South Africans' consumer rights will be among the best protected in the world once the Consumer Protection Bill is written into law. But suppliers will need to review not only their manufacturing standards and quality control, but also their contracts and complaints handling processes to ensure that they do not contravene any provisions in the new law. Suppliers found to contravene the law could face imprisonment of up to 10 years or administrative fines of R1m or 10% of their previous year's turnover.
"The bill is unashamedly pro-consumer," says Deneys Reitz director Donald Dinnie.
The rights-based piece of legislation includes eight fundamental consumer rights. These are the right to equality; privacy; choice; disclosure and information; fair and responsible advertising; fair and honest dealings; fair, just and reasonable terms and conditions; and fair value, good quality and safety. There are also a number of sections dealing with suppliers' accountability to consumers.
WHAT IT MEANS
 Easier to establish producer liability
Enhanced consumer protection
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"Though many of the provisions of the bill are to be welcomed, ultimately the costs of implementation and the liabilities created under the bill are likely to be passed on to consumers," says Dinnie.
One of the most controversial parts of the bill is the section that introduces a no-fault liability for damage caused by goods. Under current legislation, consumers are required to establish a causal link between a defective product, its negligent manufacture and harm suffered as a result of the negligent conduct of the supplier. But the new bill means this will no longer be the case.
A common complaint from consumers has been that it's difficult to establish producers' product liability because they are not privy to the manufacturing and quality control process. But this hurdle will now fall away.
"Negligence does not need to be proved in terms of the bill," says Dinnie. "All that is required to establish liability of the supplier is to prove a causal link between harm caused and the defective product."
He says it's even debatable whether the bill requires, in certain circumstances, for it to be established that the product was defective when it left the hands of the supplier.
Some suppliers produce inherently risky products. The various blood transfusion services in SA, for example, provide blood to patients. Though they have strict screening procedures in place, such services could face product liability claims if contaminated blood and blood products were transfused to patients notwithstanding no fault on the part of that service. "There are clear social benefits of no-fault liability which are to be welcomed, but it could affect the financial viability of providing such products," he says.
Suppliers that consider themselves to be at an increased risk of exposure will have to look at changing their production methods and improving their quality control. They will also need to take out product liability insurance - the price of which is likely to increase with the increased risk of being sued.
Even companies that merely fit, install or provide access to other products are considered suppliers of those goods and services in terms of the product liability provisions of the bill.
For example, a surgeon who inserts a pacemaker that is defective faces the same no-fault liability as do other suppliers under the new legislation. An appliance repair person who supplies or installs a component that is defective also has a no-fault liability. "The market for product liability insurance will certainly expand significantly," says Dinnie.
Distributors and retailers are protected under the bill through limited exclusions, but these don't apply to producers or importers. The most significant exclusion to liability is where it is unreasonable to expect a distributor or retailer to have discovered that a product is unsafe, defective or hazardous. "This depends on a person's role in marketing the goods to the consumer and the state of scientific and technical knowledge at the time the goods were under the control of that person," he says.
But for all the benefits provided to the consumer by the product liability provisions of the bill, a limiting provision is the definition of "harm" for a person or loss or physical damage to any property as well as economic harm which results from that physical harm.
"You wouldn't be able to claim for pure economic loss, for example, as in where a defect in the product is discovered - and before it results in physical damage or injury - triggers a product recall," says Dinnie. In these cases the common law of contract or delict would still be used."
The bill is also considered pro-consumer because while it provides for apportionment of liability between joint wrongdoers there is no provision for reduction in damages due, even if the consumer played a role in causing the damage by using the product negligently.
A major concern for the airline industry is that the bill requires suppliers to refund consumers if they cannot provide goods or services on a specified date or time because there was insufficient stock or capacity.
"This will hit the airline industry particularly hard, especially those companies that deliberately overbook and then bump passengers off the flight," says Dinnie.
"Airlines will have to refund customers who can't get on a particular flight, not only the reservation amount and interest, but also the consequent economic harm they suffered."
He says making suppliers liable for consequential damages and economic harm is significant because the section does not place any responsibility on behalf of consumers to mitigate their losses. "The result may be that airlines will be inflexible about bookings made."
Government departments are also not exempt from the bill. Where the state is a supplier, the bill will apply, but where it is the consumer in a transaction, it will not be covered by the bill.
