The Consumer Protection Act, which received President’s assent in August 2019, came into force on July 20, 2020.
It seeks to safeguard consumer rights from unfair trade practices and misleading advertisements.
The Act fixes the liability on endorsers, given that there have been numerous instances in the recent past where consumers have fallen prey to unfair practices, being influenced by the ‘star value’ of the brand ambassadors.
Now on, endorsers will have to verify the veracity of the ad claims before promoting it.
Any false or misleading advertisement will attract a minimum penalty of Rs 10 lakh and a one-year imprisonment and a maximum of Rs 50 lakh and up to five years’ imprisonment.
A celebrity who is part of any misleading advertisement may also be banned from endorsing any products/services up to one year, which can be extended to three years.
Has any celebrity landed in trouble?
Amitabh Bachchan, Madhuri Dixit and Preity Zinta have landed in trouble in the past over misleading advertisements.
They were associated with Nestle's Maggi and many legal cases were filed against them after reports surfaced that the noodles contain Monosodium glutamate (MSG), an additive that enhances the flavour of food, and lead.
In 2012, an FIR was filed against actress Genelia D'Souza on charges of cheating customers through a real-estate venture called Anjaniputra. She was its brand ambassador. Many customers said they booked the flats as the actress was associated with the company.
In her defence, D'Souza said that she was not the company's brand ambassador but had only done a one-day shoot for the company.
In the Amrapali Group controversy, MS Dhoni had landed in trouble. Experts say that Dhoni, being the face of the brand, did attract many buyers. He was the company's brand ambassador for six years but stepped down after the controversy came to the fore.
So, what can celebrities do to stay out of trouble?
A celebrity will have to increase due diligence before he or she takes on an endorsement (product details/product quality/quality compliance).
Plus, they will need to make higher indemnity provisions in the endorsement contracts so as to mitigate any future liability. This may lead to increased endorsement fee.
High risk will mean higher cost
According to Sandeep Goyal, Chief Mentor, IIHB (Indian Institute of Human Brands), endorsements will now cost more. “If risks have gone up for the celebrities, they will want to be compensated. Mere indemnities may not be enough.”
While celebrities will have to be careful, Section 21 of the Consumer Protection Act, which deals with the use of an ‘endorser’ in advertising, still has not been notified to be enforced.
While the provision is part of the Act, it is still not an enforceable law. So, for now, it gives a breather to clients, agencies and endorsers.
While many are supporting move to hold endorsers liable, Meet Malhotra, Senior Advocate, thinks otherwise.
“While the government is attempting to hold endorsers accountable, the quantum of penalties proposed are meagre compared to what most high-profile endorsers would charge for endorsing a product and may not draw the desired result. Endorsers may insure themselves against such penalties or take indemnities from the product manufacturer or service provider. Further, an escape window of due diligence has been given," he said.
Malhotra may not be wrong about the penalties on endorsers being meagre. Celebrity endorsers like Virat Kohli reportedly charge between Rs 5 crore- Rs 5.5 crore a day for endorsements.
E-Daakhil
One-sided contracts
Authorities
Class-action
suits, mediation set to give teeth to consumer laws
Consumers in India will be able to initiate
class-action lawsuits and also opt for mediation under the new Consumer
Protection Act 2019, which gives legal teeth to claims for damages over
defective products or poor services.
Class-action
suits, a legal tool widely used in western consumer markets such as the US,
enable one individual complaint of a faulty product or service to be treated as
an “interest group” of other people in similar circumstances.
This
type of legal suit can be invoked to recall an entire batch of faulty products
based on a single complaint. If one lot of a consumer item, such as mobile
phones or cars, has a common defect, a single complaint can trigger the recall
through “class action”.
consumer
affairs ministry is in the process of finalising an apex investigative
authority under an agency called the Central Consumer Protection Authority
(CPPA), which will take up class action suits exclusively.
“The agency will start functioning in first week of April. Most of
the set up is almost ready,” said a government official who asked not to be
named.
The Indian market has
seen mass product recalls of faulty products earlier, but such cases have been
voluntary rather than a legal necessity under consumer rights. For instance, in
April 2017, Toyota Kirloskar Motor announced it was recalling 23,157 units of
its sedan Corolla Altis in India, as part of the then ongoing recall of 2.9
million vehicles globally, for defective air bags.
“A faulty medicine causing damage to a large section of people is
a fit case for class-action suits. Instead of multiple of claims coming to
court, a single case can be a more efficient way of dealing with the problem,”
said Sriram Panchu, a Chennai-based lawyer, who specialises in mediation.
According to Panchu, the
much-needed provision of mediation under the new law is fit for cases where
damages are payable in monetary terms. It can cut prolonged legal battles, he
said.
The new law overrides
the older Consumer Protection Act 1986, which provided for national consumer
dispute redressal courts and commissions. Previously, consumers had to approach
such platforms, but there were no clear rules on product recalls, a legal
meaning of product liability, which confers post-purchase obligations for a
product-maker, as well as rules for mass recalls. Moreover, lack of any
provision for mediation meant long-drawn court battles were the only recourse
for dispute settlement.
According to the new law, the consumer protection authority has powers to first
initiate class action and then enforce recall, refund and return of products.
If such mass defects are proven, the manufacturer’s liability and onus of
product recall – whereby the maker replaces or fixes the fault – have also been
defined in the new law.
At the state level,
district collectors have been empowered to probe complaints that affect the
interests of consumers as a class.
The new law additionally
defines “unfair contract” between a manufacturer or trader or service provider
on the one hand and a consumer on the other. Legal recourse will now be
available in such cases where an “unfair contract” causes “significant change”
in the rights of a consumer. These include a manifestly excessive security
deposit or a penalty to be paid to a manufacturer or a service provider which is
disproportionate to the losses caused.
“The new law expands the scope of consumer protection by
introducing two new concepts, namely product liability and product recall.
Moreover, it defines the consumer and manufacturer for the first time. It also
covers online transactions,” said Maurice Fernandez of the Bangalore-based
Citizens’ Collective for a Safer Marketplace.
“We had a fruitful
meeting with the consumer affairs minister Ram Vilas Paswan on various aspects
of implementing the new Consumer Protection Act 2019 earlier this month,” said
Rajendra Singh of the All-India PET Products Manufacturers’ Association.
Feb 25, 2020, Zia Haq,
Hindustan Times, New Delh
Industry specific Regulatory Authorities in India : RBI(Banking), CCI(Monopoly & Oligopoly), RERA( real estate), TRAI ( telecom rates)
Regulation of airfares through CCI
The airfare monitoring cell is ready and will soon be commissioned under the aegis of the ministry: Ajit Singh
Ticket pricing by airlines is set to come under scrutiny, with the civil aviation ministry roping in anti-trust watchdog Competition Commission of India (CCI) to keep in check indiscriminate airfare increases in domestic aviation.
The ministry, which will soon make operational an economic cell to monitor domestic airlines' pricing mechanism, is looking at forwarding reports to CCI to take corrective action in the event of discrepancies in airfares.
Civil Aviation Minister Ajit Singh said: "The airfare monitoring cell is ready and will soon be commissioned under the aegis of the ministry. The economic cell would analyse data on tickets sold by airlines under different price buckets and make the information public to bring in transparency in airfare pricing. In case there are discrepancies, it would be referred to CCI."
He clarified the ministry would not attempt to regulate fares and would continue to allow airlines to determine fares based on market dynamics. However, if discrepancies surface in ticket prices from an analysis of data by the economic cell, it would be reported to CCI for commensurate evaluation and action.
The ministry would access data on all the tickets sold by different carriers under various price brackets and then analyse the data to give an indication of exactly how many tickets were sold under each price slab. The airfare monitoring cell will help keep in check random increases in fares and predatory pricing in the aviation industry by making it mandatory for airlines to disclose data on fuel charge and taxes being levied on tickets. This will help the government keep a tab on the correlation between seats available, prices offered, taxes levied and the final pricing of air tickets to consumers.
Available data would be made public to inform consumers of how airlines arrived at the final pricing of an air ticket.
Senior ministry officials said, though airlines claimed to follow a dynamic pricing model at present, there was no mechanism to know whether the tickets in the lower price band had been sold or not. Besides, there were no set criteria to determine the price bands under which tickets were sold. The economic regulator would closely monitor the parameters in ticket pricing, they added.
Currently, there is no regulatory mechanism to monitor pricing mechanism of airlines. The Directorate General of Civil Aviation asks airlines to disclose the components in airfare structure on receiving complaints of predatory pricing but does not have the power to take corrective action.
Consumer Protection in Real Estate
Real Estate Regulation Authority RERA
Home buyers now have the means to bring defaulting promoters to book
The Cabinet has approved the Real Estate Regulatory Bill.It would offer the much-needed protection to home buyers. Here are the ways the provisions will impact you.
New regulator
First, the Bill requires setting up a new regulator for the real estate sector. Just as you have SEBI and IRDA for the capital markets and insurance industry respectively, an authority will be created to help frame policies for the real estate sector.
The regulator will maintain records of all projects, promoters and agents. It will also monitor compliance of rules on an ongoing basis as developers have to provide updates on progress. The regulator will also maintain a database on violators.
You can thus have access to the names of promoters, details of the project for which registration has been revoked along with related reasons. And as real estate comes under the purview of state governments, individual states are responsible for setting up the Regulatory Authority at the state level.
Safeguards for buyers
Home buyers too will have more ways to check project details and promoter track records, if the Bill becomes law.
For one, it will become mandatory for all projects larger than 1,000 sq m or, alternatively, more than 12 apartments, to be registered with the regulatory authority. Developers must provide all project details such as layout plan, approvals and names of contractors.
For these projects, the time frame for completion must be clearly mentioned and adhered to. The developer is expected to receive all approvals from local authorities before marketing the project. The buyer will also have the right to obtain stage-wise completion schedule. Second, flowery ads with misleading data on project location, appearance and amenities will be discouraged, thanks to strict guidelines on advertisement.
Terms such as carpet area will be made uniform to ensure that there is no ambiguity in specifications. Third, apart from developers, real estate agents will also be regulated. They have to be registered and should maintain books of accounts, records and documents. Promoters and agents can be punished for making misleading statements.
Fourth, the new rules disallow a developer from making changes to the original plan without consent from at least two-thirds of the customers.
Changes to plans after signing agreements is a persistent problem for many buyers.
When payments are made, there is no way of ascertaining whether the money is actually used for a specific project.
If the Bill is enforced, the developer will have to maintain half the project cost in a separate bank account within 15 days of receiving it. This will increase accountability and help prevent fund diversion by the builder.
Resolving disputes
If your builder reneges on his promises, you currently have few options to get justice. You are forced to contend with long-drawn and expensive court battles. If the new rules are put in place, an Appellate Tribunal can be set up to resolve disputes in shorter time-frames. This will be in addition to existing options such as consumer courts. Also, the options for appeals in courts will be limited as other authorities will not be allowed to entertain cases covered under the Bill. The Appellate Tribunal will be headed by a sitting or retired Judge of the High Court who will have powers to impose punishments such as penalties or cancel registration. For example, the fine for not registering a project can go up to 10 per cent of the project cost.
Builders can be fined up to 5 per cent of the project cost for wrong or non-disclosure of information. As a buyer, you have the right to demand refund with interest as well as compensation for default by the developer.
Additionally, if there are quality issues after taking possession, the developer has the obligation to rectify them.
RBI preiodically reviews and gives directions for addressing your pain points : CIBIL score
Free CIBIL Report, yearly once wef.,01/01/2017 - RBI Directive issued:
Credit Reports of individuals have been now and then 'talk of the town', whenever an individual went
to a financial institution. At times, credit facilities were either denied or rejected quoting lower
#credit #scores.
#CIBIL
Individuals never knew what their credit scores were as the same were maintained by a Credit Information Company (CIC) with inputs from financial institutions and bank only. If one wanted to have their credit reports; a fee was required to be paid to the
#CIC by the individual. This added to the cost of the same though the individual was accessing his/her own credit database.
Reserve Bank of India
#RBI vide its directive(s) RBI/2016-17/58
BR.CID.BC.No.11/20.16.042/2016-17 dated 1st September 2016 empowers every individual a free Credit Report every year (Jan-Dec) from each CIC upon a request.
This is a good initiative on the part of RBI as by this directive, every individual can assess its own credit score and also send rectifications to the same if the data has any updations which are not actioned.
Us law suit
Moody's to pay $864 mn fine to US authorities for pre-2008 crisis ratings
Moody's Corp has agreed to pay nearly $864 million to settle with US federal and state authorities over its ratings of risky mortgage securities in the run-up to the 2008 financial crisis, the US Department of Justice said on Friday.
The credit rating agency reached the deal with the Justice Department, 21 states and the District of Columbia, resolving allegations that the firm contributed to the worst financial crisis since the Great Depression, the department said in a statement.
"Moody's failed to adhere to its own credit-rating standards and fell short on its pledge of transparency in the run-up to the Great Recession," Principal Deputy Associate Attorney General Bill Baer said in the statement.
S&P Global's Standard & Poor's entered into a similar accord in 2015 paying out $1.375 billion. Standard and Poor's is the world's largest rating firm, followed by Moody's.
Moody's said it would pay a $437.5 million penalty to the Justice Department, and the remaining $426.3 million would be split among the states and Washington, D.C.
As part of its settlement, Moody's also agreed to measures designed to ensure the integrity of credit ratings going forward, including keeping analytic employees out of commercial-related discussions.
The rating agency's chief executive also must certify compliance with the measures for at least five years.
Moody's said that it stands behind the integrity of its ratings and noted that the settlement contains no finding of a violation of law or admission of liability.
Moody's said it already has implemented some of the compliance measures in the agreement.
Moody's shares closed at $96.96 on Friday. The stock plummeted more than 5 percent on Oct. 21, the day it disclosed the Justice Department had notified the firm it was planning to sue over the ratings.
Moody's settlement on Friday resolved the Justice Department probe without a federal lawsuit. In the Standard & Poor's case, the resolution was reached after the US filed a $5 billion fraud suit.
Connecticut, whose attorney general helped lead negotiations, filed a lawsuit against Moody's in 2010. Mississippi and South Carolina later sued, and other states had potential claims.
Connecticut's lawsuit claimed that Moody's ratings were influenced by its desire for fees, despite claims of independence and objectivity. It also accused Moody's of knowingly inflating ratings on toxic mortgage securities.
Moody's ratings were "directly influenced by the demands of the powerful investment banking clients who issued the securities and paid Moody's to rate them," Connecticut Attorney General George Jepsen said in a statement on Friday.
