Most municipalities are excluded from the Consumer Protection Act{writer: Piet Coetzer}

On 1 April, a year after it was signed into law, the Consumer Protection Act (CPA) came into force, but the customers of the majority of the country’s municipalities will be missing out… or will they?

For most transactions, the South African legal framework for consumer protection – including protection of small businesses – is brought in line by the Act with that of most developed or first-world countries.

On 14 March this year, however, Minister of Trade and Industry Rob Davies delayed the application of the CPA to all municipalities (other than high-capacity municipalities) by way of a notice in the Government Gazette. As such, it appears the CPA will not yet apply to the more than 230 small and medium municipalities.

A spokesperson for the Ministry, however, said the municipalities were not exempted from the Act – they were simply given a deferment to give them time to get their house in order.

While municipalities will be bound by, among other things, the CPA’s warranties, it will be possible to hold a municipality liable for harm caused by defective or hazardous products supplied to a consumer.

Municipalities will be bound to give ratepayers reasonable service and value for money, or they will have to reimburse ratepayers who are dealt bad service.

The transitional provisions of the CPA, however, allowed Minister Davies to delay the application of the Act to any particular municipality, except for high-capacity municipalities. These include the City of Cape Town and City of Johannesburg, Tshwane, Polokwane, eThekwini, Drakenstein, Stellenbosch, George, Hibiscus Coast and Randfontein.

While the private sector now has to comply with the stringent new legislation, consumer groups and legal experts have urged Davies to reverse his decision to exempt medium- to low-capacity municipalities from the Act, meaning consumers will not have any recourse under the Act for service
provision failures.

Minority rights activist group, Afriforum, has threatened to take the matter to court if Davies does not withdraw the exemption notice.

Most of the exempted municipalities are in rural areas. The people who make use of their services and goods are mostly the more unsophisticated, impoverished and vulnerable consumers in South Africa.

Ironically, the CPA specifically states that its purpose is to protect consumers who:

• are low-income persons;

• live in remote or isolated areas; or

• have limited fluency in the language used for advertising, warnings, instructions and contracts.

There could, however, still be a twist to this intended exemption of most municipalities.

In terms of CPA provisions, the notice must be published at least 20 business days before the general effective date. Since the minister’s notice was published after 14 March, it may be argued it is invalid and that the CPA will apply to all municipalities, irrespective of their capacity.

AfriForum legal representative Willie Spies said he had written to the minister, asking for the notice to be withdrawn.

“If the minister refuses to withdraw the notice, AfriForum will approach the courts for an order to set it aside,” he added.

“Apart from the seeming unconstitutionality of exempting certain municipalities from the Act arbitrarily, the notice was not published in time. The Act stipulates that notice must be given at least 20 working days before the Act comes into effect: Dr Davies’s notice was only published on 14 March.”

Department of Trade and Industry spokesperson Sidwell Medupe said the Act allowed the minister to “temporarily” defer its application to municipalities other than high-capacity municipalities.

“The minister has exercised the power on application by the Minister of Co-operative Governance [Sicelo Shiceka],” he explained.

“Municipalities are not exempted from the Act, but there is a deferment of the application of the Act to allow municipalities sufficient opportunity to put in place administration systems for the effective implementation of the Act.”

Reach of the CPA

The CPA is far-reaching. Many clauses that have become standard in agreements between a business concern and a consumer buying a product or service from it, will have to change.

For instance, it will become illegal for a contract to include the clause that states: If the consumer does not pay, or breaks the contract in some other way, the “attorney/client costs” will be for the consumer to pay. Unless a similar provision with similar rights for the consumer is included, that clause would be illegal.

Any contract with provision for a fixed term through which a service is to be provided, cannot exceed 24 months; and automatic renewals are something of the past.

While that maximum exists at present, the consumer will be able to cancel the contract, giving 20 business days’ (effectively a month’s) notice.

A cancellation fee may be charged, but it cannot be more than 10% of the value of the full term of the contract.

Cellphone contracts are an example of such an instance: Automatic renewals of contracts will be outlawed, and cellphone companies would have to disclose the value of selling a “bundle”, which includes the phone as well as the rest of the contract.

Ina Meiring, director at Werksmans Attorneys, told Business Live that under the new Act, the consumer will be entitled to receive goods that are reasonably suitable for the purpose for which they are generally intended, are of good quality, in good working order, and free of any defects.

However, sellers can exclude themselves from the implied warranty by telling the consumer that the goods are being offered in a certain condition. The consumer must then agree to accept the goods in that particular condition.

“A seller must explain, for example, that the item is not new; and if the seller discloses that there are some defects and the consumer accepts this, then that’s fine,” Meiring explained.

The Act defines juristic persons (which include companies, trusts, partnerships and so on) as consumers, and affords them the same protection – but only if the juristic person’s turnover is less than R3 million a year.

Some general arrangements under the CPA include:

• The Act imposes default warranties and indemnities that favour the consumer – possibly over and above the warranties given by the supplier;

• It applies to both products and services;

• All agreements have to be in clear and understandable language, and hiding important details in the fine print will no longer be possible;

• In the past, a consumer had to show a causal link as well as negligence on the part of the supplier to have a claim against a supplier for a defective product or service. Now all that needs to be shown, is that the product or service is defective or sub-standard;

• The Act brings in new restrictions and conditions for direct marketing, negative option (or inertia) marketing, catalogue marketing, coupons, loyalty programmes, promotions and more. A cooling-off period of five days will now apply to all transactions; and

• All business names will have to be registered, and the days of stipulating “trading as” are something of the past. All trade names will have to be formally registered to ensure consumers know exactly with whom they are dealing.

Municipalities not exempt from the provisions of the new CPA face legal challenges if they do not deliver proper goods and services to their customers, according to legal experts.

While the Act covers services, it could include, for instance, refuse removal, which may be classed as a service provided to residents in an area.

According to legal experts, if these services are not provided to a generally acceptable standard, or are delayed without timeous notice, consumers are entitled to recourse under the Act.

This includes the right to request that the services be repeated to remedy any defect, to request a refund for the services, or to withhold payment pro rata to the extent of the failure by theservice provider.

Some exclusions

Services provided under the Long-Term Insurance Act and Short-Term Insurance Act have been exempted, as well as services that constitute advice or an intermediary service that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act.

Goods as defined within the CPA may, however, include intangible items such as music, data, gas, water and electricity.