Consumer Law Reform: Department briefing

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Trade and Industry

21 March 2006
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Meeting report

TRADE AND INDUSTRY PORTFOLIO COMMITTEE


22 March 2005
CONSUMER LAW REFORM: DEPARTMENT BRIEFING

Chairperson:
Mr B Martins (ANC)

Documents handed out

Briefing by the Department of Trade and Industry: Consumer Law Reform

SUMMARY
The Committee was briefed by the Department on the progress of the Consumer Protection Bill. The Bill aimed to address the protection needs of consumers, while at the same time replacing the current outdated and fragmented consumer protection regime. Members questioned the Department on a wide range of issues. Concerns were raised over how the Bill would effectively see to the consumer needs and rights of the poor, without stifling the growth of the informal sector with excessive regulation. The accessibility and process clarity of obtaining redress was another important issue. The suggestion that a definition for the concept of fair and just pricing should be pursued for inclusion in the Bill was an important substantive contribution.

MINUTES
Briefing by the Department of Trade and Industry
The Committee was briefed by Ms Astrid Ludin (Consumer and Corporate Regulation Deputy Director-General) and Ms Magauta Mphahlele (Consumer Law Reform Project Manager) on the process to date of the Consumer Protection Bill. The Bill aimed to address the lack of disclosure and limited choice; misleading information and advertising; poor quality, safety and lack of product liability, and unfair contract terms. In addition, it also targeted the invasion of privacy, fraudulent schemes, inadequate remedies and the lack of redress. The Bill also addressed fragmented legislation and inadequate remedies in that it was to replace six whole existing Acts and two more Acts in part.

The Bill gave statutory content to eight fundamental consumer rights. These include the rights to equal access, confidentiality and privacy, disclosure and information, and the right to choice. It also enshrined the right to fair and responsible marketing and promotion; honest dealings and fair agreements; fair value, good quality and safety; and the right to be heard and obtain redress.

The role players in the Bill were the national consumer protection institutions, civil society groups and provincial consumer protection agencies. At a national level, the Bill provided for the enhancement of existing enforcement capacity of the Office of Consumer Protection via the establishment of the National Consumer Commission

Discussion
Dr E Nkem-Abonta (ANC) suggested that the Bill, in many instances, sought to give statutory status to what was already enshrined in the common law. He referred specifically to the requirement that the price of goods must be displayed. He felt that such laws would be to the detriment of the informal sector. He warned against a scramble to promulgate too many laws, as it would make implementation difficult.

Ms Ludin responded that, in the case of the Consumer Protection Bill, there was a concerted effort to codify the common law. This was not only for the purposes of creating awareness, but also so that greater access to redress could be afforded to consumers and that the state could be enabled to enforce these laws. The intent was not to inhibit the development of common law in all areas, and continuous debate on the matter was necessary.

Ms Ludin told the Committee that it was certainly within the reach of informal traders to draw up handmade signs to display the price of their goods. This also did not prevent price adjustments.

Ms Mphahlele stated that the issues of giving receipts and price labelling were considered when it came to the informal sector. The Bill did provide that the Minister could look at circumstances of trade should exemptions be necessary, but generally, the Department would not be making any exemptions.

Dr Nkem-Abonta felt that there were instances where enforced equal access for all consumers to the product or service of a supplier could be construed as a violation of the sanctity of private property. He used the example of a restaurant discriminating against prospective guests on the basis of race.

Ms Ludin responded that the Bill would merely give further effect to the Constitutional provision around unfair discrimination.

Dr Nkem-Abonta felt that before laws such as proposed by the Bill were implemented, cost-benefit analyses needed to be conducted. He expressed the opinion that legislation should aim to minimise the need for apportioning powers to the Minister as far as it was possible.

Ms Luding explained that a regulatory impact assessment was done on the policy underlying the Bill, the outcomes of which were favourable. The complexity of a cost-benefit analysis on a piece of framework legislation made the latter prohibitive.

Ms Ludin agreed that the powers of the Minister should be circumscribed. She mentioned the example of the Consumer Affairs Act which gave the Minister broad powers to prohibit certain conduct. This was believed to be unconstitutional. The Bill tried to rectify this by clearly defining rules and, where the situation necessitated Ministerial discretion, clear qualifications for discretionary action. To ensure that the legislation could function over a period of up to 15 years in a changing environment, it was necessary that some Ministerial discretion be provided for. The aim was to ensure that process was sufficiently provided for, rather than laying down fast rules in the law that could quickly become outdated. Secondary legislation did not go to Parliament, but was still subject to a consultation process and administrative justice. The Department and the Minister would therefore still be accountable.

As chairperson, Mr Martins reminded Dr Nkem-Abonta that the Constitution prevented discrimination on the basis of race, colour or creed.

Prof B Turok (ANC) thought it wise to attempt a definition of the concept of a "fair and just price" for inclusion in the Bill. Such a definition should include a reference to the cost of the production of an article.

Ms Ludin acknowledged that a definition for ‘fair and just price’ would create more certainty and increase parameters for regulation. She undertook to pursue the matter.

Prof Turok felt that the Committee had a role to play in the promotion of the Bill, in the sense that every office of Parliament, and every Member’s constituency office should serve as a location for dispensing such information.

Ms Ludin concurred with Professor Turok on the importance of the role of the Committee in promoting the Bill. The Department would be compiling a standardised presentation for the Provinces and this could also be provided to the Committee or any other members of Parliament. The Department could also respond to specific requests for information.

Prof Turok stated that if the Department was shifting some of its policy creation, implementation and enforcement activities externally, the Minister should come and explain such shifts to the Committee, as it had direct bearing on the latter’s oversight rights.

Ms Ludin explained that there was no new change in policy. The current shifting of certain activities of the Department to external agencies was just the last vestiges of a policy that had already been approved by Cabinet in 1999. The Department deemed it necessary to divest from certain non-political decision-making around the enforcement of certain provisions in favour of independent regulators. This did not mean that there should not be accountability or specific mandates. These mandates were given in law. The independent regulators were still part of broader Department and, as such, accountable to both it and Parliament.

Finally, Professor Turok stated that rules of origin was fundamentally a trading issue and not a consumer issue.

Ms Ludin again concurred but stated that, increasingly, consumer issues were considered barriers to trade. Rules of origin were one such issue. Though effect was given to rules of origin in trade agreements, such as the Southern African Customs Union (SACU), it was necessary that they also be given some direct effect in consumer protection law.

Mr L Labuschagne (DA) suggested that the Department consult American models in terms of bringing simplified language into legislation and legislation promotion and implementation. Mr Labuschagne asked whether the provision that allowed for the cancellation of future or continuous service agreements after twenty days would be valid if the service agreement was reached on the same day that the service period commenced. He gave the example of a lawyer and client situation.

Ms Ludin explained that the Bill dealt with the recission of contracts according to the way in which the contract was sold. The aim was to formally provide for the recission of a contract at a fair penalty.

Mr Labuschagne felt that the recourse for consumer protection needed to be clarified and streamlined into a clear, step-marked process that would be understandable and could be communicated to consumers.

Ms Ludin agreed that too many options for redress would also be confusing. The Department had tried to outline the scheme. The first step would be to go to the supplier. The second step would be to seek alternative dispute resolution. This could be done through the Consumer Commission, which would advise consumers on informal complaint resolution through NGOs, consumer courts and other alternative mechanisms. In terms of enforcement, the provisions outlined in the Credit Bill were replicated in the Bill. As such, matters of contract or discrimination would be best referred to the relevant courts. It was not possible to enforce every contravention as part of an investigation. Resources were therefore focussed on issues that were broader and more systemic.

Ms Ludin explained that the Bill was a response to the overriding problems in consumer recourse: the fragmented nature of the legislation; the fact that the legislation had not been reviewed for far too long; and, the lack of proper enforcement. Complaints were assessed, and certain inclusions in the Bill were affected as a result thereof. Contract terms and provisions related to specific problems in advertising were two such issues.

Mr Labuschagne asked whether the provisions of the Bill would apply to the sale of property.

Ms Ludin explained that if property was sold over the internet or through direct marketing, the Bill would apply. This was so since the cooling-off period, and most of the recission provisions, related to the way in which the article was sold.

Ms N Khunou (ANC) explained that, in rural areas, supply stores and informal traders often supplied food that was not fresh. If rural consumers sought redress from the storeowners or traders they were often met with arrogance. Consumers were often not issued with receipts on purchase, and if they then returned with a complaint, store owners or traders could just deny the transaction ever took place. Even if receipts were supplied, in most instances the name of the trading concern would not even printed on it. She asked how the provisions of the Bill would be implemented if this was the situation.

Ms Ludin explained that the first step in protecting his or her rights was for the consumer to demand a receipt, or complain if he or she was not provided with one upon request. This was a stage that would take a long time to reach in South Africa, as it had in other countries with a long history of consumer activism. An enhanced role for the state and non-state actors was the only remedy in the interim.

Ms Khunou stated that at rural trading stores it was often not just a matter of demanding a receipt, since many of them did not have any receipts at all.

The meeting was adjourned.

 

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