Tough consumer law ‘adds to costs'
Big business should brace itself for soaring insurance premiums and higher production costs in light of new consumer protection laws.
The Consumer Protection Act, which was passed into law by President Kgalema Motlanthe last week, will give consumers more legal clout by raising the risk of product liability damages claims.
“Big business can expect to pay higher insurance claims because of the greater risk of lawsuits involving product liability,” said Angela Itzikowitz, a director at corporate law advisers Edward Nathan Sonnenbergs. “This could have a detrimental effect on smaller businesses that may not be able to afford insurance premiums and may be squeezed out of the market,” Itzikowitz said.
Simone Monty, a director at Routledge Modise in association with Eversheds, said SA's consumer laws provided inadequate protection for consumers and limited redress. The main purpose of the new act was to prevent the exploitation of consumers, she said.
Itzikowitz said businesses would be faced with a number of challenges. “All franchises will have to revisit their franchise agreements. Franchisees will be given much greater protection under the new law,” she said.
Further, manufacturers and retailers would have to pay close attention to their product quality and safety processes, she warned. “Most of the costs to business are unknown at this stage and will only become known long after the law has taken effect,” she said.
Nomfundo Maseti, acting deputy director-general of the Department of Trade and Industry, said the new law introduced a system of product liability and improved redress. Consumers may now return goods to the supplier, without penalty and at the supplier's risk and expense, if the goods fail to meet the required standard.
Neil Kirby, a director at Werksmans Attorneys, said there would be a phasing-in period for the law, which contains transitional provisions that mean it will only take effect in its entirety about 18 months after having been signed into law by the president.
Pick 'n Pay spokesman Tamra Veley said that for the most part the protections offered to consumers by the act reflected Pick n Pay's existing retail practices.
Woolworths said it supported the principles of the new legislation to provide customers with a fair deal and ensure transparency in all transactions.
Source: Business Day
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