Consumer protection

The consumer now has a big stick: “The consumer may hold at their whim any or all persons in the supply chain liable for damages…”, as explained by Hahn & Hahn Law. The ugly fact remains – the consumer doesn’t even have to buy your product, they may lay a charge even if it offends them on the shelf.

October 24, 2010 will be a significant day for businesses across South Africa. The Consumer Protection Act 68 of 2008 will come into effect on that day and it has far reaching consequences for all businesses providing goods and services in South Africa.

Due to our growing market, consumers in South Africa have often been the victims of incidents of scams and unfair practices. Unfortunately there are currently weak and inappropriate structures in place to deal with these scams and unfair practices. Furthermore, the current legislation in the country is biased towards suppliers based on the ‘buyer beware’ principle as well as criminal sanctions. The current laws have also not been reviewed since 1989 with the enactment of Unfair Business Practices Act – much has changed since then.

According to research 85% of South African consumers, especially rural consumers, are not aware of their rights and 75% have indicated that the courts were too far away inaccessible. Consumer violations are prevalent with misleading and baited advertising, none honouring guarantees, abuse of information, non disclosure, unfair contract terms and poor product quality being the most frequent complaints.

Where consumers took action to complain, some 42% of them were refused assistance (65% of these in rural areas) and only 21% of consumers are aware of the various institutions that are there to assist consumers (16% for provincial courts). Consumers prefer better disclosure, simpler administrative remedies in the form of replacements and refunds and accessible dispute resolution. Interestingly, it was discovered that an average of 60% of consumers do not complain when they experience problems, simply because they do not know where to go to complain or they lack confidence in the system of consumer redress and enforcement.

The consumer now has a big stick: “The consumer may hold at their whim any or all persons in the supply chain liable for damages…”, as explained by Hahn & Hahn Law. The ugly fact remains – the consumer doesn’t even have to buy your product, they may lay a charge even if it offends them on the shelf.

The objective

The new Act aims to promote a fair, efficient and transparent marketplace for consumers and business, offering a consistent, predicable and effective regulatory framework that fosters confidence amongst consumers, but at the same time also recognises the developmental imperatives of the South African economy.

Further goals are to provide access to effective consumer redress for economic citizens, promote better consumer service in the public and private sector and to harmonise our consumer protection framework with international best practice.

The purpose

The Act is coming into effect to promote and advance the social and economic welfare of consumers in South Africa by:

* Establishing a legal framework for the achievement of a fair, accessible, responsible and sustainable market.
* Reducing any disadvantages experienced in accessing the supply of goods and services by low income, low literacy, rural and vulnerable consumers.
* Promoting fair business practices.
* Protecting consumers from unfair and deceptive conduct.
* Improving consumer awareness.
* Providing for an accessible, efficient and effective scheme of redress.

This Act will apply to numerous players involved in the supply chain. This includes: * Both profit or non profit suppliers that promote or supply goods or services to consumers across all sectors of the economy unless exempted.
* Government institutions or any entity contracted by the state to provide goods or services to consumers and franchise offers, solicitations and agreements.
* Any business-to-business transaction subject to a threshold to be set through regulation.

However, certain special cases are excluded, for instance, where the state is the consumer. Others include transactions exceeding a threshold value set by the Minister and where the goods or services are supplied to a person in the supply chain who in the ordinary course of business, the and goods for resale or applies or uses them to produce other goods as well as Advisory Services regulated by FAIS and other financial services regulated by the short and long term insurance Acts.

New rights

Along with the new Consumer Act, South African citizens will also be handed a number of new rights. These will include the right of equality to consumer market, the right to privacy, the right to choose, disclosure and information, fair and responsible advertising, marketing and promotion, fair and honest dealings, right to fair, just and reasonable terms and conditions and the right to fair value, good quality and safety. In a nutshell this means the following:

Right of equality to consumer market: Prohibit any form of unfair discrimination in the line of the Equity Act and the Constitution. The Equity Court has jurisdiction to adjudicate cases on referral from the Consumer Commission.

Right to privacy: Limits unfettered use of consumer’s personal information for unsolicited direct marketing campaigns by requiring all direct marketers to provide consumers with an “opt out” option for unsolicited marketing communications. Consumers can also register a pre emptive block on a register to be operated by government or industry.

Right to choose: Prohibits an automatic renewal of fixed term agreements, requires quotes for maintenance and repair services, provides a five day cooling off for direct marketing and provides for right to return goods and receive refunds within 15 days.

Disclosure and Information: Facilitates access to simple and transparent contracts and improves disclosure by: Giving consumers the right to information in plain and understandable language, requiring the compulsory display of prices and provision of transaction records and requiring product labels and trade descriptions not to be misleading.

Fair and responsible advertising, marketing and promotion: Prohibits unfair marketing practices (bait, referral, negative option), regulates promotional competitions and sets standards for customer loyalty programmes.

Fair and honest dealings: Prohibits false, misleading and deceptive representations, prohibits overselling and overbooking and prohibits unconscionable conduct.

Right to fair, just and reasonable terms and conditions: Prohibits unfair, unreasonable or unjust contract terms, requires consumers to be given free copies of contracts, outlaws unilateral changes to contracts, outlaws certain types of agreements (minors, negative options) and outlaws any form of contracting out.

Right to fair value, good quality and safety: Facilitates access to quality services, safe goods and services and redress by:
* Providing statutory warranties for safety and quality.
* Introducing a general product safety monitoring and recall regime.
* Extending strict liability to retailers for illness, injury, damage to property and details as a result of defective goods or improper labelling.

As you can see, the new Act will have a great effect on many industries and businesses. Do not get caught out – read the new act and see how your business has to change and adapt to follow these new laws.