Why Indian Consumers Struggle for Compensation Compared to Global Counterparts

Global Companies and Consumer Claims

Major corporations worldwide frequently pay millions of dollars to settle claims related to their products or services. For instance, Johnson & Johnson has proposed a staggering $5.5 billion to resolve thousands of lawsuits linked to its talc products, while Apple has agreed to a class-action settlement over allegations of misleading consumers regarding Siri's capabilities.

Challenges Faced by Indian Consumers

Across the globe, airlines, tech firms, and consumer brands face substantial compensation claims from customers due to defective products, misleading advertisements, or privacy violations. Many of these companies also operate in India, where consumers use the same smartphones, apps, airlines, and consumer products. Despite this, it remains rare for Indian consumers to receive significant compensation, even in the face of misleading advertisements, flight disruptions, service deficiencies, and product-related issues.

The Discrepancy in Consumer Compensation

This situation raises an important question: why do consumers in some countries receive substantial payouts while those in India often have to engage in lengthy legal battles for minimal relief? Legal experts suggest that the disparity is not due to companies treating consumers differently, but rather the legal systems in which they operate. Factors such as the availability of class-action lawsuits, the scale of damages awarded by courts, and the robustness of enforcement mechanisms all influence how companies assess litigation risks and decide on settlements.

Consumer Dissatisfaction in India

The issue gained attention following a survey by LocalCircles, which revealed widespread dissatisfaction among Indian consumers regarding grievance redressal. According to the survey, most consumers reported being unable to resolve disputes despite attempting to contact companies through available channels.

Why Large Settlements Are Common Abroad

Alai Razvi, Managing Partner at Accord Juris, explained that multinational companies often agree to large settlements abroad primarily due to the legal framework in those jurisdictions. "Significant payouts typically occur in jurisdictions that allow for broad class or collective actions, recognize substantial (including punitive) damages, and have strong enforcement by regulators and plaintiff attorneys," he stated.

The Legal Framework in India

In countries like the United States and parts of Europe, millions of consumers affected by the same issue can consolidate their claims into a single lawsuit. This significantly increases the financial risk for companies, making large settlements commercially viable. In contrast, India follows a very different model. Razvi noted that similar damages are usually addressed through individual complaints or separate civil lawsuits under the Consumer Protection Act, which typically involve relatively modest amounts and primarily compensatory damages.

Limited Class Action Mechanisms

Since claims are rarely consolidated into large consumer groups, companies seldom face the kind of legal risks that lead to billion-dollar settlements abroad. Razvi emphasized that the legal and financial pressures that generate such consumer settlements are largely absent in India.

Consumer Protection Act of 2019

India has laws in place, but the outcomes are not comparable. The Consumer Protection Act of 2019 has strengthened consumer rights and provided for complaints on behalf of a class of consumers in certain circumstances. However, experts argue that the legal framework still differs significantly from the mature class-action systems found in countries like the U.S.

The Need for Stronger Collective Redress Mechanisms

Razvi believes that the design of India's collective redress mechanisms is the primary reason behind this disparity. "These three factors (legal framework, enforcement, and class-action mechanisms) play a role, but the design of the legal framework for collective redress is the central factor," he stated, comparing it to systems in the U.S. and Europe.

Challenges in Legal Enforcement

While Indian law allows for representative lawsuits under the Civil Procedure Code and complaints on behalf of a class of consumers under the Consumer Protection Act, these mechanisms remain narrow in scope and are rarely utilized on a large scale. Razvi pointed out that India's enforcement mechanism relies more on regulatory actions than on substantial civil damages.

Consumer Experiences Reflect Legal Gaps

The legal gaps are reflected in consumers' experiences. A survey by LocalCircles involving over 15,000 consumers across 312 districts found that 66% of respondents who faced significant service deficiencies were unable to resolve their complaints. Among them, 36% reported that the service provider refused to address the issue. Only 5% indicated they eventually received relief through consumer courts, while 94% believed that the Central Consumer Protection Authority (CCPA) should take suo motu cognizance of cases affecting large numbers of consumers.

The Feasibility of Collective Compensation

While provisions exist in India for consumers with similar complaints to pursue collective action, experts argue that doing so is much more challenging in practice compared to countries with established class-action systems. Razvi noted that collective compensation is legally possible, but procedural hurdles make it difficult for consumers to bring large-scale claims against multinational companies.

Barriers to Organizing Collective Actions

Organizing thousands of affected consumers into a single legal action is not straightforward. "These proceedings require permission from the forum, proof of common questions of fact and law, adequate representation, and effective notice to affected individuals. Organizing a large class, funding complex litigation, and maintaining it against a multinational defendant are significant barriers," Razvi explained.

Individual Resolutions Dominate

As a result, most consumer disputes in India are resolved individually or through regulatory intervention rather than through large collective claims. "In practice, most disputes are resolved individually or in small groups, or through regulatory intervention, rather than through large-scale collective claims that could realistically provide much higher compensation," he added.

Assessing Legal Risks Across Jurisdictions

Differences in legal frameworks also influence how multinational companies respond when consumer disputes arise. Razvi noted that companies regularly assess litigation risks on a country-by-country basis before determining their legal strategies.

The Impact of Enforcement Architecture

He pointed out that companies operating in the U.S. and Europe face mature class-action regimes, extensive discovery processes, active regulators, and significant statutory or punitive damages. Consequently, the expected costs of non-compliance with consumer and product liability are much higher.

India's Unique Risk Profile

India presents a different risk profile. "While regulators and consumer forums can impose penalties and compensation, the likelihood of facing substantial consumer damages through a single collective action is relatively low, and the awards are modest compared to practices abroad," Razvi stated.

Corporate Behavior Shaped by Legal Differences

This directly influences how companies respond to consumer disputes. "The differences in enforcement architecture and remedial scales shape corporate behavior: firms adopt more preventive and settlement-driven strategies in jurisdictions with strong legal repercussions, while in places like India, they tend to respond more incrementally and on a case-by-case basis," he explained.

Fairness in Consumer Treatment

For consumers, the pressing question is whether it is fair that those affected by similar issues receive compensation in one country but not in another. Tushar Kumar, an advocate at the Supreme Court of India, argues that this issue is more complex than it appears legally.

Jurisdictional Challenges

From a legal standpoint, the question is not just one of fairness but also of jurisdiction. According to Kumar, multinational companies are governed by the laws of each country in which they operate, meaning that agreements made in one jurisdiction do not automatically create legal liabilities elsewhere.

The Need for Comparable Remedies

However, he believes that consumers experiencing similar harm should receive comparable remedies. "Where consumers in different jurisdictions have experienced largely similar harm arising from the same product defect, misleading practice, or privacy violation, there is a compelling jurisprudential argument for them to receive comparable remedial treatment," Kumar stated.

Concerns Over Consumer Rights

Kumar expressed that when companies only compensate consumers in jurisdictions where litigation risks are higher, it raises significant concerns about consumer rights. "If companies voluntarily compensate consumers in markets where litigation risks are higher while denying similar relief in jurisdictions with weaker enforcement mechanisms, it raises serious concerns about the equality of consumer protection and undermines trust in the rule of law," he added.

Necessary Changes for Improvement

Experts believe that strengthening India's collective consumer redress mechanisms would significantly enhance consumers' ability to seek compensation. Kumar noted that while India has made progress through the Consumer Protection Act of 2019, its collective litigation framework still falls short compared to mature class-action jurisdictions.

The Path Forward

"The most transformative reform would be to establish a robust, litigation-capable collective redress mechanism," he stated. He pointed out that while the Consumer Protection Act has strengthened consumer rights, collective actions remain procedurally burdensome, litigation often drags on, and the compensation awarded by courts is generally modest.

Comparative Analysis of Class Action Systems

Kumar emphasized that India still lacks a class-action system comparable in scale and effectiveness to those in jurisdictions like the United States. Collective actions remain procedurally cumbersome, litigation often takes a long time, and damages are typically modest.

Regulatory Authority for Consumer Restitution

According to Kumar, regulators should have clear statutory authority to seek restitution for affected consumers rather than merely penalizing companies for misconduct. "Higher monetary penalties, mandatory corrective actions, expedited decisions, and greater use of representative actions would materially change the economic calculus for corporations, making non-compliance significantly more costly," he concluded.