Overview of the Consumer Protection Act

A DV I S O RY

The Consumer Protection Act will be the

overarching piece of legislation regarding the
protection of consumer rights.

When will it be effective?

The Consumer Protection Act (CPA or Act) will be phased in over time, but most
of it will come into effect on 24 October 2010, unless the Minister defers this
date by another six months. Provisions dealing with the National Consumer
Commission and the Regulations will take effect on 24 April 2010.

Does the Act apply to your organisation?

The first step is to determine whether the CPA applies and, if so, how. In this
regard, generally one needs to consider whether:
■ The organisation is entering into ‘transactions’ as contemplated by the CPA.
Fundamental to this determination are the definitions of services, goods,
supply, transaction and consumer. It should be noted that a user, recipient or
beneficiary of goods or services is also regarded as a consumer even if that
user, recipient or beneficiary was not part of an agreement relating to the
supply of the goods.

■ Any of these ‘transactions’ are exempt from the ambit of the CPA. For
example, an agreement between two large organisations would, on the basis
of the annual turnover/asset value exemption, be exempt from the ambit of
the CPA. Conversely though, where the same agreement is concluded with
an individual, this agreement would fall squarely within the parameters of the
CPA. The thresholds for the annual turnover/asset value exemption will be
known once the Regulations under the CPA have been promulgated.

■ The organisation operates in any part of the supply chain as producer, importer,
distributor and retailer of goods or as service provider and the extent of the
application of the CPA to such activities. For example, manufacturers need to
consider the implications of the product liability provisions of the CPA.

The CPA decision tree below is a useful tool for a high level determination of
whether the CPA could apply and, if so, how.
 Consumer Protection Act: Decision Tree

1 Does the business enter into transactions1? YES

NO

Does the business promote goods or services or

2 YES
the supply of goods or services?

NO

Are the goods or services supplied or performed in

3 YES
terms of a transaction (for example, tied arrangements)?

NO
Evaluate if
exemption2
applies

Has a partial
Is the transaction Is it an exemption been
Is the transaction Does a ministerial
with a juristic employment granted due to a
with the State? exemption apply?
person? contract? regulatory
overlap?

(Turnover threshold/asset value No exemption

exemptions still to be regulated) applies

YES

Evaluate role in supply chain

Producer,
Importer or Distributor Retailer Consumer
Distributor

1
For example, an agreement to supply goods, (eg. music, gas, software etc) or services, (eg. provision of accommodation, transportation of individuals or
goods etc) in exchange for consideration (not limited to money) and includes a franchise agreement. (This is not an exhaustive list.)
2
This is not an exhaustive list of all the exemptions in the CPA.

2 Overview of the Consumer Protection Act

Assessing and managing the impact of the CPA
The implications of the CPA
The CPA may impact on products (design and development), business
management and processes (risk management processes and internal controls)
as well as interactions with customers.

Astute organisations will have sought to comply with current South African
consumer law and international consumer best practice and, as such, may be
less impacted by the CPA than an organisation that has not previously ascribed to
these principles. Similarly, organisations operating within sectors that are already
highly regulated, such as the financial services sector, could be impacted less by
the CPA.

The CPA could similarly impact on different parts of an organisation in various

ways. For example, a financial services organisation would not be impacted
significantly in terms of its lending or deposit-taking activities, but its loyalty
programmes or marketing programmes could be affected.

Managing the implications of the CPA

Once a determination has been made that the CPA applies, the following
approaches are suggested:

■ The potential business implications of the CPA should be understood, from

a strategic, operational and risk management perspective. A detailed gap
analysis could be used to assess those areas of business that are not
compliant. This could include a determination of where certain activities
may already be regulated by, for example, the Financial Advisory and
Intermediary Services Act. The board and senior management should be
apprised of these implications.

■ The potential impact of the CPA on proposed new businesses or products

should be assessed before the launch.

■ Training requirements should be considered and implemented.

■ All consumer interactions should be adjusted to comply with the CPA. This
includes ensuring that all marketing and advertising consultants or agents are
fully apprised of the requirements of the CPA.

■ The implications of the product liability provisions should be assessed,

contracts amended and, where appropriate, insurance cover adjusted.

Conclusion
The impact of the CPA could prove difficult for organisations to assess and
manage, particularly organisations that are operating in different sectors.

Given the 18-month lead time for the implementation of the CPA, organisations
should finalise the assessment of the implications of the CPA as soon as possible
and start the implementation of the requirements of the Act.

Overview of the Consumer Protection Act 3

kpmg.co.za

Contact us

Karin Rathbone
Director
Corporate Law Advisory Practice
Tel: 011 647 7547
karin.rathbone@kpmg.co.za

Gustav Von Bratt

Associate Director
Regulatory Compliance Services
Tel: 012 431 1333
gustav.vonbratt@kpmg.co.za

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
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