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The Customer is Always Right alias The C P B |
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- The Consumer Protection Bill has been passed by both houses and is awaiting the President’s signature. It will affect every South African consumer/ supplier as well as overseas suppliers. Its aim is to achieve a Consumer Market that is fair, accessible, efficient, sustainable, and responsible for the benefit of Consumers generally. It creates class actions for Consumer Protection Groups and for various types of damages, including Consequential Damages and Administrative Fees, based on the turnover of any supplier contravening it.
- What is a transaction?
The Bill applies to a “transaction” which means any agreement between persons (including Juristic Persons being Corporate Entities and Trusts) for the supply of any goods or services in exchange for a consideration occurring within the Republic. There are various exemptions, such as where a Consumer is a Juristic Person whose Asset Value, or Annual Turnover exceeds a threshold value to be specified by the Minister, or a Credit Agreement under the National Credit Act, any form of an Employment Contract, or where, on an Industry wide basis, the Minister has exempted certain types of transactions because of other National or International Regulatory Controls.
- Common Law Protection
Over time, South Africa has built up a common-law and statutory system that to some extent provided protection for purchasers of goods but it was haphazard and often contradictory. The Bill seeks to codify all these provisions in a structured form and create new remedies that substantially increase Consumer rights!
- All Consumers are Equal!
We will identify the important aspects of the Bill, in particular where it creates rights and obligations that have not previously existed. Section 8 lays down numerous Consumer “Equality” Rights, for instance, that Suppliers cannot charge different prices to persons or category of persons i.e. a Supplier cannot grant a discount based on the quantity of an order! A Consumer has the right to cancel any advanced booking, reservation or order for any goods or services to be supplied! There is also a right for customers to examine goods without responsibility for any “loss or damage to any goods displayed by a Supplier….. unless the damage results from gross negligence or criminal conduct…” An interesting inclusion relates to the sale of “gray goods” and in terms of which a Supplier is required to apply “a conspicious notice in the prescribed manner and form…” Almost every form of selling is carefully regulated, including pyramid and related schemes, lay-byes, referral selling, and how auctions are to be conducted. Franchisees are entitled to cancel “a Franchise Agreement without cost or penalty within 10 business days after signing such Agreement…”
- Fixed Term contracts can be cancelled
Section 14 provides for the cancellation of fixed term agreements and termination of renewal provisions in such agreements. At first glance, these provisions suggest a drastic incursion across the whole realm of Commercial Contracts. What emerges however, is that what was sought to be achieved was to ensure that Consumers could not be held to an Agreement for a Fixed Term against their will. In other words, it was aimed to entitle Consumers to disengage themselves from the typical Gym Contract, or 24 months Cellphone Contract, by giving the Consumer an absolute right to cancel on giving the Supplier 20 business days in writing. The Supplier will be entitled to levy a reasonable cancellation penalty and no more. When its import was realised after the introduction of the initial drafts i.e. that it would apply likewise to leases on movable and immovable property, Fixed Deposit terms, Mortgage Bonds, and a host of interrelated Commercial and Financial transactions, the Portfolio Committee on Trade and Industry conceded a vital amendment, namely to exempt any transactions between Juristic Persons whatever their Annual Turnover or Asset Value.
- Free Gifts No More
Section 21 provides that if a person is in possession of any unsolicited goods, he may retain the goods and obtain full ownership or return the goods to the Supplier or Deliverer at the risk and expense of Supplier or Deliverer. Those “free” gifts in the post will soon be a thing of the past!
- Over Booked Aircraft
Section 47 deals with over-selling/booking and provides that where a Supplier is unable to honour a commitment towards the Consumer, the latter is entitled to a refund as well as consequential damages sustained by the Consumer. It will, however, constitute a defense if the Supplier offers to supply comparable goods or services to the Consumer and the Consumer unreasonably refuses such offer or if the shortage of stock is due to circumstances beyond the Supplier’s control and the Supplier takes reasonable steps to inform the Consumer thereof, as soon as is practicable. This is a wake-up call to airlines and the like who turn ticket holders away. From now on they will be liable for the damages i.e. a missed contract signing, apart from a replacement seat.
- Direct Marketing
Section 16 allows the Consumer an absolute right without penalty to terminate transactions resulting from direct marketing (where the Consumer has not sought out the Supplier) by notifying the Supplier within 5 business days from the date on which the goods were delivered of such cancellation.
- Strict Liability of supplier
Further, Section 61 allows the Consumer or even a User to sue anyone in the supply chain i.e. the producer, importer, distributor or retailer, for harm (including economic loss) occasioned by the supply of unsafe goods, a product failure, defect or hazard in any goods or inadequate instructions or warning provided to the Consumer/User in respect of any hazard associated with the use of the goods.
- Enforcement
A Commission and a Tribunal is set up in terms of the Act to enforce Consumer rights and to hear complaints and the like. The Tribunal is entitled to impose an administrative fine in respect of any prohibited conduct, which may not exceed 10% of the annual turnover, or R1 million, whichever is the greater! A person convicted of an offence is subject to a fine, apart from a possible 10-year sentence! So the critical lesson is not to get it wrong! The use of business names is separately dealt with, whereby a person cannot carry on any form of business under a name, other than that as recorded in our ID document, or alternatively other than as registered in terms of an office specially set up to register business names, wherein full details must be given.
- No Liability Escape Clauses!
Under Section 49, any attempt by a Supplier to waive, vary or disentitle the Consumer from these various rights must be explicitly highlighted in plain language notices and even so, other protective measures follow suit.
- The Customer is Always Right
Lastly, it must be borne in mind that Bill is to be interpreted in a manner that gives effect to the Purposes as set out in the Bill, of which include Consumer protection, improving Consumer awareness, and promoting fair business practices. It further provides that any conflict between the Bill and any other law protecting Consumers must be enforced concurrently as far as possible. If not possible however, the law that provides greater protection to the Consumer must prevail.
- Document Audit
It is readily apparent that all Commercial contractual provisions and standard form contracts should be scrutinized to ensure that they comply with the Bill.
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