The new Consumer Protection Act of 2019 & its Impact on Marketing Agencies: Lawyers Advice
The recent Consumer Protection Act of 2019 has brought about major changes to the consumer protection law in India, providing consumers with protection while keeping in mind the current reality and vast amount of goods are services being provided. The new Act incorporates an expanded definition of “consumer” including E-commerce websites in its ambit, introduces concepts such as unfair contracts and product liability, and provides for the establishment of the Central Consumer Protection Authority as well. While this Act has had an impact on multifarious aspects, this article aims to highlight its impact on marketing agencies specifically.
Key Changes of the Consumer Protection Act of 2019 with respect to Marketing Agencies –
- Definition of “consumer”– As under Section 2(7), the Act of 2019 has expanded the definition of “consumer” so as to include consumers involved in online transactions. The Act now covers E-commerce business within its ambit. As per the Explanation provided under Section 2(7)(b) the Act states that “the expressions “buys any goods” and “hires or avails any services” includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing”.
- Definition of “consumer rights”– As per the Act, under Section 2(9)(i), the expression “consumer rights” includes “the right to be protected against the marketing of goods, products or services which are hazardous to life and property”.
- Definition of “unfair trade practices”– The Act of 2019 has expanded the definition of “unfair trade practices”. As compared to the 1986 Act, under this definition the new Act includes –
• Online misleading advertisements,
• Not issuing a memo or bill for goods and services,
• Failure to either take back defective goods or deactivate defective services and refund the amount within the stipulated period of time, and
• Disclosing the consumers personal information, unless such disclosure is in accordance with the law.
- Central Consumer Protection Authority– The new Act provides for the establishment of the Central Consumer Protection Authority (CCPA).
• The CCPA has been provided with vide powers to inquire, investigate and take actions against the violations of the Consumer Protection Act, 2019.
• The CCPA also has the power to impose penalties and take action against misleading and false advertisements as well as any endorser of such advertisements. Celebrities who endorse such advertisements without conducting any due diligence can also be held liable by the CCPA.
• The CCPA has the authority to impose a penalty of up to Rs.10 Lakhs for first violation and up to Rs.50 Lakhs on every subsequent violation on a manufacturer or an endorser, for a false or misleading advertisement. In addition to this, such manufacturer or endorser may be sentenced to imprisonment for up to two years.
- The new Act also incorporates other key changes such as–
• Complaints can now be filed by complaints, where they reside or personally work for gain, as compared to the earlier option of filing the complaint where the opposite party resides or carries out business.
• The pecuniary jurisdiction of the District, State and National Commission has been increased.
• The Act also provides for mediation as a dispute resolution mechanism in order to ensure speedy resolution of disputes.
• The Act also provides for filing of complaints before the District Forums electronically.
Analysis of the Impact of the Consumer Protection Act of 2019 on Marketing Agencies:–
- Celebrity Branding may not be the easy route to market products and services– As per the provisions of the Act discussed above, it is evident both misleading advertisements and celebrities who endorse such false and misleading advertisements can be taken action against by the Central Consumer Protection Authority. Recently, various celebrities also received criticism for endorsing fairness products. I believe marketing agencies and celebrities who endorse such products will act with greater care and caution due to this Act. Companies such as Hindustan Unilever, Pepsi, or even Coco-Cola, whose backbone is celebrity endorsements will also have to act with greater caution and responsibility.
- E-commerce will grow and operate with responsibility– The Act of 2019 has brought off-radar distribution channels like telemarketing and multilevel marketing into the ambit of the law. The Act will also ensure that the unchecked growth of e-commerce and online markets is put to a stop. Hence, the ground commonly taken by E-commerce websites that they merely act as “platform”’ or “aggregators” will now not be tenable before the court anymore.
- Marketing Agencies need to act with care and caution– The new Act provides various benefits to consumers, from filing of e-complaints, to filing complaints where they reside or carry out business, increasing the pecuniary jurisdiction of the forums and even providing for mediation. Since consumers now have a wide ambit of protection, marketing agencies need to act responsibly while carrying out their business. The products and services being provided by companies and the advertisements cannot afford to be false or misleading in any way.
To conclude, the provisions incorporated under the 2019 Act have been introduced while keeping the current market scenario in mind. Consumers have been provided with a wide ambit of protection and grievance redressal mechanisms. Due to these provisions and the provision for the establishment of the Central Consumer Protection Authority, marketing agencies, whether offline or digital, need to act with greater responsibility and exercise caution while promoting, advertising and branding products and services to consumers today.
Authored By: Adv. Anant Sharma & Madhulika Iyer