The Consumer Protection Act – watch the definitions

Watch the definitions in the new Consumer Protection Act, and ensure that any interpretations give effect to the Act’s purpose and policy as set out in Section 3. This was the message from Professor Angela Itzikowitz, a director of Edward Nathan Sonnenbergs, at the 12^th Annual Conference of the Compliance Institute of South Africa.

“Don’t automatically assume a word means what it says, without referring to the statutory definitions,” she told delegates. “In addition, watch for terms that should be defined, but aren’t.”

For example, while the term ‘transaction’ is defined, ‘fixed-term transaction’ is not. Nor is the definition of a transaction what you would normally assume, she said. Instead, it has two elements; first, it must be carried out in the ordinary course of business and second, it must be for a consideration. This effectively removes contracts of donation, and once-off transactions such as selling or renting a property, Itzikowitz said. “Even ‘consideration’ goes way beyond a simple quid pro quo.”

Using the Act’s purposes as a guideline is an important tool, particularly as Section 4 says that where any ambiguity arises, the court must resolve it in favour of the consumer and against the purpose and policy clause. “The purpose clause also provides a context to words such as consumer, supplier and manufacturer.”

In the context of ‘services’, for example, a supplier is not just the provider of the service, but also the person or entity who provides access to a service. Therefore, if an airline allows consumers access to car rental and accommodation services through its website, for example, it could be said to be a supplier of those services.

Julie Methven, CEO of the Compliance Institute said that compliance officers, in particular, should keep a watchful eye on the way management is defining and interpreting terms.

The product liability provisions in Section 53 of the Act, for example, has its own a set of definitions that must be studied. The terms ‘defect’, ‘failure’, ‘hazard’, and ‘unsafe’ are all specifically defined under that section but not under Section 1.

‘Defect’, for example, has a lengthy, two-part definition. The first part refers to any material imperfection in the manufacture of goods or components, or in the performance of any service that renders the goods or the results of the service less acceptable than consumers would be reasonably entitled to expect. The second refers to any characteristic of goods or components that renders them less useful, practicable or safe than consumers would be reasonably entitled to expect. “Obviously the intention was to eliminate as much ambiguity as possible. However, by including the phrase ‘reasonably entitled to expect,’ the door has been left open to interpretation.”

Other definitions that suppliers need to be aware of include the definition of ‘consumer’ and the definition of ‘promote’. Establishing who is a consumer, and therefore protected by the Act, can be tricky as it extends beyond individuals to include companies, close corporations, corporate bodies, associations, partnerships and trusts with an annual turnover or asset value of R2 million. “It can be difficult for a supplier to establish a consumer’s turnover or asset value,” said Itzikowitz.

She said the definition of ‘promote’ was also much broader than suppliers might realise. “When we think of promoting something, we think of embarking on an active campaign. But the definition includes simply displaying goods, or expressing a willingness to supply goods or services.”