CPA

The Consumer Protection Act (CPA) went live on Friday.  Good luck to those who don’t have the time, money or legal intellect to digest this document.  The media has been poor at linking to the official Government Gazette for the public to browse over.  Find it embedded below.  Note how the government has even been so kind so as to tell us how we should calculate effective annual rates of interest, in Schedule 17 starting on page 32 “Calculation of interest for multiplication schemes.”

CPA Regulations

There’s not too much to be said about the CPA right now, but we leave you with an HA commentary from back in October 2010.

Consumer Protection Act: An economic oxymoron

“Waiting to open presents can be fun, but the 18-month wait for the implementation of the new Consumer Protection Act, Companies Act and the Competition Amendment Act has been a miserable experience, whichever way you look at it,” writes Nkosikhulule Nyembezi on page 13 of The Star newspaper on October 25^th.

“These are important pieces of legislation aimed at promoting good corporate governance as well as protecting poor and vulnerable consumers from unscrupulous companies and inefficient government departments.  In a sense, these acts will serve as a “Bill of Rights” for consumers.”

“It is therefore with a sense of deep disappointment that I received the recent announcement of yet another delay in the implementation of the Consumer Protection Act and the Companies Act.

Perhaps our government is onto something with its proposed Protection of Information Bill.  Consumers should really be protected from economic drivel such as this.

The media loves to tell us – the public, the consumer – how these policy proposals from government will benefit us.  Isn’t it just so easy to toe the government line while never taking the time to critically reflect on the unintended consequences these policies will have?

Apart from the absurd idea of Nyembezi’s excitement that the most inefficient of them all – government – will now protect poor and vulnerable consumers from inefficient government departments (amongst other things), there is more than meets the eye.

The burden of regulation to protect the consumer will fall largely on “unscrupulous businesses” that take advantage of “poor and vulnerable consumers.”  The costs of administering these regulations through more paper work, higher tax payments, and more expensive legal bills will push the cost of doing business higher.  Those who we want to protect will, firstly, pay for the ‘privilege’ of being protected through higher product prices.

Furthermore, while businesses can afford legal protection, your average poor and vulnerable consumer cannot, placing businesses and consumers on an uneven playing field when it comes to fighting legal battles.  To the extent that government tries to tilt the playing field in favour of consumers, what is not seen is that consumers will foot the bill through larger state regulatory and judicial spend (taxpayer) and higher product prices (consumer).

What is perhaps even more disconcerting is that these policies place the poor and vulnerable at risk of job destruction in the broader economy.  As businesses must now divert more resources to complying with additional regulations, the boon of job creation will go mainly to the legal industry and compliance departments, unproductive capital to say the least.  As a side note, if you have noticed the majestic legal buildings going up in Sandton in recent months, this is where the jobs and resources are going…not productive enterprise, but to complying with government regulations and laws.

Ultimately, consumers will be worse off as a result of the Consumer Protection Act.

Why all this need for consumer protection in the first place?  The sovereignty of the market lies with the consumer.  When a consumer purchases a product he or she is not satisfied with, it is taken up with the producer or the retailer, or that product is simply  not bought again.  It is in the interest of the manufacturer or retailer to provide the best possible product at the lowest possible price to avoid competitors from stealing market share, leaving the final decision up to the consumer whether to make the purchase or not.  Competition between many producers and consumers ensure the best product is made available on the market at the lowest possible price.

The unfettered free market is the best protection any consumer can or will ever have against poverty.

Which brings me back to Nyembezi.  Maybe the government is onto something.  Consumers really should be protected from economic drivel such as this, and newspapers should be forced to provide a balanced and complete view of all the unintended consequences of government policies, not just mindless cheerleading that make us all poorer.

By JGalt, on October 26th, 2010 | Category: Economic Policy