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The Consumer Protection Act - a heads up

April 30, 2009 – 8:26 pm by John Giles

The President of South African signed the Consumer Protection Act Act on 24 April 2009 and it was published in the government gazette on 29 April 2009.  The official statement made by the Department of Trade and Industry is worth reading.

john-giles-for-michalsons-018I attended a presentation on the Consumer Protection Act recently.  It was a very good presentation and it certainly made me realise that the Act is going to have a huge impact on virtually every business in South Africa in 2009 and beyond.  A lot bigger impact than I had anticipated.  I therefore thought that I would give you a heads up on some of the practical implications of this Act for you.

I’m going to refer to it as the Consumer Protection Act or just the Act.  Many people still incorrectly refer to it as the Consumer Protection Bill rather than as the Consumer Protection Act.  A Bill is a draft Act that has not yet been enacted.

The Act has become law, but there are two things to bear in mind:

  1. However, there are currently no regulations (not even in draft form) for the Act.  It is very difficult to consider the implications of the Act without the regulations.  So it might be some time yet until you can establish with certainty what your obligations will be under the Act.
  2. The Act will only operate from 24 October 2010 (18 months from the date it was signed by the President), so everyone has lots of time to prepare to comply with the Act.  There is no need for panic.  Read schedule 2 of the Act for more information.

What the Labour Relations Act did for employees, the Customer Protection Act will do for consumers

So what does the Consumer Protection Act mean for you?   Here are some of the things that stood out:

  1. South African consumers are the most protected consumers in the world.  If you are consumer facing, this is not good news.  However, as with many challenges it can also be seen as an opportunity.  You are required to comply with the law, so why not do so and use the marketing opportunity to tell your customers how much you protect them.  The businesses that comply first might well be viewed favourably by consumers.
  2. If your goods are shrink-wrapped (such as shrink-wrapped software) you might run into problems with regards the consumer’s right to inspect goods.  The definition of goods includes intangible goods such as software.
  3. If you have fixed term agreements with your customers you may be required to give them notice prior to the expiry of the fixed term.  This could place an administrative burden on you.
  4. All agreements with consumers must be in plain and understandable language.  You are probably going to have to re-draft or amend your terms, your sale agreements and your advertisements into plain language.  If you don’t, then your customers might be able to get out of the agreements, you might be guilty of unconscionable conduct, or you might be sued.
  5. The general theme of the Act is to protect the poor and the vulnerable and is in a way the Bill of Rights for the consumer.
  6. The Act alters the common law to be more favourable to consumers.  By default, you give the consumer various warranties and indemnities.  The warranties that you give in your agreements are no longer the only warranties that apply.
  7. The Act also applies to legal services provided by attorneys so it impacts on attorneys directly too.  The ambit of the Act is very wide.    Depending on what is contained in the regulations, a lessee may be viewed as a consumer and therefore lease agreements may need to comply with the Act.  The Act does not apply to employment contracts.  A franchisee will be a consumer and therefore franchise agreements will have to comply.
  8. The court will be given the power to redraft (well order you to change them actually) your contracts, terms of business, terms of sale and other consumer related terms.  Radical I know - it took me a while to get my head around this.
  9. Courts must interpret standard form contracts in favour of consumers.
  10. Promotional competitions will be governed by this Act, rather than the Lotteries Act.  The way in which promotional competitions was dealt with in the Lotteries Act was (with respect) a mess and it is a good thing that those provisions are being repealed.  At least now we will have more certainty.  You must prepare competition rules before you run in competition - be they online or offline.
  11. If you are currently ABC (Pty) Ltd, trading as XYZ, you will have to register the business name XYZ.
  12. The consumer protection provisions in the ECT Act are not repealed and therefore there is a potential overlap.
  13. You are going to have to revisit your refund policy.
  14. Your marketing campaigns are going to be affected and conducted in accordance with the Act.
  15. Mechanisms are put in place to enable consumers to enforce their rights.

We will be writing more about various aspects of the Consumer Protection Act in due course.  To receive future updates, register for free or subscribe.

We welcome your comments and feedback.

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  1. 6 Responses to “The Consumer Protection Act - a heads up”

  2. What is the definition of a refund - does a retail business have to refund cash or can they offer a credit note/gift voucher for returned goods?

    By nicolem on Mar 17, 2010

  3. I refer to point 51.(j) (i) and (ii) in the CPA - can we still use an SA ID number to activate a Loyalty card? It is important to note that no retention of the ID document/or copy is required thereafter. Plus the only access to use is the Loyalty Card which is initially activated against this ID number as it is unique and cannot be duplicated on the system.

    By nicolem on Mar 17, 2010

  4. I apologies for the lateness of this response,

    Unfortunately there isn’t a clear answer to your question. The Act does not give a definition of “refund”, and “refund” is used quite liberally in the Act without much clarification of what is exactly intended. As such, one would need to try and give a definition to refund by looking at the context that it is in, and intent of the clause and statute as a whole. Given that the Act was drafted to empower consumers and promote consumer rights, one would probably have to give definition to “refund” that benefited the consumer.

    Basically I think it will come down to why the person is returning the product. If they are suffering from buyer’s remorse, or simply don’t want the item, then a non-cash refund would be fine. If the product was faulty or broken, then a cash refund would probably have to be offered alongside a non-cash refund. At the very least in such circumstances I don’t think a customer could be denied a cash refund if they demanded one.

    I’m sorry that I can’t give you a clearer answer, to do so would require quite a lot more research into the topic. If you would like us to formally research the topic, please don’t hesitate to contact us at Michalsons Attorneys at instruct@michalsonsattorneys.com .

    Regards

    Nick

    By Nicholas Hall on Mar 26, 2010

  5. Section 51(j) talks about “depositing” the identity document. So long as the customer is not required to physically hand over the ID document to the supplier for keeping, the agreement won’t be illegal. The scheme you described above is fine, your only using an ID number to generate an account, you are not actually keeping the person physical copy of the ID.

    Be aware that an ID number will fall under the definition of “personal information” under the Protection of Personal Information Bill (which is due to be enacted this year). When this Bill is enacted you will have to consider how you are processing this information, and may be required to change your processes, as it may fall foul of the Bill. For more information on this topic I suggest looking at some of the articles found here

    Hope this answers your question.

    Regards

    Nick

    By Nicholas Hall on Mar 26, 2010

  6. I am a franchisee in the biggest casual and quick dining franchise Company in South Africa. The holding Company of the franchises (there are 14 identities within the group) is not only the main Company, it is the main supplier of food to the franchisees as well. This situation is an example of rather a strong conflict of interest. More and more products that we use in the franchise have now become “licensed products”. These even include bottled water, juice, ice cream (soft serve), etc. This is obviously mainly due to the fact that the manufacturers of these products belong to the Main Company. We are now forced to use these products even if better or similar products are readily available at better prices. Surely this is 180 degrees out from what the consumer protection act and competitions act has in mind?

    Further to this, the Franchisor has now named their “licensed supplier” for any equipment that you purchase for a revamp. I am for instance restricted to buy stainless steel equipment which is more durable at the coast, versus mild steel products as the mild steel products are manufactured by their “licensed supplier”. The stainless products are to the exactly same spec except it is better quality and more durable, especially at the coast.

    These bully tactics escalates on abroad front and we need to be able to counter this. I believe the new consumer protection act may give us some respite….How do we go about addressing these issues as well as ensuring that the new franchise agreements (after end of October) conforms to the act?

    By sunboy on Apr 26, 2010

  7. Hi,

    The Consumer Protection Act will definitely apply in the situations you’ve mentioned above. The CPA specifically treats franchisees as ‘consumers’ and so you have the full protection of the Act. I haven’t done much research into it, so any answer I give is speculative at best, If you’d like you can contact us at instruct@michalsonsattorneys.com and arrange that we do a full legal opinion on the matter which will lay out your rights and the possible recourse you can take under the Act.

    Short, unresearched answer is you might be able to challenge the franchise agreement using the the rights conferred in Chapter 2 part G (sections 48 to 52) which deals with the right to fair,just and reasonable terms and conditions. You could also maybe make an argument using Chapter 2 part H which deals with the rights to fair value and good quality products. There is also a section on referral selling (s38) but if I recall correctly it does not apply to franchise agreements. You can check out the Act by clicking on the link in the post above to view the sections I’ve mentioned. Another consideration you will have to bear in mind is that the Act may not apply to franchise agreements that where entered into before the Act came into effect.

    A definitive answer that I can give is, you will be able to report this conduct to the National Consumer Commission, when it gets created. They will have the power to review your problems and possibly act on it.

    Hope this helps

    Kind regards

    Nicholas

    By Nicholas Hall on May 3, 2010

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