The Consumer Protection Act has radically shifted the balance of power when it comes to defective goods.
Since it came into effect in April 2011consumers have had the right to choose our remedy if something we buy breaks, or stops working the way it was intended to within six months.
No more do we have to accept the supplier’s first choice, a repair; the CPA entitles us to choose a refund, replacement or repair.
That is a massive boon for consumers and retailers are understandably reeling because replacing or refunding is a lot more expensive for them than repairing.
So it stands to reason that the industry with the most to lose is the motor industry, given the high price of its products, which is why that industry has pretty much decided that the sections of the CPA which cover defective goods (sections 55 and 56) don’t really apply to it.
I hope I got your attention with that last line. It’s a biggie.
It’s an oversimplification, of course, so I’m going to use this space to attempt to explain this very complicated state of affairs; to condense what I’ve learnt after thrashing the issue out with the various authorities involved.
I’ll start with a case which highlights the dilemma.
Two months ago Durban businessman Naresh Theeruth bought a new high-performance SUV – the R1.45 million Mercedes ML 63 AMG – from NMI Durban South Motors, trading as Mercedes-Benz Umhlanga. Six weeks later, the power steering failed, while the car was stationary, making it difficult to drive. The dealership later advised him that the steering rack had to be replaced.
Theeruth said in an e-mail to Consumer Watch: “This is a very high-powered vehicle and I am not happy with that part being replaced, for safety reasons.”
“I need to know if I have the option to replace the vehicle.”
According to a letter he’d received from the dealership, he did not.
The regional sales manager wrote: “Vehicles are man-made objects and are subject to the same frailties as man.
“If this was not so, it would not have been necessary to sell vehicles with a warranty and/or maintenance contact.
“Regarding the replacement of the vehicle, we reserve the right to repair your vehicle which forms part of the sales agreement.”
The dealership advised him to refer the matter to the Motor Industry Ombudsman if he was unhappy with its decision.
The ombudsman has been mandated to handle all motor vehicle complaints on behalf of the National Consumer Commission, and an industry code, which will determine the basis on which complaints will be decided, will be published for comment within two weeks. The ombudsman, Johan van Vreden, recently shared his, to my mind, rather unusual interpretation of the CPA’s defective goods provisions to support his office’s view that when it comes to defective cars, consumers aren’t automatically entitled to demand another car or a refund.
He referred me to the act’s definition of defect (section 53):
“A defect means any material imperfection in the manufacture of the goods or components, that renders the goods less acceptable than persons generally would be reasonably entitled to expect in the circumstances; or “any characteristic of the goods or components that renders the goods or components less useful, practicable or safe than persons generally would be reasonably be entitled to expect”.
Van Vreden maintains that this means that “in the event that a component becomes defective, the component becomes the product”.
I argued – as did a top consumer attorney I ran this by – that in terms of this interpretation, no supplier would ever have to replace or refund an entire product, just the faulty bit, in other words, do a repair – which flies in the face of the act’s intention.
It’s a radical departure, and if other industries took the same stance, section 56 - which gives the consumer the right to choose the remedy in the case of goods which prove to be defective within six months - would become meaningless. The ombudsman’s interpretation essentially gives the supplier the sole right to choose a repair over the other remedies.
Van Vreden also referred me to the fact that the CPA’s “implied” six-month warranty - during which time the consumer may return defective goods for their choice of a refund, repair or replacement - was “in addition” to the manufacturer’s warranty.
That’s true, but the CPA warranty trumps that of all other warranties in the first six months.
Van Vreden says if the motor industry was forced to replace defective cars on a wide scale, or issue refunds, the industry would “crash” within months - it’s just not financially viable.
“The CPA was intended to be fair to both consumers and suppliers,” he said. “The legislators would never have intended to bring an industry to its knees.”
I get that, and to some extent, I sympathise with the industry.
To have to take a car back when the problem could easily be solved by a simple repair or replacement of a part is costly and wasteful, and ultimately that financial burden would be borne by consumers.
The problem is that the act, as it stands, doesn’t exclude motor vehicles or any other expensive items.
In terms of the act, if a new car’s steering rack fails, the car is defective, and the owner should be entitled to a replacement car.
So, confusion reigns.
I asked Van Vreden if he would support the dealership’s stance in the Theeruth case. He said he would.
“The steering rack is the product, not the car,” he said. “But in the event that the replacement of the steering box does not remedy the problem, then of course we have a completely different scenario.
“Now we can talk about replacing.”
And in cases where a vehicle “fails catastrophically”, he said, “my office has always insisted that the vehicle be replaced without penalty”.
Van Vreden said that at one point he’d asked 30 attorneys to give an opinion on the CPA as it applies to motor vehicles and each one came up with a different interpretation.
“The National Consumer Commission is in agreement with our stance,” he said.
Babs Kuljeeth, who is acting as consumer commissioner in the absence of Ebrahim Mohamed, who is overseas, confirmed that the motor industry has not been excluded from the CPA.
As for the supplier’s right to choose to replace a component rather than the entire vehicle, he said that was an issue which had been discussed at length, but there was currently “no answer”.
“The act specifically gives the consumer the right to choose the remedy in the case of defective goods,” he said, “but the government also has a responsibility to support the automotive industry.”
Sipho Tleane, who is the National Consumer Commission’s legal advisor, said: “The approach that we would support would not promote absurdity.
“To an extent, we do agree with the ombudsman in that we can’t create chaos in the market,” he said.
“We wouldn’t support a consumer’s demand for a replacement car if his car’s indicators stopped working, for example,” he said.
“Each case has to be decided individually, on its merits.”
“What we need is for the high court to issue a declaratory order, which tells us how to proceed,” Tleane said.
In the meantime, the consumer commission can take cases to the Consumer Tribunal for a decision.
Tleane said it was “about time” that this happened, in order for precedents to emerge.
Meanwhile, the steering rack on Theeruth’s car has been replaced, at a cost of R47 000, which was covered by the manufacturer’s warranty.
“The vehicle seems to be driving okay, but I am apprehensive now,” Theeruth said.
“I am not a chancer - it wasn’t the radio which broke, it was a critical component.”
Theeruth and the dealership have since last week been negotiating a replacement vehicle deal, which would see the dealership take back the vehicle and pay Theeruth R200 000 less than he paid for it, and he’d get a replacement next year at a discounted price.
Dealer principal Steve Hickman said it was a “preferential” offer.
“We’ve offered him more for his vehicle than he would ordinarily get,” he said.
“We have always conducted business in an ethical manner,” he said.
“In cases where a car’s engine has failed, we’ve taken the car back and replaced it at absolutely no cost to the customer.”
So what’s the upshot of all of this?
Well, that right now, if a car you bought less than six months ago fails in some way, you don’t have an automatic right to demand a replacement, or a refund.
The more serious the failure, and the more safety-critical the component - such as brakes or steering - the stronger your case will be.
But the National Consumer Commission does not support the replacement or refunding of cars in the case of all defects, only very serious cases.
In other words, it’s highly subjective. And the issue is complicated by the fact that if a consumer lodges a case with the ombudsman, they won’t get a quick answer - it’s likely to take months.
Legal clarity is urgently needed. - Pretoria News