The Consumer Protection Act will have an impact on all businesses and will radically change the way we do business in South Africa. The Act aims to provide for consumer protection and to prevent exploitation of consumers. Together with other laws which provide for consumer protection, for example the National Credit Act, the Consumer Protection Act will serve as a comprehensive legal framework for consumer protection. All suppliers of goods and services will need to take note of the new measures and ensure that they are able to comply once the Act becomes effective. Even though the act partially came into effect in April, the bulk of the Act that deals with consumer rights will be effective on 24 October 2010.
The Act has a broad application scope and will affect an extensive range of consumers and transactions. The definition of a “consumer” has been widened to include both the person to whom the goods or services have been delivered as well as the actual user of the goods or beneficiary of the services. This means that if a father purchases a television for his child, both the father and the child will be entitled to protection under the Act.
Juristic persons are also protected under the Act. However, as with the National Credit Act, juristic persons will only be protected if it has an asset value or annual turnover below a threshold to be determined by the Minister.
The Act applies to all transactions for the supply of goods or services in South Africa, the promotion of goods or services as well as the goods or services themselves. Certain transactions are however exempted from the Act, amongst others (as stated above) transactions with juristic persons above the threshold (it is expected to be an annual turnover amount of between R1m and R5m) and credit agreements under the National Credit Act.
Even though credit agreements are exempted, the goods or services that are the subject of the credit agreement are not excluded from the ambit of the protection of the Act. If for example furniture is sold in terms of a credit agreement, the agreement itself will be dealt with under the NCA, but the consumer will be offered protection by the Consumer Protection Act regarding the furniture purchased.
The Act provides for various consumer rights which place South Africa in line with foreign consumer protection legislation. The consumer rights contained in the Act will impact your business in various ways, the most important affects will however be on agreements, marketing and the way you conduct your business.
Agreements
This will most probable have the biggest influence on your business. The provisions in the Act will require that almost all businesses must re-evaluate its standard terms and conditions, including health practitioners, airlines, retailers, car dealers, telecommunication businesses, beauty and education. Particularly the provisions regarding unfair, unreasonable or unjust contract terms must be considered and applied. The Act requires the supplier to give notice to the consumer in certain instances, for example when limiting the supplier’s liability. The content and format of agreements are also prescribed, for example requiring that it be in written form. Furthermore the Act prohibits certain transactions, agreements and provisions, for example an assumption of risk by the consumer. Consumers are now empowered to cancel contracts if they are not satisfied with the terms and conditions, to decide whether to renew the contract or not and to enforce certain obligations and liabilities from businesses who in the past would have induce them to waive their rights.
Marketing
The Act deals at length with general marketing standards, bait marketing, negative option marketing, direct marketing, catalogue marketing, trade coupons and similar promotions, customer loyalty programmes, alternative work schemes and referral selling. Discriminatory marketing is prohibited, there are however exemptions for when there will be reasonable grounds for differentiating marketing, e.g. marketing alcohol only to over 18’s. The rules regarding direct marketing will have a significant impact on businesses. Consumers now have the right to restrict unwanted direct marketing. This includes the right to refuse to accept, require another person to discontinue, or in the case of an approach other than in person, to pre-emptively block any approach or communication if the approach or communication is primarily for the purpose of direct marketing. Businesses are now required to ensure that they have measures in place to receive and record consumers' choice when it comes to receiving marketing material.
Risk Management
The Act affects a major departure from the current position of the consumer in the event where the consumer suffers damages or loss because of unsafe or defective goods. This is because the Act imposes strict liability for damages caused by goods. The effect of this is that liability for damages is extended to the producer, importer distributor or retailer of goods if the damages is the cause of "supplying any unsafe goods, a product failure, defect or hazard in any goods, or inadequate instructions or warnings provided to a consumer pertaining to any hazard arising from or associated with the use of any goods - irrespective of whether the harm resulted from any negligence on the part of the producer, importer, distributer or retailer...". The consumer does not have to prove negligence/fault in any action for delict or claim for damages meaning that it will be much easier to claim damages. The Act provides consumers with various remedies to enforce their rights. Consumer groups can be accredited to lodge complaints on behalf of consumers and the act provides for possible financial support for activities such as consumer advice, education, publications and research. It also aims to limit the amount of litigation (which can be costly) by providing for alternative dispute resolution through mediation or conciliation. An enforcement agency, the National Consumer Commission, was also established. Courts should also interpret contract terms in favor if the consumer.
If you have any questions with relation to the above article, please do not hesitate to contact us at Tel: 021 888 6000 or e-mail us at info@compuscan.co.za
The Consumer Protection Act will have an impact on all businesses and will radically change the way we do business in South Africa. The Act aims to provide for consumer protection and to prevent exploitation of consumers. Together with other laws which provide for consumer protection, for example the National Credit Act, the Consumer Protection Act will serve as a comprehensive legal framework for consumer protection. All suppliers of goods and services will need to take note of the new measures and ensure that they are able to comply once the Act becomes effective. Even though the act partially came into effect in April, the bulk of the Act that deals with consumer rights will be effective on 24 October 2010.
