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Consumer Affairs
Monday, September 1, 2008
Caveat vendor

There are some scary things about the Consumer Protection Bill 2008. Sitting at the third and final draft, it seems the war weary protagonists have thrown in the towel and accepted that it will become law as it stands by the end of the year, and come into operation in 2010.

Why it’s scary is because it runs to 238 pages (the contents list alone runs to 11). How much consumer protection it will eventually afford is open to debate, as its complexities will undoubtedly stoke the courts with expensive lawyers and protracted argument.
The marketing and advertising departments of business are being forced to accept a greater responsibility for their actions. Contravention of the law, with specific reference to ‘the rights of consumers’ generally, and their specific rights to fairness…… will carry heavy financial penalties that would eat into profits. It is hoped the fear of this will encourage self-regulation. However, one wonders if the proposed legislation will stifle competition, innovation and variety by discouraging manufacturers and retailers from marketing new products; and maybe consumers will end up in a sort of protective custody for their own good.
The Bill is riddled with terms that are defined in Section 1. It is therefore difficult to provide a meaningful assessment of the general principles without ploughing through a myriad of terms that have been specifically defined for purposes of enforcing the provisions of the Bill.
In any case the definitions are not enough: neither ‘negative response marketing’ nor ‘fair business practice’ are defined, for example. No doubt many other imponderables will turn up. Nor is there a clear distinction, say, between ‘business’ practice and ‘trade’ practice.
To be fair it is not easy to create a legal framework to deal with what is after all a somewhat subjective topic. How do you ‘protect’ a consumer? You cannot hold his hand when he visits a retail outlet, and you can’t stop him being drawn in by unbridled materialism, fostered by loony advertising, and going out to buy that latest fancy gadget. And anyway. what exactly is a ‘right’? And what exactly is ‘fair’? Neither are really adequately defined in the law, and will have to be hammered out in tribunals, commissions and probably the courts too.
The intention of the new law is, like our Constitution, both laudable and idealistic:
to promote a fair, accessible and sustainable marketplace for consumer products and services;
to establish national norms and standards relating to consumer protection;
to provide for improved standards of consumer information;
to prohibit certain unfair marketing and business practices;
to promote responsible consumer behaviour;
to promote a consistent legislative and enforcement framework relating to consumer transactions and agreements; and,
to establish the National Consumer Commission.
One reason the Bill is so complex is that it replaces no less than six Acts of Parliament and various portions of related law. The following Acts will be repealed:
• the Business Names Act, 1960
• the Price Control Act, 1964
• the Sales and Service Matters Act, 1964
• the Trade Practices Act, 1976
• the Consumer Affairs (Unfair Business Practices) Act, 1988
• the Businesses Act, 1991

• while Sections 2 to 13, and sections 16 to 17 of the Merchandise Marks Act, 1941, will also be repealed.

Cramming all the above law into one Act must have been quite a mission, but will its grand intentions really work in practice?
They might if an important theme of this new law — the need for self-regulation — is taken seriously by industry, manufacturers, and suppliers of goods and services. The law is essentially an exercise in the redistribution of risks, largely away from the consumer and over into the lap of those designing, developing, manufacturing and marketing goods and services. For it is important to realise that the Bill not only recognises ‘transactions’ but also ‘advertisements transmitted or published’.
Without getting too technical the Bill essentially requires the individual to determine a number of key elements, obvious at first hand, but in reality quite complicated:
• the individual must first determine if he is a consumer in the transaction under dispute;
• he must then prove that it is a ‘transaction’ in terms of the law;
• and then determine whether or not he has received goods or services (ie that they fall within the bounds of the Bill) in return for money; and,
• that such matters fall within “the ordinary course of business.”

If he gets through this tangle (he’s a genius if he achieves this without a lawyer), he then has to determine his course of action. The Bill creates a number of regulatory bodies, all of whom are required to deal with a complaint should it pass the definition tests. For example, should a particular complaint be presented to the Commission in terms of the National Credit Act, or the Tribunal, in terms of the Bill?
Much of the law essentially codifies what is already ‘common law’, that for example, it is an implied term of a contract that the supplier is responsible to deliver the goods or perform the services as agreed, or within a reasonable time. However, the Bill extends beyond this, prescribing entirely new rights, for example the right to cancel an advanced booking or reservation for goods and services. A consumer will have the right to a cooling off period, and the right to return goods. Under certain circumstances a cancellation fee may not be levied. Customers are no longer liable for in store breakages unless it is proven they were deliberately negligent or reckless.
All about Rights and Protections
The consumer rights embodied in the Bill are based on those promoted by the United Nations. In its own words, the Bill provides for:
• The Right of equality in the market place;
• The Right to privacy;
• The Right to choose;
• The Right to disclosure and information;
• The Right to fair and responsible marketing;
• The Right to fair and honest dealing;
• The Right to fair, just and reasonable terms and conditions; and,
• The Right to fair value, good quality and safety.

The Bill will have a far greater scope than the National Credit Act in that it will apply to every transaction between the supplier of goods and services, excluding such transactions over a prescribed limit, yet to be determined. The government has deftly excluded the state from this law, which is a bit of a cheek since it is the worst offender of poor service delivery in this country.
The Financial Services Board describes it well when it says that, for transactions covered by the Bill it will no longer be a case of caveat emptor (let the buyer beware) but caveat vendor (let the seller beware). It may therefore be the beginning of a new era where for the first time in the history of the country it really is a case of: the customer is always right.
But again, things are not so simple. In the words of Neil Kirby, a director at Werksmans, “The Bill presents us with a paradigm shift in relation to the legislative approach traditionally taken by South African law to consumer rights and consumers in general.” It now presents us with a ‘consolidated text’ of consumer rights and obligations that are imposed upon certain persons or people for the purpose of ensuring that those rights are upheld, protected, maintained and respected.
He acknowledges the Bill as an exceptionally onerous and complex piece of legislation.” No one ever said that protecting consumers was going to be easy, or that legislation should be accessible or simple to read, interpret or enforce. “This is, however, one of the Bill’s most crucial failings….
Another is the conflict between ‘principle and precedent,’ on the one hand and ‘equity’, on the other. “Our courts are not courts of equity,” he points out; “they are courts of principle and precedent.”
In this light he asserts that Section 4(2)(a) of the Bill is in direct conflict with well established principles of South African law. There is certainly panic amongst the legal fraternity in respect of the revolution the Bill is expected to cause. “This is primarily the result of the principles of equity that the Bill intends to introduce into South African law.”
Kirby concludes, “I should be able to pick up the Consumer Protection Bill, read up what it is that I need to know and enforce my rights accordingly. That is certainly a neat theory. However, the reality is markedly different.” “All in all I think the complexities inherent in the Bill preclude, almost entirely, the lay person from enforcing his or her rights, as a consumer, in the absence of legal assistance.”
It’s really a matter of opinion whether the law will protect consumers effectively against a broad range of harmful business practices, dubious marketing and misleading contracts/advertising; or will it frustrate freedom of choice. But one thing I can predict: there are going to be lots of amendments in the years ahead.

Warranties - time for strict liability

The Bill introduces ‘implied warranty’ against defects, over riding any terms and conditions that might seek to avoid liability. Indeed, the consumer will be able to rely on wider implied principles; for example, that the product concerned is deemed to be usable and durable for a reasonable period of time; and that it is reasonably suited for the purpose for which it as originally intended and of good quality. Furthermore, ‘strict liability’ is now imposed on suppliers of goods and services. This means consumers would be able to sue for damages without having to prove fault: in other words, a manufacturer would be strictly liable for damages caused by the supply of defective goods.
Eric Levenstein of Werksmans says, “This removes a major evidential burden on the part of the consumer hen the consumer approaches the claim with a claim for damages.”

Copyright © Insurance Times and Investments® Vol:21.8 1st September, 2008
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