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Harsh Act to follow ‘A lingering issue – as with other new laws –
THE CONSUMER PROTECTION ACT (CPA), which was gazetted in April 2009 and will become fully operational on 24 October this year, has far-reaching consequences for business at large. “In my years as an attorney I don’t think I’ve seen a piece of legislation with more potential impact on business than the CPA,” says Dean Chivers, a director at Deloitte in its Legal Business Unit.
Chivers, an attorney who’s been part of Deloitte Legal since its inception 12 years ago, says the CPA will fundamentally change the way business is done in South Africa. It requires businesses to reconsider many traditional business practices to ensure all their dealings with consumers are fair, reasonable and honest.
The first phase of the CPA, introduced on 24 April this year, is the harsh section 61, which holds producers, importers, distributers and retailers – even if they weren’t negligent – jointly and severally liable for damages caused by unsafe goods, product failure, defects or hazards in goods or inadequate instructions or warnings. The remainder of the CPA will be implemented on 24 October this year, when phase two of the CPA takes effect.
Through its promulgation, the CPA will consolidate many of the effects of older Acts, such as the Unfair Business Practices Act, the Trade Practices Act, the Sales and Service Matters Act, the Price Control Act and the Merchandise Marks Act, which addressed the issue of consumer protection on a more fragmented basis.
“The CPA is an extremely progressive piece of consumer protection legislation and businesses will be required to assess and amend many of their business models, strategies and service delivery methods in order to satisfy the requirements for the implementation of the Act,” Chivers says.
The Consumer Tribunal, Consumer Commission and courts, to name a few forums, are given comprehensive powers to grant orders dealing with any contravention of the Act. Should a business be convicted for contravening the Act it may face a hefty fine or even imprisonment of its management. A supplier found to have contravened the Act may face an administrative fine of up to 10% of its turnover or R1m/incident, whichever is the greater.
“It will be interesting to see how far the interpretation of the Act takes the protection,” says Chivers. “The CPA touches on so many different aspects of business there will no doubt be some very interesting consequences. The devil is always in the detail. A couple of potentially interesting areas include how companies will balance the new legislated warranties and existing voluntary warranties provided by companies, how the different parties in the supply chain will manage their relationships, considering their new joint and several liability obligations, and how business deals with the fact the Act protects not only the buyer of goods but also the beneficiary or user.
“Does that imply a shop or petrol station selling any kind of pre-paid offering – such as cellphone airtime – could be liable for damages caused by the offering sold? And does it imply a hotel or landlord could be liable for damages suffered by guests when using electronic appliances in the room or premises hired? Drilling down into all the practical business implications of each provision of the Act is the most interesting part of advising companies about the CPA.
“I think I’m more of a frustrated businessman than a traditional attorney, so analysing the real business issues this Act introduces is very enjoyable. We at Deloitte