Insurance premiums for manufacturers and suppliers are likely to increase, along with certain production costs, once the Consumer Protection Bill is passed into law later this year, legal analysts say.
This is because consumers who fall victim to defective products will have much more legal clout, raising the risk of product liability damages claims.
“There is a strong possibility that when the bill is passed, manufacturers and retailers could face additional cost,” Eric Levenstein, a director at Werksmans Attorneys, says. “I think they can expect to pay higher insurance premiums because of the greater risk of product liability litigation.”
Manufactures and retailers will also have to pay close attention to their watchdog processes, especially product quality and safety checks, which could push up production costs, he says. ”Product warning and information will have to be looked at carefully, also potentially driving up costs.”
These precautions could be a small price to pay in comparison with the financial and reputational consequences of facing product liability litigation.
Webber Wentzel partner Anthony Norton says the bill will replace the laws regulating consumer protection. He says it will create a single framework for consumer protection. It builds on the consumer protection principles contained in the National Credit Act, and covers issues such as product liability, disclosure and pricing, and even regulates certain marketing practices.
Levenstein says the new law aims to make it much easier for consumers suffering harm or injury from defective products to sue for damages. “We will probably see an increase in the number of product liability cases being lodged,” he says.
Historically, when a consumer sued a manufacturer for a defective product, he or she would have to show both “wrongfulness” and “fault” on the part of the supplier's goods.
Wrongfulness refers to the manufacturer's legal duty to reasonably prevent defective products from reaching the market, while fault refers to negligence on the part of the manufacturer.
“The most difficult element to prove would be that of the fault of the manufacturer,” Levenstein says. “This is because they would need to prove fault (negligence) in the production process on the part of the manufacturer, and such evidence is simply not available to the consumer.”
The bill provides a legal framework for consumer protection, and provides consumers access to the courts.
In the past, the law frightened off many consumers as it was expensive to litigate, Levenstein said.
Once the bill is passed into law, it will be for the manufacturer or supplier to prove that the product concerned was not defective.
The bill introduces the concept of “strict liability”, which is a major departure from the current product liability framework.
The producer, importer, distributor or retailer has to prove the harm was not caused as a result of a defect or hazard in the product, or as a result of inadequate instructions or warnings to consumers.
“In effect, it means that when you sell something into the market, there's got to be responsibility and there's got be comeback. The onus will be on the manufacturer, not the consumer, to disprove liability regarding the supply of defective goods. This removes a major evidential burden for the consumer in approaching the court for a claim in damages.”
This means manufacturers will have to carefully label products in simple language that the layman understands, Levenstein says.
“Manufactures will also have to carefully label disclaimers and warranties or they could face potential lawsuits.”
In the cases of those retailers that use brand names, they may have to think twice about labelling who their suppliers are in the future, he suggests.
Examples of cases where the manufacturing process has gone wrong include a bee found in a cream soda bottle, a decomposed toe found in chewing tobacco and labels not correctly marked for cattle dip in SA that caused cattle to die from arsenic poisoning.
Levenstein says the consumer has the right to fair value, good quality and safety.
Parliament is scheduled to consider the final adoption of the bill in August.
Source: Business Day
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