Consumer Protection Act, 2019 – Key Highlights for Product Manufacturers

BACKGROUND

•     The Consumer Protection Act, 2019 (“Act”) has been passed by the Parliament. The Act, inter alia, provides for protection of interests of consumers, establishment of a central consumer protection authority, mechanism to settle consumer disputes and specifically regulates product liability and misleading advertisements.

•     The Act has received the President’s assent. However, the Central Government is yet to notify the date on which the Act will come into force. Once so notified, the Act will apply and govern the matters contemplated by it and will replace the existing Consumer Protection Act, 1986.

KEY HIGHLIGHTS FOR PRODUCT MANUFACTURERS

•     Who is a product manufacturer. The Act classifies a product manufacturer as an entity that makes goods (or parts thereof) or assembles parts thereof made by another party, or places his own mark on the goods made by a third party, or designs / produces / fabricates / constructs or re-manufactures any product before its sale etc.

The Act prescribes separate definitions for ‘manufacturer’ and ‘product manufacturer’. Broadly, all manufacturers may be product manufacturers, however all product manufacturers are not manufacturers.

•     Product manufacturer’s liability.
The Act has introduced product manufacturer liability for harm caused to consumers due to defective products.

•     When is a product manufacturer liable. In the following scenarios:

(a)  the product has a manufacturing defect;

(b)  the product is defective in design;

(c)  there is a deviation from the manufacturing specifications;

(d)  the product does not conform to an express warranty. Express warranty is a material statement, description, sample of a product conforming that the product corresponds to such statement, description, sample (as the case may be); or

(e)  the product does not contain adequate instructions as to how to correctly use it to avoid any harm or the product does not contain appropriate warnings regarding improper usage.

•     Exceptions to product manufacturer liability.
In a product liability claim arising on account of failure to provide adequate warnings / instructions, the product manufacturers will be exempt from liability in scenarios where: –

(a)  the product was purchased by an employer for use at workplace and the product manufacturer had provided warnings or instructions to such employer;

(b)  the product which was sold was to be used as a component in another product, provided the following conditions are met – appropriate warnings or instructions were given by the product manufacturer in relation to such  product; and the harm was caused by use of the main  product (i.e. of which the product of the product manufacturer was only a component);

(c)  the product was legally meant to be used under the supervision of an expert and the product manufacturer had deployed reasonable means to give warnings or instructions regarding such condition;

(d)  the product was used under the influence of alcohol or a prescription drug without such prescription; and

(e)  the dangers with respect to a product are obvious or commonly known or consumers ought to have known, in view of the characteristics of the product.

•     Who can bring an action.
An action for product liability claims can be brought against a product manufacturer by multiple persons including a consumer (i.e. a purchaser or user of the manufactured goods but does not include a reseller or a person who uses such goods for commercial purposes), a registered voluntary consumer association, Central or State Government, and one or more consumer(s) where a number of consumers have the same interest.

•     Nature of remedies.
The Act entitles persons (such as the ones indicated above) to claim compensation for any harm caused on account of a defective product. Separately, the authority formulated under the Act may require that goods which are dangerous, hazardous or unsafe be recalled or that purchasers of such goods be reimbursed etc.

•     Punishment for goods containing an adulterant and spurious goods.
The Act seeks to impose liability on persons who manufacture products which contain an adulterant (i.e. material, including extraneous matter, which makes a product unsafe) and spurious goods. The punishment prescribed in this regard is imprisonment and fine and the quantum of the foregoing depends on the damage suffered by consumer (such as hurt, grievous hurt and death). Additionally, the Act also contemplates suspension of any license (up to 2 years) issued to the aforementioned persons for the first offence and cancellation of such license in case of a subsequent offence.

•     Manufacturer’s liability vis-à-vis misleading advertising.
A misleading advertisement under the Act, amongst other things, includes an advertisement which  falsely describes a product, deliberately conceals important information, or is likely to mislead the consumers about certain aspects of the products. In relation to misleading advertisements: –

(a)  A manufacturer may be required to discontinue or modify such advertisement; and

(b)  A monetary penalty up to INR 10 lakhs may be imposed on the manufacturer, if the concerned authority is of the opinion that imposition of such penalty is necessary. Subsequent offence is punishable with monetary penalty of up to INR 50 lakhs.

The Act also imposes liability on manufacturers who ’cause’ false or misleading advertisements (via various media including electronic media, internet or websites) which is prejudicial to the interests of the consumers to be published, with imprisonment (up to 2 years) and fine (up to INR 10 lakhs). Subsequent offences are punishable with enhanced penalties.

•    Compounding.
Specific offences (such as causing misleading advertisements by manufacturers, or failure to comply with an order passed by an authority under the Act) are compoundable on payment of the amount which will be prescribed, either before or after institution of prosecution. Compounding is not possible if the person commits the same or similar offence within 3 years from the date on which the first offence was compounded.

Authors:

Aprajita Rana, Partner
Aman Gera, Senior Associate

Date: September 4, 2019