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Consumer protection regulations to move away from common law

June 1, 2009

Portfolio Committee on Trade and Industry

Whilst consumers must still remain vigilant on conditions of sale for goods and services, the new Consumer Protection Bill focuses more upon facilities for a consumer to obtain regulatory redress rather than have to go through judicial procedures where common law principles such as “buyer beware” are involved and only certain unfair practices are criminalised.

Also, proposals contained in the bill do not confine any imminent regulations to the actual purchasers of the goods alone, but define as consumers all users of the products and services, whether or not they actually purchase the goods themselves. Therefore the scope and effects of the regulations are considerably widened to take in, say, a family of the purchaser.

Said Ms Maguta Mphahlele from the consumer tribunal, DTI (department of trade and industry), when introducing the bill to a joint NA/NCOP briefing before the trade and industry portfolio committee, “In many instances common law protection is totally insufficient and consumers are often even made to contract out of their common law rights before a purchase can be made”. Present at the meeting were also representatives of the Gauteng legislature.

The primary purpose of the bill, said the DTI, is to promote a fair, efficient and transparent market place for consumers and business. “There are as many issues that affect the consumer as affect business and the bill goes to great lengths to ensure that fairness applies to both”.

Other objectives include a predictable framework to foster consumer confidence, provide consumer redress facilities and harmonise legislation with international best practice and much of the current SA legislation that already exists.

What previously constituted aberrant business is now to be decided upon by a national consumer commission plus a tribunal in terms of regulations and the inclusion of such terms as “unconscionable business practice” will no doubt add considerable ammunition to the state in correcting both business malpractice and public protection and take much away from the courts in terms of work pressures.

The interests of those involved in the bill are affected by two main factors. Firstly, over seventy pieces of legislation affecting the consumer were involved, says the DTI. Twenty three of these were administered by the DTI themselves, eight by the department of health, another eight by the department of agriculture, six by the department of justice, five by the transport department and some consumer legislation were even indirectly handled by the departments of environmental affairs and tourism, water affairs and communications.

Secondly, new parties affected are directly introduced for the first time, due in main to the fact that all sales contracts of any type and all financial transactions with the public (except a few notable exceptions which are listed), including counter sales, are now included, plus aspects of labelling, marketing and communications. The extensive list of definitions gives a glimpse of the large, new section of business that might be affected.

There has been little in the way of updates to consumer practice legislation in recent years since the introduction of the Consumer Affairs (Unfair Business Practices Act), but now affected will be the Trade Practices Act, the Sales and Services Matters Act, the Business Names Act, the Price Control Act, the Merchandise Marks Act and the Lotteries Act. Most of these statutes, says the DTI, will need updating in the course of time.

Harmonization was also needed with the Electronic Communications and Transactions Act, various pieces of insurance legislation, the Medical Schemes Act, the Standards Act and various health laws, said the department.

The bill essentially establishes a National Consumer Commission that will be moved away eventually from the ambit of the DTI and made independent. The National Consumer Tribunal, established in terms of the National Credit Act, will also be considerably re-enforced.

Direct marketing methods are given very specific attention in the proposals. Whilst the sector association involved must keep a register of those consumers who wish not to be solicited, such register must be capable of being referred to by all those involved in direct marketing processes.

Also, those businesses using SMS messages to make selling proposals must contain an “opt out” contact address, thus giving a consumer facility to cease further solicitations on the subject. Parties affected not only include those involved in marketing services, therefore, but the advertising and publicity parties involved.

There are also business implications for those who manufacture goods and sell direct, those who retail goods and those who offer repair services – regulations in this case particularly referring to the subject of return of goods and the period of time allowed for such, including matters regarding guarantees and warranties.

Issues regarding directly imported “white goods” and electrical appliances in a manner often referred to as “parallel importing”, where there is no warranty or guarantee, are also regulated for. Gambling and lottery matters are also dealt with.

On the subject of “language of choice” in the matter of contracts or sales agreements, the DTI has left the bill open for further debate, saying that whatever the choice, the result must be in plain “everyman” language, using terms that all can understand.

On pyramid and multi-level marketing, considerable changes to the Unfair Business Practices Act have been made. Similarly, regulations have been drafted regarding what is often referred to as “negative marketing”.

The DTI have also specifically referred to organisations such as airlines, travel businesses and retail stores offering “loyalty returns” inasmuch that any offers made must be accounted for immediately to honour undertakings given once a consumer request is made.

Matters such as over-booking to guarantee the filling of aircraft seating plans, selling more tickets than a stadium could possibly hold, or selling a twenty year pension scheme to an eighty year old were all referred to by the DTI in their parliamentary briefing as “unconscionable business behaviour”. This is defined as behaviour which is “otherwise unethical or improper to a degree that would shock the conscience of a reasonable person”.

Such events will carry heavy fines, to be applied by the new commission and its tribunal operating with inspectors appointed to enforce the regulations. This body would become independent of the DTI.