Risk Management

Signed by the President in April, the Consumer Protection Act (COPA) is now officially law and will come into full force on 29 October 2010. From a risk management perspective, the next 12 months should therefore be quite a busy time for manufacturers and suppliers as they attempt to align their entire supply chain to comply with the onerous and far-reaching implications of COPA.

COPA heralds a new era in consumer protection in South Africa by empowering consumers and re-establishing their fundamental rights when procuring goods or services. It provides redress to consumers and an enforcement vehicle to the courts. This has not been previously available in South African law. Consumers and consumer rights activists can now hold any party in the supply chain liable under a strict liability regime, even if the manufacturer was not negligent in making the product.

Essentially, COPA imposes strict liability on a producer, distributor or supplier of goods for any loss or damage that results from a product failure, defect or inadequate instructions or warnings provided to the consumer (including those provided via advertisements). Parties in the supply chain may face three main types of liability claims arising from:

• manufacturing defects (poor quality materials, poor quality control, poor workmanship);
• design defects (defects that render a product dangerous or useless); or
• failure to warn (the right information not provided in plain and understandable language, as well as incorrect product labelling and trade descriptions).

Preventative measures to reduce the probability of being held liable under COPA should be implemented as soon as possible. Before committing any resources, however, the first step must be to conduct a comprehensive risk assessment with regards to the Act, identifying specific areas of potential risk, the potential impact on the organisation, as well as the probability of such a risk realising.

This approach would ensure a commensurate effort and prevent time and money being spent on areas where the probability or impact of liability is low. Preventative measures should include the following aspects: the review of all labels and product descriptions to ensure compliance with COPA, increased training for sales staff, active post sales monitoring programmes that include strict procedures on consumer feedback and defect reports, increased insurance to cover areas of high impact, etc.

For more information on the risk management process and procedures, please contact Louw van der Merwe directly on tel. 021 882 8140 or Louw@exceed.co.za.