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Consumer Protection Act
August/September 2009

The Consumer Protection Act:

The consumer is King 2

In the second article on the Consumer Protection Act, BEVAN FRANK explores its implications on the sport and outdoor industry with a focus on retailers

Consumer rights will soon be protected by the new Consumer Protection Act, effective from 29 October 2010. In the previous issue we looked at some of the provisions of the Act in light of suppliers selling goods to retailers. This article explores other scenarios that could arise when retailers in the sport and outdoor industry sell to consumers.

A contentious issue would be the clause relating to the return of damaged goods — the Act prescribes the conditions under which a retailers will be obliged to accept the return of damaged goods).

Return of ‘damaged’ cricket bats, hockey sticks, running shoes, etc

Cricket bats, for example, need to be knocked in, oiled etc. if you want to prevent them from cracking or breaking. Most suppliers also say that surface cracks and scuffing are normal in a wood product.

Will a retailer now be obliged to accept a bat returned by an ignorant customer when it doesn’t look good anymore after he played a game or two with it. The same applies to hockey sticks, as well as wear and tear on running shoes. How does the Act address issues like these?

Section 20 of the Act deals with the right to return goods. Goods, including sporting equipment, may not be returned if the goods “have been partially or entirely disassembled, physically altered, permanently installed, affixed, attached, joined or added to, blended or combined with, or embedded within, other goods or property”.

Therefore, says Neil Kirby, a director at Werksmans, if the retailer is able to show that the equipment has been physically altered — bearing in mind that this term is yet to be interpreted legally — then the right of return does not favour the consumer;

This is in addition to (not in substitution for) the consumer’s right to return unsafe or defective goods (or any other right in law between the supplier and consumer to return goods and receive a refund).

The common law principles would apply to the retailer in this regard, says Simone Monty, a partner at Routledge Modise in association with Eversheds. The consumer may return goods, and receive a full refund of any consideration paid for those goods, if the supplier (retailer) delivered goods intended to satisfy an unsuitable purpose.

The Act stipulates that the consumer’s right to return does not apply if, for reason of public health or otherwise, a public regulation prohibits the return of those goods. Also, the rights do not apply if the goods have been partially or entirely disassembled, physically altered, permanently installed, affixed, attached, joined or added to, blended or combined with or embedded within, other goods or property.

Monty says unless, of course, the consumer had to open packaging or use the goods to check if they were okay.

What about refunds?

The Act says that in respect of refunds, a retailer must refund the consumer the price paid for the returned goods, less any amounts that may be charged for usage. In determining the right of a retailer to impose a charge, the Act says that if any returned goods are in the original unopened packaging, he may not charge the consumer anything.

If returned in their original condition and repackaged in the original packaging, a retailer may charge the consumer a reasonable fee for use of the goods during the time they were in his possession.

An exception is made for goods that are ordinarily consumed or depleted by use (creams, supplements etc) when no such consumption has occurred; or when consumption or depletion was a reasonable amount necessary to determine if the goods are acceptable.

In any other case, however, the retailer may charge the consumer a reasonable amount as a usage fee and a fee for necessary restoration costs to render the goods fit for restocking — unless it was necessary for the consumer to destroy the packaging to determine whether the goods conformed to the description and were fit for the purpose intended.

Displaying returns policy

Does it make a difference if the retailer clearly displays information on when they will accept returns and when not?

“The retailer is required to adhere to provisions in the Act that allow the consumer to examine goods and must draw the attention of the consumer to his or her rights in terms of the Act. This will, for example, include provisions of any industry codes that are applicable to the sale of sporting goods, the terms and conditions of the sale of the goods under ordinary contract law, and the rights of the retailer in terms of the Act,” says Kirby.

Monty states that the way to address the returns policy is to ensure that one has a returns policy and statement attached to all invoices or sale slips (which must obviously comply with the Act).

“In short, a retailer would only be required to accept returned goods at no cost if they are unopened and unused,” Monty says. “Otherwise, his returns policy should set out the fact that costs will be applied for the use of goods and/or for opening the packaging — and that examination must try to take place in the shop. Clearly, it is essential for the retailer to bring this to the attention of the consumer.”

Liable when suppliers don’t deliver

What happens when customers place orders and the retailer is let down by his supplier who does not deliver?

For example, after the IRB Rugby World Cup in 2007, retailers could place orders with the supplier for special T-shirts commemorating the Springbok victory. Consumers placed orders with retailers to make sure they got one. In the end the chain stores wanted so many shirts that several independent retailers did not receive any stock.

Does the Act address this issue, where consumers are disappointed because they expect advertised goods that do not become available? And does the retailer then have any recourse?

It is important to remember that the Act does not get rid of any of the provisions of contractual law and common law.

“Orders may have been placed by the consumer, but they would probably not have been paid for, and the retailer is unable to perform if his supplier runs out,” Monty stipulates. “The retailer could offer to substitute those goods with substantially the same stock. The retailer in respect of its relationship with the supplier would have a contractual claim for breach of contract if an order that was placed was not honoured.”

Eunice van Zyl, a senior associate at Webber Wentzel, points out that if the consumer had paid, the retailer must refund any amount paid with interest. “The retailer is also liable for costs directly incidental to his breach of contract, except if the shortage of stock is due to circumstances beyond his control,” says Van Zyl. “A small trader will have the same remedy against his supplier as a consumer.”

Benefits of the Act

“The Consumer Protection Act is a revolution in consumer rights in SA law,” Kirby proclaims. “For the first time in our legal history, consumers have a consolidated statute of rights and obligations that they may rely upon to regulate previously difficult contractual territory and redress an imbalance of power between themselves and larger corporations, or powerful retailers and suppliers.

“The Act’s worth as an effective and practical commercial tool for the consumer will have to be measured and assessed in due course, but it has the potential to be a highly effective piece of legislation — albeit mired in legalese and complex procedural mazes!”

Monty points out that the Act effectively codifies a number of common law provisions and various legislative provisions which already exist and further amplifies and consolidates them.

“The Act makes the consumer protection laws of SA one of the most protective worldwide,” Monty espouses. “There will be an immense cost in the implementation of this Act, but it is a codification that needed to take place since there were many different laws, none of which directly governed consumer rights, but which indirectly did so.

“Whether the Act proves to be good will be seen in its implementation and the effectiveness of the governance thereof. As with the implementation of the National Credit Act, smaller players might find it difficult to find the funds to amend all of the documentation that requires amendment in order to initially effect compliance with the legislation”.

It is clear that South Africa has for a long time needed laws protecting the consumer.

“As with any legislation, the implementation thereof will make it work or not. It is an ambitious piece of legislation with good ideals. I do think that in many instances it places a heavy burden on suppliers, who will have to spend more money on compliance with legislation. My fear is that those costs will somehow be passed back to the consumer, who will in the end not be better off than before.”

While this article covered some issues pertinent to the industry, it is intended to serve only as a guide. This article should be read in conjunction with part one which appeared in the previous issue of Sports Trader. Readers are furthermore advised to consult with their attorneys if and when necessary.

Special thanks to Simone Monty, a partner at Routledge Modise in association with Eversheds; Eunice van Zyl, a Senior Associate at Webber Wentzel; and Neil Kirby, a Director at Werksmans.

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