1 October 2009 by

Application of the Consumer Protection Act

The Act applies to:

  • every transaction occurring within the Republic;
  • the promotion of any goods or services or of the supply of any goods or services;
  • goods or services that are supplied or performed in terms of a transaction.

The Act has a very wide application and manufacturers, importers, retailers, distributors, agents and marketers should be conscious of the fact that the Act applies not only to the provision but also to the promotion and marketing (i.e. advertising) of goods and services as well as to actual agreements between suppliers and consumers in terms of which goods or services are supplied or offered. he definition of the term 'transaction' attempts to cover almost every agreement for, or act of supplying, goods or services occurring in South Africa made in the ordinary course of business. The term 'ordinary course of business' indicates that supply outside of the ordinary course of business, does not qualify as a transaction for the purposes of the Act. Where one friend privately sells a car to another, the transaction is not subject to the Act (unless the selling party ordinarily conducts the business of selling cars).

Although a transaction typically involves some form of consideration payable, a transaction also includes 'the supply of goods or services in the ordinary course of business to any of its members by a club, trade union, association, society whether incorporated or unincorporated... irrespective of whether there is a charge or economic contribution demanded or expected'. The Act applies irrespective of whether the supplier resides or has its principal office outside the Republic, or operates on a for-profit basis or otherwise.

The term 'goods' is a common sense notion of things ordinarily traded and is defined to include almost any tangible or intangible item. This covers, but is not limited to, all consumables, as well as literature, music, information and legal interests in immovable property. 'Services' are defined to include any work or undertaking performed for the benefit of another including those relating to education, banking, advice and consultation, transportation, accommodation, electronic communication and entertainment, as well as the right to access or occupy premises. The Act applies to persons promoting or offering services even if that person does not actively participate in, supervise or engage in the service.

The upshot of this is that all parties to a transaction, at all stages of the supply chain, will have to pay closer attention to the way in which they conduct business and implement trading policies in order to avoid falling foul of the Act.

The application of the Act to pre-existing transactions and agreements is, however, limited. It generally does not apply to the marketing of any goods or services, transactions concluded and or goods and services supplied before the general effective date.

In addition, the Act exempts certain types of transactions. Exemptions include transactions in terms of which:

  • goods or services are promoted or supplied to the State;
  • the consumer is a juristic person whose asset value or annual turnover, at the time of the transaction, equals or exceeds the threshold value to be determined by the Minister (it is expected that these thresholds will be set at a level that will ensure that small businesses and juristic persons that are alter egos of individuals will be protected under the Act);
  • the transaction constitutes a credit agreement under the National Credit Act (although the goods or services subject to the credit agreement will be subject to the Act. For example, in the case of the sale of a car on hire purchase, the credit agreement itself in terms of which the car is bought and sold will be subject to the National Credit Act, while the actual car, will have to meet with the quality and safety requirements of the Act);
  • services are supplied under an employment contract;
  • effect is given to a collective bargaining agreement.

Banking and related financial services and advice regulated under the Financial Advisory and Intermediate Services Act, the Long-term Insurance Act or the Short-term Insurance Act are also carved out.

Regulatory authorities are entitled to apply for exemptions for the industry under their control, but only to the extent that the sector regulator has a remit to regulate consumer protection affairs, and to the extent that such regulation would not detract from rights that consumers in the relevant sector would otherwise enjoy under the Act. However, regardless of what exemptions apply, all importers, producers, distributors and retailers are always subject to safety standards that must be developed in terms of the Act and are strictly liable (liable without fault or negligence) for any damage caused by unsafe or defective goods.

Chris Charter, Director, Competition and
Gregory Solik, Candidate Attorney, Competition

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