Consumer Protection Act is now law – manufacturers & suppliers beware!
25/05/2009

Signed into law by former President Kgalema Motlanthe on the 24th April and gazetted on 29 April 2009, the Consumer Protection Act 68 of 2008 (“the Act”), is now officially law. The Act will only come into full force and effect in 18 months after promulgation, namely on 29 October 2010, as per the transitional provisions. This is to allow sufficient time for the establishment of the National Consumer Commission, an enforcement /investigative body on consumer protection issues, which it is anticipated, will be established after 12 months from the date of signing of the Bill by the former President. The National Consumer Commission will commence implementation of the Act on 29 October 2010. The Act replaces, in a new and simplified manner, existing provisions from a number of Acts, but most notably, the following five Acts: the Consumer Affairs (Unfair Business Practices) Act of 1988, Trade Practices Act of 1976, Sales and Service Matters Act of 1964, Price Control Act of 1964, and Merchandise Marks Act of 1941 (specifically Sections 2-13, and 16-17). Furthermore, the Minister must still publish all the required Regulations within 12 months of promulgation of the Act.
What does all this mean for the consumer?
The Act heralds a new era in consumer protection legislation in South Africa by empowering consumers, who are defined in the Act as, “a user of the goods or a recipient or beneficiary of the services, irrespective of whether that user, recipient or beneficiary was a party to the purchasing transaction”. The Department of Trade and Industry hails the Act as a bill of rights for consumers, a form of compliance code for business, an improved tool for the enforcement of rights that have existed in the past but have never been properly enforced due to limited redress and weak enforcement capacity, and a codification of the common law. Consumers fundamental rights are given life under the new Act, such as the consumer’s right of equality in the consumer market, the right to privacy, the right to choose, the right to disclosure and information, the right to fair and responsible marketing, the right to honest dealing and fair agreements, and the right to fair value, good quality and safety.
What does the Act mean for the manufacturer, component manufacturer, supplier and retailer?
The Act will have far-reaching consequences in the area of product liability, especially on the right to fair value, good quality and safety. It imposes strict liability on a producer, distributor or supplier of goods for any loss or damage which results as a consequence of a product failure, defect or inadequate instructions or warnings provided to the consumer. As a consequence everyone in the supply chain will now have to pay closer attention to their procedures and policies regarding product quality, product warnings, product labeling and the general safety of products. The three major types of liability claims manufacturers, suppliers and retailers under the new Act can expect are 1) manufacturing defect; 2) design defect; and 3) failure to warn.
‘Manufacturing defects’ will in most cases be those that occur in the manufacturing process due to poor quality materials (component manufacturers beware!!), poor quality control and poor workmanship. On the other hand ‘design defects’ will be those that render a product dangerous or useless. ‘Failure to warn defects’ will be those mainly related to section 22 of the Act which deals with the right to information in plain and understandable language and section 24 which deals with product labeling and trade descriptions.

Some important aspects for manufacturers, suppliers and retailers to note regarding the application of the Act and important definitions are the following: the Act applies to every transaction occurring between a supplier and a consumer; and every advertisement transmitted or published in the ordinary course of business to prospective consumers in the country. The Act does not apply to employment contracts, credit agreements and transactions where the consumer is the State, or to transactions between two parties who are part of the ‘supply chain’ , for example when a distributor sells goods to a retailer, if the value of the transaction falls above a threshold prescribed by the Minister. Transactions under the Act are defined as any offer between two or more people for the supply of any goods and services in exchange for consideration or payment. Goods are defined as any tangible object, including but not limited to literature, music, software and electricity while services are defined as any work or undertaking performed like educational and consulting services.

With the dawn of this Act, strict liability on manufactures and suppliers is now set in stone in South Africa and consumer rights activists and consumer alike will be pleased to know that under the strict liability regime, the manufacturer or any other party in the supply chain is open to liability if the product is defective, even if the manufacturer was not negligent in making the product defective.

This Act will now force manufacturers to take preventative measures in order to minimize the chances of being held liable under the Act and how, if found liable, to mitigate the impact of legal claims and sanctions imposed under the Act. Such measures will typically include, revising and replacing product labels with those that comply with the Act (i.e.: adequately warn and instruct the consumer on how to use and maintain the goods) and purchasing components and raw materials from suppliers who are equally committed to complying with the provisions of the Act. Other measures will include post-sale monitoring, the prompt address of defects by all members of the supply chain (including communicating such defects to others in the supply chain) and making adequate insurance provisions to cover risk for liability.

Some critics may argue that this Act will only, in turn, have the effect of the manufacturers and suppliers building the increased insurance and production costs into the sale price, thus resulting in the end consumer bearing the burden of the very Act enacted to protect them. Consumers in South Africa, on the backdrop of a global recession, will naturally be very price sensitive right now and it remains to be seen if the Act will not result in a drop in the demand curve of goods and services due to the speculated increase in prices brought on by manufacturers in their aim to comply with the provisions of the Act.
All businesses forming part of the retail chain are encouraged to make the most of the following 15 months, before the Act is in full force and effect, to align their trading practices for the purposes of complying with the Act. This will require the possible implementation of effective risk management procedures, the tabling of cost-effective structures to deal with increased insurance, product recalls, preparing for product liability lawsuits and their associated defense costs, improved quality control, records retention, the identifying of product liability risk areas and of equal importance the review of contracts for compliance with the Act.

The Commercial, Property and Litigation department of Adams & Adams developed expertise to advise clients on all consumer protection issues.
Jonathan Maphosa
Professional Assistant
jonathan-m@adamsadams.co.za