Unfair and exploitative trade practices of electronic appliance manufacturers: JGLS students file complaint

What if you got to know that you had paid for something, but you did not get it? What if you were then told that you were made to buy that very thing again? A team of law students from Jindal Global Law School (JGLS) discovered that electronic appliance manufacturers were illegally activating the period of warranty from the date of the order, not the date of installation.

This affected the warranty period on appliances sold to millions of consumers in India. They also discovered that this was being done with the help of electronic service providers. Finally, they found out that these millions of unsuspecting consumers were being sold extended warranties which they should not need if the original warranty was correctly provided.

The students filed a complaint before the Central Consumer Protection Authority (CCPA) in January regarding the violation of consumer rights, unfair and exploitative trade practices and misleading advertisements by electronic appliance manufacturers and electronic service providers. The complaint is filed before the CCPA for timely intervention and to safeguard certain rights of Indian consumers by exercising its powers under the Consumer Protection Act, 2019 (CPA).

The complaint: Cause for concern

The complaint brings to light the unjustifiable and often imbalanced standard form documents used in retail consumer transactions, resulting in unfair and exploitative trade practices.

One of the examples of such a practice was uncovered by the complainants when a consumer ordered an air conditioner from an electronic service provider’s website before the COVID-19 pandemic. Due to the lockdown(s) imposed, the product was delivered after a few months. When the consumer attempted to avail the free services under the warranty sold to him, the company informed him that the warranty period had expired within a few months of the delivery and demanded payment for the services. The manufacturer claimed that the warranty period begins from the date of order and not the date of installation. They claimed that this is an industry-wide policy. This scenario is not unique, as millions of Indian consumers buy electronic appliances without realising that they are being subjected to unfair trade practices.

Online shopping is still developing and evolving in the Indian market. The shift from physical to online marketplaces brings with it certain challenges like the significant gap between the date of order and the date of installation. However, contracts with sellers are yet to reflect this change, specifically in warranties, as they continue to be activated from the date of order despite consumers not being in possession or ownership of the goods.

A survey conducted by the complainants showed that most consumers believe that the warranty period begins from the date of delivery. The complainants also found that many complaints on online consumer forums and online shopping websites are testament to the confusion among consumers regarding the date of warranty activation. Lack of information from electronic service providers means unsuspecting consumers continue to suffer under this misconception while shopping online.

Studies have shown that online shopping has increased since the pandemic, and the sale of electronic appliances accounts for a significant portion of it. The online market for electronic appliances is expected to grow substantially over the next few years. This means that there is a continuing situation where new consumers are exploited through this unfair trade practice.

The legal position

Electronic appliance manufacturers are illegally activating the warranty period from the date of order rather than the date of installation for products sold online. The warranty terms vaguely state that the warranty period is for one year without mentioning when the period begins. Incorporation of vague terms in warranty certificates is unfavourable to consumers and is done with a view to exploiting them.

Such activation of the warranty period is violative of the Sale of Goods Act, 1930. The property - rights and risks in the goods - passes to the buyer when it is put into a deliverable state. While purchasing electronic appliances online, this would only occur after the installation of the appliance. Manufacturers also state that consumers should not access (and/or unpack) the appliance before installation. There is also a return window of a few days after the installation is complete. These terms indicate that placing an order online would only constitute an agreement to sell. The actual sale would be complete upon the installation and lapse of the return window. However, the warranty period is activated long before the installation, when the property in the goods has not yet passed to the consumer.

Further, electronic service providers, who are identified as accomplices in this unlawful activity, do not advertise the correct warranty terms on their websites. While most websites mention the duration of the warranty period, they do not mention that the warranty is activated from the date of order. This is a violation of the Consumer Protection Rules, 2020 as it mandates that the information provided by e-commerce entities should be clear.

Additionally, on the expiry of the alleged warranty period from the date of the order, manufacturers begin to persistently market and sell extended warranty products to consumers. This results in a situation where the consumers who were owed a warranty on their original purchase are duped into buying a new warranty product which they would not require if the original warranty was lawfully enforced.

Practices in different countries

Additionally, the complainants found that electronic appliance manufacturers are specifically preventing their Indian consumers from fully benefiting from the lawful warranty period. An inter-country comparison of LG and Haier’s warranties makes this clear. LG’s Indian support page on warranties makes no mention of when the warranty is activated. However, its Singaporean terms of warranty explicitly mention that the warranty period commences ‘from the date of purchase, delivery, or installation, whichever is later’. Similarly, Haier’s Singaporean terms of warranty state that the warranty starts from the date of installation. Haier’s Indian warranty declaration page has no such information.

This shows that the silence of manufacturers on the matter of when a warranty begins is intentional and not a simple oversight. The complainants have requested the CCPA to use its regulatory powers to intervene so that manufacturers are not able to use such unethical means to exploit the Indian consumer.

It is also pertinent to note that in the European Union (EU), there is a legal guarantee for two years on all products as a minimum right and member-states may provide additional protection as per Clause 41 of EU Directive 2019/771. Clause 40 of the same directive mentions that products are ‘considered to be delivered to the consumer when the installation is complete’. The warranty starts from the date on which the product was received, regardless of the mode in which the item was purchased, as per Clause 17 of Directive 1999/44/EC. 

Many of the businesses operating in India also operate in the EU and other nations, but offer warranties that begin on the date of installation and for a longer duration than they do in India. However, due to unequal negotiating and bargaining power in India, consumers are susceptible to and suffer from these unethical and exploitative practices. As shown, consumers in India are given a one-year warranty on goods starting from the date of order.

Aim of the complaint

The complainants hope the CCPA will use its powers to investigate unfair trade practices adopted by electronic appliance manufacturers and electronic service providers, especially in terms of the sale of electronic appliances, their warranties and advertisements. All consumers who have been subject to these practices must be compensated for the illegal termination or unlawfully paid extension of their warranties and receive damages for any loss or injury faced by them due to this practice.

The role of the CCPA becomes important because unlike in developed societies where the legislature has come to identify this unequal and vulnerable position of consumers, the Indian legislature has vested that power in the CCPA.

The complaint was filed by Daksh Sachdeva, Ananyaa Murthy, Nehanshu Rao, Srishti Gupta, Ananya Walia, Kopal Arora, and Ish Chawla. The team was assisted by Assistant Professor Mayank Suri. A copy of the complaint can be viewed here.