Consumer Law Reform
MAGAUTA MPHAHLELE
PROJECT MANAGER
CONSUMER LAW REFORM
TEL: +27 12 394 1526
FAX: +27 12 394 2526
E-MAIL: [email protected]
Scope

To outline the process to date relating to the development of the Consumer
Protection Policy and Bill;
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To provide an overview of the draft Bill; and
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To outline the way forward in terms of post publication consultations and
submission to Cabinet.
Introduction
On 22 June 2005 the dti briefed the Committee on the Consumer Protection Policy
framework and the reaction of various sectors to the policy proposals; and
After the briefing the Committee recommended further consultations on the policy and
possible public hearings.
BUT
Further analysis of the comments showed that there was broad support for the policy and
most questions raised were of clarity;
In most instances the questions raised related to how the policy directives would be
translated into law and could only be answered with reference to specific provisions in the
Bill;
As a result of the above, the dti addressed most of the issues raised in the draft Bill and is
in the process of aligning these with the policy framework where necessary; and
The dti recommends that further consultations on the revised policy occur in parallel with
consultations on the draft Bill.
Comments on Policy
An analysis of the comments shows that there is broad support for the following:
The need to undertake consumer law reform in South Africa and for a comprehensive legal framework
The objectives of the policy
The entrenchment of consumer rights in law and the need for consumer education
The need to review and strengthen the current enforcement capacity and ensure better coordination of
enforcement initiatives
The inclusion of the public sector in the new regulatory framework .
Concerns were raised about the following:
The cost and necessity of establishing a new regulator
How compliance burdens on business, especially small business will be minimised
How the informal and small business sector will be dealt with
The extent to which redress will be extended to small businesses
How concurrent jurisdictional issues between Provinces and proposed Regulator will be dealt with
How duplication between sector regulators and proposed regulator would be avoided
How access to redress for rural and poor consumers would be ensured
Process to Date
June – December 2005
Draft Bill prepared and revised several times based on comments by Provincial workgroup,
internal CCRD Units and detailed review by the dti policy advisor Ms Diane Terblanche
December 2005
After presentation to the dti EXBO, Cabinet approved publication of the Bill for comment
subject to consultation with government departments
January 2006
Workshop with government departments, international and local reference teams
February 2006
Focus group workshops with NGOs, sector regulators,the dti regulatory agencies and
Industry Associations
March 2006
2 day workshop with Provincial Offices
Focus Groups
Sector
Composition
Provincial Workgroup
7 out of the 9 Provinces
Industry Associations
Time Share Institute (TISA), Furniture Traders Association.
SA Direct Marketing Association, Direct Selling Association,Banking
Council, Banking Ombudsman, Advertising Standards Authority, Consumer
Credit Association
Sector and other
Regulators
Competition Tribunal, Competition Commission, Gambling Board, NER,
FSB, Council for Medical Schemes, National Lotteries Board
NGOs and Unions
Lawyers for Human Rights,National Consumer Union, Black Sash, Legal
Resources Centre, Fedusa, Wits Law Clinic and Pretoria University Law
Clinic
Reasons for Reform
The Bill aims to address the following market failures:
a)
Lack of disclosure and limited choice
b)
Misleading information, advertising and representations
c)
Poor quality and safety of goods and services and lack of product liability
d)
Unfair contract terms
e)
Invasion of privacy
f)
Fraudulent schemes
g)
Inadequate remedies
h)
Lack of redress
i)
Fragmented legislation and uncoordinated enforcement mechanisms
Comprehensive Law
Repeal of existing legislation, consolidation and re-enactment of useful provisions:
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Consumer Affairs (Unfair Business Practices) Act, 1988 (Act No. 71 of 1988),
Trade Practices Act, 1976 (Act No. 76 of 1976),
Sales and Service Matters Act, 1964 (Act No. 25 of 1964),
the Business Names Act, 1960 (Act No. 27 of 1960),
the Price Control Act, 1964 (Act No. 25 of 1964),
Businesses Act, 1991 (Act No.71 of 1991)
Sections 2 – 13, and sections 16 – 17 of the Merchandise Marks Act, 1941 (Act No. 17
of 1941);
Lotteries Act (Section 54 and regulations only)
Consequential Amendments
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National Credit Act, No 18 of 2005, with regards to credit repair entities
Lotteries Act, No. 57 of 1997, with regards to promotional competitions
Consumer Rights
The Bill gives statutory status and content to the following consumer rights, some of which
derive from the UN guidelines on consumer rights:
Right to equal access to the consumer market
Right to confidentiality and Privacy
Right to disclosure and information
Right to choice
Right to fair and responsible marketing and promotion
Right to honest dealings and fair agreements
Right to fair value, good quality and safety
Right to be heard and obtain redress
Objectives of Bill
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Establish a legal framework for the maintenance of a fair, accessible, efficient,
sustainable and responsible market place for consumers;
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Promote fair business practices;
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Protect consumers from unfair, unreasonable or otherwise improper trade practices and
deceptive, misleading, unfair or fraudulent conduct;
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Promoting social, economic and environmental responsibility in consumer markets;
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Improving consumer awareness and information and encouraging responsible and
informed consumer choice and behavior;
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Promote consumer confidence and empowerment and development of a culture of
consumer responsibility through individual and group education, vigilance, advocacy and
activism;
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Provide for a consistent and accessible system of consensual resolution of disputes
arising from consumer transactions; and
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Providing for an accessible, consistent, harmonised, effective and efficient system of
redress for consumers.
Interpretation
Definitions:
“Transaction”
means any interaction or agreement to interact, in the ordinary course of
business, between a supplier and a consumer concerning the supply or potential supply of
goods or services in exchange for consideration, including any such supply or potential
supply of goods or services in an exchange for consideration in terms of any public
Regulation;
“Consumer” depending on the context means:
a) A person to whom goods or services are advertised, offered, supplied, leased, sold or
delivered in the ordinary course of business;
b) A user of such goods or a recipient or beneficiary of such services; or
c) A person who has entered into an agreement or transaction with a supplier
Application
The Bill applies to all consumers and every transaction between parties dealing at arm’s
length. Transactions between a franchiser and franchisee are regarded as a transaction at
arm’s length. The Act does not apply to employment contracts and credit agreements.
If the consumer is the state, an organ of state or a juristic person and its asset value and
turnover or the value of the transaction is above the thresholds set by the Minister, only the
provisions relating to the Rights to Equal Access to the Consumer Market and strict product
liability apply.
The provisions on product labelling and trade descriptions (section 28) and disclosure of
environmental factors affecting goods (Section 29) do not apply to the marketing of used
goods,
SMMEs are protected under this Bill for transactions up to the threshold value determined by
the Minister
Consumer Rights
Right to Equal Access to Consumer Market
There is a general prohibition on a supplier from unfairly discriminating against consumers, on
the grounds set out in the constitution, when transacting with them.
The prohibition covers all aspects of the transaction such as i.e. pricing, supply, scoring, pricing
or other evaluative mechanisms, enforcement to reporting of consumer information.
It provides for differential treatments on the basis of age e.g. prohibition of sales of alcohol for
under age minors and discounted prices for persons over a certain age; and different facilities for
different genders.
Gives jurisdiction to the Equality Court to prosecute contraventions of this part in terms of the
Promotion of Equality and Prevention of Unfair Discrimination Act. NCC can receive and refer
cases to the Equality Court.
Consumer Rights
Right to Confidentiality and Privacy
The Bill obliges suppliers to protect the confidentiality of consumers’ information and to only
use it for the purpose permitted or required.
It prohibits suppliers to use or allow others to use consumers‘ information without their
express consent. The Act requires of suppliers to establish and maintain a “Consents
Register”.
The right to privacy includes the right of consumers to accept, refuse or block electronic
communications. To enable consumers to exercise this right the Act provides for the
establishment of an “Exclusion Register” by the NCC. This allows consumers to pre-emptive
block against electronic communications.
To further protect consumers the Minister may prescribe certain days, dates and times
during which it is prohibited for the contact with consumers for promotional purposes.
Consumer Rights
Consumer’s Right to Choose
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Suppliers are prohibited to, as a condition to buy goods or services from them, require of
consumers to buy other / additional goods or services from them or a third party through
bundling goods unless it is to the advantage of the consumer;
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Suppliers may not charge for repairs or maintenance services without an estimation and
authorisation for it by the consumer. The supplier may only charge for an estimate if he has
disclosed the costs and the consumer agreed to it.

The right to choose encompasses the consumers’ right to examine goods. Consumers
have no obligation to pay for unsolicited goods, and if more goods are supplied than the
consumer contracted for, the consumer has a choice to accept or reject the excess goods.
It places a responsibility on the supplier to deliver goods and services at a place and time
agreed on by the consumer.

The right to choose also extends to the right of the consumer to cancel advance
reservations or bookings and to rescind or cancel an agreement. The right to cancel or
rescind an agreement is linked to specific timeframes - 10 days if the consumer was not
able to examine the goods, 5 days for a direct, distance, electronic sale or time share
interest, 1 month for a continuous service agreement (e.g. for telephone service, electricity
supply); 1 year for goods or services bought from a unregistered company / in
contravention of the Act.
Consumer Rights
Right to Disclosure and Information

A person who carries on business may only do that in his own name or registered name
(or registered alternative business names). Trade catalogues, circulars, etceteras, has to
reflect that name, description of the business and statement of the place where it is
carried on. An intermediary has to provide prescribed information to the consumer about
the identity of the supplier and whom he (intermediary) represents, solicits of make offers
for as well as the basis on which he is compensated for the transaction.

The price of goods has to be displayed. Where two prices are displayed, the lowest has to
be charged. When an estimate was provided, a higher charge may not be levied, unless
the consumer has authorised the work to continue.
Consumer Rights
Right to Disclosure and Information

Product labels and trade descriptions (the Minister may be regulation exempt certain
categories of goods) and environmental facts affecting goods, have to be provided,
unless it is already provided for in terms of other public regulation. Environmental facts
are i.e. GMO ingredients or components, ingredients presenting a chemical or biological
hazard to humans, estimated energy requirements, nature and intensity of potentially
harmful energy radiation and special handling and waste disposal.If goods are reconditioned that has to be disclosed.
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Sales records have to be provided with details of the transaction and the goods. Written
agreements have to be supplied for continuous service agreements. Certain categories of
agreements prescribed by the Minister have to be provided in an official and plain and
understandable language. The NCC may publish guidelines for methods assessing
whether a document is in plain language.
Consumer Rights
Right to Fair and Responsible,Marketing and Promotion Advertising Standards

The Bill sets out standards for fair and responsible marketing and prohibits marketing that is misleading, fraudulent, or deceptive, of goods or services that are illegal, in a
manner that is degrading to the dignity of any person, inconsistent with any law or
discriminatory.
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A supplier is prohibited from advertising goods unless he has sufficient supplies to meet
the reasonable anticipated demands. The supplier may limit the time, quantity and
duration of promotions.
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Negative option marketing, where a consumer is bound to a contract unless the consumer
turns down an unsolicited offer, is prohibited.

When marketing directly to consumers and through electronic means, consumers have to
be informed and provided with the identity of the agent/ person and informed of their right
to rescind the agreement. A copy of the agreement has to be supplied to the consumer
within a specific period (10 days for an electronic marketing approach).
Consumer Rights
Right to Fair and Responsible,Marketing and Promotion Advertising Standards

The sponsor of a loyalty programme has to accept a tender of sufficient loyalty credits as
consideration for goods and services. The sponsor of the loyalty programme has to keep
a register of members and may only on notice to the members increase the price of the
credits.

The Bill outlaws the offering of prizes with the intention of not providing it. It also outlaws
informing consumers they have won a prize when no competition have been conducted,
they have never entered a competition, the prize is subject to a previously undisclosed
condition and the consumer has to offer further consideration for the prize.
Consumer Rights
Right to Honest Dealing and Fair Agreements

In terms of these provisions the consumer may assume, and it is an implied term of every
transaction, that the supplier of lessor has legal right to sell or lease the goods for full title
of the goods to pass to the consumer. If a third part claims the goods the supplier is liable
to that third party.
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The right to fair and honest dealing relates specifically to future and continuous service
agreements. It prescribes duration (unlimited for suppliers of public services and
maximum prescribed periods for prescribed goods /services); 5 day cooling of period;
requires express renewal; allows for cancellation of 20 days; allows penalty of up to 5% of
the amount of the unexpired period; and that the terms have to be set out in a written
agreement. It requires that notice be given to consumers if and when the facility is to
close down. It also requires advance payments and membership fees to be held in trust
and consumers.
Consumer Rights
Right to Honest Dealing and Fair Agreements
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There is a prohibition against overselling and overbooking and requires consumers to be
refunded amount paid and interest, contractual and consequential damages, the latter
including economic losses and loss of enjoyment.
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Exemptions from liability are prohibited unless they specifically and conspicuously brought
to the attention of the consumer. In this respect, there are specific provisions in respect of
how these have to be brought to the attention of consumers who suffer of a form of
impairment e.g. sight and illiteracy. The Minister may for the latter instances prescribe
standards for notifying consumers of hazards.
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A supplier or a person acting on his behalf is prohibited from making false, misleading or
deceptive representations in respect of any goods and services (specific instances are
listed in Section 51).
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Supplier is prohibited from supplying or agreeing to supply unsuitable goods or services to
consumers having regard to the nature of the goods or services, the consumers apparent
age, experience, familiarity with such goods or services and sophistication. Suppliers are
also prohibited from supplying goods and services at a price or on terms that are unfair
and unjust
Consumer Rights
Right to Honest Dealing and Fair Agreements
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Unconscionable conduct – force, coercion, undue influence, pressure or harassment,
unfair tactics or conduct, is prohibited in connection with any marketing, supply,
negotiation, collection or recovery of goods from consumers.
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Certain contracts are listed as unlawful in the Bill. They are contracts with unemancipated minors, mentally unfit persons and person subject to an administration order
in terms of the Magistrates Court Act. Others are agreements resulting from negative
option marketing and unreasonable, unfair and unjust and unconscionable contracts,
contracts with a supplier who is not allowed (by law or notice) to provide the products and
services. These contracts are void from inception irrespective of the common law or
provision other laws. The same applies to unlawful conditions and provisions.
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The Bill prohibits fraudulent schemes and offers, pyramid and related schemes.
Consumer Rights
Right to Fair Value, Good Quality and Safety
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The Bill provides for a general right to consumers and imposes a warranty obligation (in
respect of repair and maintenance work new or re-conditioned parts installed and the
labour is warranted for a period of six months) on the supplier. They are for fair value,
good quality and safety to consumers of goods and services.
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It provides that consumers have a right to receive goods that are reasonably suitable for
the purpose for which they are intended, of good quality, in good working order, free of
defects, and useable and durable for a reasonable period of time. Specifically, if the
consumer had informed the supplier of the use he wants to put the goods to the
consumer has the right to expect that it will be suitable for that purpose.

The Bill imposes an obligation on the supplier to issue alerts of any activity or facility that
is subject to any hazard that could result in serious injury or death to consumers; notice
or instructions of safe handling of goods; notice of ingredients that pose a chemical or
biological hazard to humans or the environment on how to inhibit the risk, remedy or
mitigate the effects, safely dispose of the goods unless it is regulated elsewhere.
Suppliers are obligated under the Bill to accept waste that may not be accepted in the
common waste collection system.
Consumer Rights
Right to Fair Value, Good Quality and Safety
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Certain goods may be designated prescribed goods. The manufacturer or importer of
such goods must maintain a register identifying each original consumer of the goods. It
must establish a system for consumer complaints of product failures, defects or hazards,
return of such goods, indications of failure or premature failure.
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Over the period prescribed for the goods it has to monitor and analyze the information
received to identify previously undetected and unrecognized potential danger the conduct
an investigation, and if they conclude hat there is potential danger to the public, inform
each registered consumer. It must then submit a plan to the NCC to notify the public and
remedy the product failure (repair or replace the product). The NCC has authority to
investigate and recall dangerous of defective products.
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A producer, distributor or supplier of a good is strictly liable for any damage wholly or
partly as consequence of product failure, with certain exceptions. The liability provided for
in the Bill is in addition to any other liability of that person in terms of any law. Provides for
strict product liability (death, injury, loss or damage to any property)
Consumer Rights
Right to Fair Value, Good Quality and Safety

It gives consumers the right to refunds, from rescinded transactions, within 5 business
days of notice to supplier. In respect of lay-bys it provides that amounts paid by
consumers to suppliers for lay-byes be kept in trust, the goods remain at the risk of the
supplier, lay-by be paid over 60 business days, refunds to be repaid with interests,
goods to be replaced at the option of the consumer and lastly that amounts paid by
consumers doubled or paid with interests in the event the supplier cannot deliver the
goods contracted for.
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It provides that money paid for prepaid certificates, credits and vouchers be kept in trust
and obligation on the supplier to supply goods against consideration reflected on them.

The Minister may make regulations to set deposits of containers, pallets and similar
objects to be refunded to the consumer when they return it to the supplier. It requires
property belonging to a consumer and in possession of a supplier to be held in trust in
terms of the Trust Property Act (deposits). It also provides for suppliers to return parts and
materials remaining from maintenance work.
Consumer Rights
Right to be Heard and Obtain Redress
This rests on two legs:
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
Firstly, suppliers are prohibited from victimizing or penalising consumers who exercise
their rights under the Act.
Secondly, consumers can enforce their rights through (personally, represented by
another, by a consumer protection group, as part of a class of consumers affected)
alternative dispute resolution with the supplier, applying to a consumer court, filing a
complaint with the NCC and approaching a court with jurisdiction.
Role Players in the Bill
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National Consumer Protection Institutions
Civil society groups
Provincial Consumer Protection Agencies
Enforcement Institutions
The Bill provides for the enhancement of existing enforcement capacity of the Office of
Consumer Protection and CAFCOM through the establishment of the National Consumer
Commission.
C D : O ffice of Consum er P rotection
P ersonal Assistant
2xTeam Assistant
Admin Clerk
D : Education & C ompliance
D : Investigations
D : Complaints R esolution
D : Legal S upport &
P rosecutions
DD
2 x D Ds
2 x D Ds
AS D: C onsum er H elpline
2 x ASDs
4 x ASDs
4 x ASDs
4xTIAs
ASD
Enforcement Institutions
The functions of the NCC are –
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Development and promotion of Voluntary Codes
Promote legislative reform (with government and NGOs);
Promotion of consumer protection in organs of state;
Through research and public information increase knowledge of the dynamics of the
consumer market and promote public awareness of consumer protection matters;
Develop and maintain relations with other regulatory authorities including Provinces;
Monitor trends in the consumer market and industry with respect to the needs of and
interests of disadvantaged consumers and submit an annual work plan to the Minister in
this regard; and
Advice and report to the Minister, who should the account to Parliament.
Enforcement Institutions
Specific enforcement functions of the NCC are 
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Promotion of informal dispute resolution
Receiving complaints concerning prohibited conduct under the Act]
Monitoring the consumer market
Investigating complaints
Issuing compliance notices
Negotiating undertakings and consent orders
Referring to Competition commission concerns re market share and anti-competitive
behaviour
Referring matters to the NCT
Referring offences to the National Prosecuting Authority
Enforcement Institutions
National Consumer Tribunal (NCT)

This National Consumer Tribunal is created and its’ functions are set out on the National
Credit Act, Act 34 of 2005.

The NCC refers prohibited conduct to the Tribunal upon completion of their
investigation.Consumers may refer matters directly to the Tribunal where the Commission
issued a non-referral or where they require interim (urgent) relief.
The NCT may –
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Declare transactions or agreements unreasonable, unfair and unjust and unconscionable
Declare conduct prohibited i.t.o. the Act,
Interdict prohibited conduct
Impose administrative fines
Confirming consent orders
Condoning non-compliance with its rules
Confirming an order to cease by the Commission
Enforcement of Rights
The Bill creates a system for enforcement of consumer rights. It is –
Alternative dispute resolution (“ADR”) by agreement between the parties. This can be done
through consumer protection groups, alternative dispute resolution agents and an ombud.
Consumer court of the province, for businesses operating in that province only, subject to
the law establishing or governing that court.
National Consumer Commission (“NCC”) for complaints filed with it in the prescribed manner
and form in terms of Section 81 of the Bill / within 20 days of failure of ADR, such longer
period as the Tribunal may allow. Access to and assistance by the NCC is free of charge to
consumers. The NCC may initiate complaints.
Consumers may litigate their complains through the ordinary courts, at their own expense
and without assistance by the structures created on the Bill..
Enforcement of Rights
Consumer rights may be enforced through Orders contemplated in the Act –
Interim relief ;
Declaration of prohibited conduct;
interdicting prohibited conduct;
 imposition of administrative fines – 10% of annual turnover for previous financial year and
R1m payable to National Revenue Fund;
Consent Order;
Orders confirming unaccredited and unlicensed activities;
 requiring suppliers to repay consumer any money owed and alter any practice
Awards of damages against a supplier for collective injury to all or a class of consumers
generally
Take reasonable steps to publicly acknowledge past contravention of the Act or abuse of
consumer rights
Role of Civil Society
CIVIL SOCIETY
The Bill provides for the possible accreditation and support of NGOs who:
Promote or represent the interests of consumers or a specific category of consumers;
Is committed to achieving the purposes of this act;
The following activities may be supported
Consumer advise and education
Research, market monitoring, surveillance and reporting
Promotion of consumers rights and lobbying
Representation of consumers,
Alternative dispute resolution through nediation and conciliation
Participation in national and international associations, conferences and for a concerned with
consumer matters.
Role of the courts
Criminal Courts
There is provision for the prosecution of offences created under the Act upon referral by the
Commission. These offences are –
Breach of confidence concerning the affairs of a person whilst carrying out a function under
the Act under certain circumstances;
Hindering administration of the Act;
Failure to attend when summonsed;
Failure to answer truthfully;
Failing to comply with an order by the tribunal;
Improperly influence the tribunal and the offences created in Section 136(2)(a)- (h).
Failure to comply with an order of the National Consumer Tribunal carries a fine or
imprisonment for up to ten years or both. Any other offence carries a fine or imprisonment of
up to 12 months or both. The magistrates Court may impose the penalties under the Act
(Section 139).
Role of the Provinces
The Bill provides for the Minister to consult with the MEC of each Province to facilitate -
Harmonization and co-ordination of the functions of the NCC and the Provincial
authorities;
Resolution of disputes between NCC and Provincial Consumer Protection Authorities;
and
Ensure that provinces have the capacity to fulfil the functions where the Act require of it
to fulfil specific functions.
The Provinces:
 Have jurisdiction over businesses operating exclusively in each Province;
Can refer matters to the NCC and vice versa; and
Can issue compliance notices in terms of the Act.
Way Forward
6 week publication of the Bill
3 month consultation on the Bill involving information sessions in all the provinces;
presentations, one on one meetings, media campaigns;
Revision of the Bill;
Submission to Cabinet;
Introduction into the parliamentary process;
Expected enactment 1 April 2007
THANK YOU
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