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Global Retail Giants to Face Tough Penalty as India Cracks Whip With All New Consumer Protection Law

New Delhi (Sputnik): After facing a major clampdown on predatory discount offers, e-commerce portals like Amazon, Flipkart, and manufacturers will have to pay a heavy price including jail terms in the event of delivering counterfeit goods or using misleading ads.

Narendra Modi’s government rolled out a new Consumer Protection Act on Monday, with provisions that empower consumers to drag fallacious advertisers, manufacturers, and sellers to court. The act, which replaced a three-decade-old law, has broadened its grip on e-commerce giants and celebrity endorsements.

The new law will tighten the noose on manufacturers, service providers and hold celebrity endorsers accountable for ads and even allow mediation between the parties, which was earlier missing.

The stricter laws were laid out as global technology giants have infused $16.2 billion in India’s tech sector. Walmart recently invested $1.2 billion in Indian e-commerce giant Flipkart.

In 2019, India attracted $9.36 billion in investments in the technology sector, as per data compiled by Dealroom.co. Amazon has already injected $305 million into its Indian unit.

Uniform Rules 

Dilip Cherian, brand consultant and co-founder of PR firm Perfect Relations, explains the development by saying that international e-commerce giants will now look at India’s market as being similar to other more developed markets.

“Global giants will recognise that India is not a market where you can have different rules for different markets, where they can do things which would happen 10-15 years ago. This will put us on par with other European countries where they already have stricter well-defined rules for the online marketplace”, Cherian told Sputnik.

Now, globally the rules are being aligned as e-commerce giants are becoming powerful and larger than the consumer, therefore the government has to protect the consumer, said Cherian.

“There are two things to keep in mind: first the rules are becoming uniform and they are not that draconian and second the change is happening across the world as companies are getting larger and there is a greater need to strengthen rules”, he added.

The act will also enable an e-complaint filing system for unfair trade practices or false or misleading advertisements.

The Consumer Protection Act 2019, which updated 1986 legislation, will change the way the advertising industry is monitored. Until now the advertising industry was monitored by the Advertising Standards Council of India (ASCI).

A Central Consumer Protection Authority has been set up in Delhi to regulate violations of consumer rights, unfair trade practices and false or misleading advertisements. It will be headed by a government-appointed chief commissioner.

Strict Penalties for False Adverts & Celebrities  

A separate set of penalties has been laid out, giving importance to fallacious advertisements. It will also include advertisements that attempt to intentionally withhold information.

The guilty will be fined INR 1 million ($13,336) with imprisonment for up to two years or INR 5,000,000 ($66,680) with imprisonment for up to five years. Celebrities found endorsing misleading ads can be fined up to one million rupees ($13,336) and receive a one-year jail term.

Cherian says it is unfair in a broader sense to hold celebrities accountable for the work for which several regulators are assigned. 

“It is a level of unfairness to it. We cannot expect a cricketer to understand the quality of cement. The government is trying to avoid its responsibility. These things are governed by different regulators. You can’t expect Dhoni and Amitabh Bachchan to understand whether they are endorsing the right product”, said Cherian. 


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