Draft law will make ICT expensive

By Leon Engelbrecht, ITWeb senior writer

Johannesburg, 22 May 2008

The Consumer Protection Bill, currently making its way through the National Council of Provinces, will have a "significant" impact on the way ICT companies operate, says industry lawyer Mike Silber.

The Bill was approved by Cabinet in December and was recently introduced into the upper chamber of Parliament for adoption. It will then go to the National Assembly before being signed into law by president Thabo Mbeki or his successor.

Silber says the draft law will have a significant impact across the board. "It is going to bring about a lot of changes in the way hardware and accessories are sold in this country. It may also lead to increases in price, because of the liability insurance everyone will require under this law. That industry [insurers] will benefit substantially."

Silber says the law for the first time introduces "strict liability", which will have an "immense, considerable and significant impact" on the way ICT goods and services are marketed and sold, and on the way warranties and guarantees are worded and enforced.

Section 68 of the Bill will make strict liability part of South African law and will hold every producer, distributor or supplier strictly liable for "any damage caused wholly or partly as a consequence of a product failure, defect or hazard in a good or as a result of inadequate instructions or warnings provided to the consumer pertaining to any hazard".

This, says Silber, means ICT vendors can be held liable not only for a person's death or injury - however improbable - but also for a loss or damage to property and for an economic loss. "This is fantastic for consumers," notes Silber, but less so for vendors or their channel partners.

Stuff happens

He explains that "economic loss" means the loss of income or profit suffered by a business or an individual as a result of ICT equipment malfunctioning. "It is a lovely concept, very pro-consumer, and a first in SA, but very expensive," as it will require businesses to heavily insure themselves against such lawsuits and damages, and that cost will be passed on to consumers.

"Everybody knows electronic equipment is subject to breakdown. There is a risk in using machinery and you take the necessary precautions, such as keeping spares or having in place a service level agreement with the vendor. What you don't do is sue," he says.

World Wide Worx director Steven Ambrose agrees the Bill is veering the country to a nanny state. "The Bill is comprehensive and tries to cover all known technologies and situations. The basic protection of those who are vulnerable is laudable, as [is] the entrenchment of these rights in law. It will reduce the 'consumer beware' attitude of many retailers, for example with cellphone contracts."

But the law is attempting the impossible, says Ambrose, and will, therefore, prove "somewhat ineffective" when enacted as the march of technology is inexorable and exponential, and because the law cannot anticipate emerging technology or how that technology will be utilised.

"The potential to exploit these technologies for reasons not related to fair use, such as spam, cannot simply be legislated," Ambrose warns.

"The provisions of the Bill are also fairly difficult to police. Proving and taking those who ignore the provisions to court will be far too costly and drawn out for most of us."