Decision to delay implementation of Consumer Protection Act welcomed

15th October 2010 By: Petronel Smit

The Department of Trade and Industry (DTI) announced on September 23, 2010, that the effective date of the Consumer Protection Act (CPA) (of 2008) and the Companies Act (of 2008) would be deferred to March 31, 2011, becoming effective on April 1, 2011.

Business representative body Business Unity South Africa (Busa) has welcomed the decision by the Minister of Trade and Industry, Dr Rob Davies, to postpone the effective date for both the Consumer Protection Act and the Companies Act. Busa has led discussions between the private sector and the Department of Trade and Industry (dti) on these Acts and approached the Minister regarding difficulties with meeting the original implementation dates.

The CPA was published in its current form on April 24, 2009, and a grace period of 18 months was incorporated to give business the opportunity to prepare for the consequences of the provisions. This meant that businesses would be required to comply by October 24, 2010.

Deloitte Legal corporate and commercial senior manager Candice Holland says that the CPA is acknowledged as a piece of legislation that will necessitate a number of process changes on the part of businesses, ranging from implications for late delivery to onerous warranty and product liability consequences, where goods are not labelled in accordance with the standards required by the CPA.

Although businesses now have more time to comply with the new legislation, Holland encourages them to seize the opportunity and take steps to become compliant as soon as practically possible.

“Businesses should not be complacent and put compliance efforts or initiatives on hold, or worse, delay the start of any planned compliance efforts or initiatives. Rather embrace the fact that compliance is required by law and view the postponement as another opportunity to take the steps they should have begun taking 18 months ago,” she advises.

The operational process changes are significant for most businesses and exceptionally diverse, depending on the industry in which the individual business operates. Holland notes that, even taking the first step of understanding the extent of the application of the CPA to a particular business will take at least a few weeks and the process changes required for compliance, thereafter, will take a few more.

“Most businesses have a December shutdown period and, if compliance initiatives are only begun in January 2011, achieving compliance by April 1, 2011, will be excep- tionally challenging,” she adds.

The time required to achieve compliance should not be underestimated as most businesses will have to redraft warranties, redraft contracts, change returns policies and processes, and train staff in these changed processes. Regulations which expand on the content of the CPA will also be published prior to the effective date of the CPA. These will create further obligations with which business will have to comply.

Busa believes that the additional period should provide enough time for the National Consumer Commission, due to come into operation in the last quarter of 2010, to be properly resourced and capacitated.

The body reports that the establishment of the commission will provide the contact point for other regulatory authorities to apply for industrywide exemptions from certain provisions of the Act and for the commission to carry out its other functions, such as reviewing industry codes and making recommendations to the Minister.

Further, Busa expects the Minister to shortly publish thresholds for the exemption of juristic persons from the CPA. Should this threshold not be published, all companies, regardless of size, will be subject to the Act.

Meanwhile, Werksmans Attorneys director Gareth Driver says that it has been known for some time that implementation of the Companies Act during 2010 would not be practicable. The statement by the DTI has now made it official.

“The delay until April 1, 2011, will be more realistic in that it allows companies time to absorb and prepare for the promulgation of the final version of the Companies Act and the regulations, neither of which has yet been finalised and published,” he explains.

Despite the additional preparation time afforded by the delay, Driver still expects that there will be challenges with regard to the new Companies Act, as companies seek to absorb the meaning of unfamiliar provisions.

However, there is a further complication, particularly for listed companies, that must be taken into account. “The JSE will need to update its Listings Requirements to respond to the new Act and regulations, but it has advised that it will only publish its draft amendments to the Listings Requirements for comment once the final versions of the new Act and regulations have been published,” Driver points out.

He adds that, allowing for a period for comment on the draft amendments to the Listings Requirements and then the publication by the JSE of the final amendments, April 1, 2011, could still be a tight deadline.

Busa reports that the postponement will allow for the due process to be followed in the finalisation of the Companies Amend- ment Bill and its accompanying regulations, and adds that the regulations will require at least a further 30-day period for public comment.

The body points out that, once those processes have been completed, additional time should be used for the development of comprehensive compliance programmes by business.