Bhawna Lakhina and Nishi Bhamkar, both 2nd year students of National Law Institute University, Bhopal analyzes business malpractices and consumer protection in the times of COVID-19 pandemic.

Introduction

The COVID-19 pandemic has taken a toll on the lifestyles of people across the world. It has forced a change in consumer habits in the most striking sense. Essentially, it has led to a rise in the number of first-time-e-commerce-users (FTUs), increasing with it the chances of online fraud.[1]

There has been a rise in the demand for essential commodities as compared to other products. People are grappled with the uncertainty regarding the availability of such products and are thereby compelled to make peace with unfair business practices adopted by the manufacturers and sellers.

In this blog, the authors have attempted to analyse all plausible ways in which consumers can be protected from business malpractices being adopted amidst the pandemic by manufacturers and sellers of essential commodities. The first part of the blog provides an in-depth discussion on the various unfair trade practices adopted by manufacturers and sellers of essential goods. The second part of the blog analyses the measures adopted by the government authorities to handle the situation at hand.

Business Malpractices: A Masked Pandemic

The most glaring among the various business malpractices faced by the consumers today includes price hikes, hoarding, black marketing and false advertisements.[2] While the initial rise in the prices of essential commodities was due to a shortage in the availability of such goods, the United Nations Conference on Trade and Development (UNCTAD) has confirmed that suppliers are now deliberately engaging in practices like hoarding and black marketing leading to an upsurge in prices.[3] Furthermore, there has been an increase in false advertising claims made by companies, i.e., advertisements which claim that their products are capable of eliminating/reducing the coronavirus infection.[4]

There has also been a rise in instances of unfair trade practices such as wrong or incomplete deliveries and issues with the quantity and quality of goods. Further, consumers are exposed to fraudulent websites, especially designed to phish information from them.[5] Adding to the plight of the consumers was the notification issued by the National Consumer Disputes Redressal Commission (NCDRC) adjourning all non-urgent matters till 15th April, 2020, thus, adding to the backlog.[6]

In this uncertain environment, e-commerce websites prima facie appear to provide some respite to consumers. Websites such as Amazon have tried to do away with sellers selling fake products that claim to cure the virus.[7] Similarly, Google has started to closely monitor advertiser’s behaviour to protect users from advertisements looking forward to taking advantage of the COVID-19 crisis.[8] However, it has been pointed out that contrary to the claims made by such websites, malpractices have been committed by them wherein they have misused their dominant positions to engage in exclusive trading of essential products.[9]

The government and relevant regulatory authorities have undertaken measures to deal with the problems faced by Indian consumers as a result of the pandemic.

Steps Undertaken by the Government and Regulatory Bodies 

The Consumer Protection Act, 2019, is a positive step towards consumer welfare as it has the potential to bring e-commerce transactions under its jurisdiction. The new guidelines on e-commerce issued under the legislation seek to prevent fraud and unfair trade practices and protect the legitimate rights and interests of consumers.[10]

The guidelines mandate e-commerce entities to register themselves under the prescribed laws, and follow provisions of the IT (Intermediaries Guidelines) Rules, 2011, and conform to the Reserve Bank of India (RBI) guidelines for payment facilities.[11] It also includes provisions against misleading advertisements, and provisions for the return of products in cases of wrongful or improper delivery[12], and stipulates other liabilities of the seller.[13] All disputes under the guidelines are to be directed to the respective consumer courts.[14]

Further, the Union Ministry of AYUSH has taken crucial steps in the direction of curbing misleading advertisements. It issued an order under Section 33P of the Drugs and Cosmetics Act, 1940, directing the authorities concerned to prevent false AYUSH related claims of products being corona resistant.[15] Further, the Advertising Standards Council of India (ASCI) is engaged in monitoring and reporting such advertisements.[16] Additionally, the Cable Television Network Regulation Act and Rules, 1994, prohibit deceptive advertising and, thus, could be used to ban advertisements violating the Code for Self-Regulation, formulated and adopted by the ASCI.[17]

After the recent move by the Ministry of Consumer Affairs declaring hand sanitisers and protective masks “essential commodities” and capping their maximum retail price under the Essential Commodities Act, 1955, the government is now trying to take measures to curb black marketing and hoarding.[18] Statutory provisions exist in this regard. For instance, the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980, empowers the government to detain any person found to be committing or instigating any offence punishable under the Essential Commodities Act, 1955, or dealing in any essential commodity to make a gain.[19]

The Competition Commission of India (CCI) has come to the forefront and cautioned business enterprises from taking advantage of the COVID-19 situation.[20] It has declared that the accrual of benefits to consumers, improvement in production or distribution of goods or provisions of services along with the promotion of technical, scientific and economic development will be taken into consideration while assessing competition under Section 19(3) of the Competition Act, 2002.[21] This section lists the factors that may be taken into consideration to determine whether an agreement has an appreciable adverse effect on competition or not. Thus, companies and competitors can now share resources such as distribution network and infrastructure, transport logistics, and production without fear of adverse action or scrutiny as long as it results in increased efficiency and consumer welfare.

Conclusion

The pandemic has significantly increased concerns of malpractices committed by business enterprises, thereby placing consumers in a vulnerable position. In such a context, the government has taken important steps for consumer protection. Though these measures are a step in the right direction, firmer actions are needed towards safeguarding consumers at this point in time.

In this regard, the UK Competition and Markets Authority (CAM) has prepared a taskforce especially aimed at consumer protection amidst the pandemic.[22] Similarly, given the critical state of consumer affairs in India, the government must prepare a task force designed to clamp down business enterprises indulging in unfair trading practices and scrutinise the market situation to prevent harmful sales and pricing. Such a task force would enable the authorities to provide easy and quick responses towards consumer grievances as it would effectively keep a check on any instance of infringement of fair competition and consumer protection guidelines. 

At the same time, it is important that consumers discourage any malpractice on the part of the business enterprises. Any instance of unscrupulous trading must be reported to the relevant authorities. This is because legal measures addressed to safeguard consumers stand futile without consumer activism. In this respect, consumer awareness measures must be undertaken regarding recent steps taken by the authorities concerned to prevent unfair trading practices. This would inculcate confidence amongst people that their grievances will be redressed and lead to the much-needed assurance and credence in the minds of the consumers.


Bhawna Lakhina and Nishi Bhamkar are Second year students from National Law Institute University, Bhopal.


[1]Filip Truta, Surge in Online Shopping Drives Major Increase in Coronavirus-Themed Fraud Attempts, Security Boulevard (June 9, 2020, 10:28pm), https://securityboulevard.com/2020/04/surge-in-online-shopping-drives-major-increase-in-coronavirus-themed-fraud-attempts/.

[2]E-Commerce, Trade and the COVID-19 Pandemic, WTO (June 6, 2020, 14:15pm), https://www.wto.org/english/tratop_e/covid19_e/ecommerce_report_e.pdf.

[3]Teresa Morera, Head, UNCTAD Competition and Consumer Policies branch (June 5, 2020, 15:18pm), https://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=2326.

[4]Pushpa Girimaji, As Covid-19 peaks, beware of advertisers peddling false claims regarding the virus, Hindustan Times (June 8, 2020, 18:19pm), https://www.hindustantimes.com/cities/as-covid-19-peaks-beware-of-advertisers-peddling-false-claims-regarding-the-virus/story-Gfj9VnT4A6vMJJxyx9bgSN.html.

[5]Mohammed Faisa, From fake apps to phishing mails, how Covid-19 is affecting our tech lives, TheIndian Express (June 8, 2020, 16:18pm), https://indianexpress.com/article/technology/tech-news-technology/coronavirus-scams-fake-apps-phishing-mails-who-identity-theft-fake-products-6307017/.

[6]National Consumer Disputes Redressal Commission, Circular (June 7, 2020, 19:10pm), http://ncdrc.nic.in/pdf_Files/circular16032020.pdf.

[7]Jon Porter, Amazon has barred a million products for making false coronavirus claims, The Verge (June 16, 2020, 17:10pm), https://www.theverge.com/2020/2/28/21157629/amazon-coronavirus-products-misleading-false-claims-price-gouging-face-masks.

[8]Google purged 2.7 billion bad ads in 2019, COVID-19 fake ads next target, Brandequity (June 11, 2020, 13:17pm), https://brandequity.economictimes.indiatimes.com/news/advertising/google-purged-2-7-billion-bad-ads-in-2019-covid-19-fake-ads-next-target/75466748.

[9]All India Online Vendors Assn. v. CCI, Company Appeal (AT) No. 16 of 2019.

[10]Advisory to State Governments / Union Territories: Model Framework for Guidelines on e-Commerce for consumer protection, Ministry of Consumer Affairs, Food and Public Distribution (June 12, 2020, 18:19pm), https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Guidelines%20on%20e-Commerce.pdf.

[11]Consumer Protection (e-Commerce) Guidelines, 2018, §3.

[12]Consumer Protection (e-Commerce) Guidelines, 2018, §4.

[13]Consumer Protection (e-Commerce) Guidelines, 2018, §5.

[14]Consumer Protection Act, 1986, §9; Consumer Protection (e-Commerce) Guidelines, 2018, §6.

[15]Ministry of Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy (AYUSH), Order F. No. Z 25023 /09/2018-2020-DCC (AYUSH) (June 17, 2020, 16:19pm),https://www.ayush.gov.in/docs/121.pdf.

[16]COVID-19: ASCI says keeping tab on ‘unsubstantiated, opportunistic claims’ in ads, Brandequity (June, 17, 2020, 19:18pm), https://brandequity.economictimes.indiatimes.com/news/advertising/covid-19-asci-says-keeping-tab-on-unsubstantiated-opportunistic-claims-in-ads/74923614.

[17]Supra 4.

[18]Ministry of Consumer Affairs, Food and Distribution, Notification F. No. 26(1)/2020-ECR&E (June 16, 2020, 17:19pm), https://www.mohfw.gov.in/pdf/218645.pdf.

[19]Abhishek Gupta, Conundrum of the Consumers during COVID-19, Bar and Bench (June 10, 2020, 17:19pm), https://www.barandbench.com/columns/conundrum-of-the-consumers-during-covid-19.

[20]Advisory to Businesses in Times of COVID-19, Competition Commission of India (June 19, 2020, 18:19pm), https://www.cci.gov.in/sites/default/files/whats_newdocument/Advisory.pdf.

[21]Ibid.

[22]CMA launches COVID-19 taskforce, Gov.Uk (June 18, 2020, 18:19pm), https://www.gov.uk/government/news/cma-launches-covid-19-taskforce.

IMPORTANT – Opinions expressed in this article are the sole responsibility of the author and do not necessarily reflect the views of IJOSLCA.

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