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Consumer protection legislation to establish fair and competitive market

June 1, 2009

Portfolio Committee on Trade and Industry

Proposed consumer protection legislation would introduce strict liability for product quality despite numerous submissions warning of high compliance costs and potential adverse implications for small business. The department of trade and industry provided responses to the portfolio committee on trade and industry in Parliament on numerous public submissions received on the Consumer Protection Bill. Ms Zodwa Ntuli, deputy-director-general in the department, asserted that wide-ranging amendments to existing consumer legislation had been necessary as no substantial review had occurred since 1989. Consumer protection issues were regulated on a “piecemeal” basis and available redress mechanisms were limited. The provisions of the bill would apply to all economic activities in South Africa. The relationship between suppliers and consumers had to be better regulated in the interests of fair and competitive markets. The bill would introduce new principles of consumer protection. Ms Ntuli declared that the bill would exclude certain consumer protection regulations within particular sectors in order to prevent duplication.

Numerous submissions had referred to the danger of duplication with other existing pieces of legislation such as the National Credit Act and the Financial Advisory and Intermediary Services (FAIS) Act. The department responded that the bill’s intention was to create “overarching and comprehensive national legislation” that was equally applicable in all sectors. Intermediary services regulated by the FAIS Act and credit agreements would be excluded from the bill. However, the department stressed that goods bought on credit would fall under the provisions of the bill. Ms Ntuli stated that exemptions from the bill would only occur where sound protection measures were already in place that were in accordance with the bill’s principles. The definition of “regulatory authority” would be widened to include government departments that enforce other national or sector legislation.

The department declared that the bill would not provide protection to the state as a consumer but would include the state as a supplier. The appropriate section would be amended to exclude collective bargaining services currently regulated under the Labour Relations Act. Rather, the bill would regulate commercial activities provided by trade unions. The proposed regulation of franchisees was not intended to undermine the franchise model but merely to contribute to the national strategy to encourage and promote small business. An amendment to the bill would be introduced to allow for bundled goods to be sold separately and at individual prices. Business to business transactions would be excluded from the provisions on cancellation of fixed term agreements that required a twenty-day notice period. Big business had submitted that a suitable replacement for a large contract would be difficult to find in the stipulated time period.

With regard to cooling off periods, the department stated that an amendment would be introduced that instructed consumers returning goods to pay for those goods that had been opened or consumed. The requirement for genetically modified organisms (GMO) to be correctly labelled would not be reintroduced at this stage. The departments of agriculture and health had raised concerns at the potential high compliance cost factor of GMO labelling. Courts of law would retain exclusive powers to determine whether contract terms were unfair or not. The bill would ensure that banks would not be prohibited from asking for a PIN number from clients during a transaction. Sections on implied warranties would be amended to provide consumers with the option to either obtain a refund or repairs in the case of damaged goods. The bill would introduce strict liability that would remove the need for a consumer to prove negligence on the part of suppliers. The department stated that the section on consumer redress would be tightened up to make it clear which forums consumers should approach to obtain redress.