The new Consumer Protection Act will provide consumers with wide protection against unfair business practices and defective products but its implementation is expected to push up the price of goods and services.
It is also expected to lead to consumer class action suits against companies such as tobacco producers and litigation by people with cancer living close to power stations.
This is according to commercial law expert Christo van Wyk who spoke to members, property managers, owners and administrators of the SA Council for Shopping Centres in Durban this week.
The CPA comes into effect on April 1 but the insurance industry, which Van Wyk says is already highly regulated, has been granted an 18-month extension to fall in line.
“The Consumer Protection Act is as wide as God’s mercy. The only act that will enjoy preference over this act is the constitution,” Van Wyk said.
He said the act shifted the burden of proof on to companies, which would have to prove that they were not liable for damages caused as a result of their goods or services, from the current position where consumers had to prove liability.
However, Van Wyk said consumers would have to pay for their new protection because companies would increase their insurance in order to cover themselves against losses due to product returns.
“Insurance premiums are going to go up because product liability is a lot worse than it used to be. It’s going to cost consumers,” Van Wyk said.
Under the new legislation, all goods would carry a six-month warranty and consumers have the right to return defective items to suppliers to be repaired. A further three-month warranty will apply after the repair and if the item breaks down again, then the consumer has the right to demand a replacement or a refund.
“Consumers will have protection and better-quality products but they are going to be paying more. I can’t see how that can be escaped,” Van Wyk said.
However, he said he was surprised the legislation had not addressed the issue of food and clothing returns, which could be exploited by consumers. Consumers who enjoy protection under the act include natural persons and companies with a net turnover or asset base of R3-million or less. Consumers are also protected against poor services or products provided by Section 21 (non-profit) companies.
“It does not matter if you are making a profit or not. It doesn’t matter if you are an overseas company,” said Van Wyk. “You take full responsibility for every product you bring into South Africa, you can’t say ‘I’m just the distributor’.”
While a South African court may not have the jurisdiction to issue a judgment against a foreign company, if the managing director arrives in the country “you will attach his person and he will pay money as security or if he owns property you can attach his property” pending litigation, Van Wyk said.
Van Wyk said class actions had been legislated under the CPA and the country would see far more.
He said companies were rewriting their contracts and policy documents to ensure they were in “plain language” that could be understood by a person with “average literacy skills” and “minimal experience”. Companies would not be allowed to ask consumers to agree to sign away their rights via waiver clauses, clauses assuming consumer obligation, or to waive any liability of the supplier.
“Most agreements in the country have some sort of waiver because it is so intertwined in South African law but you can’t do it any more.”
He advised businesses to soften their waiver clauses and leave it up to consumers to prove that a clause was unfair.
The act makes provision for a five-day cooling-off period for consumers to cancel purchases as a result of direct marketing. Companies must refund consumers within 15 working days. However, the register of consumers who do not want to be contacted by direct marketers would take a few years to put in place and would be costly, as the names and particulars of 20 million consumers would have to be captured.
Under the act it is an invasion of privacy to contact consumers between 6pm and 8am and on weekends and public holidays.
“I feel sorry for call centres because most of them do their work at night and on weekends,” Van Wyk said.