Consumer Protection Bill, 2008

RESPONSES TO STAKEHOLDER ORAL & WRITTEN SUBMISSIONS

DATE: 10 September 2008
Zodwa Ntuli – DDG: Consumer and Corporate Regulation Division (CCRD)
Fungai Sibanda – CD: Policy & Legislation (CCRD)
Ebrahim Mohamed – CD: Office of Consumer Protection (CCRD)
Nomfundo Maseti – D: Competition & Consumer Policy & Law (CCRD)
Sipho Tleane – D: Office of consumer Protection (CCRD)
Magauta Mphahlele - Member: National Consumer Tribunal
 Purpose

• The purpose of this presentation is to provide the dti’s responses to

issues raised by stakeholders during public hearings

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 Introduction

The need for a comprehensive consumer protection legislation arises from:

• the fact that no there has been substantial review since the enactment of Unfair
Business Practices Act in 1989;
• an outdated common law regime that is routinely not complied with and depends on
private remedies through the courts;
• piecemeal approach in regulating consumer protection matters and limited redress
mechanisms.

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 Introduction
The scope of the Bill
• The Bill seeks to regulate the commercial relationship between supplier and consumer to
ensure fair and competitive markets
• It is a general law of application to all sectors of the economy i.e. it applies to all
economic activities within the Republic
• Recognizes existence of some consumer protection measures in other sector specific
legislation. Whilst some measures are complementary others require harmonization or
coordination
•The Bill repeals certain legislation and introduces new and general principles of
consumer protection which serve as a governing statement on consumer protection
matters in South Africa
• To deal with duplication, the Bill allows for:
-concurrent exercise of jurisdiction over consumer protection matters and allows
for proper management of this concurrency;
-exemption provisions by regulatory authority; and
-upfront exclusion of some sectoral legislation.
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 Dti Response
Overview of the dti response:
1. Duplication with sectoral laws
2. Exclusions and exemption provisions – section 5
3. Thresholds – sections 5
4. Bundling of goods – section 13
5. Fixed term agreements – section 14
6. Cooling off period – section 16
7. Return of goods – section 20
8. GMOs labelling – section 24
9. Unfair contract terms – section 48
10. Prohibited transactions or terms – section 51
11. Implied warranty – section 56
12. Safe disposal of designated products or components – section 59
13. Product liability – section 61
14. Enforcement institutions – section 69
15. Consent orders – sections 70-74
16. Consequential amendments

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 Duplication with sectoral laws

Comment
Section 1
• The Bill overlaps with other sectoral laws which contain consumer protection matters;
• Duplication on services regulated under:
- Financial Advisory& Intermediary Services Act (FAIS Act)
- National Credit Act (NCA) – credit agreements
- Collective Investments Schemes Act
- Short term Insurance Act
- Long term Insurance Act
• Exclude advice and intermediary services regulated under FAIS Act as well as services
regulated under the above laws.
Dti response
• The policy rationale is to develop an overarching & comprehensive national legislation that
applies across all sectors of the economy.
• An assessment of various pieces of legislation reveals that consumer protection measures in
SA are inadequate.
• Certain legislation that deal with consumer protection matters were excluded upfront.
• These are Short term and Long term Insurance Acts, services regulated by FAIS Act and
certain services regulated under Electronic Communications and Transactions (ECT) Act.
• The dti proposes that the definition of “service” be reviewed to exclude intermediary services
regulated by FAIS Act as well as credit agreements. However goods purchased on credit will
be regulated under this Bill.

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 Exemptions & Exclusions

Comment
Section 5
• Exemption provisions are limited as they only allow regulatory authorities to apply for
exemption; Firms and associations are excluded from applying for exemption
• Proposed definition of regulatory authorities to include government departments enforcing
other national legislation
• Section 5(2)(a) excludes consumers of goods supplied at the direction of the State; the actual
users of those goods or recipients or beneficiaries of those services will not be in a position to
rely on the Bill
• Section 5(6) regulates internal services of trade unions which are already covered under the
Labour Relations Act (LRA)
• Section 2(9)(b) contradicts section 210 of the LRA
• Threshold in the Bill is based on size of transaction; this will mean protection to big business
• Exemption of all sectors before the coming into operation of the Act

dti response

• Exempt where there is adequate consumer protection measures in line with principles and
protection offered in the Bill; The dti does not support upfront exemptions other than those
already in Bill.
• The dti proposes that the definition of “regulatory authority” be broadened to include
government departments that enforce other national or sector legislation.

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 Exemptions & exclusions

• To address concern on section 5(2)(a), we will remove phrase “at

the direction of the state” which contradicts section 5(8). The
intention is to exclude the state as a consumer but to include the
state or any of its agents as a supplier.

• The dti proposes amendments to section 5(6) to explicitly exclude

collective bargaining services regulated under LRA. The intention
was not to regulate the primary services of trade unions such as
collective bargaining services offered by them, but rather to
regulate any commercial activities rendered by unions (e.g.
funeral scheme plans, investments). There is no contradiction
between section 2(9)(b) of the Bill and 210 of the LRA since the
former deals with consumer protection issues whilst the later deals
with labour relations issues.

• The dti proposes amendments to section 5(2)(b)(i) to reflect a

threshold based on annual turnover/ asset value, to be determined
in terms of regulations. The intention is to protect SMMEs.
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 Exemptions and exclusions

Comment

Section 7
• Regulation of franchise agreements in terms of the Bill will impact negatively on
franchise industry which may result in job losses;
• Delete all sections dealing with franchise agreements

dti response
• The purpose for regulating franchise agreements is to protect franchisees who fall
under definition of small business; intention is not to undermine franchising model
or to distort principles underlying franchising.
• Most terms and conditions of franchise agreements are biased in favour of
franchisors with detrimental effects on franchisees; There are clear power
imbalances existing in this relationship.

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 Exemptions and Exclusions
cont’d

Comment

Section 8 & 9

• Reduce the age of majority from 18 to 13 because some customers do transactions on their
own.

dti response

• The definition of minor in the Bill, is consistent with South African law and other national
legislation. No change will be made on this matter.

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 Bundling of goods

Comment

Section 13
• Proposed that the wording of section 13(2) be widened to allow goods unrelated to the object
of the franchise agreement to be bundled if disclosure is made upfront;
• Allow for consumers to buy goods separately at individual prices.

Dti response

• The protection provided in section 13(2) for the supplier is sufficient. The proposal will weaken
the protection to franchisees as they may be compelled to accept upfront bundling of products
which are unrelated to the object of the contract.
• It is proposed that section 13(1) of the Bill be amended to allow for bundled goods to be sold
separately and at individual prices.

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 Fixed Term Agreement

Comment
Section 14
• Clarification sought on meaning of fixed-term agreement
• Consider including the words “or any other recordable form” in section 14 (1) (c)
• Exclude franchise agreements from the ambit of section 14.
• Cancellation of fixed term agreements by giving 20 days notice will impact negatively on big
businesses such as Eskom, Transnet etc. who enter into big contracts. It will be difficult for big
businesses to find replacement in event of cancellation.

Dti Response
• It is proposed that definition of fixed term agreement be provided in the Bill.
• The dti proposes that the Bill be amended to include “any other recordable form”.
• Franchise agreements are already excluded from the definition of consumer agreements.
regulated under section 14 of the Bill for fixed term agreements.
• The dti proposes that section 14 be amended to exclude business to business transactions.

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 Cooling Off Periods
Comment
Section 16
• Cooling-off period must be aligned with section 20(2) of the Bill.
• The concern is that consumers may abuse this provision by returning goods after they have
been consumed or opened

Dti Response
• The dti proposes to align section 16 and 20 to provide for consumers to pay if goods have been
opened or not in the original condition.

Comment
Section 20
• Consumers may abuse their right to return goods. Section 20 does not give recourse when
goods are opened.
Dti Response
• Section 20(6) gives suppliers the right to charge any reasonable amount if goods are opened
or consumed

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 GMO Labelling
Comment
Section 24

• Re-introduce the requirement for Genetically Modified Organisms (GMOs) labelling

to enable consumers to make informed choices.

Dti Response
• The GMO labelling was originally covered in the Bill but was removed after
concerns raised by the Department of Agriculture.
• Concerns relate to cost of labelling and technical expertise in regulating safety
issues on GMO products;
• The Dept of health also raised concerns regarding cost of labelling on food prices;
• The dti has no technical capacity to pronounce on the safety or non-safety of
GMOs. Technical aspects on safety are dealt with in the GMOs Act.
• the dti has no problem in principle to regulate labelling aspect of GMOs to enable
consumers to make informed choices.

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 Unfair Contract Terms
Comment
Section 48, 49 & 51

• Unfair contract terms in the Bill do not provide effective protection of consumers.
• Introduce the concept of “Greylist” clauses on what constitutes unfair contract terms
• Greylist clauses will be presumed to be unfair.

Dti Response
• The aim of the Bill was not to take over common law from the domain of our courts;
• Legislation needs to provide broad principles to cover future situations;
• Section 48 provides broad principles for the courts to guide on how to approach issues of unfair
contract terms;
• Section 51 already provides for “blacklist” of unfair contract terms and agreements that are
prohibited upfront;
• The proposed greylist cannot be incorporated in the Bill but may be considered in the
regulations. It can be flexible and be amended from time to time as the need arises.
• Dti proposes that ordinary courts should have exclusive powers to adjudicate on unfair contract
terms

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 Prohibited Transactions
Comment
Section 51
• Section 49 is risky to the consumer as it is binding the consumer to indemnify suppliers by
signing indemnity notices;
• It does not provide consumers with opportunity to challenge once notice is signed; delete s49
• To require a consumer to provide a PIN number is prohibited by the Bill this will have
unintended consequences – security feature regarding use of ATMs.
• Exempt banks, mutual banks or “other financial institution”

Dti Response
• Section 49 compels a consumer to indemnify supplier for potential risk & liability
• Delete section 49 as the issues are dealt with under section 48 & 51. It contradicts section 51
and 61.
• Section 51(1)(j)(ii) and 51(2)(b)(ii) of the Bill will be made to ensure that banks are not
prevented from asking PIN code when transacting with clients. This was not intended.
• Exclude sections but require suppliers to guarantee security of PIN codes & compensation in
the event of security breach.

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 Implied Warranties
Comment

Section 54 &56
• Option to refund consumers should not be on supplier’s discretion, but should allow consumer
to choose whether to fix the problem or get a refund.
• These sections limit consumer’s rights in terms of common law. Under the section it is the
supplier who has the discretion to repair or to replace.

Dti Response

• The dti proposes that section 54 & 56(2)(a) will be amended to enable the consumer to choose
whether she or he wants the goods to be repaired or get a refund in line with the common law.
• Rights provided in these two sections are in addition to common law rights, and are meant to
enhance rather than weaken consumer protection.
• These are goods not fit for purpose for which they were purchased.

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 Product Liability
Comment

Section 61
• The wording of this section is too wide and will have unintended consequences.
• This section will require huge infrastructure and attract major costs. Companies will take
insurance cover to guard against product liability and these costs will eventually be passed on
to consumers.
• Costs will cripple small businesses and lead to job losses. Prefer to accept liability if at fault.
• Strict liability can also affect small and medium enterprises. Charges on returned goods can be
severely limited.
• Section 61 excludes damage caused by GMO products.

Dti Response
• Strict liability is long overdue in this country, even courts stated that it is a socio-economic
issue to be considered by the legislature on whether to introduce it or not;

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 Product Liability cont’d

• In the matter involving Wagener & Cuttings v Pharmacare Ltd (2002), the Constitutional Court
held that the question as to whether strict liability should be imposed is really a socio-economic
question that will require substantial consideration and would have to be answered by the
legislature.

• The principle of product liability without fault is to remove onus on consumers to prove
negligence or intention on the part of suppliers. It has been introduced in legislation in other
countries such as Malaysia, US and the EU.

• Although we don’t believe that this section on its own would raise significant costs, it is our
view that strict liability is necessary for the protection and benefit of the consumer.

• No single stakeholder provided any actual or potential costs arising from strict liability except
for generalisation.

• The dti proposes deletion section 61(1) in order to include liability for damage caused by GMO
products, depending on proposal on GMO labelling.

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 Consumer Redress

Comment

Section 69

• Confusion as to which forum consumers should approach for enforcement of rights;

• Alternative dispute resolution mechanism meant to be point of entry for consumer redress;
however this is not clear in the Bill

Dti Response
• The Bill provides alternative avenues of access for consumer redress
• To the extent that this is not clear it is proposed that section 69 be amended to make it much
clearer amd further articulation on the complaint process should be dealt with in the regulations

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 Dispute Resolution Process

High Court

Consent Order
Tribunal/Courts

Dispute Resolution
Provincial Courts OMBUDs
Agent

NCC

Suppliers

Consumer

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 Consent orders

Comment

Section 70 to 74

• Section 70 requires an ADR award to be confirmed by the High Court and not by the Tribunal,
High Court process expensive.

dti Response

• To amend section 70 to insert the Tribunal as a competent body to confirm ADR awards

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 Consequential amendments

Comment
Schedule 2; Section 8(1)

• Schedule 2; section 8(1): if a law is repealed it ceases to exist, Cannot thus continue to
investigate or prosecute in terms of a repealed law.

Dti Response
• Despite the repeal of the repealed laws, for a period of 3 years after the general effective date
the National Consumer Commission may exercise any power in terms of any such repealed
law to investigate any breach of that law that occurred during the period of 3 years immediately
before the general effective date.

• In exercising authority under sub-item (1), the National Consumer Commission must conduct
the investigation as if it were proceeding with a complaint in terms of this Act.

• This is meant to deal with the transition from the old to the new dispensation.

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 Consequential Amendments

Comment

Section 112 of the Bill and section 151 of the National Credit Act

• These sections are not aligned, and limit the powers of the Tribunal to impose fines only for
conduct prohibited in terms of each Act.
• For example: Section 151 of the NCT empowers the Tribunal to impose fines only in respect of
conduct prohibited in terms of that Act.
• Align Bill with section 7 of Electronic Communications and Transactions Act

• Dti Response

• Align sections 112 of the Bill and 151 of the NCA to empower the Tribunal to impose fines for
prohibited or required conduct.
• Consequential amendment to section 151 of the NCA.
• It is proposed that the Bill be aligned with section 7 of the ECT Act as it makes reference to the
Consumer Affairs Committee

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THANK YOU