvalkya‖ when he provided punishment to the trader who deceived a purchaser by showing a different article and changing it subsequently at the time of sale or delivery. In ―Yajanvalkya Samhita‖ one finds elaborate mechanism regarding pricing policy, and profit ratio charged by the traders on the sold goods. Principle of caveat emptor and breach of warranty is the modern principle of law applicable in sale of goods Caveat Emptor (Buyer Beware) finds place in ―Narda-Samriti‖.
In ―Manu‘s‖ code which lays down that: If same commodity is sold or meant to be sold is not delivered, the contract is not made good. It must be of the same quality as contracted for. Ancient Hindu Code also contains some rules regarding deficient services rendered by the professional persons like Physicians. For instance ―Yajanvalkya -Samhita‖ provided professional norm to be adhered by the physicians and any dereliction of duty on their part was declared to be severely punishable. Serious efforts had been made by the law makers in the ancient period of civilization in India to protect the different interests of consumers by providing rules and regulation prescribing certain duties and the violators of these rules/regulations were in most of the cases, subjected to punishment by fine.
Consumer protection laws during ancient period Although Ancient Hindu Law continued to govern Hindu populace particularly in the field of personal law, the legal principles of Muhammadan laws were engrafted in the Indian judicial system with the advent of Islam in India. The ―Holy Quran‖ is the first and foremost source of Islamic Law in which also serious concern is found, like Hindu scriptures, for the problems faced by the consumers of the modern days. The use of unjust weights and measures has been condemned by the prophet in the passages found in the Quran. In the Qoran men are taught to abstain from dishonest dealing lest they be deprived of God‘s blessing. Prophet Mohammad impressed upon his followers, the duty of strictly fulfilling their contracts. The problem of excessive rate of interest, charged by the traders from the purchasers particularly in matters of purchase by hire, is a serious one faced by the consumers all over the world. Everywhere laws have been passed to protect consumers from this menace known as Usury. In India, the Usurious Loans Act 1918 and the Hire-purchase Act of 1972, intend to protect the consumers from excessive rates of interest. Interestingly, the Holy Quran took up this matter seriously and the practice of usury was condemned in the severest term. Thus, it is clear that the genesis of consumerism dates back to ancient period starting from Vedic era. The need to protect consumers from the malpractices indulged into by the traders had always been felt since the dawn of civilization. During the ancient period ―Vedas,‖ Code of ―Kautilya‖, ―Manu Smriti‖, ―Yajnavalkya-Samhita‖, ―Narada Smriti‖, and various other ancient codes contained provisions with a view to cater and protect the interests of the