The Consumer Protection Act (“the Act”), effective from 1 April 2011, will be for consumers what the Labour Relations Act is for employees.

The Act represents a major departure from the common law dealing with consumer protection. The long-established maxims of “let the buyer beware” and good sold “voetstoots” will no longer find favour under this legislation. The Act shifts a significant amount of protection from suppliers, manufacturers and retailers to consumers: there will now be extensive legal remedies available to consumers who are faced with unfair business practices as defined in the Act.
So revolutionary is the Act that in the case of ambiguous contract provisions, the National Consumer Tribunal will be able to redraft contracts in order to resolve disputes to the benefit of the consumer if the Tribunal is of the view that the contract falls foul of the Act. If the original provisions of the contract cannot be preserved, then the Tribunal is empowered to render the entire transaction void.

The Act will impact virtually every business entity in South Africa. Business owners who choose to ignore the provisions of the Act do so at their own peril. The solution? Understand how your business is affected by the Act and put the necessary steps in place to ensure that it meets all of its obligations under the Act.

Does the Act apply to your business?

The Act applies broadly to the supply of goods or services in South Africa, even if the agreement regulating the supply of the goods or services was not concluded in South Africa.
“Goods” and “services” include tangible or intangible goods and services and extend for example to the provision of water, electricity, education, information or advice. In addition, suppliers that offer complementary services through their websites (think airlines, travel agents and booking agents) run the risk of being held liable for the inadequate performance of those complementary services simply due to the fact that they exist in support of the service, even though they are not the actual provider of the complementary service.

Excluded from the Act are transactions that fall under the National Credit Act 34 of 2005 (such as employment contracts, collective bargaining agreements within the meaning of section 23 of the Constitution and the Labour Relations Act) and transactions where the State is the consumer. Furthermore, services regulated under the Financial Advisory and Intermediary Services Act or under the Insurance Act are not afforded the protection of the Act.

Who is protected by the Act?

The Act is geared towards the protection of natural persons and juristic entities who have an annual turnover of less than R3 million (as per the current draft regulations).

The definition of “consumer” is so broad that even persons who have not been direct parties to the original transaction may receive the protection of the Act. For example, people receiving gift vouchers (the user) from friends (the direct purchaser) will be entitled to hold the service/ product provider liable for non-compliance with the Act.

The Act is applicable both to the supply and to the marketing of goods and services.

What does the Act mean to the day-to-day running of your business?

The Act provides a regulatory framework in which a business may supply its products or services. In doing so, businesses should note the following:

1. Businesses may no longer trade under trading names, but must be transparent in disclosing its registered name.

2. Businesses have to ensure that systems are put in place to record specific consumer preferences with regards to direct marketing:
For instance, consumers electing to opt-out of communication from would-be suppliers are entitled to register this preference with the National Consumer Commission and it is the responsibility of businesses to keep updated records that accord with this register at no cost to the consumer.
Furthermore, consumers who purchase goods or services as a result of direct marketing are entitled to a 5 business day cooling-off period in which to decide whether to keep the goods or service and businesses are not at liberty to refuse return of the goods so long as the consumer has communicated his intentions in writing.

3. Liability for unsafe or defective goods is far-reaching. Consequently consumers no longer have to prove that the damage suffered to a defective product resulted due to the fault of the business. Businesses will be liable whether or not the damage has resulted due to their negligence, unless they can prove that it was not reasonable for them to have discovered the problem, having regard to their role in the supply of the good or service.

4. Businesses are not entitled to automatically renew fixed term contracts. Rather the contract will continue on a month to month basis until the consumer elects to cancel the contract or renew it for another fixed term.

5. Consumers are also able to cancel their contract at its expiry or at any other time on 20 business days’ notice to the business on payment of a reasonable cancellation fee. In addition the Provider must remind the consumer about the expiry of the contract at least 40 business days before the contract is due to expire. Essentially the Act removes the ball from the consumer’s court and places it in the business’s one.

6. Businesses that advertise or promote goods or services to consumers must deliver as promised - think advertisements offering goods at special prices for limited periods of time. Overbooking or overselling will entitle the consumer to a refund with interest and possible consequential damages as a result of the business’s breach of contract.

7. Quality warranties are now automatic. This means that regardless of whether the business includes a warranty in the transaction, or not, the law includes it. For instance, goods that do not comply with the requirements and standards of the Act entitle the consumer to elect a replacement or to be refunded. Furthermore, goods that that are repaired carry an automatic three month warranty.

Where to from now?

Businesses are urged to review their standard contracts, terms and conditions, and procedures, to train their staff on how changes in the Act will impact on the running of the business, to assess their return and refund policies, to conduct due diligences as to their contracts with their suppliers, and to conduct a thorough risk assessment which may include increasing their insurance cover.

Bottom line is that you can’t afford to adopt an ostrich mentality. The Act is coming, ready or not.

Written by Nichola Walker-Woodard of Robyn Hey & Associates

The article was originally published in BBQ