INTRODUCTION
Every consumer has the right to receive genuine, high-quality products that match their expectations and the value they pay for. Yet, in India, this right is often compromised. The sale of substandard and counterfeit goods, particularly in the consumer durables sector, has become a widespread issue. The recent report by the ASPA-CRISIL estimates that almost 25% to 30% of all products sold in the country are fake/spurious. Even more concerning is the fact that 27% of consumers are unaware they are purchasing counterfeit goods, while 31% knowingly opt for them due to lower prices. This not only undermines customer trust but also challenges the effectiveness of the Consumer Protection Act of 2019, which aims to safeguard consumers from defective products and unfair trade practices. To deal with this issue, the Indian Government is devising a comprehensive plan for consumer protection. This blog critically examines the existing legislative framework, identifies loopholes, draws insights from international practices, and proposes actionable recommendations to establish a robust legal and regulatory mechanism for ensuring consumer rights and product safety.
IDENTIFYING THE ISSUES
To begin with, India’s struggle with counterfeit and substandard products is multifaceted , involving both regulatory and enforcement challenges. India faces several shortcomings in the consumer protection framework. The Consumer Protection Act, 2019, does not address terms like counterfeit and substandard which lead to inconsistent enforcement. The Act provides limited scope for redressal mechanisms and falls short due to several reasons.
First is a time-consuming and cumbersome process for filing a complaint. From identifying the appropriate consumer forum to carefully drafting and filing a complaint, the process is slow and complex. Even after extensive proceedings, judgments often fail to provide timely relief, as appeals and procedural delays pile up. This discourages even well-informed consumers from seeking justice. .
While Section 91 of the Consumer Protection Act, 2019 provides Punishment for the manufacturing and sale of spurious goods, the fines imposed are disproportionately low compared to the profits companies reap from such practices. Although the regulatory bodies in India, such as the Central Consumer Protection Authority (CCPA) and Food Safety Standards Authority of India (FSSAI), are not toothless, there remains a weak implementation and insufficient penalties. The nature of these regulatory bodies is reactive rather than proactive, leading to weak enforcement against well-resourced corporations. Furthermore, India lacks sufficient accredited laboratories and does not mandate post-market surveillance, allowing certified products to escape further scrutiny.
The preamble of the Consumer Protection Act, 2019, envisions the establishment of authorities for the timely and effective resolution of consumer disputes, aiming to provide simple, speedy, and inexpensive redressal. However, in practice, this objective remains largely unfulfilled due to weak enforcement. This is proved through a 2016 verdict, where the Supreme Court constituted a committee led by Justice Arijit Pasayat, which found that consumer fora suffer from poor organisational structures, inadequate infrastructure, untrained personnel, and a lack of qualified adjudicators. The committee also highlighted red-tapism and corruption as significant factors contributing to delays and inefficiencies in the system. Though it has been a while since the report came out, nothing much appears to have changed, as evidenced by the data; there have been 244,813 cases filed in consumer courts at national, state and district levels. Out of that 194,555 cases have been disposed of and 50,258 cases are pending as of July 31, 2024.
Another pressing issue is the chronic understaffing of consumer forums, with a significant number of positions remaining vacant. The Supreme Court has, on multiple occasions, criticised state governments for undermining the objectives of consumer protection laws and, in one such instance, directed them to fill approximately 800 vacancies in consumer courts nationwide within eight weeks, underscoring the persistent lack of administrative will.
According to data from the Department of Consumer Affairs, consumer complaints against e-commerce companies in India rose to 4.6 lakh in 2023–24, marking a significant 11% increase compared to 2022-23. The root cause of this persistent issue lies in the regulatory gap that enables e-commerce platforms to evade liability by distancing themselves from the actions of individual sellers, often claiming a lack of knowledge about repeat violations and fraudulent practices. At present, liability is typically imposed only when the platform is shown to have actively participated in the transaction. This narrow standard allows platforms to escape accountability even in instances where repeated misconduct by sellers occurs under their watch. It has thus become imperative to evolve a more robust legal framework that imposes liability not only on sellers but also on the platforms that enable and profit from these transactions.
There remains a lack of collaboration among regulatory bodies, escalating the issue of consumer protection in India. These aforementioned issues present significant hindrances to effective consumer protection in India. It is essential to address these challenges to establish a robust and reliable consumer protection framework that ensures accountability and safeguards consumer rights.
DRAWING INSPIRATION FROM INTERNATIONAL PRACTICES
While devising a plan to bolster India’s quality standard for consumer protection, India can take a page from various international norms that can be effectively incorporated. The EU’s General Product Safety Regulation (GPSR) provide for proactive market surveillance and stringent safety standards. Articles 6 and 7 of GPSR provide for the aspects for assessing the safety of products and empowering market surveillance authorities to take all appropriate measures if the product is deemed dangerous. Article 9 of GPSR places an obligation upon manufacturers to ensure product safety and shall carry out an internal risk analysis and draw up technical documentation which shall contain an analysis of the possible risks related to the product and the solutions adopted to eliminate or mitigate such risks. Mirroring the GPSR’s approach, manufacturers in India could be compelled to conduct comprehensive risk assessments prior to product launches and notify consumers about any identified risk associated with the product and this documentation would ensure accountability and facilitate swift action in case of safety issues. Article 10 of GPSR outlines the obligations of market surveillance authorities to monitor product safety actively.
India could enhance the powers and resources of its regulatory bodies like the BIS to conduct regular and unannounced inspections of products in the marketplace and follow-up testing to ensure compliance. Article 18 of GPSR put emphasis on the system of traceability. India could adopt a similar approach requiring all manufacturers to implement a traceability system for their products requiring full disclosure and sourcing for all products which will enable quicker identification in the event of a recall. Additionally, India could develop a system similar to the Recall Enterprise System used by the FDA. The system provides an alternative method for removing or correcting marketed consumer products that present a risk of injury or deception by initiating recalls at any time. The recall system could be effective in combating counterfeit production. In 2023, the EU’s Safety Gate system (Rapid Alert System) validated a record 3,412 alerts, accompanied by 4,287 follow-up notifications circulated among member states. It demonstrates how a well-integrated regulatory network, supported by active surveillance and data sharing, enables swift identification and mitigation of product risks across jurisdictions..
India could also draw inspiration from American laws on consumer protection. Section 212 of the U.S. Consumer Product Safety Improvement Act (CPSIA), 2008 provides for the establishment of a public consumer product safety database which includes reports of harm relating to the use of consumer products received from consumers and other entities that are publicly available. According to data from SaferProducts.gov, the United States’ public consumer product safety database has received over 60,000 consumer incident reports and facilitated more than 9,000 product recalls. The database empowers individuals to make informed purchasing decisions and remain vigilant against defective or counterfeit products. Establishing such a database in India will allow consumers in India to access real-time data on product safety issues and enable consumers to directly report incidents related to products. This will foster accountability among manufacturers and enable consumers to make informed purchasing decisions and avoid potentially hazardous products.
Another plausible solution could be to adopt a model similar to the UK’s Arms-Length Bodies. These are the government’s extended family and deliver important public services using public funding. The UK’s National Trading Standards, an arms-length body, demonstrated its operational effectiveness in 2023–24 by addressing over £92 million in consumer and business detriment, securing 103 years of prison sentences, and confiscating over £11.7 million in criminal assets. Its enforcement actions including the seizure of illicit tobacco and 1.2 million vapes, and the takedown of 545 illicit websites underscore the powerful role such independent bodies play in protecting consumers and upholding market integrity. India could establish such Independent agencies dedicated to different aspects of consumer protection. This will ensure unbiased enforcement of quality standards while freeing the regulatory bodies from conflict of interest.
The Consumer Protection Act, 2019 does not explicitly set out obligations for e-commerce platforms regarding digital security, transaction safety, or seller monitoring. In this context, India can take valuable guidance from China’s E-Commerce Law of 2018. Article 30 of China’s E-Commerce Law (2018) requires e-commerce platform operators to ensure network security, safeguard transaction safety, prevent cybercrimes, and report incidents to relevant authorities without delay. Moreover, Article 38 addresses the liability of platform operators when sellers violate consumer protection norms. It establishes that platforms have a duty to protect consumer rights and may be held jointly liable with sellers if they know or should have known about the infringement and fail to act. This should have known standard is a critical element, as it expands liability to include willful ignorance and negligent oversight, thereby closing a significant loophole. The imposition of such a duty creates a strong deterrent effect, incentivising platforms to implement stricter seller verification, real-time monitoring, and responsive redressal systems. Following China’s E-Commerce Law of 2018, Alibaba’s IP Protection Platform preemptively removed 96% of counterfeit listings in 2020, highlighting the law’s strong deterrent effect. Its strict liability regime compels platforms to enforce compliance rigorously to avoid penalties
Further collaboration among regulatory bodies like FSSAI, CCPA, BIS and National Testing House by sharing data and intelligence regarding counterfeit cases can create an integrated tracking system that identifies patterns and hotspots for counterfeit activity, enabling targeted enforcement actions. By incorporating these targeted provisions and measures, a robust legal framework for consumer protection can be created that can safeguard the rights of consumers.
STRENGTHENING CLASS ACTION: A WAY FORWARD
To tackle issues related to substandard products and counterfeit production, CCPA is planning to initiate a class action against companies that fail to meet quality standards. When it comes to class action lawsuits in India, the country has yet to fully utilize the potential these mechanisms have to offer. However, these are progressing and hold immense potential to safeguard the rights of consumers. The Consumer Protection Act, 2019 provides for a class action under Article 35 (1)(c), which provides that where there are numerous consumers having the same interest, they can file a lawsuit to seek justice collectively. The CCPA is empowered under Sections 17 and 18 to promote and enforce the rights of consumers as a class, ensuring that any complaints regarding violations of these rights are addressed effectively. Further, CCPA can take suo moto actions to investigate and file class action lawsuits.
With the class actions gaining attention, it can lower litigation costs as expenses can be shared by the individuals. The collective nature of class action suits offers more than just economic benefits; it creates a deterrent effect against entities that might consider unethical or illegal actions and serves as a mechanism for the enforcement of consumer laws. In 2024, the CCPA issued 325 notices for violations of consumer rights, misleading advertisements and unfair trade practices, emphasising its active status. Further, the CCPA issued a notice to 11 quick and e-commerce firms, including Zepto, Swiggy and Blinkit. With this active approach, CCPA is creating a deterrent effect, encouraging firms to be more vigilant in protecting consumer rights.
Having said that, the success of class action suits in India is still limited. This is due to structural and procedural challenges. One of the key issues is the lengthy duration of legal proceedings, which discourages consumers from pursuing these claims despite their legitimate grievances. Further, well-resourced Corporations exploit legal loopholes to delay justice or undermine these actions. An apt example could be Nestle’s Maggie case where the class action was taken by the Union of India on behalf of Indian consumers in 2015 for alleged indulgence in unfair trade practices. However, NCDRC dismissed the plea in favour of Nestle India on April 2, 2024. The suit started in 2015 and the final dismissal came in 2024, showing the status of delayed class actions in India. It can be dealt with by establishing a strict time-bound trial for class actions. Another issue is lack of the participation and awareness among consumers regarding their rights and the existence of such legal pathways. Apart from spreading awareness through education and campaigns, one effective solution could be the implementation of an “opt-out” mechanism prevalent in the USA that automatically includes individuals in a lawsuit unless they choose to remove themselves from the class. This could enhance the consumer participation rate in India. To realize their potential as a potent tool for consumer protection and corporate accountability, class actions in India must overcome procedural and awareness barriers. Given their capacity to provide collective redress and deter unfair trade practices, a more proactive approach from the CCPA is imperative.
CONCLUSION
The journey towards effective consumer protection is not simple and requires sincere efforts from all the stakeholders including lawmakers, regulatory bodies and consumers themselves. To address the issue of counterfeit products and safeguard consumer rights, the Indian government is formulating a comprehensive strategy aimed at aligning its consumer protection policies with those of developed nations. While there remains considerable scope for improvement, particularly issues concerning procedural delays and consumer awareness, addressing these challenges will be crucial in empowering consumers and ensuring their rights are upheld.
By adopting these measures, India can establish a resilient consumer protection framework that not only safeguards consumer rights but also ensures product safety and promotes fair market practices. Such advancements will significantly contribute to the nation’s economic growth and development, fostering a marketplace that is transparent, accountable, and equitable for all consumers.
