Consumer committees to assist act’s effectiveness
National Consumer Act compliance to be enforced by companies’ in-house oversight committees
AYEAR after the introduction of the Consumer Protection Act, three things can be said: the act has not made much impact on manufacturers and suppliers; the National Consumer Commission has stumbled over its own procedures; and the consumer has not had full value out of the legislation. The need for larger companies to have a social and ethics committee should encourage companies to make the act work.
From May 1 the Companies Act requires pre-existing public listed companies, state-owned companies and companies with a public interest score above 500 points (which will be most companies from medium size) to appoint a social and ethics committee. A committee of at least three members including at least one director monitors the company’s activities regarding social and ethical legislation applicable to the company. Companies established since the Companies Act came into force on May 1 need to form a committee as soon as this provision applies to them. Exemptions are possible but will be rare save where one company within a group can take responsibility for the whole group.
The responsibilities include monitoring compliance with the Consumer Protection Act as well as a wide range of laws and good practice protecting labour practices, human rights, environmental responsibility, and working against corruption.
The committee must report to the board if monitoring discloses that the company falls short of its social and ethical obligations. The directors and employees involved must act in the best interests of the company and with care and skill in carrying out their functions. Seeing that directors may be personally liable for losses suffered by the company as a result of not acting in the best interests of the company or not acting with skill and diligence, the board and its social and ethics committee must take these responsibilities seriously.
Any company that is providing goods or services to the consuming public must ensure that the company does so according to the high standards required by the Consumer Protection Act. It is only a matter of time before we follow the example of some overseas jurisdictions such as Canada where class actions against companies and their directors to recover losses suffered by stakeholders are common. Directors of an affected company must form the committee, see that the committee creates a complete list of the legislation and principles of good conduct applicable to the company, and sets about listing what needs to be done to comply. Directors can avoid personal liability by delegating some of their responsibilities to competent people. Liabilities incurred despite good faith behaviour can be insured. Directors must get advice and get going.
Taken seriously, these committees will help to balance the rights of suppliers and consumers for the good of the economy.
Patrick Bracher is a senior partner at Norton Rose.