From Kohli to Flipkart beware - Consumers are the new Kings!

Published on 11 Jan 2018 by Tushar

The Consumer Protection Bill 2017, which is soon to be tabled in the winter session has introduced the much-needed concept of Product Liability. This was not there in the prior regime of consumer protection laws that existed in India. This could potentially be a huge relief for consumers in India. 

"Product Liability" means the responsibility of a-

  1. manufacturer or vendor of goods or
  2. a service provider with respect to any services,
  3. to compensate for injury or damage caused to a consumer
  4. by a defective product sold to a consumer or deficiency in services,
  5. which could have been caused amongst other things by - defects in manufacture, construction, design, formula, preparation, assembly, testing, service, warning, instruction, misleading or false marketing/ advertisement, packaging, or labelling of any product
  6. The liability would fall on all or any of responsible parties involved in the chain of production, manufacturing, service providers as well as celebrities (brand ambassadors) when it comes to punishments for misleading marketing or advertisements.

Illustration

  1. ‘X’ pays the complete amount upfront for advance booking for a car.
  2. The brochure states the car would tentatively be launched in a few weeks time, and the same is clarified by the by the salesman.
  3. In this situation, X’ was later told that he would have to wait at least for a few months as the car is only going to be launched after the new year.
  4. As per the old law, he might have been able to file a consumer complaint against the company but it would have become long drawn and hard-fought process.
  5. However, as per the new law, he can approach the CCPA for having been misled by the brochure not having the required clarity amounting to product liability of the car dealership/ manufacturer.
  6. Here the CCPA can club any other such aggrieved customers into a class action and enforce the rights of the consumers by providing them with a full refund and taking any required action against the dealership or manufacturer at fault.

Making Advertisements accountable

Brand ambassadors are commonly used to provide credibility to outrageous claims by corporations which could lead to injury or damage to the consumer. Celebrities which endorse such products or services are quick to dissociate themselves in cases where the damage comes to the notice of public and media at large.

Examples-

  1. The Nestle case where the product Maggi was under scrutiny to improve standards. Various celebrities were involved in the advertisement campaigns like Amitabh Bachchan, Madhuri Dixit.
  2. MS Dhoni resigned as the brand ambassador of Amrapali after unsatisfied consumers launched a campaign against the builder and vicariously held him responsible as well.

Defining ‘Endorsement’ in the widest sense

Any individual, group or institution can be an ‘endorser’ as per the new Act. This ensures that if via an ‘endorsement’ if a good, product, service is being sold to a consumer the same has to be authentic otherwise all parties so involved would be liable to the consumer for any injury or damage.

Endorsement is defined as-

  1. Any message, a verbal statement, demonstration or depiction of the name, signature, likeness
  2. or other identifying personal characteristics of an individual or the name or seal of an organization
  3. having the effect of making the consumer believe that it reflects the opinion, findings or experience of the person making such endorsement

Penalty for false or misleading endorsement

Whoever makes an endorsement which is false or misleading and prejudicial to the interest of any consumer shall be punishable with imprisonment for a term which may extend to two years and with fine which may extend to ten lakh rupees;  for the second and subsequent offences, be punishable with imprisonment for a term which may extend to five years and fine which may extend to fifty lakh rupees

Liability of an endorser 

The new Act imposes penalties on the manufacturers, service provider and any celebrity who makes any misleading or false advertisement that is prejudicial to the interest of any consumer-

  1. Rs. 10 lakh as fine with a jail term of two years for the first offence and;
  2. Rs. 50 lakh and a jail term of five years for subsequent offences
  3. Exception- a celebrity to escape liability by proving that he or she took reasonable precautions and exercised all due diligence before endorsing the product or service.

Illustration- The liability extends to the services being provided by the airlines which is the product in this case. Hence, a flyer can now sue an airline for not just reimbursement for a missed flight but also compensation for any important event or meeting he or she missed because the flight was cancelled at last minute.

Analysing the Provisions

Section 75B provides for liability of an endorser: 

“Whoever makes an endorsement which is false or misleading and prejudicial to the interest of any consumer shall be punishable with imprisonment for a term which may extend to two years and with fine which may extend to ten lakh rupees; and for the second and subsequent offences, be punishable with imprisonment for a term which may extend to five years and fine which may extend to fifty lakh rupee."

Hence 75B imposes penalties on the manufacturers, service provider and any celebrity who makes any misleading or false advertisement that is prejudicial to the interest of any consumer and has crucially now imposed Rs. 10 lakh as fine with a jail term of two years for the first offence and Rs. 50 lakh and a jail term of five years for subsequent offences which may seem harsh to a few but a reasonable proviso has been made to the statutory provision.

Proviso:- The provision to section 75B allows a celebrity to escape liability by proving that he or she took reasonable precautions and exercised all due diligence before endorsing the product or service.

Section 75A makes a manufacturer and service provider also legally responsible for any false and misleading advertisements, and prescribes penalties in the same manner in which celebrity brand ambassadors have been made liable.

Illustration- Under the new Act, even the service providers like airlines can face liability action. The liability extends on the services beng provided by the arilines which is the product in this case. Hence, a flyer can now sue an airline for not just reimbursement for a missed flight but also compensation for any important event or meeting he or she missed because the flight was cancelled at last minute.

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