"Grey" Goods under the Consumer Protection Act

//"Grey" Goods under the Consumer Protection Act

“Grey” goods or parallel imports, are goods that have been imported into a country through unofficial or unauthorized distribution channels. Grey goods are not illegal. But because they have not been imported through official channels, if the good breaks, the official supplier will refuse to uphold the warranty. This problem is further compounded when the supplier of the grey good also refuses uphold the warranty. Some grey good sellers will offer to repair the goods, but these repairs will be done ‘in-house’ and the quality of these repairs is questionable. Some unscrupulous sellers will not even tell their consumers that the goods are grey, which can often lead to frustrated  consumers when their goods break. The grey goods market is about to be shaken up with new laws coming into effect that will give consumers greater rights against the suppliers of grey goods.

New requirements under the CPA

a supplier … must display a “conspicuous” notice on the goods

s25(2) of the Consumer Protection Act (CPA)  deals with grey imports. Under this section a supplier of grey imports must display a “conspicuous” notice on the goods that it is in fact a grey import.

There is an implied warranty of quality on all goods sold under s56 of the CPA. This implied warranty allows consumers to return faulty goods and get the seller to repair it, replace it or get a full refund. What is important to note is that the consumer elects which of these options it would like. So even if the goods are “grey”, the consumer will have a statutory warranty to fall back on. Failure to comply with these sections could lead to an administrative fine of R1 000 000 or 10 percent of the sellers turnover, which ever is higher.

even if the goods are “grey”, the consumer will have a statutory warranty

Purchases from outside the country

How do these laws affect consumers who have bought goods from outside of the country (which technically speaking is also a form of parallel importing)? If the consumer buys “grey” goods from a local distributor they will have the rights as outlined above. If the consumer has bought a good while outside of the country the CPA will not apply to that transaction (and so they cannot rely on its provisions to protect them).

An interesting question arises when a consumer buys goods online from a seller located outside of South Africa. The CPA applies to “…any transaction within the Republic”, I would argue that if the consumer is using a computer in South Africa when they purchase the goods, at least part of the transaction must be taking place in South Africa. However enforcing these laws on foreign companies, especially those that have no presence in South Africa could be problematic.

While these new laws will go some ways to protect consumers from unscrupulous sellers,consumers must also be smart and act with due caution, the law can only go so far to protect them.

Where the buck stops

So who can consumers enforce these rights against? Typically the seller of the good is where the buck stops, but in certain cases the consumer has the election to go after people up the supply chain (s56 specifically springs to mind). If the consumer elects to go after the retailer, the retailer cannot put up their hands and say “it wasn’t my fault, you must take it up with our supplier”, the retailer bears the responsibility.

Typically the seller of the good is where the buck stops

One must bear in mind (especially with smaller retailers) is that the retailers themselves are considered as consumers in relation to their suppliers, and so will have the same rights against their suppliers that their customers have against them. If a retailer is too large to have the CPA apply to their transactions they should ensure that they, at the minimum, can pass the liability up the supply chain.

If you are a seller of grey goods, and are worried what effect the CPA will have on you, why don’t you attend one of our webinars or contact us with your queries ?

By |2019-08-21T10:12:20+02:00February 21st, 2011|Categories: Consumer Protection|Tags: , , |