Consumer Protection Bill: public hearings

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Trade and Industry

02 September 2008
Chairperson: Mr BD Martins (ANC)
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Meeting Summary

The Committee continued to hear public submissions on the Consumer Protection Bill.

The South African Freeze Alliance on Genetic Engineering (SAFeAGE) was an NGO running a campaign to have Genetically Modified (GM) foods labeled. It explained the need for labelling by quoting research as to the harmful effects of Genetically Modified Foods, and made two proposals for amendments to the Bill. It called for re-instatement of the clause dealing with labelling of Genetically Modified Organisms, which had been in the initial drafts, and for inclusion of GM goods under clause 61, dealing with liability and redress. It pointed to the Department of Agriculture’s stance on GM organisms, but the inability of that department to deal properly with labeling. It believed that liability for damage must rest with the originator of the product, and that self-regulation of labeling by the biotechnology industry was not an option. Members asked where the proposed labeling should appear, and questioned how many organic farmers there were in South Africa, how many international countries grew GM food, whether the Department could not deal with these issues and the education provided by SAFeAGE to the public, especially rural communities, on genetically modified foods and its dangers.

The Internet Service Providers Association (ISPA) pointed out that various transactions covered by Chapter 7 of the Electronic Communications and Transactions Act (ECTA) were excluded from the ambit of the Bill, and that the dual provisions across the two pieces of legislation created confusion and the possibility of abuse. Unwanted Direct Marketing  was another concern, and ISPA recommended that this Bill repeal section 45 of the ECTA. The provisions in the Bill on strict liability were problematic, and there was apparently a drafting error in clause 61(6)(c). It proposed that both this and clause 11(1)(c) be amended. The Association touched on the industry codes of conduct and requested that there be allowance made for exemptions, noting also that the procedures for prescribing an “industry code” in terms of clause 82 were unnecessarily cumbersome. Members queried ISPA's comments on economic loss and industry codes. They sought comments on the wording of criminal consequences and how people could be educated on expectations for and use of computer equipment.

Prof J du Plessis of University of Stellenbosch raised comments on Clauses 40 and 48 of the Bill, suggesting modifications to make the Bill more simple and easy to understand. He proposed that clause 40(2) be redrafted to contain reference to pre-existing weaknesses of the consumer, and that sub clause 48(2)(c) be deleted, relating to the right to fair, just and reasonable terms and conditions. Members commented that his points were legally sound, and asked for a formulation in writing.

The Minister of Finance’s E-Commerce Advisory Committee also raised the conflict between this Bill and Chapter 7 of the ECT Act, but called for Chapter 7 to be repealed entirely. They also commented that non face-to-face transactions, those conducted telephonically, by fax and in writing, should be dealt with in this Bill. The Committee said that there would have to be consultation with the Department of Trade and Industry and consultation with the Portfolio Committee on Communications. 

The Chemical and Allied Industries Association’s (CAIA) submission focused on provisions for hazardous goods in the Bill. The chemical industry was already specifically regulated in respect of life cycle of chemicals and there was significant duplication in this Bill, which would raise the costs of compliance because of the duplications in reporting. Their detailed submissions referred to clauses 2(9), 5 (3), 22(1)(a),  53(1)(c), 53(2), 58(2), 58(3), 58(4), 58(5), 59,  and 60. Another area of concern was the  Industry Codes of Conduct in clause 82. The Committee queried the repeated mentions of duplication, asked how the return of chemical products would be addressed and what the financial implications of the proposals would be.

Business Unity South Africa (BUSA) was a confederation of business associations, who submitted an overarching submission, and a detailed sectoral submission, highlighting the unintended consequences, duplication, concurrent jurisdiction, institutional structures, compliance notices, vicarious liability, proof of facts, procedures, regulations, public consultation and transitional provisions. Proposals for detailed revisions were made in respect of clauses 2(9), 5(2), 12, 22, 53, 93, 97, 113, 119(2), and 120(2). In conclusion BUSA supported the need to strengthen consumer protection, however the significant legal challenges and burdens outlined had be addressed before the finalisation of the Bill. Members discussed the remarks around the application of the National Credit Act and the fact that many consumers were still using loan sharks. They asked for clarity on the vicarious liability, proof of facts  and technical challenges, and what would apply when the State was both a supplier and a consumer of goods.

Business Connexion, a leading black empowered Information and Communications Technology (ICT) company, raised two objections to the Bill. It believed that, in line with international trends, this Bill should not apply on a corporate to corporate level. The current wording of the Bill would not meet the Department’s stated objective of protecting small businesses. If this was the intention, then big business should be excluded, and there was a need to tighten up the drafting. It suggested that instead of using “person” should be defined and so should “small business” , and that the small business should then be defined along similar lines as the National Credit Act, using turnover instead of transaction size as the determining factor. The Committee commented that the suggestions were clear and that they would involve drafting changes only.

The Banking Association of South Africa (BASA) expressed concern on the Bill’s application to credit agreements and services that were regulated by the National Credit Act (NCA) and the Financial Advisory and Intermediary Services (FAIS) Act). In the last draft of the Bill, certain exclusions were introduced and some were removed, and this needed urgent attention. The consumer protection in financial services specific to the FAIS and NCA Acts was reviewed. The Association recommended that NCA should be excluded from the ambit of Consumer Protection Bill, with consequential amendments to NCA. Four gaps in clauses 12, 35, 41 and 49 were identified. It also sought exclusion for all services regulated in terms of the FAIS Act should be excluded, as many were duplicated. Members asked whether the Association thought that goods should be inspected. The  Committee took a differing view in respect of protection of privacy. The recommendations in respect of the definition of “service” were queried as well as the exclusions.

The National Economic Development and Labour Council (NEDLAC) reviewed he agreements that business and labour had come to on the Bill. They felt that insufficient attention had been paid to the implications for employment and industrial development. The duplications, compliance costs, and criminal sanctions were raised as concerns, and additional issues raised by Labour were also discussed. Members asked why small enterprises were not included as a consumer, and why the word “user”  was not covered. They queried the exclusion of sectors and their coverage in the Bill, queried if there should be an NCA Tribunal and asked for clarification of the opt-out approach and criminal sanctions mentioned in the presentation. Other issues related to the scope of fair labour practices and the expansion of the comments on further work to be done.

The Consumer Goods Council of South Africa (CGCSA) focused primarily on issues related to franchises. The definition of consumer was unsuitable and a franchisee was not a consumer. The bundle of goods specified in the Bill was also too vague. Their key proposal was that the CGCSA should prepare a standard template for consumer complaints to appear in all similar retail outlets. The Committee asked if CGCSA was considering self-regulation, and if so, the reasons.
 
The Wireless Application Service Providers Associations (WASPA)  gave a broad overview of South Africa’s mobile usage statistics. It was concerned that there were legal and practical gaps, and regulations may not provide for highly complex technology scenarios. The service providers were self regulating and evolving, and the various codes of conduct and rules were reviewed. Technology  regulation was very complex and therefore it requested an exemption similar to the Electronic Communications and Technology Act, or interim recognition. Members asked how to curb unsolicited communication, and asked also about blacklisting of operators, monitoring of prices, and display of terms and conditions in competition entries, as well as the R10 000 prize value entry level threshold and how it was reached.

The Congress Of South African Trade Unions (COSATU) broadly supported the Bill, but believed it was poorly drafted. Particular concerns related to the interpretation, purpose and policy, application, right of equality, product labeling, trade descriptions, alternative work schemes, liability for damage caused by goods and penalties. Members asked for elaboration on the references to land redistribution, what agreements had been reached with NEDLAC, late claims, supply of gas, water and electricity, the situation where the State was both a service provider and a consumer, and whether COSATU believed there was a case for the exemptions.

Meeting report

Consumer Protection Bill (the Bill): Continuation of public hearings
South African Freeze Alliance on Genetic Engineering (SAFeAGE) submission

Ms Charmaine Treherne, National Co-ordinator, South African Freeze Alliance on Genetic Engineering (SAFeAGE) broadly made two proposals for amendments to the Consumer Protection Bill. The first was a call for reinstatement of Genetically Modified Organisms (GMO) labelling in clause 29(1)(a), and the second was a call for inclusion of genetically modified organisms in clause 61(1) under liability for damage caused. She noted that under the current law, liability rested with the end-user, which was not acceptable.

Ms Treherne then noted that SAFeAGE was an NGO running a campaign to had Genetically Modified (GM) foods labeled. She reviewed the attached findings of non industry-funded research, and said that GM products had not been tested on humans and that the findings of tests on animals were cause for concern. SAFeAGE wanted to know why genetically modified foods were unlabelled and had been excluded from the regulations. It had several concerns around the Bill as it now stood. One concern was that the reliance on the Department of Agriculture (DoA) to address labelling was grossly negligent on the Government’s part, because the Genetically Modified Organisms Act (GMO Act) did not protect the consumer at all. It was of the opinion that the government was focused on promoting GMOs in accordance with the mandate of the DoA and the interests of the biotechnology industry. It did not think that GMO labelling would create confusion, rather it would remove confusion and promote consumer awareness and empowerment, which was the stated purpose of the Bill. It proposed that liability for damage must rest with the originator of the product.

Ms Treherne referred to SAFeAGE’s effort to understand Government’s reasoning behind removal of the labelling clause from the Draft Consumer Protection Bill and shared with the Committee an extract from the minutes of a meeting (held on 17 August 2006) of the Executive Council, which was the decision-making body under the GMO Act.  She added that self-regulation of labeling by the biotechnology industry was also not an option, given the conflict between its profit motives and the concerns of consumers about GMOs as food.

Discussion
Ms F Mahomed (ANC) stated that she concurred with the concerns outlined by SAFeAGE. She asked where on the products the proposed labelling would go. She added that this was an important issue and it would perhaps be best to state the details clearly in writing.

Ms Treherne responded that the labelling should go directly on the end product and should be clear. Furthermore, SAFeAGE did not want this labelling to conform to the current convention, as a label saying “this product may contain GMO” was of no help to the consumer.

Mr L Labuschagne (DA) commented that genetic modification of food was quite controversial. He was curious as to why the consumer should not be informed. He stated that the consumer should know what was going on and make the decision.

Ms Treherne responded that the Member was quite correct and this was the purpose of the SAFeAGE campaign.

Ms M Ntuli (ANC) thanked SAFeAGE for the presentation, especially for highlighting the negative impacts on people, animals and the environment. She asked if labelling the products on the shelves would really help.

Ms Treherne responded that the labelling would help as long as it was clear. There was particular concern about the current usage of the phrase: “ this may contain”. She stressed that the word “may” was very ambiguous. SAFeAGE suggested that if a product contained GM material of above a threshold of 0.9%, then clear GMO labelling should apply.

Ms Ntuli asked how many organic farmers there were in South Africa, and how many international countries there were who grew GM food.

Ms Treherne responded that the number of farmers producing organic produce (free of pesticides, herbicides and GMO) was growing rapidly in South Africa, as it increasingly made more economic sense.

Ms Ntuli asked if these provisions were appropriate inclusions to the Consumer Protection Bill, and if these issues should not be dealt with by the Department of Health.

Ms Treherne responded that there was no labelling required by the Department of Health. The only hope for labeling of GMO products was this Bill.

Ms Ntuli asked if the research that was previously quoted could be provided to the Committee at a later stage.

Ms Treherne responded that the research mostly derived from a book called Genetic Roulette by Jeffrey Smith. She added that SAFeAGE would be willing to come back at a later date, to do a full presentation on this and other research.

Dr S Rasmeni (ANC) wanted confirmation on the total number of consumers that SAFeAGE represented.

Ms Treherne responded that the figure currently stood at 3.7 million people.

Dr Rasmeni remarked that many consumers did not know about the damaging effects of GMO, or whether their food was GM, and what the implications of that were. He asked if SAFeAGE provided education to the public on these issues. Additionally, he queried whether this information reached the rural communities.

Ms Treherne responded that one of the main aims of SAFeAGE was providing education. The GMO labelling campaign was their first public campaign. They had had good responses from the major faith groups of South Africa and were in the process of approaching unions and other public organisations. She remarked that the member was quite correct, that people did not know enough about GMO or their harmful effects. Government was not educating the public. She made it clear that SAFeAGE drew a clear line between Genetically Modified Organisms and biotechnology as a science. They were not against biotechnology as a science but were campaigning against the use of GMOs.

Dr Rasmeni asked who produced this GM food and how Government could act against them. He agreed with the proposals on labelling.

Ms Treherne replied that GMOs were produced by only a few large international chemical and seed companies, including Monsanto and Syngenta. She added that SAFeAGE could provide literature to the Committee to substantiate this. The Consumer Protection Bill was their last hope legislatively. At the moment the legislation (GMO Act) placed the liability on the end user, that is, the person who conducted activity with the GMO. This would include farmers and consumers.

Internet Service Providers Association (ISPA) submission
Mr Mike Silber, Regulatory Advisor: ISPA, gave the Committee some background on the Association, which was a South African Internet industry body. ISPA currently had over 150 members, comprised of large, medium and small Internet service and access providers in South Africa. It was formed in 1996 and had historically served as an active industry body, facilitating exchange between the different independent Internet service providers, the Department of Communications, Independent Communication Authority of South Africa (ICASA) and other operators.

Their specific comments on the Bill related to Chapter 7 of the Electronic Communications and Transactions  (ECT) Act. He pointed out that the various transactions covered by Chapter 7 of the ECT Act were excluded from the ambit of the Bill. Chapter 7 was meant as an interim step, but the creation now of these dual provisions created the possibility of lacunae and the possibility for abuse.

Unwanted Direct Marketing was also an area that needed attention in the Bill. This had been treated in one way in the ECT Act and another in this Bill. It would possibly be better handled in the Bill as the duplication created the possibility of issues not being adequately addressed. Unwanted direct marketing was an annoyance for most people and represented a multi-million rand headache for their members.

The Bill could also help with spam and ISPA proposed that the Bill should also repeal Section 45 of the ECT Act. The amount of spam was increasing and clause 11(2) of the Bill was not appropriate for web spam. He explained that an approach or communication, other than in person, meant primarily for the purpose of direct marketing, should be unlawful if sent in bulk and without the prior specific request or consent of the intended recipient. This would not apply if there was a prior commercial relationship between the sender and intended recipient, which would reasonably give rise to such communication.

He also raised the provisions in the Bill relating to strict liability. He stated that despite the laudable intention of clause 61, this was likely to lead to an increase in the retail pricing of goods to consumers as suppliers passed on the cost of additional liability insurance. ISPA noted an apparent drafting error in clause 61(6)(c). The submission detailed (with examples) the consequences for which a supplier of goods could be rendered liable, including or death, physical damage, injury, and pure economic loss caused by unsafe goods or a product failure. He remarked that this was certainly not the intention of the drafters and went far beyond what was reasonably necessary in the circumstances. This problem extended to strict liability and the IT industry. ISPA therefore proposed new wording to clause 11(1)(c). 

Mr Silber touched on industry codes of conduct, saying that ISPA had introduced such a code, had applied for recognition of that code since 2002, and that all their members were bound by this code of conduct. The fact that members could also hold licences or pay consumer service charges created the possibility that some members would face three separate codes of conduct. ISPA submitted that as an industry representative and self-regulatory body, it should be entitled to make an application for exemption, and this should not be restricted to statutory regulatory authorities alone. ISPA noted the process for prescribing an “industry code” in terms of clause 82 of the Consumer Protection Bill and was concerned that the procedure was unnecessarily cumbersome, particularly in the electronic communications sphere. There were also generally possibilities of contradictions between the Bill and the ECT Act.

Discussion
The Chairperson noted the mention of amendments that would concern the Communications Portfolio Committee. This Committee could not make such amendments that sought to ensure the harmonisation of that legislation.

Dr Rasmeni recounted his own experience with spam, and commented that consumers were indeed vulnerable and that this was something that needed to be looked into. As to the economic loss, he was yet to be convinced that clause 61(c) was needing amendment.

Mr Silber responded that ISPA was limited in controlling spam, as most spam emanated outside of South Africa. It did not want South Africa to become a hot bed for spam when people did not have a mechanism to control it, and wished all control to be legally enforceable.

Ms Mahomed asked that ISPA send some comments on the wording of criminal consequences to assist the Committee in re-examining this aspect. She thought that this was quite well articulated in the ECT Act and that this Bill was meant to be complementary. She asked for clarification of the proposal on Clause 11.

Mr Silber responded that he was relieved that the Committee wanted to make the legislation stronger and would send through the suggested wording.

Mr D Dlali (ANC) queried the trade focus and asked they now contemplate their intention to protect consumers. He asked why the ISPA believed there was a need for an exemption and wondered if ISPA was saying they did not want to accept any liability.

Mr Silber responded that ISPA was not looking to be exempt from everything, but it also not want to be obliged to honour three contradictory codes of conduct.

Ms N Khunou (ANC) asked how people could become education on how to get out of spam e-mail scams and what ISPA could do to educate people who did not know much about their IT equipment, including its use, maintenance and lifespan.

Mr Silber responded that there was a wide interpretation being given to “damage” covering all the factors which might cause a computer not to work. ISPA proposed that the supplier not be liable for damage unless there was physical harm caused to a person. He agreed that consumers needed to be made more aware about what was expected as to the potential faults and lifespan of their IT equipment.

Mr S Njikelana (ANC) recalled his only frustrating experience with spam and asked if their proposal on clause 11 was specific to direct marketing. He suggested that it should be a little wider.

Mr Njikelana referred to industry codes and to the problem of unlicensed service providers. He said the exemption was risky and asked how they would get the unlicenced service providers to comply.

Mr Silber responded that one did not need a licence for e-mail services, or to resell these services. The ISPA suggestion was that those people should be bound by a code of conduct which could be enforced by ICASA, and furthermore, that the Bill should harmonise the various codes.

Prof J du Plessis submission
Prof Jacques du Plessis, Department of Private Law: University of Stellenbosch,  commented on only two provisions. His submission referred specifically to Clauses 40 and 48 of the Bill. These were aspects that required modification to make the Bill more simple and easy to understand.

Clause 40 referred to the problems related to the formation of a contract, specifically the advantage taken of people in general. He outlined this according to the provisions of the clauses: physical force against an individual (including economic threats), coercion, undue influence, and unfair tactics. Clause 40(2) essentially dealt with consumers who suffered from some pre-existing weakness when advantage was “knowingly” taken of them by a supplier. He was concerned that by merely qualifying the words “take advantage” with the phrase “knowingly” gave insufficient protection to consumers. He felt that it was possible for a supplier to escape the ambit of section 40(2) by hiding behind inexcusable ignorance. He therefore proposed that section 40(2) be redrafted to contain such a further qualification. At a time when consumers were in economic distress, this change became particularly applicable. He included a draft formulation for consideration of the Committee (see attached document)

Clause 48 concerned the right to fair, just, and reasonable terms and conditions. He felt that the clause was worded in a way that was unsuited to South Africa and resembled the Australian legislation of 1974. He was of the opinion that more recent insight would prove useful. He commented that, viewed from a lawyer's perspective, this clause was not entirely clear on the issue of counter-performance as the tests were conflicting.

The distinction in sub-clause 48(1)(a) between (i) “at a price that was manifestly unfair, unreasonable or unjust”; and (ii) “on terms that were unfair, unreasonable or unjust” was not clear. Sub-clause 48(2)(c) invited confusion, as there could be problems with the formation of a consumer contract, and problems with its content or substance. To avoid this confusion, it was suggested that subsection 48(2)(c) be deleted.

Discussion
Mr Labuschagne commented that these were legally very sound points that deserved consideration. It was always important that legislation should be adjusted in view of the case law decisions.

Ms Ntuli asked if the clauses could be re-drafted to formulate the amendments in writing – possibly by the following day.

Prof du Plessis responded that there was a draft proposal of clause 40 on page 6 of the written submission. He could formulate something for clause 48 by the following day.

Minister of Finance E-Commerce Advisory Committee submission
Mr Wim Mostert, Member of the Minister of Finance’s E-Commerce Advisory Committee, said that the Electronic Communications Transactions (ECT) Act provided for a Chapter 7 on consumer protection, due to the lack of an apex law that dealt specifically with this. Comprehensive consumer protection legislation would now be in place and therefore it was suggested that Chapter 7 of the ECT Act could be removed. He said that a case could be made out for “surgical removal” and this should present no problem or damage to the other provisions of the legislation.

The result of keeping Chapter 7 in the ECT Act, would be that two regimes would exist for electronic transactions, and he doubted whether this was the intention. The proposal, therefore, was for Chapter 7 of the ECT Act to be repealed.

Discussion
The Chairperson responded that the Committee would speak to the Department of Trade and Industry (DTI) on that issue, as this Bill did not “belong” to the Portfolio Committee and it was not for them to give instructions on the proposed removal. The Department would have to liaise with their legal advisors.

Ms Mahomed concurred with the Chairperson and asked if the present bill was not complementary to the ECT Act. This was the first time she had heard of such a provision. She got the impression that the two bills would work hand in glove. She asked if the Consumer Protection Bill would not be a “master” Bill to the ECT Act.

The Chairperson commented that he had a problem with the master and servant implication.

Mr Njikelana asked what the terms of reference were and how far this would go.

Mr Mostert responded that he was quite comfortable that the Consumer Protection Bill adequately provided for electronic transactions. A possible caveat arose because Chapter 7 of the ECT Act referred specifically to non face-to-face transactions. He did wonder if the Bill adequately dealt with that and pointed out that the issue was not just electronic transactions but that “non face-to-face” included transactions conducted telephonically, by fax and in writing. This should come through in the Bill.

Chemical and Allied Industries Association (CAIA) submission
Ms Laurraine Lotter, Executive Director: CAIA took the committee through her organisation’s submission of the Bill. She clarified that she was a full time employee of the Chemical and Allied Industries Association, but also had affiliations with Business Unity South Africa (BUSA) and New Economic Development and Labour Council (NEDLAC). The CAIA represented the interests of chemical industry. They were the custodian of the Responsible Care initiative in South Africa, a member of BUSA and party to the BUSA submissions as well as being party to the agreement on growth and development of chemical sector with government and labour.

Their submission focused on hazardous goods. The CAIA supported the regulation of hazardous goods but also had some concerns pertaining to it. She stated that the chemical industry was already specifically regulated in respect of the life cycle of chemicals and that there was significant duplication in the Bill, the consequence of which would be to significantly increase compliance costs.

CAIA in general recognised the Committee’s concern that provisions for labeling did not assist illiterate customers. The chemical industry recognised this globally and preferred to control of sale of hazardous goods to consumers. Their detailed submissions referred to clauses 2(9), 5(3), 22(1)(a), 53(1)(c), 53(2), 58(2), 58(3), 58(4), 58(5), 59, and 60 (see attached document). Another area of concern was the Industry Codes of Conduct. This comment pertained specifically to clause 82.

The CAIA was concerned that despite repeated assurances to the contrary, this Bill as currently drafted constituted significant duplication with existing legislation regulating chemicals and their use in products. CAIA was willing to work with the Committee in finding a solution to the challenges presented in this submission. They trusted that the committee would give favourable consideration to the proposals.

Discussion
Dr Rabie commented that the points raised were interesting. He asked if the provincial authorities were not in charge of the administration of the Waste Management Act, or, if not, who was in charge. He queried the deletion of clause 60 and asked whether the Department of Health had adequate powers to control and monitor that particular provision.
 
Mr Dlali requested clarity on the proposal for clause 60(1)(a).

Ms Lotter responded that the Waste Management Act would be under the control of the Department of Environmental Affairs and Tourism.  The CAIA was not saying that clause 60 should be deleted, merely that a chemical should not be returned merely because it was hazardous or poisonous. Chemicals were inherently hazardous.

Mr Dlali referred to the repeated mention of duplication. He suggested that they needed the cluster approach for departments to communicate. He added that the administrative burden could be excessive and that there was no proposal for a solution.

Ms Lotter responded that the prescriptions of clause 22 referred to the duplication and the conflict in the laws, which were extremely negative for business. The chemicals industry was already very heavily regulated, but must be regulated harmoniously. Duplicate reporting on the same matter was very costly and she suggested that the Committee should revisit the definition of regulatory authority. It was possible to achieve what was needed in a simpler way in this Bill.

Mr Njikelana asked how the return of chemical products would be addressed.

Ms Lotter responded that there was a possibility to return pesticides purely because they were hazardous, as that was an inherent property of chemicals. The proposals of CAIA had largely to do with the language of the drafting, and it saw a problem because of the way hazardous was defined.

Mr Njikelana asked what the financial implications of the proposals would be, as there was always the possibility of increased risk and the increased cost of doing business. He wanted to know how CAIA proposed to minimise this cost.

Ms Lotter responded that a solid way forward would be to revisit clause 2(9) and 5 and then review the rest of the Bill so that the logic of that approach could be applied, and the terminology could be kept consistent. There was no law that did not imply a cost for consumers, businesses and government. The key challenge was to manage that cost. This would need the support of all of society as the implementation would be challenging.

Business Unity South Africa (BUSA) submission
Ms Laurraine Lotter, representing Business Unity South Africa (BUSA) explained that BUSA was confederation of business associations. The submission that she would now make was an overarching submission from business. BUSA recognised the need for improved regulation of consumer protection. The detailed engagement with NEDLAC was welcomed, as was further engagement with the Department of Trade and Industry. Many concerns were addressed in the submission. These included unintended consequences, duplication, concurrent jurisdiction, institutional structures, compliance notices, vicarious liability, proof of facts procedures, regulations, public consultation and transitional provisions. She explained that the written submission also contained detailed proposals for revisions to
clauses 2(9), 5(2), 12, 22, 53, 93, 97, 113, 119(2), and 120(2) (see attached document).

In conclusion, she stated that BUSA supported the need to strengthen consumer protection, but felt that the significant legal challenges and burdens must be addressed before finalisation. The NEDLAC agreements were not fully addressed. The regulations had to be published simultaneously, as agreed at NEDLAC. The implementation of the Bill was technically challenging. BUSA and it affiliates were committed to co-operation at any future opportunity.

Discussion
Ms Khunou commented that there was a general need to read the explanatory notes of the National Credit Act (NCA) and its aims to promote responsible credit. It was unfortunate that since the coming into effect of the Act, loan sharks now had more business than ever. The problem with loan sharks was the high interest that they charged. This was something the DTI needed to cover in their discussions.

Ms Christine Malan, Group Compliance Officer: Foschini, speaking on behalf of BUSA, stated that the NCA also had a number of unintended consequences and that this was unfortunate. There was an affordability requirement in the NCA, which made it difficult for people to obtain loans if they could not reasonably afford the repayments. This had led to many people being unable to obtain “regular” loans, becoming desperate and having to take the kinds of loans offered by loan sharks. The NCA would prevail in dealing with that issue as it was a sector specific legislation that dealt with credit. There was a need to neatly delineate between the NCA and the Consumer Protection Bill.

Ms Khunou asked for clarity on the vicarious liability and proof of facts issues mentioned by the presenter.

Ms Malan responded that this section of the submission was based on a report of Strategic Business Partnerships, commissioned by government, entitled Cutting the Red Tape, which reported a cost of about R79 billion without additions of the implementation cost of the NCA.

Mr Njikelana was of the view that the Committee must focus on crafting regulations and the implementation of the Bill, and asked BUSA for their comments on his view. He asked BUSA to share the details of the cost compliance study with the Committee.

Ms Lotter responded that they would provide that report to the Committee.

Mr Njikelana stated that he expected the Department also to elaborate on the situation where the State was both a supplier and a consumer.

Ms Malan replied that when it was a matter of credit extended, the NCA would apply but in matters where goods were purchased by government, the Consumer Protection Bill would apply.

Ms Lotter replied that if the Department wanted to exclude the State from being regarded as a consumer it would have to be done through far more definitive wording.

Ms Mahomed asked if the Bill could accommodate the sector-specific provisions and asked for comments on the technical challenges of the implementation of the Bill.

Ms Lotter responded that the Bill should not, for instance, mention the time within which a person may be contacted by SMS messaging, unless the times were specifically set, which would usually be done by regulation. That was just one example of a technical issue of regulation. She was confident that this would be deliberated on, and details set as to the time frames. Another technical issue was that of the regulation of GMOs. If the Committee decided that this matter should be dealt with by way of a label, they would need to deal with the detail of that label in the regulations. Her conservative time estimate for the drafting of regulations would be around a year because of the complexity of the technical challenges. There were many more examples of such technical challenges.

Business Connexion submission
Mr Niel Haupt, Legal Counsel and Compliance Officer: Business Connexion, described the entity as a leading black empowered Information and Communications Technology (ICT) company, an integrator of competitive, innovative business solutions based on ICT.

He detailed Business Connexion's primary objection to the Bill. It was of the view, in line with worldwide trends in consumer legislation, that the Bill should not apply on a corporate to corporate level. This referred to the relationship between corporate supplier and corporate consumer. So far, through listening to the processes being followed, he had some indication as to why there had been a decision to deviate from worldwide practice, which was, in summary, that the Department of Trade and Industry wished include small businesses in the protection that the Bill afforded, as many small businesses could not afford to defend their rights in court. He stated that the blanket exclusion proposed would not help in that regard.

He believed that the current wording of the Bill would not meet the DTI's stated intent. Business Connexion accepted that small businesses may be in need of the protection afforded by this type of legislation. The problem was that the wording was based on a transactional value. If a small business was in fact worthy of protection, then it should be entitled to that protection whether there was a small or large transaction involved. The aim of the DTI would only be partially met, as small businesses would not get the full protection they needed.

The second objection was that if the intent was to protect small businesses, then big business should be left out of it. The loose drafting of this provision in the Bill had the unintended consequence of also pulling in the transactions of big business. In their environment, Business Connexion seldom entered into standard form contract transactions. There was no need for this kind of paternalism and protection when parties were of equal bargaining power, and had the time and resources to negotiate. It understood this need on the level of small business. He called for a reconsideration of medium to big business transactions. This could easily be achieved by adjusting the current wording of the Bill. The suggestion was that the definition of “person” could be restricted by a further stipulation of “small business” and that the small business then could be defined in line with the National Credit Act, which worked on a turnover basis. For instance, if the annual turnover was R1 million or more, then the Consumer Protection Act would not apply. This would be a very good indication of what would be regarded as a small business. Business Connexion were not particularly insistent on the R1 million amount, but considered it a good yardstick for differentiation between small and big business, that was also in line with other legislation.

Discussion
Mr Labuschagne commented that it was very clear what was required. It was a question of simple draftsmanship, and should not be too difficult to accommodate. He had always had trouble with defining what was a big or small transaction. He agreed that basing it on the size of the business would be preferable to using the size of the transaction. He was sure this was something that DTI would look at.

The morning session was adjourned.

Banking Association of South Africa (BASA) submission
Mr Cassim Coovadia, Managing Director: BASA, stated that the Banking Association of South Africa (BASA) welcomed the opportunity to make a submission on the Consumer Protection Bill. An overriding concern of the banking industry related to the Bill’s application to credit agreements and services that were regulated by the National Credit Act (NCA) and the Financial Advisory and Intermediary Services Act (FAIS Act). In the last draft of the Bill, certain exclusions (for FAIS and insurance) were introduced and some were removed (credit). This required urgent attention.

Mr Coovadia reviewed consumer protection in financial services, noting that the Act and the NCA promoted consumer protection. The Bill only partially excluded transactions subject to the FAIS Act and excluded no transactions subject to the NCA, although the latter Act provided more consumer protection than insurance laws. It was inconsistent to take into account insurance specific sector laws whilst not providing for credit laws in a similar vein.

The Bill currently provided partial exclusion for FAIS Act. The definition of “service”, however, excluded “advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002”. The FAIS Act regulated not only advice, but also intermediary services. This partial exclusion required the industry to assess which elements of FAIS were excluded, and this caused significant uncertainty. It was recommended that all services regulated in terms of FAIS Act should be excluded.
There were currently no exclusions for NCA, although it was excluded from the first public drafts of the Bill. This produced the result that the National Credit Regulator would need to apply for exemption from specific clauses from the Minister of Trade and Industry. No timeframes were provided for processing of applications, and there was a risk that the industry would not be ready when Bill was implemented if the exemption was not processed. When the exclusions for the NCA were removed from the draft, the Bill was not reviewed to ensure consistency and as a result there was conflict between the NCA and the Bill in a number of provisions.

BASA therefore recommended that NCA should be excluded from the ambit of the Consumer Protection Bill, with consequential amendments to NCA, to address four gaps in clauses 12, 35, 41 and 49.
The critical recommendation was that the sub-clause (1)(c) of the definition of “service” should be rephrased. This would extend to the consequential amendments to NCA to accommodate sections 12, 41 and 49.

Mr Nicky Lala-Mohan, General Manager: BASA, summarised the comparison of the substantive provisions and duplications between the NCA and the Bill.

Discussion
Ms Ntuli referred to Clause 55 (6) and asked if BASA did not think that the goods should be inspected. She added that she would be comfortable with that proposal if such an inspection took place.

Mr Lala-Mohan stated that this was a problem inherent to the “voetstoots” clause (when an item was sold “as is” and the buyer was not allowed to request any improvement to the item being sold). He commented that second hand cars were often sold on this basis. The nature of “voetstoots” created this problem.

Mr Njikelana noted that there was provision made for the protection of privacy in the Bill. He differed in his interpretation from that of BASA and asked for further clarity.

Mr Lala-Mohan responded that this referred to customer loyalty programmes, and there was a difficulty in disclosure, where the price was not disclosed but the value of the prizes was.

Dr Rasmeni referred to the recommendation on the definition of “service”. He asked what the gist of this was, and if this exclusion was really necessary.

Mr Lala-Mohan responded that this actually excluded any service regulator and did not specifically exclude services. The recommendation was that it must exclude services rendered in respect of the National Credit Act.

Mr Dlali , asked if the insertion of (b) on page 3 of the submission would be tautologous.

Mr Lala-Mohan responded that this was possible, and that this point would receive attention.

Mr Dlali referred to point 2.3.8 in the submission and asked why the Banking Association would want to influence the application.

Mr Coovadia responded that BASA recognised that the consumer protection legislation would be the prime piece of legislation for consumer protection, but that it must be seen in the context of existing legislation. Banks had responded to the National Credit Act and the previous legislation should be allowed to be applied.

National Economic Development and Labour Council (NEDLAC) submission
Mr Herbert Mkhize, Information Officer: NEDLAC,  tabled NEDLAC’s report. He reviewed the history of NEDLAC, the accepted process flow, and the agreements that business and labour had come to on the Bill. Most notably they did not think that sufficient attention had been paid to the implications for employment and industrial development. The objections that would be set out were agreed to by all constituencies. NEDLAC regarded the inclusion of Small Micro and Medium Enterprises (SMMEs) as consumers. He noted the concerns about definitions, duplications, the publication date of regulations and consultation on the regulations. References to institutions in the Bill were also discussed, as were the duplication, compliance costs, and criminal sanctions. He outlined the areas on which business and labour did not agree and discussed the additional issues raised by labour (see attached presentation).

Discussion
Mr Labuschagne asked for clarification as to why SMMEs were not included as a consumer. He asked if a sole proprietor would be included, as a Close Corporation (CC) would be excluded. He asked why all SMMEs could not have that protection.

Ms Laurraine Lotter, Executive Director, Business Unity South Africa, speaking on behalf of business, responded that this had been the previous position of business. Upon further discussion NEDLAC had come to the conclusion that SMMEs should be included as a consumer.

Ms Mahomed asked for comments on why the word “user” was not covered.

Ms Lotter responded that the term “user” currently also referred to products that were intermediate. The reference noted the intention not to include such products.

Mr Njikelana queried the exclusion of sectors and their coverage in the bill. He asked if this was something different from what had been presented.

Ms Lotter responded that this referred to the precedence of sectoral legislation or regulation. There were serious conflicts around which legislation should take precedence.

Mr Njikelana asked if there should be an NCA Tribunal. In this regard the rationalisation of agencies might be a good approach. He asked if the tribunal would be adequate to address the legislation.

Ms Zodwa Ntuli, Deputy Director-General, Corporate and Consumer Regulation, dti,  responded that the tribunal was already established in terms of the NCA, and it did deal with multiple Acts already. As to the capacity of the tribunal, she added that if the mandate increased the funding would have to increase as well.

Mr Njikelana remarked that the Committee Members would have to apply their minds to areas of disagreement.

Dr Rabie asked for clarification of the opt-out approach and criminal sanctions mentioned in the presentation

Ms Lotter responded that there was a principle-based approach as to how businesses conducted themselves, and limited the extent of the provisions of the Bill. On these broad principles, businesses would decide how they would implement provisions. Most of the sanctions in previous laws were criminal, but consumers were more interested in other kinds of redress, such as refunds or discounts. The dti would suggest a pyramid process where they could stratify responses in levels, dealing with clarification on problems, refunds and discounts, up to matters where criminal sanction was appropriate.  Mr Mkhize responded that the labour sector felt that criminal sanctions should be retained.

Ms Ntuli asked for an indication of what was meant by the comment that the Bill limited the scope of fair labour practices.

Mr Mkhize responded that the Bill should not undermine fair labour practices.

Dr Rasmeni asks for expansion on the comment of further work to be done.

Ms Lotter responded that there was a need for further work to be done while the process of the Bill was in progress, as the DTI continued to incorporate the agreements that arose.

Ms Ntuli asked if these were the only problematic matters that would affect consumers. She asked that there be a specific focus on areas for regulation that affected the poorest of the poor.

Mr Mkhize responded that the process was ongoing to fix these issues. He commented that NEDLAC recognised the sovereignty of Parliament at times when social partners did not agree, and thought it appropriate for it to provide leadership.

Consumer Goods Council (CGCSA) submission
Mr Nick Tselentis, Legal and Regulatory Affairs Manager: CGCSA, gave the Committee some background  on the Consumer Goods Council of South Africa (CGCSA). Its membership consisted of retailers, wholesalers, manufacturers and relevant services providers. The total membership – including local and international organisations – consisted of more than 11 000 companies. The various projects included GS1 barcodes, RFID tags, product data catalogues, a Crime Prevention unit, a food safety initiative, the promotion of an efficient consumer response and legal and economic affairs.

The Council’s submission focused primarily on issues related to franchises. It believed that the definition of consumer was unsuitable, and that a franchisee was not a consumer. The bundle of goods specified was too vague. As an example he pointed out that cell phone packages and hamburgers were not the same.

The CGCSA proposed that, since consumers faced a mountain of product complaint procedure and redress information, the CGCSA should prepare a standard template for consumer complaints to appear in all similar retail outlets. This would be an effective industry response as the CGCSA could reach most participants in the industry in at least 23 categories of products involved. The sector thanked the dti for its persistence in this important work. The South African consumer would surely benefit from simplified and all encompassing processes.

Discussion
Mr Njikelana  commented that there were always ups and downs in the consultation process with reference to the 'sad' period mentioned by the CGCSA.

Mr Njikelana referred to the mention of the self regulating industries. He asked if the CGCSA was considering its own initiative in that direction.

Mr Tselentis responded that the Council had a standard template concept, so that consumers would know what their rights were. The aim was to have this information displayed in-store. Their members battled to get all the information in the same place. The idea was to come up with a simple format for consumers to understand what they could and must do in respect of a complaint. The reality was that every store and product was different. The Council was trying to extract the commonalities and generate a single formulation. This was also aimed at a quicker response to the consumer complaint for retailers.

Ms Ntuli asked why the CGCSA's members would like to be a self regulatory industry.

Mr Tselentis responded that the Council did not seek to be a regulator. If their members required assistance, they had to listen. Their focus was now on the template and allowing that consumer have their own rights explained to them.


Wireless Application Service Providers Associations (WASPA) submission
Mr Leon Perlman, Chairman: WASPA, reported that the Association represented ‘Wireless Application Service Providers’ (WASPs). WASPs provided novel mobile services. WASPA, formed in 2004, required all service providers to be members of it, and it had achieved worldwide recognition for its work. WASPA had self regulatory consumer protection, using an enforced Code of Conduct. WASPA had the power to close services and provide immediate refunds, amongst other sanctions and powers. He gave a broad overview of WASPA’s statistics, and South Africa’s mobile usage statistics, including interactive TV (such as the voting for “Idols”), banking via cellphone, search engines, payment services, music and game downloads, competitions, location services, tracking services and news alerts. The services WASPs provided included M-Commerce (e-commerce via the mobile phone.)

Mr Mike Silber, Regulatory Advisor, WASPA, outlined the specific comments of the Association on the Bill. He pointed out that there were legal and practical gaps and that the general regulation or rules may not speedily provide answers to highly complex technology scenarios. WASPA submitted that there was a need for flexible self regulation via sector-specific agencies. WASPs were an industry that was evolving, and was aiming to provide an ex ante code of conduct to protect children and other vulnerable consumers, put pressure on rogues, impose sanctions on services, closed own services and build consumer confidence.

He reviewed their proposal of self regulation, the WASPA Code Of Conduct and advertising rules, the scope of the code of conduct, the WASPA Media Monitor, WASPA Adjudicators & Appeals Panel and their results from this approach (see attached document)

Other comments covered consumer issues, their belief that a reflexive Code of Conduct was necessary, promotional competitions, recognition of Codes of Conduct and the concerns that some provisions of the ECT Act of 2002 still were not implemented. He reiterated that technology regulation was very complex. Therefore WASPA proposed services exemption (similar to the ECT Act) or interim recognition.

Discussion
Ms Khunou remarked that some of the SMS competitions were uncalled for, and asked for advice on curbing this unsolicited communication. As an example she referred to the Win IKhaya SMS competition.  

Mr Perlman responded that Win IKhaya was currently under consideration by the courts, and therefore could not be discussed. 

Ms Khunou asked what happened if WASPA was blacklisting the expelled operators and whether they could continue to operate outside of WASPA.

Mr Perlman responded that such operators could not hop from WASP to WASP. The system was connected to the mobile operators’ billing system. The only option available to them, once blacklisted, would be to give away the service for free.

Ms Ntuli wanted to know how WASPA monitored prices, and how these terms and conditions of the competitions were displayed in the advertising.

Mr Perlman responded that the WASPA media monitor checked compliance. They had a very strict code of conduct. When investigating an operator, WASPA could request an audit, ask for any information and even suspend services until the investigation was concluded, so the regulatory process was very robust.

Mr Silber added that WASPA had very strict rules regarding pricing. If a complaint was brought to its attention, it would investigate. WASPA was largely happy with the Bill’s provisions in this regard. He noted that it was not possible for service providers to offer an unlawful prize, and requirements to qualify for the prize had to be made clear.

Ms Ntuli asked for clarity on WASPA’s proposal to be a self-regulatory body and its submission that it be entitled to apply for an exemption.

Mr Silber responded that WASPA believed it was doing a better job through self regulation than could be achieved by statutory regulation.

Ms Mahomed referred to the comments that self regulation would save time and narrow bureaucracy. She asked if it was saying that the Bill was insignificant, or was complementary to their effort to  be self regulatory.

Mr Silber responded that in the absence of support, self regulation would help consumers. If co-regulation was imposed, it was his opinion that it would slow them down. It would not give WASPA any more beneficial powers than their existing powers – for instance to shut down an operator within a day. The problems that WASPA faced required speedy resolution, and this would not be possible in a statutory process.

Ms Mahomed queried the R10 000 entry level threshold and asked what parameters WASPA used to arrive at this capping amount. She asked how they would frame this to include conglomerates and Small Micro and Medium Enterprises (SMMEs).

Mr Perlman responded that the idea behind the R10 000 prize limit was that the cap was low enough so as not to overindulge people. It was at this stage only a suggestion.

Congress Of South African Trade Unions (COSATU) submission
Ms Prakashnee Govendor, Parliamentary Officer, COSATU, reported that COSATU broadly supported the Bill in its efforts to balance individual with collective interests. She briefly commented on the NEDLAC process. Generally, they had focused more on compliance and the structure and approach of the Bill. The opinion was expressed that the Bill was poorly drafted. She outlined the scope of the Bill and its overlap with other sectoral legislation. Their comments on the specific provisions of the Bill covered concerns around the definitions. Here she noted the effect on the broader development objectives of the inclusion of land and immovable property, and gas, water, and electricity in the definition of goods.

Other specific comments covered the interpretation, purpose and policy, application, right of equality, product labeling and trade descriptions, alternative work schemes, liability for damage caused by goods and penalties (see attached presentation for details).

Discussion
Ms Ntuli asked COSATU to elaborate on what was meant by the reference to land redistribution and potential clash with consumer rights.

Ms Govendor responded that those comments came from their ongoing struggle to implement land reform. COSATU was not saying that the regulation of immovable property should be removed, rather that it wanted immovable property to be regulated in terms of consumer protection. It needed to be sufficiently differentiated, to ensure that it did not compromise land reform. The Bill would relate to redistribution as well as restitution, but would lean more toward a focus on redistribution as the process was concluded.

Dr Rasmeni asked about agreements or protocols with NEDLAC.

Ms Govendor responded that the COSATU and NEDLAC agreements were not reflected in the Bill. The dti should be asked to answer as to why these were not yet reflected. She realised COSATU could not bind Parliament but was making an urgent call in this regard.

Mr Njikelana referred to comments on the broad base of the Bill and asked COSATU to elaborate on the issues surrounding the overlap. He asked if it believed there was a case for the exemptions.

Ms Govendor responded that the main argument was not to reduce regulation in any way, rather to provide more clarity for the Bill’s application.

Mr Njikelana asked what COSATU thought could be included in the chapter in relation to the State.
Mr Mahomed remarked that she was quite concerned about the comments that the Bill was poorly drafted from a technical point of view and would like to hear more specific comments.

Ms Govendor responded that COSATU had provided examples in its written submission, detailing the specific instances where, on a strict reading of the Bill, it seemed to be flawed. This could give rise to unintended consequences. That specific comment related to the fact that the sectoral provisions had not been dealt with.

The meeting was adjourned.

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