In Business Today

Entrenching consumer rights

FRESHLY-buoyed by the National Credit Act, customer rights can anticipate even greater salvo in their fight against unscrupulous business practices when the Consumer Protection Bill comes into play next June.

Considered two sides of the same coin, the new legislations aim to prevent consumer exploitation either via unmanageably-high levels of debt or by dubious trading practices that impact on spending patterns and purchases or endanger lives. When enacted, the Act will apply across the board from suppliers to advertisers and consumers and will only exclude employment contracts and credit agreements.

“Essentially, this is a Bill of Rights for consumers, meaning it is an improved tool for enforcing the rights that existed previously, but were never properly enforced. It gives life to consumers' rights.” Shepstone & Wylie commercial department attorney Jonathan Maphosa says.

Trade and Industry Minister Mandisi Mphahlwa anticipates  that the Act will generate competitiveness; initiate higher quality goods and services for South African consumers and boost competitive pricing, innovation and economic stability.

Translated for the man-in-the-street, the bill will have far-ranging consequences in terms of product liability and companies’ ability for dodging their responsibility for goods on their shelves. Manufacturers and retailers will be forced into acknowledging the fair value, quality and safety of their products.

Maphosa says this means each element of the supply chain faces significantly stricter liabilities for damage caused by their products, including death, injury and economic loss. They will also have to display adequate instructions or warnings on products.

Gone will be the incomprehensive legal language on contracts and documents, as consumers embrace the right to “information in plain and understandable language” that eliminates difficult terms and conditions. Consumers may also choose one of the two official languages as prescribed by the Minister after considering the preferences of the population ordinarily served by the supplier in the particular region in which they receive their contract documentation.

Maphosa says producers will have to consider the average literacy skills and product experiences of South African consumers. Customers will be able to cancel short-term contracts without penalty, while long-term contracts may only attract a maximum 10% penalty.

Clients purchasing goods on lay-by can also anticipate greater protection, as each payment towards their new goods remains theirs until the goods have been wholly paid off and delivered to them. Cancellation penalties become illegal unless the retailer informed the consumer of that consequence at the outset of the lay-by agreement.

Gone too will be SMS-based competitions where a fee is levied for entry, as that practice becomes illegal under the proposed legislation.

Unscrupulous businesses that renege on contracts will find themselves on the wrong side of the law, as the bill enforces retailers to continue the service – gym memberships, franchise agreements and subscription services like television, security and mobile communications - for the duration of the contract. However, utility services, fixed telephone line service and transport infrastructure are exempt.

Maphosa says the fundamental consumer right to equality guards consumers against discriminatory marketing, while their privacy will be protected as no-one may secure or retain their personal information other than for legal reasons.

“Even then consumers are not obliged to grant the request, which has to be made in writing, and should they acquiesce, it carries with it the promise that they will not be unwittingly bugged by telephone marketing,” he says.

In a move that may pose problems for the higher purchase market, the new bill prohibits retailers from bundling or tying sales to further conditions or third-party contracts. This means sales cannot be linked to acquiring further goods or services like extended warranties or life insurance policies.

In cases where a third-party transaction becomes relevant, like the associated links involved in purchasing a property, consumers will have the right to choose those relationships rather than have them imposed on them.

“As a potentially complex piece of legislation, producers, manufacturers, distributors and suppliers will have to review their risk control procedures and it may be in their interest to secure legal guidance ahead of the implementation,” Maphosa says.

Disclaimer: In Business Today disclaimerThe In Business Today section is reserved for relevant company announcements and releases. Companies are not entitled to have their announcements published in this section, but from time to time, these may be selected by Moneyweb for publication in the interest of the Moneyweb Community of readers. The copy has not been generated by Moneyweb nor should be attributed to Moneyweb. Nor has the information contained therein been verified by Moneyweb journalists. 29 January 2007