Consumers Protection Bill: public hearings

Meeting report

Consumer Protection Bill (the Bill): Department of Trade and Industry (dti) briefing
The Chairperson advised that the Consumer Protection Bill had been considered already by the National Council of Provinces (NCOP), had proceeded back to the Department and was now before this Committee. Comments would be received from stakeholders during the week’s public hearings.

Ms Zodwa Ntuli, Deputy Director General, Consumer and Corporate Affairs Division (CCRD), dti, introduced the Bill She set out the chronology and genesis of the Bill from the Unfair Business Practices Act. Changes in the country in recent years had included the development of a burgeoning middle class and the entry into marketplace of significant groups of rural persons. The number of scams and unfair practices, weak enforcement mechanisms and uneven regulation, together with legislation biased towards the supplier, with the maxim of “let the buyer beware” still prevalent, were seen as problematic. This all required a comprehensive legislative review, taking into consideration human rights and commercial human rights. The Bill was an attempt to answer the problems, while conforming to International Best Practice, and providing a unified piece of legislation that would give easy access to information and certainty of information and implementation. The Bill was viewed as containing sufficient protection for ethical business against unfair competition from unethical business, being able to foster a competitive environment, and being able to reduce costs to the economy arising from consumer detriment and enforcement action. It was hoped that it would provide a consistent, predictable and effective regulatory framework that fostered consumer confidence; and provide access to effective redress for citizens.

Previous legislation dealing with consumer rights was contained in about 60 different Acts, some of which were dated back 65 years, which were spread between different departments. Many would be repealed by this Bill, and were listed (see attached presentation). This Bill would be harmonised with the Electronic Communications Act, insurance laws, the Medical Schemes Act, the Standards Act and Health and Agricultural laws.

Ms Ntuli took the Committee through the Bill.

In Chapter 1, Clause 1 contained the definitions and interpretation and introduced an expanded definition of consumer. It was to include beneficiaries or recipients of services, so as to extend redress to third parties, especially with regard to product liability and would also include franchisees who currently enjoyed very little protection under the law, instead having to rely upon a voluntary industry code of conduct.

Part B of Chapter 1 set out the purpose and policy of the Bill. Briefly, this was to promote and advance the social and economic welfare of consumers in South Africa by establishing a legal framework for the achievement of a fair, accessible, responsible and sustainable market, to reduce disadvantages in accessing the supply of goods and services, to promote fair business practices, to protect consumers from unfair and deceptive conduct, to improve consumer awareness and provide an effective system of redress.

Part C of Chapter 1 set out the application of the Act, noting that it would not apply to instances where the State was the consumer, to transactions over a certain threshold (to be set to the Minister) where the goods were supplied to a person whose ordinary course of business would market the goods for resale or would use them to produce other goods, and to Advisory Services regulated by Financial and Intermediary Services Act, or other financial services regulated by the short and long term insurance Acts. There was provision for exemptions either by the regulatory authority, where the Bill overlapped with or duplicated an existing law, treaty or international law, convention or protocol, and where the applicant accepted the exemption conditions set by the Minister. Transactions with the State as consumer would not be exempt from the provisions of clauses 61 and 62, which dealt with product liability, irrespective of their exemption status and the introduction of thresholds in insurance.

Chapter 2 had been drafted in line with UN and internationally accepted and adopted consumer rights. Part A, dealt with the Right of Equality to the consumer market. The Equality Courts would have jurisdiction to adjudicate on referrals from the Consumer Commission. Part B dealt with the Right to Privacy, in line with the Constitution. Clause 14 provided limits or fetters to the use of a consumer’s personal information for unsolicited direct marketing campaigns, by providing an opt out mechanism and the registration of a pre-emptive block. Part C dealt with the Right to Choose.  This prohibited automatic renewal of fixed term agreements, provided for quotations for maintenance and repairs, a five day cooling off period for direct marketing, and the right to return goods and receive refunds within 15 days. Part D dealt with Disclosure and information, giving consumers the right to information in plain and understandable language, the compulsory display of prices and the provision of transaction records, and the requirement that product labels and trade descriptions not be misleading. Part E prohibited unfair marketing practices, regulated promotional competitions, and set standards of customer loyalty programmes. Part F prohibited false, misleading and deceptive representations, regulated over selling and over booking, and prohibited unconscionable conduct. Part G enshrined the Right to fair, just and reasonable terms and conditions, prohibiting unfair, unreasonable, or unjust contract terms, required that customers be provided, at no charge, with copies of contracts, outlawed unilateral changes to contracts and any form of contracting-out.  Part H  provided statutory warranties for safety and quality and a general product safety monitoring and recall regime, and extended strict liability to retailers for certain events as a result of defective goods or improper handling.

Chapter 3 set out the Protection of Consumer’s rights and Consumer voices. Part A intended to prevent suppliers from discriminating, intimidating or penalising consumers who sought to enforce their rights, made provision for access point for consumers to lodge complaints, provided for alternative dispute resolution and consent orders to be made orders of Court, and noted that consumers could at all times approach the Commission. Part B noted that the Commission could launch investigations both as a proactive and reactive power, could negotiate consent orders, and allowed for administrative enforcement through compliance orders. Part C provided that the Courts could alter or discontinue any conduct inconsistent with the Act and award damages for collective injury to all or a class of consumers, and decide on the just and equitable distribution of such damages.  Part D covered support of consumer protection groups, and said that accredited groups could take up matters on behalf of consumers through the Commission. Such groups had to meet various criteria to be accredited

Chapter 4 set out the Industry codes of Conduct. It recognised self-regulation, and gave it statutory backing by providing that the Minister could prescribe, approve or withdraw an industry code. It could also approve dispute resolution schemes, and provide the Commission with monitoring and evaluation powers.

Chapter 5 dealt with concurrent jurisdiction, and she noted that clause 83 encouraged coordination and harmonisation in the function of the Commission and provincial consumer protection authorities. The Minister could consult with the MEC to facilitate dispute settlements. It further dealt with the regulatory agencies and administration of the Act, providing for a National Consumer Commission (currently the Office of Consumer Protection), to deal with education, enforcement and market surveillance, and a National Consumer Tribunal (established in terms of the National Credit Act) to deal with adjudication of referrals by the Commission and appeals against administrative decisions

Chapter 6 set out the offences and penalties. It largely decriminalised conduct and dealt with alleged abuses through a system of administrative enforcement, to avoid the criminal law onus of beyond reasonable doubt, However, the Courts still had the powers to impose penalties for offences and had sole jurisdiction over contractual issues.

Discussion
Dr S Rasmeni (ANC) stated that he had some problems with the definitions, especially that of supplier, and the effect upon the supply chain between the factories to the wholesalers to the retailers.

Ms Magauta Mphahlele, Member of National Consumer Tribunal, advised that wholesalers were included in the definition of supplier, which was all encompassing from factory to consumer, no matter how many parties intervened. She advised that the Bill extended to retailers, even if such retailers had bought the goods they were selling from other retailers, for every seller had to bear responsibility for the goods they sold.

Ms F Mohamed (ANC) raised questions about the Bill possibly creating some overlap between the jurisdiction of the Ombud and the Tribunal.

Ms Mphahlele said that the overlapping of jurisdiction could depend upon how it was seen. It was intended that there be no gaps and there was provision for tariff regulation through the question of the quality of service. However, this Bill did not set standards of technicality.

Ms Mohamed wondered  whether the DTI had the capacity to extend into the far flung rural areas and whether the intended Ombud would be able to resolve disputes quickly and effectively. She raised concerns about the abuse of credit cards, where the monthly statements reflecting transactions would be received only on the day after which the due date for payment, thus invoking the interest penalties.

Mr S Njikelana (ANC) also raised concerns about the ability of this proposed legislation to extend its reach to the poor in the rural areas. He also asked whether it went far enough to align itself with the UN Declarations and Protocols, and he expressed concern about the criteria for the proposed protection of insured persons.

Ms Mphahlele said that most consumers did not had a general or concentrated view, and because they operated individually, they were not in a position to be an effective counter weight to the power of the manufacturers or the suppliers. She noted that there were no individual consumers present at the meeting, but only representatives of manufacturers or salespersons. At present there was no Consumers Commission with powers to investigate either proactively or re actively. She advanced the view that if the consumers were not happy with the Ombud they would not present their grievances to it for adjudication.

Mr Sipho Tleane, Director: Legal Support and Prosecutions, dti, also explained that there were proposed provisions for the upgrading of the Ombudsperson and that the Commission itself would have tools to use.

Ms Mphahlele went on to say that the United Nations (UN) had restricted the rights to basic goods and services. Even the South African Constitution, which included the rights to housing, clean air, electricity, and water was more a wish list than a set of rights because the Constitutional Court had observed the practicalities that the Government only had limited monetary resources available to be spread around as much as possible. She added that the Bill was an attempt at codifying the common law and certain statutory laws, for better implementation.

Public Hearings
Submission by Deloitte
Dr Johan Erasmus, Senior Manager: Accounting & Auditing, Deloitte, began by placing on record that Deloitte was in favour of the basic or broad principles contained in the Bill. However, it had identified some pitfalls. Firstly, Clause 5 was applicable to all except the State and its consumers. This meant that the consumers of Reconstruction and Development Programme (RDP) houses, for example, would had no redress regarding poor materials or poor skills used in the building of their houses. It was suggested that the words, “at direction of the State” be included to overcome this deficiency.

With regard to the definition of “consumer” it was submitted that this did not foresee the scenario where a small individual contracted with a juristic person such as a bank. The relative commercial power lay only with the consumers and not with the supplier of, for example, a computer programme. Therefore Deloitte proposed that large powerful juristic persons be excluded from enjoying the benefits included therein, to tie in with the policy objectives of protecting the vulnerable consumer. Clause 5(2), as presently worded, included any transaction or person in the supply chain, but actually excluded the consumer. An unintended consequence of this Bill might be where a large business was the consumer of a small business’ goods or services, where  the weighting might be against the small business.  It was submitted that the threshold should apply to all transactions, as experiences with the National Credit Act (NCA) had shown that small or medium businesses required protection, particularly since they often could not afford to hire lawyers to assist them.

With regard to the possible provision of exemptions for certain categories Deloitte asked at what point such exemption could be sought, and, if granted, where the exemption was to be founded.

Deloitte noted that the Government Gazette was to be used to publish. Not everybody subscribed to, or would read the Government Gazette, and this was not a user friendly mechanism for finding information.

The NCA and the Bill were viewed as sister acts with the same intention of protecting consumers, but at the moment there were many potentially conflicting situations, especially with regard to the intended Regulations and Commission.

Discussion
Ms Mahomed was curious about the examples and the motivation for use of the possible exemptions.

Dr Rasmeni was interested in the view that the NCA and CPB complemented one another, and wanted to know when and why this should be viewed as a problem.

Dr Rasmeni was concerned about the exclusion of the State from liability, especially when it affected those who were awarded RDP houses. He also suggested that the limitations on juristic persons required attention, and he asked that the threshold should be looked at against the supply chain. He also asked whether Spaza shops were intended to be included in the ambit of the legislation.

Dr P Rabie (DA) said that he felt that warranties were abused and cited the example of “a life time guarantee”, wondering whether this was intended to extend beyond the life of the person who purchased the item, or only to the item’s life span, which, through planned obsolescence, could be within a few minutes of purchase.

Ms M Ntuli (ANC) was concerned lest the operation of the Bill with the NCA would open up loopholes.

Ms Ntuli felt that the inclusion of a juristic person might have a hidden agenda.

Dr Erasmus responded that it was the view of Deloitte that the Industry Regulator would have to apply the Bill when it became law, but that the NCA provided a “negative option”. He said that either suppliers or sellers could apply for an exemption, and for this reason Deloitte wished to know the criteria to be applied. In his view there were contradictions between the NCA and CPB, but essentially they were designed to serves the same purpose, which was the protection of the consumers.

Ms Ntuli suggested that the two should be left as they were.

Dr Erasmus agreed with her strongly but added that their operative criteria should be spelled out.

Neotel and Cell C Submission
Mr Denzil Bowman, Parliamentary Officer, NEOTEL, reminded the Members that the Independent Communication Authority of South Africa (ICASA) set the technical standards or requirements of their industry, but without public consultation. He addressed each clause in order and asked that in Clauses 19 and 20 the aggrieved consumer should put their complaints in writing. He further suggested that in regard to the return of allegedly defective goods, the time periods for return should be reduced to 10 days.

The Chairperson said that he had hoped that he had heard incorrectly, and that the submission did not envisage that if he bought goods at a Spaza shop he would not be able to return such goods to the shop directly, and receive a refund.

Mr J Maake (ANC) observed that he felt the common law gave sufficient protection to a consumer and that the Bill did not need to add economic loss as potential damages.

Mr Njikelana observed that in addition to exemptions, the Bill provided for Codes of Conduct. He added that he felt multiple laws were unnecessary, and he agreed that the provisions of exemptions would not help the regulatory authorities.

Ms Mphahlele felt that where death or illness arose out of the sale of goods to a consumer it was only right that damages be paid. She added that the Bill covered all retailers and that the Spaza shops and other “Mom and Pop” stores would be included.

Retailers Association
Ms Janine Jefferies, representative of the Retailers Association, then addressed the meeting, placing on record that her Association agreed with the need for Consumer protection, but asked that the correct balance be struck and maintained, and that the burden of compliance not be placed on the retailer.

Specific concerns of this Association related to the need for plain and simple language. She asked whether this requirement for plain language in contracts should be extended to pamphlets, booklets, and similar promotional literature. She also asked whether this requirement covered imports from out of the country and whether Chinese and Japanese manufacturers would be required to had their contracts and promotional literature in one of the 11 official South African Languages, and if so, which one. She also asked if it was intended that this  requirement extend to advertising, and whether there was an adverse effect on advertising creativity foreseen. 

Ms Jefferies emphasised Clause 2 (a), saying the overlap between laws designed to protect consumers was very broad. She wondered if it might not be more advantageous to “beef up” the other laws, rather than include such a provision in this Bill.

In regard to Clause 5 (2), which covered over-regulation, she submitted that there was in fact no clarity in this draft, as it seems to cover each and every step in the supply chain. The threshold was unclear as it seemed to apply to each and every panel in the possible supply chain, even to listed companies on the Johannesburg Stock Exchange (JSE), and this had the potential to outweigh certain participants in the supply chain.

Ms Christine Malan, Retailers Association, then addressed Clause 56, which provided for an implied warranty. She submitted that the time periods were impractical for the return or replacement of goods as they were not appropriate to all goods. She further submitted that refunds should be in the form in which payment was made – in other words a cash payment would get a cash refund, but a credit card payment would had a credit card refund.

She noted that Clauses 56 and 20 read together did not require adequate proof of purchase and, as shown by the crime wave in the country, not all consumers were examples of probity. She noted that Clause 61 encompassed the supplier, not only the manufacturer, and was contrary to the common law. In this regard the redress mechanism was too wide, being either the Commission or the Tribunal, and she submitted that this would lead to uncertainty. She submitted that each prudent participant in the supply chain would contract for indemnity insurance, which by its nature was exceptionally costly, and the costs would then be incorporated in the pricing mechanism to be paid by the consumer. This inflated the process exponentially.

With regard to Regulations, she noted that it seemed that these would be drafted after the enactment of the legislation, and in view of the potential conflict between Clauses 12 and 14 this would cause conflict. She submitted that greater clarity was required already at this stage.

Addressing the role of the intended Tribunal she placed on record that the common law, in operation since time immemorial, reflected the wisdom acquired by mankind over the ages and had given rise to Judge-made laws that were known, certain and to the advantage of all. She asked whether the intended Tribunal would achieve the same result since many similar tribunals created under other legislation had not lived up to expectations. She submitted that this would impact upon the provisions for Alternative Dispute Resolution (ADR).

She submitted that the provisions in Clause 20 were too wide and asked whether the time frames were also intended to cover perishable food items. There were no provisions covering for abuse by consumers, who were not always the innocents envisaged by some proponents of the Bill. She submitted that the provision for administrative penalties were harsh, as the accused’s right to a fair trial in the Court process was removed.

Discussion
Ms N Khunou (ANC) felt that 6 months time frame for return of goods was adequate and wanted to know what alternative was suggested. With regard to strict liability and the damage caused by unsuitable goods, she felt that this was a good provision and wanted to know what the Association had in mind as an alternative.

Dr Rasmeni referred to the requirement that all literature pertaining to a commercial transaction should be in clear and simple language. He noted that the Constitution provided for 11 official languages, and he expected all involved in commercial transactions to respect this fact, and ensure that all literature pertaining to commercial transactions be in all the 11 official languages. This was not being adhered to by everyone in commerce.

Dr Rasmeni, in regard to the request that refunds be in the form in which payment had been made, he wished to know why this suggestion was made, as to his mind all refunds should be in cash.

Mr Njikelana asked whether the comment about the common Law and the Tribunal was not designed for the benefit of the lawyers. He was under the impression that the envisaged Tribunal was being set up so that ordinary people, including the poor in the rural areas, would had access to a dispute resolution mechanism.

Mr Njikelana referred to the observations that strict liability could cause the insolvency of traders, and he asked why this was suggested, as he did not think it possible. He added that he felt that it was incumbent on the smaller retailer to check the quality of the goods before he placed them on the shelves and offered them for sale to the public. If he did not do so he had to bear the consequences. However, he felt the Spaza shops should be excluded from this requirement.

Ms Ntuli said that there was no definition proffered for what would be a reasonable period, and asked whether the South African Bureau of Standards (SABS) had expressed an opinion about this time period.

She also requested why a prudent retailer would take insurance cover for product liability, and then pass on the costs through the sale price to the consumer. She felt this would be unreasonable.

Ms Ntuli asked how the comments on page 5 of the submission were considered to be a barrier to justice, asking how a defendant firm could stretch out the legal process to the disadvantage of the plaintiff consumer.

Ms Ntuli agreed with Dr Rasmeni in regard to the plain language, and asked that the 11 official languages all play an equal role in commercial transactions.

Mr J Maake (ANC) also asked that the 11 official languages be utilised fully. He also asked for reasonable periods depending upon the type of goods and suggested that the provided time frames be the maximum periods. With regard to the proposed Regulatory provision he said that what was important was what the consumers had to say about the goods and services provided to them.

Ms F Mahomed asked that the question of liability be clarified

Ms Jefferies suggested that the implied warranty should be in accordance with the nature of the goods and that one time period did not suffice for all situations. She added that the refund in the manner in which payment had been made was a submission made to avoid placing too harsh a burden upon the retailer. She noted, in regard to refunds, that the use of debit entries would reduce the temptation that large amounts of cash provided to the criminal sections of the population. She submitted that a retailer might conceivably receive a batch of goods from a manufacturer, subject such goods to tests that the retailer was capable of and competent to perform, and place them on his shelves. In due course, after a sale, a consumer might perhaps lodge a claim arising out of – for instance – health damage or even death arising from ingestion of those goods that were not designed for consumption, and the claim would be so large that the claim or the costs of defence could force the retailer into insolvency. The claimant would have a claim but would not be able to enforce it, and the retailer would end up with no business and his employees out of jobs.

M/s Ntuli conceded that it could not be expected of every retailer to inspect all his goods as spot checks would suffice, but she wanted protection for the consumer.

Massmart submission
Mr Graham Rebello, Forum Chairperson, Massmart addressed the Members. Massmart agreed with all moves to protect consumers, and consumer rights and Human Rights. However, his organization, through its several divisions of varying size, dealt with the small retailers and there was no one protecting these rights – to the extent that, as observed earlier, there was no representative of the small retailers even present to make submissions.

He addressed Clause 3(2)(b)(ii), and submitted that the provisions would impact heavily on small business. He reminded Members that small business was not confined to small retailers, but encompassed small producers as well. He submitted that a single product deficiency claim, whether directed at the retailer or the producer, had the potential to sink that defendant financially. He added that unlike the Court process, where the losing claimant could be punished by an award of costs, thus limiting spurious claims, the Tribunals would not appear to deter spurious claims at all. This meant that small businesses of either retailers or producers could be harassed by persons determined to conduct vendettas against them, who could tie such businesses up in semi-legal processes for long periods of time, leading to difficulties with the running of the business.  In addition the small emergent trader with limited funds could be put out of business, and possibly into insolvency, by one claim, even if it was of a spurious nature. He therefore pleaded for a redefinition of exemptions and the strict liability provisions, because of the serious potential impact upon business. He submitted that the Bill as presently drafted had many unintended consequences. With regard to the requirement of strict liability, he suggested that a fund similar to the Road Accident Fund could be set up for the protection of small businesses, to ensure that the consumer was assured of some compensation, and a limitation upon claims.

The Chairperson intervened at this point to note that oral submissions were deviating more and more from the written submissions and introducing new points. He asked that presenters curb their tendency to do so.

A Member addressed the question of joint and several liability. He noted that it was the retailer who would face these claims, merely because of its local presence and ease with which claims could be lodged. That local person would effectively be paying the penalty for the overseas manufacturer.

With regard to the question of the recalls he submitted that this was going to increase the administrative burden on retailers and manufacturers, and the costs associated with this increased administrative burden would be passed on to the consumers, and exponentially impact upon inflation.

Additionally, he submitted that second failures, either after exchange or repair, would also be a problem and would impact severely upon retailers with a low financial base.

The Member viewed Clauses 55(5), 56(2, 56 (3) and 57(2)(b) and (c) as being avenues for abuse by consumers. He said his practical experience of consumers was far removed from the idealised version of consumer which the drafters of the Bill had when drafting. He also submitted that bait marketing and special offers “while stocks last” were legitimate marketing tools. He submitted that in Clause 39(1)(b), there should not be reliance on the legal definition of minors, as there were several sharp operators in their late teens who could take advantage of retailers through their commercial maturity, which exceed their physical maturity.

Dr Rabie said that this suggestion was immediately attractive and he wondered whether this had been considered and worked upon extensively. He also wondered whether perhaps it could be tied in with the threshold of R5 million turnover.

Ms Ntuli asked whether despite the definition of strict liability, there was now a suggestion of an exemption from strict liability. She also expressed concern about suggestions that the practical impact of this Bill would be a reduction in commercial competition and also a reduction in jobs.

Dr Rasmeni asked whether foodstuffs and liquor would be exempt from this Bill. He added that he did not foresee this Bill squeezing out the small retailer; on the contrary he viewed it as upgrading the small retailer

Ms F Mahomed wished to have clarification on the possible effect of Clause 3(1) (b), and how this was viewed as denying market access.

Ms Khunou stated that in rural areas people needed goods of an equal standard as those enjoyed by the urban dwellers. She asked that attention to small business not be used as a defence for lower standards for the rural areas.

Mr D Oliphant (ANC)thanked the Chairperson for raising the question of the differences between the written submissions and the oral presentations.

Mr Oliphant thought that the drafters of the Bill had set out the intention of the Bill and yet the submissions were suggesting that those intentions of the Bill would not be met. He stated that in his view the consumers in Mbizana were entitled to receive exactly the same goods and services as the consumers in Johannesburg.

The Chairperson said that he personally was concerned about the suggestion that the definition of a minor be reviewed.

Mr Rebello conceded that with regard to the suggestion that a Compensation Fund be established, more work in clarifying the issues and problems was required. With regard to exemptions, Parliament had not yet given thought to the cost of exemptions, and the suggestion was that this be considered to ensure that the Bill met its intentions as far as was practicable. With regard to the comments around insolvencies and loss of jobs, he suggested that whenever increased administration was imposed upon commercial entities, this amounted to additional costs. When production costs were increased this would lead to cost cutting measures, and job-cutting was often the first cost-cutting measure considered by many entrepreneurs who, after all, were not charitable institutions. He submitted that the question of repairs and refunds required further attention so that clarity could be achieved. He pointed out that foodstuffs and liquor should not be exempt from this Bill but that foodstuffs and liquor were also subject to other legislation, whose regulations were, understandably, extremely strict.

Mr Rebello said that differences between small and large businesses did exist, but that even large businesses might be operating on margins as tight as those of small businesses. Defending of any claims, particularly spurious claims, might jeopardise business. With regard to market access, it was suggested that access was open to all who met the financial requirements of entry and complied with the regulations governing that particular activity. In regard to quality of goods, he said that there were such arrangements as premium goods and less valuable goods, but obviously it should be required that all goods be of the optimal standard for that category. In regard to the suggestions around the age of majority, he suggested that this was currently 18. However, many youngsters between at least 14 and 18, both girls and boys, were very sophisticated and able to perpetrate many undesirable practices upon retailers and other traders, by persuading those traders that they were merely innocent minors, whereas in fact the trader was the one being disadvantaged. 

Pick’n’Pay (PNP) Submission
Mr Janusz Luterek, attorney with Hahn & Hahn Attorneys, appeared on behalf of Pick’ n ‘Pay. He placed on record that PNP agreed with the principle of consumer protection, and that this group of companies had long been offering a money-back scheme without quibble. In an effort to grow the economy they had been operating franchises, through the Pick and Pay Family Markets. He placed on record that the establishment of a brand required a lot of work, and once it had been established there was even more work required to retain the benefit established. He noted that he would be breaking away in part from his written submission, as there were certain key areas requiring attention.

He noted that franchises should be encouraged but the franchisor must be afforded sufficient leeway to protect the brand. He said that the foodstuff market was already highly regulated, which was fit ad proper, but that in the opinion of PNP, clauses 55 to 61 impaired access to commercial activity. With regard to the provision of a 20 day period before a franchisor could take steps to sever the franchise relationship, he noted that within that period  irreparable damage might well have been done by a franchisee to the brand reputation of the franchisor. He suggested that this period was too long and required attention

He proposed the deletion in its entirety of Clause 6(7) and Clause 7.

With regard to foodstuffs he suggested that this was a very risky area and that the relevant foodstuffs legislation provided sufficient protection to consumers. Therefore this sector should be removed from the ambit of this Bill and left to Quality Control under the existing Acts.

He submitted that Clauses 54 to 61 emphasised fair value, quality and safety, but had unforeseen consequences with regard to the costs of compliance. PNP had done an exercise from the facts and figures available to them or their suppliers, and concluded that the increase in costs for adherence to the compliance provisions would be a minimum of another 6.5 %, which would be added to the end price, and would have an deleterious effect on inflation. In addition the lack of protection for manufacturers and suppliers from spurious claims was a disincentive to embarking upon a commercial undertaking, and so no jobs would be created.  With regard to the provisions for the return of goods he said that these would have an enormous impact upon retailers. He cited the example that a consumer might wish to upgrade a computer through installing a new software programme, might consult a non-expert salesperson, purchase the programme and after installation find it not compatible with other software. In its present form this Bill entitled such disgruntled consumer to approach the retailer for a refund. He submitted that the Bill had tilted the scale of balance unfairly on the side of the consumer, and this would impact adversely upon commerce.

As currently worded Clauses 20(2)(d) and 55(3) engendered unrealistic expectations among the unsophisticated consumers. Clause 56(2) generally provided for warranty failures but did not take into account the actual cause of such warranty failures, including the “induced failure” referred to by previous presenters. The requirement for refunds could have a greatly deleterious impact upon the business cash flow. The same held for strict liability. PNP submitted that there were serious policy issues which impacted upon Small, Medium and Micro enterprises (SMMEs) and which required further consideration. Finally, the question of cost of compliance and its effect upon inflation required greater consideration.

Discussion
The Chairperson pointed out that Parliamentary processes allowed for public participation. However, where different presenters were all going to make the same, or similar submissions, he asked that they try to cooperate so that one presenter should make those points on behalf of the many others, to avoid repetition.

Ms Khunou conceded that this had been an interesting presentation. She emphasised that the intention of the Bill was for suppliers to present good quality goods, and she asked what alternatives there were if goods were of poor quality.

Dr Rasmeni conceded that PNP had gone a long way to ensuring that its consumers received good treatment. However, he felt that it had a moral duty to ensure that other suppliers also maintained the same standards. For far too long the public had been fobbed off with shoddy goods and services.

Mr Njikelana pointed out that before the enacting of the National Credit Act there had been many presentations upon the possible deleterious effects of the proposed legislation, how it would be impossible to meet the required standards, lack of capacity of the administrative bodies and similar issues. This Act had been in operation for over a year without complaints or the doomsayers’ prophecies being fulfilled. He felt that this Bill would achieve similar results. He added that the question of the cost of doing business was continuously being raised, but businesses did continue to operate, companies announced increased turnovers, and increased dividends to shareholders. He felt that this Bill was moving in the right direction.

Ms Mahomed said that there was a suggestion that the manufacturer should honour the warranty, but the consumer dealt with the retailer, who, in her opinion, should be liable

Ms Ntuli explained that the dti was not responsible for the costs of business, or the increased cost of doing business

Retail Motor Industry (RMI) Submission
Mr Gary McGraw,  representative for Retail Motor Industry, placed on record that the RMI fully supported the intentions of the Bill but had problems with regard to certain provisions of it. It saw clause 14 (1)(b (ii), dealing with the return of goods, as problematic insofar as a consumer might have leased a motor vehicle, the lease might have expired, but the consumer had failed to return the vehicle, impacting on the lessor’s business commitments. The 20 days envisaged in the legislation was either too long or too short for business purposes. With regard to the requirement to provide a quotation regarding repairs or services in advance, this was, practically speaking, impossible in the motor industry. The latest generation of motor vehicles were so computerised that they needed to be disassembled before the fault could be located and identified, and a quotation provided, and there was no mention of who must bear the diagnostic costs. In relation to clause 18 relating to examination of goods, he pointed out that potential consumers were often accompanied by unruly children who had damaged the vehicles, and there was no mention of who should bear the reparation costs. There was also no mention of who would bear the costs of “extras” fitted on a vehicle that was then returned within the time period. He asked whether it was the intention of the Bill to do away with the “voetstoots” provision in the common law ,and require strict liability from all participants in commerce. He submitted that the common law already provided sufficient protection for the consumer.

With regard to the provisions for alternative dispute resolution, he noted that clarity was required for the jurisdictional clashes between what the RMI currently administered and those envisaged under the Bill.

Discussion
Ms Ntuli said she had received many reports from her constituents that when a vehicle proved defective the sellers would rely upon the voetstoots clause and do nothing to compensate the consumers. This, to her mind, was unfair. She noted that most motor car manuals were only produced in English and this was to the disadvantage of South Africans.

Mr Njikelana wanted clarity on business to business transactions.

Ms Khunou wished to know who paid for damage to cars and felt the arrangements intended are very reasonable.

The Chairperson pointed out that there were “lemon” motor cars, thrown together just prior to the ending of the Friday shifts, which gave endless troubles.

Mr McGraw stated that the motor retail industry was doing much to overcome the problems of the past, and that the question of the “lemons” was really one for the manufacturers, and not the retailers. He added that the usage given to a motor vehicle was the main factor in assessing depreciation, and if consumers in rural areas drove their vehicles over dirt roads or without due care, they must expect greater depreciation than careful drivers on good roads in urban areas. He conceded that consumers had rights but placed on record that business owners, too, had rights and a balance had to be achieved.

Life Officers Association (LOA) Submission
Ms A Rosenberg, representative of the Life Officers Association, advised that she would make a presentation on behalf of the Long and Short Term Insurance Industries, and the Pension Fund Administrators. All these activities were currently supervised by FAIS, and the industries had to comply with their rules and regulations.  She requested that the definition of service contained in the Bill be deleted, because the definition covered goods and intangibles, and the two expressions were viewed as being mutually exclusive. In respect of Clause 5, she asked that the definition take into account immovable property. She submitted that, as presently worded, landlords could be placed in a difficult position and that there was no certainty of a lease period or its termination. This would place landlords, which in many cases were simply extensions of the policy holders, in difficult situations, as they would no longer be able to eject unsatisfactory commercial tenants. This was exacerbated through the vagueness of the 20 day allocation. With regard to Collective Investments (Unit Trusts) and their assets, it was submitted that there was sufficient regulation in terms of FAIS to meet the possible scenarios.

Discussion
Ms Ntuli requested clarity regarding the meaning of service and asked for clarification of the suggested confusion in the term.

A representative of the LOA suggested that when drafting leases it should be clarified that a service was being offered, rather than goods, to preclude any tenant clutching at any straws to deprive Policy holders of their expected returns, by frustrating the continuation of the lease or the introduction of a successive tenant.

Ms Mahomed asked for clarification about the intermediaries

Mr Oliphant said that he understood the Bill’s intention to be protection of the consumer of insurance. However, his constituents had complained of insured persons, who might incidentally suffer from high blood pressure or diabetes, dying because of murder or motor vehicle accidents, yet the insurance companies would still repudiate the claims based on the lack of disclosure of a prior medical condition, which was not even related to the cause of the death. He felt that the LOA was not user or consumer friendly.

Ms Ntuli asked whether, if the financial service providers were excluded from the ambit of the Bill, complainants against this industry could receive redress elsewhere.

The representative of the LOA replied that the FAIS regulations would apply. The LOA was a self regulating entity. Repudiation of policies in the circumstances described by Mr Oliphant did not apply. He added that any applicant for life or short term insurance was the only one in a position to know of prevailing conditions, whether in connection with short or long term insurance. If this information was not conveyed to the Underwriter a proper assessment of the risk could not be done. That assessment of the risk led to proper premiums being established. It was only fair that if the insured withheld information, whilst assuring the insurer that the replies were full and accurate, then he would be regarded as having lied and caused the underwriter to establish an incorrect or prejudicial premium. It was then only right, when the fraud was discovered, that the underwriter should repudiate such claim so that the other policy holders were not prejudiced.

Direct Marketing Association (DMA) submission
Mr Brian Mduli and Ms Janine Jefferies made a submission on behalf of the Direct Marketing Association. It was pointed out that the original submissions by the DMA had been made several months ago, and that issues had changed in the interim. The original submission had exceeded 65 pages in length. He placed on record that the DMA was in favour of consumer protection but, similar to the other presenters, was concerned lest the balance swing too far against the retailer or supplier of goods and services. The DMS believed that the definition was too wide and did not make allowances for technological advances like blue tooth and websites which had changed the way their business was done. The main areas of concern were Clauses 11, 12, 16, and 21.

In respect of solicitations out of certain hours, it was noted that a call centre might make arrangements well before the end of the stipulated times but the service provider only delivered the sales messages after termination of the free time, and he asked who would be held liable for this. He said that problems could also arise with unsolicited trading, if a consumer made an order, the supplier packed the goods and delivered this by courier to an incorrect address. If the incorrect recipient kept the goods and the original person who had lodged the order made application for redress, he queried what redress could be applied against the incorrect recipient. 

Ms Jefferies set out that there had been much debate about what was coercion or harassment, and what was merely good selling tactics and persistence. If a supplier of goods or services took a decision not to supply a potential consumer, this could be considered discrimination at one point, or good economic judgment at another.  She also agreed that there should be a greater balance between the rights of the consumers and the rights of the suppliers, and she submitted that the Bill did not provide this.

Discussion
Mr Oliphant said that personally he felt the Bill was long overdue and that the consumers should be favoured against the suppliers.

Mr Njikelana said that the Committee had recently been attending to the Companies Bill and had met with much the same line and type of objections. His personal experience was that many Direct Marketing callers were not tenacious but plain rude

Ms Khunou wanted to know where the Direct marketers got their information. It seemed that they knew a great deal about the person they called.

The Chairperson said that there had been a lot of input from the Stakeholders but much of it had been repetitive.

The DMA representative conceded many of the complaints but repeated that there should be a happy balance between the rights of the parties. The consumers, through this Bill, now had the balance tipped in their favour. Many consumers were unscrupulous and would attempt to take undue advantage of the retailers.

Ms Jefferies added that there was a great deal of cross pollination among service providers and one service provider would make its knowledge about customers available to another service provider, which would in turn reciprocate. She added that there were many fly-by-nights among the Credit Bureaus, as there were among all business activities, and the same was true of consumers.

The meeting was adjourned.