Overview of the Consumer Protection Act
The Consumer Protection Act (“CPA” or “Act”) will serve as the overarching piece of legislation regarding the protection of consumer rights.
As was the case with the National Credit Act, the CPA will be phased in over a period of time. Most of the Act will come into effect on 24 October 2010 (unless the Minister defers this date by a further 6 months on the basis outlined in the CPA). Those provisions dealing with the National Consumer Commission and the Regulations will however take effect on 24 April 2010.
Determining whether the CPA applies
Generally one needs to consider whether:
- The business is entering into ‘transactions’ as contemplated by the CPA: Fundamental to this determination are the definitions of services, goods, supply, transaction and consumer. It is important to note that a user, recipient or beneficiary of goods or services is also regarded as a consumer even if that user, recipient or beneficiary was not part of an agreement relating to the supply of the goods.
- Any of these ‘transactions’ are exempt from the ambit of the CPA: For example, an agreement between two large corporates would, on the basis of the annual turnover / asset value exemption, be exempt from the ambit of the CPA. Conversely though, where the same agreement is concluded with an individual, this agreement would fall squarely within the parameters of the CPA. The thresholds for the annual turnover / asset value exemption will be known once the Regulations under the CPA have been promulgated.
- The business operates in any part of the supply chain as producer, importer, distributor and retailer of goods or as service provider and the extent of the application of the CPA to such activities: For example, manufacturers need to consider the implications of the product liability provisions of the CPA
Assessing and managing the impact of the CPA on your business
The business implications of the CPA
In essence, the CPA may impact on products (design and development), business management and processes (risk management processes and internal controls may need to be adjusted) and interactions with customers.
More astute businesses will have sought to comply with current South African consumer law and international consumer best practice and, as such, may be less impacted by the CPA than an organisation that has not previously ascribed to these principles. Similarly, businesses operating within sectors that are already highly regulated, such as the financial services sector, could be impacted less by the CPA.
The CPA could similarly impact on different parts of an organisation in a variety of ways. For example: a financial services organisation would not be impacted significantly in terms of its lending or deposit-taking activities, but its loyalty programmes or marketing programmes could be affected.
Managing the implications of the CPA
Once a determination has been made that the CPA applies, the following approaches are suggested:
- The potential business implications of the CPA should be understood (i.e. from a strategic, operational and risk management perspective). A detailed gap analysis could be used to assess those areas of business that are not compliant. This could include a determination of where certain business activities may already be regulated by, for example, the Financial Advisory and Intermediary Services Act. The board and senior management should be apprised of these implications.
- The potential impact of the CPA on proposed new businesses or products should be assessed prior to launch.
- Training requirements should be considered and implemented.
- All consumer interactions should be adjusted to comply with the CPA. This would include ensuring that all marketing and advertising consultants or agents are fully apprised of the requirements of the CPA.
- The implications of the product liability provisions should be assessed, contracts amended and, where appropriate, insurance cover adjusted.
Conclusion
The impact of the CPA could prove difficult for organisations to assess and manage, particularly organisations that have businesses operating in different sectors. Given the 18 month lead time for the implementation of the CPA, businesses should finalise their assessment of the implications of the CPA as soon as possible and commence with the implementation of the requirements of the Act.
For more information, kindly contact:
|
