Ready or not, here it comes
Yesterday in Parliament, the Department of Trade and Industry (DTI) presented the Consumer Protection Bill (CPB) to the Select Committee on Economic and Foreign Affairs for final consideration, taking the legislation one step closer to implementation.
The next step, according to the DTI’s Director of Consumer and Competition Policy Nomfundo Maseti, is for the bill to be tabled at the National Council of Provinces, where some changes might be proposed. After that, it’s time to promulgate regulations and whatnot. All in all, the bill should come into force in around 18 months.
This means that companies, many of which are still struggling with the rigours of the National Credit Act, will have to gear up to implement a set of new regulations. In its current form – which is unlikely to change – the Bill creates quite a bit of complexity and confusion for companies.
Iona Dhladhla, a senior associate in the corporate department at Bowman Gilfillan, says that the bill, which is intended to protect consumers from "unfair business practices", will have a range of implications for businesses.
For one thing, there is a provision in the Bill that required contracts and materials to be in simple, easy-to-understand format. This will mean some significant rewrites in many instances, and may be costly for businesses to implement.
Far more serious, says Dhladhla, are the new rules around liability. Traditionally, companies would only be held liable for damages caused by negligence. Under the new law, the concept of strict liability is introduced. Basically, in this context, strict liability is a legal principle that makes companies responsible for the damages their actions or products cause, regardless of any error or negligence on their part.
The Bill also implicitly paves the way for class action lawsuits, because it permits "a person acting as a member of, or in the interest of, a group or class of affected persons" to approach the courts or the National Consumer Commission or Tribunal to lodge a grievance.
These two facts, says Dhladhla, could mean that major liabilities lurk in the future for some companies.
Another area that could present challenges is that of fixed-term contracts. Under South African common law, contracts could include clauses that, among other things, limited liability, allowed for penalties and so on. The Consumer Protection Bill will change all this.
According to the Bill, consumers can cancel any fixed-term contract (usually one that runs for more than 40 to 80 days) without reason just by giving 20 days notice. Naturally, this creates a lot of uncertainty for companies, because they can no longer rely on their contract customers for the life of the contract. For example, someone who signs up for a gym contract for two years will henceforth be able to cancel at will.
The Bill allows for "reasonable" cancellation penalties, but does not define what would be considered reasonable, creating yet more uncertainty.
The intent of the Bill is commendable. South African consumers have long been in a bad position vis-à-vis businesses, with very limited recourse in the case of poor quality, poor service, or failures on the part of suppliers.
Under the new Bill, a National Consumer Commission and a National Consumer Tribunal are to be created, as well as specialist Consumer Courts. Although the mechanics of these channels are as yet unclear, they will provide the average South African with many options when it comes to pursuing justice in their dealings with business.
However, the Bill will undoubtedly add yet more to the cost of doing business. Companies that have already dealt with a flurry of new laws – including the National Credit Act, the Financial Intelligence Centre Act, and dozens of other industry-specific law – will now face further complexity and cost.
Hopefully the benefits in terms of consumer benefit will outweigh those costs.
Moneyweb
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