The Consumer Protection Act – Part I: The CPA and the Business Owner
This is the first in a three part series on the Consumer Protection Act. Also read Part II: Consumer Rights and Responsibilities. Coming soon…‘Part III: The CPA and Franchisors’.
Traditionally, South Africa has had a poor track record with respect to consumer rights and the Consumer Protection Act aims to address this. This legislation makes South African consumers among the best protected in the world. Great for consumers, but how will it impact on you, the business owner?
What is the Consumer Protection Act (CPA)?
The Consumer Protection Act, No. 68 of 2008 is a piece of legislation which sets out to promote a fair, accessible and sustainable marketplace for consumer products and services. Briefly, the CPA aims to:
- Establish national norms and standards relating to consumer protection
- Provide improved standards of consumer protection
- Prohibit unfair marketing and business practices
- Promote responsible consumer behaviour
- Promote a consistent legislative and enforcement framework
- Establish the National Consumer Commission, which will oversee the implementation and enforcement of the Act.
Consumer Protection Act Commencement Date
The CPA was signed into law in April 2009. The Act was to come into full effect on 24 October 2010, but the Minister of Trade and Industry, Rob Davies, has deferred its implementation to 31 March 2011. This delay not only provides Government with the extra time it needs to implement aspects of the CPA, but also affords businesses further time to ensure that their practices are in line with the new law. But businesses beware: the Act cannot be postponed any further!
How will the Consumer Protection Act Affect You?
According to the Department of Trade and Industry, the Act ‘provides an overarching governing statement on consumer protection matters in South Africa.’ In many ways it requires a paradigm shift on the part of businesses. Many businesses continue to believe that the Act won’t affect them, primarily because they believe that they are not ‘consumer facing’ businesses. However, the Act’s definition of ‘supplier’ puts paid to this belief, defining a supplier as any person who markets any good and/or services.
In a nutshell, the CPA will affect the supplier in the following key ways:
- Consumers have a right to inspect goods – should your goods be packaged in a way that makes inspection impossible (e.g. shrink-wrapping), this may prove problematic. At the very least, you will need to make samples available for customers to look at and handle.
- All agreements that you undertake with consumers must be in plain and understandable language. You may have to re-draft your current agreements and contracts to comply with this requirement. Failure to use plain and understandable language can be construed as being guilty of unconscionable (unethical or improper) conduct.
- There is an implicit warranty in all the goods or services you provide, not just those that you write into your agreements. Should you run a boutique clothing store, for example, and have a policy of ‘no returns’, this will no longer be acceptable under the Act. You will have to revisit your guarantees, warranties and returns policies to ensure compliance.
- Marketing campaigns will be more tightly regulated. Where and how you approach your customers for marketing purposes will be regulated under the Act. For example, unsolicited direct marketing campaigns could be construed as being an infringement of consumer rights. Consumers have a right to privacy – should you use direct marketing (and make use of customer databases), you need to be aware that, amongst other things, the onus is on you to ensure that customers who have indicated that they do not wish you to contact them in any way are not contacted. Their personal details may also not be forwarded on to third parties. In addition, indications are that you may not be able to contact customers for marketing purposes after hours, on the weekends or on public holidays.
- The courts will be given the power to redraft (change) any contracts that it deems to be unfair. When drafting contracts, it will be in your best interests not to make them grossly one-sided, but to consider the point of view of the consumer. A consumer who believes that s/he is entering into a one-sided contract could take you to court to force you to make the agreement more equitable.
Consumer Protection Act ‘Cooling-off’ Period
Consumers can return goods bought as a result of direct marketing within five days of the purchase date, without reason or penalty. The onus is on you to inform the consumer of this right when offering them the deal, and to return payment made by the consumer within fifteen days of them returning the goods to you.
Class Action Lawsuits
For the first time in South African consumer history, the Act could encourage class-action lawsuits. This is when a group of aggrieved people collectively bring a case to court and sue the defendant. According to reports, the ‘Coca-Cola Vitamin Water Lawsuit’ could be the first such class action lawsuit in South Africa once the Act is implemented. Coca-Cola is accused of making ‘deceptive and unsubstantiated claims’ about their Glacéau Vitamin Water range.
What Happens If I Don’t Comply?
Failure to comply with the requirements of the Consumer Protection Act could result in you being sued. Should the courts agree that you are guilty of non-compliance, you may face fines of up to R1 million or 10% of your annual turnover.
For further information:
- To download the Consumer Protection Act, see: http://www.dti.gov.za/
- To ensure that you are not guilty of unfair marketing practices, you should comply with the Direct Marketing Association of South Africa (DMASA) Code of Ethics & Standards of Practice: see http://www.dmasa.org/
- To get up to speed with the Act, read Consumer Protection Made Easy by Advocate Neville Melville or visit the website: http://madeasy.co.za/