The Consumer Protection Act (CPA) is undoubtedly a game-changing piece of legislation and promises to completely shake up the way business is done in South Africa. Signed into law in April 2009, but only being brought into effect as of 31 March 2011 (to give businesses time to comply with the changes), the Act will have an effect on almost every enterprise in the country. While this article is by no means comprehensive and should not be construed as legal advice, here are a few practical implications:
▪ The overarching ideal behind the Act is to protect consumers against unfair business practices. They will have recourse against companies that supply them with products or services. This means that the supplier will now have to carry the risk and expense of goods or services not being up to an acceptable standard (instead of it falling in the lap of the consumer, as has generally been the case up to now).
▪ The Act imposes default warranties and indemnities that favour the consumer – possibly over and above the warranties given by the supplier already.
▪ The Act applies to both products and services. So, whether you manufacture or sell something or provide a service, it applies to you.
▪ All agreements have to be in clear and understandable language. In the past, you could hide important details in the fine print of your agreements – this will no longer be the case.
▪ Any agreement that is deemed excessively one-sided in favour of anyone other than the consumer (generally, the supplier) can be ruled to be unreasonable and unjust. This allows the consumer to get out of the agreement.
▪ In the past, a consumer had to show a causal link as well as negligence on behalf of the supplier to have a claim against a supplier for a defective product or service. Now, no negligence needs to be proved; all that has to be shown is that the product or service is defective or sub-standard. (There may be some exclusions from liability for distributors or retailers, but not producers or importers.)
▪ Your marketing methods are going to be affected. The Act brings in new restrictions and conditions for direct marketing, negative option (or inertia) marketing, catalogue marketing, coupons, loyalty programs, promotions and more. Specifically with direct marketing, a “cooling-off period” of 5 days will now apply to all transactions.
▪ All business names will have to be registered. In the past, you could trade under as many “trading as” names as you wanted, and they didn’t have to be related to your registered name. Now, if you want to use a name for trading (in any way or form), you will have to register it. The reasoning behind this is so that consumers know exactly who they’re dealing with.
▪ A lot of this means that prices may increase. Businesses will have to go to the expense of redrafting agreements, reworking marketing campaigns, and taking on (more) liability insurance. These things all cost money, and this will very likely be passed onto the consumer in one way or another.
About the author:
Gareth Cotten is an authority in the field of business start-ups in South Africa. As a “serial entrepreneur” Gareth has started and managed numerous successful businesses over the last decade. More recently, he has acted as a business start-up consultant to small and medium sized businesses, consulting firms, franchise operations, NGO organisations and Public Sector entities.
From blog on www.smallbiz.co.za