Marketers reject new consumer bill as 'unworkable'

The fledgling Marketing Association, led by Enrico du Plessis, and the Corporate Lawyers Association of South Africa, represented by CEO Alison Lee, are driving the urgent submissions process to the Department of Trade and Industry (DTI), and ensuring all affected stakeholders are informed. They have been assisted by SBS Conferences and Bizcommunity.com.

While the Bill will outlaw some very negative consumer marketing - which is accepted by the industry - it restricts retailer, marketer and many supplier services to the point of impacting on commercial enterprise.

For example, some of the worst offending practices will now be outlawed or restricted - like that of cellphone ringtone companies who use negative response marketing to lure customers into paying monthly for services unless they opt out; and bait marketing by retailers who use specials to lure customers and then don't honour their promises. Marketers are not in dispute with the outlawing of such unfair consumer and business practice.

Lee and Du Plessis explain that while the Bill seeks to address a variety of topics and forms of consumer practices, it does so in too much of a generalised sense - its approach should be more specific and contextual. In addition, an uncertainty as to what amounts to "Goods" and "Services" under the Act has been raised and the existing definitions queried and criticised. Again, these have been found to be too wide and seeking to cover too much - creating vast confusion. The big question remains for many is whether the Bill applies to their goods and services?

Compliance

Undoubtedly the Bill, if passed in its current form will result in many marketers, companies, small businesses, banks and the consumer, manufacturing and services industry at large having to change their respective business practices, so as to ensure compliance with its many provisions. This will undoubtedly result in increased costs due to the additional administrative burdens which the Bill will create - and which ultimately will be passed onto the consumer.

For example, all amendments to agreements, whether written or not, will now have to be reduced to writing and signed by the consumer and a copy thereof provided to him within a prescribed time period - if not, such amendment is of no force.

A consumer now has the right to cancel certain agreements and contracts, including ones which are continuous in nature, such as his gym membership or his cell phone contract, simply by giving the required prescribed number of days' notice - ranging from five to 10 days in some cases and one month in others.

Discounting and trade incentives to your customers are also history, says Lee, and so are those great loyalty programmes which are prevalent in today's competitive market. Promotional competitions will be more rigorously controlled and additional labeling requirements will have to be satisfied. Overbooking and unfulfilled reservations are now subject to strict control and if breached - damages, including consequential, will be due and awarded to the aggrieved consumer. Telesales and buying your goodies over the Internet are controlled and the use of customer lists and information harvesting, negative marketing and other such new age practices are outlawed.

The industry is very concerned that the time permitted for submission and public comment was originally 26 May 2006; however, this date was subsequently amended under a correction notice to 15 May 2006 and such amendment was not adequately brought to all interested parties attention. Many are still guided by the now mistaken view that their comments are to reach the DTI by 26 May 2006.

In light of the length of the Bill and the number of topics and issues which it covers and seeks to control, the current period permitted within which one was to submit comment is largely out of line, say Lee and Du Plessis.

What emerged from the workshops is that many areas of the Bill require substantial reworking, which could be dealt with appropriately through a consultative and advisory process between the DTI and the many concerned bodies of persons and groups. Regrettably, the time constraints detailed above do not permit this.

Good intentions

"Whilst the Act does have good intentions - that being to protect the consumer from the unscrupulous trader or supplier, of which there are many (and we all have horror stories), the act in its application and its extent is too ambitious for its own good," says Du Plessis, a chartered marketer and the man heading up the quest for a new marketing association.

"The Act seeks to address many issues which have already been legislated on and which are sufficiently provided for and are covered under such legislation which cater quite ably for their respective subject matter. This Act seeks to also cater and cover industry specific codes of practice and this takes away and negates the principle of self management and regulation. Because the Act tries to address all things consumer orientated and then some, it becomes like a fruit salad, a jack of all trades and this will result in it having no core competency."

While it is commendable that the Act has sought to protect the consumer from each and every angle and against all and every wolf - it has attempted to cover every conceivable possibility - this has resulted in an act containing the good, the bad and the plain ugly. "The bad and the ugly should be severed, the useless made redundant and the good - which there are many - should be retained, reworked and set out in plain and simple language for all to understand and rely on," says Du Plessis.

"In its current format it tends to almost 'enforce' price increases upon the very consumer it is meant to benefit. This will result in only big business implementing the Bill due to high cost and resource required to do so - the question is: will Government put smaller businesses and SMEs out of business if they don't comply? Lastly, we are of the opinion that the Bill will create more ignorant consumers thinking that Government and the law protects them against everyone and everything without the necessity of personal common sense being applied in the purchasing process. No law can do this and consumers should not be misled to believe that it is the case."

Du Plessis says the marketing industries' view is that funds and energy should rather be directed towards the education of consumers about unscrupulous practices and how not to become a victim in the first instance.

Concern

Areas of concern include the following, according to Lee:

1. INTERPRETATION

The Bill contains an enormous amount of superfluous provisions which will create impossible interpretation problems once the Bill becomes Law, the consequences being long protracted legal arguments and the expenditure of both time and resources on attorneys and consultants.

2. ACCEPTABLE PRACTICES

The Bill seeks to codify large areas of the common law and generally acceptable practices which are common place and prevalent in the South African marketplace and which have evolved over the years and have become generally acceptable practices known to all. The Bill also demands the development of the common law, as is necessary to improve the realisation and enjoyment of consumer rights generally, which raises many jurisprudential questions.

3. REPETITION

The Bill repeats and borrows a plethora of already stated provisions from pre-existing legislation, which are actively applied across the market place, such as the Foodstuffs, Cosmetics and Disinfectants Act, the Hazardous Substances Act, the Competition Act, the Merchandise Marks Act and the Trade Metrology Act, to name a few.

This attempt to repeat provisions of existing legislation goes against the established presumption "that any new law must change and repeal pre-existing law".

While the Bill does seek to repeal certain consumer related legislation such as the Business Names Act, the Business Act, Sec 54 of the Lotteries Act, sections of the Merchandise Marks Act, the Harmful Business Practices Act and the Nation Credit Act, its attempts fall short and a proper job has not been done.

This surely would create a massive confusion in the market place - the questions abound: which practice is right, which principle applies/is it still recognised, which act applies, and - where both - which one takes precedence and is more acceptable?

4. UNWORKABLE

The Bill runs to some 187 pages, sections of which are incomprehensible and consequently unworkable. It begs the question as to how will it be understood by its target market - the illiterate, low income and vulnerable consumers and interest groups who are susceptible to unjust, dishonest and unfair business practices and dealings - the very activity which the Bill seeks to address and prevent. The Bill rather should be drafted by the 'South African Citizen' who has a sound understanding of both marketing and economic practices and principles prevalent across the South African market, and in plain and simple South African English, as suggested under the Bill - perhaps then - the target market will begin to understand what the Bill seeks to achieve and how, when their rights have been infringed, can effectively and ably seek redress from the courts.

5. LEGAL RECOURSE

The biggest concern which has been raised by the lawyers, is this: if the consumer has a complaint and seeks compensation, they have a choice of forums that have the right (jurisdiction) to hear complaints:

• the National Consumer Commission
• an ombudsman
• a Tribunal; or
• a Provincial consumer court.

All of the above are forums - quasi- judicial bodies which are not obliged to follow and apply proper court procedure and due process - and can declare and set their own rules and apply their own principles and approach and are not bound to apply the audi alterim parten principle in terms of which all who are charged and who are brought before a court are to be given a fair opportunity to be heard and to state their case and their defense to any such claim.

This will most definitely result in a separation of powers and will give rise to the classical 'Kangaroo Court scenario' where decisions and rulings will be handed down without following proper legal process.

It gets worse, according to Lee, as these forums have the right to impose administrative penalties - being 10% of the respondent's annual turnover during the preceding financial year and R1 million.

To download the draft Consumer Protection Bill to add your submissions and submit to DTI, see below. This is a service from The Marketing Association exclusive to Bizcommunity.com.

Make your submissions to the Consumer Protection Bill