Consumer Protection Bill, 2008 PRESENTATION TO THE SELECT COMMITTEE ON ECONOMIC & FOREIGN AFFAIRS DATE: 16 October 2008 Zodwa Ntuli – DDG: Consumer and Corporate Regulation Division (CCRD) Nomfundo Maseti – D: Competition & Consumer Policy & Law (CCRD)

2 Purpose The purpose of this presentation is to present amendments to the Consumer Protection Bill (B 19B-2008) for consideration and approval

3 Introduction  The Consumer Protection Bill (“the Bill”) was introduced to the Select Committee in May 2008;  Public hearings and provincial briefings were held in June and July 2008;  The Select Committee adopted the Bill on 6 August, and it was debated in the NCOP on 21 August 2008;  On 26 September 2008, the National Assembly debated and adopted the Bill subject to certain amendments;  The amendments are presented today to this Committee for concurrency

4 Amendments Summary of amendments 1.Definitions – omitted certain words and amended definitions 2.Interpretation - excluded chemical products on clause 2 on concurrent application with sectoral laws 3.Application of the Act - exclude phrase on goods at the direction of the state; and excluded internal trade union services with members 4.Threshold – now based on turnover value and not value of transaction 5.Bundling of goods – to give consumers a choice to buy bundled goods separately and at individual prices 6.Fixed term agreements – exclude business to business transactions to avoid unintended consequences, and require notice of expiry of agreement to be in any recordable form 7.Information on plain language – notice and visuals to be produced and provided in the prescribed manner, and the amendment provides for publication of guidelines 8.GMOs labelling – included labelling of GMO products to inform the consumer and enable it to choose 9.Unfair contract terms and unconscionable conduct – omitted words for consistency and those that introduce a high standard 10.Written consumer agreements – require a supplier to keep record of transactions or agreements entered into over the telephone 11.Prohibited transactions or terms – excluded financial institutions that require a PIN Code for transactions

5 Definitions 12. Implied warranty – Remove words “at the option of the supplier” as is inconsistent with rights of consumers in terms of Common Law 13. Safe disposal of designated products or components – removed certain words and added subclause 2 to harmonize this Bill with other national legislation 14. Product liability – removed subsection which excludes GMO products from liability 15. Enforcement institutions – to avoid confusion, clause 69 on redress was revised to provide clear redress processes 16. Consent orders – clause 70 was rearranged to outline process of alternative dispute resolution; and granted the Tribunal powers to confirm consent orders 17. Appointment of Deputy Commissioners – inserted a clause for appointment of deputy commissioners 20. Consequential amendments –clause 49 of the Electronic Communications and Transactions Act for consistency; and the National Credit Act on penalty provisions for alignment with this Bill

6 Definitions Comment Section 1 Definitions of direct marketing and electronic communications in this Bill are inconsistent with the Electronic Communications and Transactions Act (ECT Act) Use of the words “Bluetooth, internet or website” are confusing and should be deleted Definition of ‘service’ should exclude services provided by National Credit Act, and services regulated under Financial Advisory and Intermediary Services Act (FAIS) to avoid duplication Amendment The definition of ‘direct marketing’ and ‘electronic communications’ were amended to align them with those already provided in the ECT Act. To avoid duplication, credit agreements regulated under the National Credit Act (NCA) are excluded from definition of services but goods bought on credit will be subjected to the provisions of this Bill. The definition of “service” was amended to exclude intermediary services regulated by FAIS Act.

7 Interpretation Comment Section 1 Section 2(9) is onerous as it allows the Bill to prevail over other legislation when there is inconsistency Technical aspects e.g. on safety, should remain with specialists departments, and the Bill may take precedence in respect of redress to consumers Amendment To address the above concerns, the definition of ‘regulatory authority’ was broadened to avoid duplication and to enable departments and other authorities to apply for exemption from the application of the provisions of this Bill; This definition was broadened by including ‘organs of state’ Further, exclusion of hazardous chemical products was excluded from the application of section 2(9), but consumers may still get redress in terms of this Bill

8 Application of the Act Comment Section 5 Section 5(2)(a) excludes consumers of goods supplied at the direction of the State; the actual users of those goods or recipients or beneficiaries of those services will not be in a position to rely on the Bill. Section 5(6) regulates internal services of trade unions which are already covered under the Labour Relations Act (LRA) Section 2(9)(b) contradicts section 210 of the LRA Threshold in the Bill is based on size of transaction; this will mean protection to big business Amendment To address concern on section 5(2)(a), the phrase “at the direction of the state” which contradicts section 5(8) was removed. The intention is to exclude the state as a consumer but to include the state or any of its agents as a supplier. The dti proposes amendments to section 5(6) to explicitly exclude collective bargaining services regulated under LRA. The intention was not to regulate the primary services of trade unions such as collective bargaining services offered by them, but rather to regulate any commercial activities rendered by unions (e.g. funeral scheme plans, investments).

9 Application of the Act There is no contradiction between section 2(9)(b) of the Bill and 210 of the LRA since the former deals with consumer protection issues whilst the later deals with labour relations issues. This concern is addressed by exclusion of trade union services with members. The threshold in section 5(2)(b)(i) is changed to reflect a threshold based on annual turnover/ asset value of the firm, to be determined in terms of regulations. The intention is to protect SMMEs, not big business.

10 Bundling of goods Comment Section 13 Allow for consumers to buy bundled goods separately at individual prices; Amend section 13(1) to include “or the supplier offers the bundled goods or services separately and at individual prices.” Amendment Section 13(1) of the Bill is amended to allow for bundled goods to be sold separately and at individual prices.

11 Fixed Term Agreement Comment Section 14 The Bill limits notification to the consumer to be in writing. Consider including the words “or any other recordable form” in section 14 (1) (c) Exclude franchise agreements from the ambit of section 14. Cancellation of fixed term agreements by giving 20 days notice will impact negatively on big businesses such as Eskom, Transnet etc, who enter into big contracts. It will be difficult for big businesses to find a replacement in the event of cancellation Amendment The Bill is amended to include “any other recordable form”. Franchise agreements are already excluded from the definition of consumer agreements regulated under section 14 of the Bill for fixed term agreements. Section 14 is amended to exclude business to business transactions in order to address the above concern.

12 Information in plain language Comment Section 22 Concerned about requirement for visual representation and presentation of notice to be in plain and understandable language It is unclear how visual representation can be displayed in simple language Guidelines must be developed for compliance with this requirement Amendment The Bill is amended by inserting “prescribed in terms of this Act or any other legislation.” This will provide guidance to business on the manner in which information in such notices should be displayed. Guidelines will be developed and published in this regard

13 GMO Labelling Comment Section 24 Re-introduce the requirement for Genetically Modified Organisms (GMOs) labelling to enable consumers to make informed choices. Amendment The GMO labelling was originally covered in the Bill but was removed after concerns raised by the Department of Agriculture. Concerns relate to cost of labelling and technical expertise in regulating safety issues in GMO products. The Dept of Health also raised concerns regarding cost of labelling on food prices. The dti has no technical capacity to pronounce on the safety or non-safety of GMOs but can deal with consumer redress issues. Technical aspects on safety are dealt with in the GMOs Act. Section 24 of the Bill was amended by inserting a clause requiring labelling of GMO products. This will enable consumers to make informed choices. No substantial cost implications expected by introducing GMO Labelling as the Bill does not prescribe how labelling should be done.

14 Unfair Contract Terms Comment Section 40 & 48 Introduce the word “duress” to replace “pressure” as it is familiar to courts and all- encompassing Unfair contract terms in the Bill do not provide effective protection of consumers Introduce the concept of “Greylist” clauses on what constitutes unfair contract terms Greylist clauses will be presumed to be unfair Amendment The word “pressure” in section 40 was replaced by “duress”; The aim of the Bill was not to take over common law from the domain of our courts; Legislation needs to provide broad principles to cover future situations; Section 48 provides broad principles for the courts to guide on how to approach issues of unfair contract terms; Section 51 already provides for “blacklist” of unfair contract terms and agreements that are prohibited upfront; The proposed greylist cannot be incorporated in the Bill but may be considered in the regulations. It can be flexible and be amended from time to time as the need arises. Section 120 of the Bill to insert for regulation of unfair contract terms and incorporate certain provisions in the proposed “greylist.”

15 Written consumer agreements Comment Section 50 This section does provide for keeping of records of transactions or agreements entered into between the supplier and consumer over the telephone. This may pose a risk on consumers. Amendment The section is amended to require the supplier to keep record of transactions or agreements entered into over the telephone or any other recordable form as prescribed. The Minister may prescribe categories of agreements that are required to be in writing.

16 Prohibited Transactions Comment Section 51 To require a consumer to provide a PIN number is prohibited by the Bill this will have unintended consequences – security feature regarding use of ATMs. Exempt banks, mutual banks or “other financial institution” Dti Response Section 51(1)(j)(ii) and 51(2)(b)(ii) of the Bill will be made to ensure that banks are not prevented from asking for PIN codes when transacting with clients. This was not intended. This section is amended to allow banks and other financial institutions to require personal identification for purposes of facilitating a transaction. The prohibition therefore excludes or does not apply to the banks.

17 Implied Warranties Comment Section 54 &56 Option to refund consumers should not be on supplier’s discretion, but should allow consumer to choose whether to fix the problem or get a refund. These sections limit consumer’s rights in terms of common law. Under the section it is the supplier who has the discretion to repair or to replace. Amendment Sections 54 & 56(2)(a) are amended to enable the consumer to choose whether she or he wants the goods to be repaired or get a refund in line with the common law. Phrases “at the option of the supplier” are omitted to give consumers choice. Rights provided in these two sections are in addition to common law rights, and are meant to enhance rather than weaken consumer protection. These are goods not fit for purpose for which they were purchased.

18 Safe disposal of goods Comment Section 59 Wording in section 59 is inconsistent with national legislation on disposal of containers or goods to a collective waste system e.g. Waste Management Bill This may lead to consumers or suppliers not complying with regulation Remove certain words such as “public regulation” as it is too broad Insert subclause 2 to recognise waste management plan prescribed in the Waste Management Bill. Amendment The wording of section 59 was slightly amended to remove words such as ‘public regulation’. Inserted subclause 2 to align this Bill with the provisions of the Waste Management Bill while still enabling the consumer to choose where to dispose the goods and ensure that no charge or costs incurred by the consumer for such disposal or return of goods.

19 Product Liability Comment Section 61 Section 61 excludes damage caused by GMO products, this must be deleted in order to ensure that illness or damage caused by GMO products is subjected to this provision. Subsection 61(5)(c)(ii) should be removed as it expects one to have scientific and technical knowledge of the state of the goods whilst in his or her control. Amendment Section 61(1) was deleted in order to include liability for damage caused by GMO products. Subsection 61(5)(c)(ii) is deleted too as it is impossible for suppliers to know the state of scientific and technical knowledge of the harm that can result from the goods.

20 Enforcement institutions Comment Section 69 Confusion as to which forum consumers should approach for enforcement of their rights. Alternative dispute resolution mechanism meant to be point of entry for consumer redress; however this section is not clear. Dti Response The Bill provides alternative avenues of access for consumer redress Section 69 was revised to make it clear which avenues the consumer should pursue for enforcement of his or her rights. This led to revision of section 70 to confine it to Alternative Dispute Resolution process.

21 Dispute Resolution Process Consumer Provincial Courts Suppliers NCC High Court Dispute Resolution Agent OMBUDs Consent Order Tribunal/Courts 21

22 Consent orders Comment Section 70 to 74 Section 70 requires an Alternative Dispute Resolution (ADR) outcome/ order to be confirmed by the High Court and not by the Tribunal, High Court process expensive. Process of ADR is confusing as the steps are not clearly outlined. The Bill also does not empower the Tribunal to confirm consent orders; and to amend or vary such consent orders if need arises. Amendment Section 70 was amended by inserting ‘the Tribunal’ as a competent body to confirm ADR awards or orders. The process of ADR is properly set out in section 70 to avoid confusion to consumers. Consumers will know steps involved before filing complaints with the Commission. The Bill is amended to empower the Tribunal to hear consent order applications, confirm and amend them.

23 Appointment of Deputy Commissioners Comment Section 87 The Bill does not provide for appointment of deputy commissioners for the National Consumer Commission (NCC). The bill must be amended to include appointment of deputy commissioners. Amendment The exclusion of appointment of deputy commissioners was an oversight. It was not a policy decision. The dti believes the Act must make provisions for these appointments to capacitate the Commission and provide for a structured decision-making authority which will assist the Commissioner. The Bill is amended by inserting a clause for appointment of deputy commissioners. It also enables the Parliamentary Committee to be consulted before such appointment.

24 Consequential Amendments Comment Section 112 of the Bill and section 151 of the National Credit Act These sections are not aligned, and limit the powers of the Tribunal to impose fines only for conduct prohibited in terms of each Act. For example: Section 151 of the NCA empowers the Tribunal to impose fines only in respect of conduct prohibited in terms of that Act. Align the Bill with Chapter 7 of Electronic Communications and Transactions Act (ECT Act) Amendment Align sections 112 of the Bill and 151 of the NCA to empower the Tribunal to impose fines for prohibited or required conduct. Consequential amendment to section 151 of the NCA. It is proposed that the Bill be aligned with section 49 of the ECT Act as it makes reference to the Consumer Affairs Committee.

25 Technical amendments Comment Other changes effected in the Bill are technical and relate to: -Deletion and replacement of words or phrases -Cross reference and numbering -Insertion of words e.g. ‘labelling’ in section 110 on penalties for non-compliance with labelling or trade description provisions. These changes are summarised in document B 19C- 2008

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