Consumer Protection in Singapore

LGST 101 BUSINESS LAW LAW OF NEGLIGENCE Academic Year 2007/08 (Term 1) PREPARED FOR: PROF SAW CHENG LIM PREPARED BY: LEE KAI XIN DORENE QIU HUI LING YVONNE ANG XINYI ZHU YING ZHAO LI JUAN Consumer Protection in Singapore Lee Kai Xin Dorene, School of Accoutancy Qiu Hui Ling Krisa, School of Accoutancy Yvonne Ang Xin Yi, School of Business Zhu Ying, School of Business Zhao Li Juan, School of Accountancy This paper aims to analyze the adequacy of consumer protection in Singapore.

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We will examine five difficult issues regarding consumer protection in Singapore, namely consumer rights, present day consumer protection legislation, the dispute resolution process, limitation of our local consumer watchdog, presence of monopolies in Singapore and lastly, education of consumers on their rights. Each section will embed the shortcomings of the present-day system, our group’s suggestion on how to enhance it and the lessons that Singapore can learn from other countries regarding the specific issues. 1. Consumer rights

Webster’s dictionary defines consumerism as “a movement for the protection of the consumer against defective products, misleading advertising, etc. ” As consumers, we possess four basic rights as extolled by former US President John F. Kennedy in 1962 which are later called The Consumer Bill of Rights— a right to be safe, a right to choice, a right to be heard and a right to be informed[1]. CASE successfully lobbied for the Consumer Protection of Fair Trading Act (CPFTA) in 2004, which sets out a list of unfair trade practices where consumers can seek civil remedies by showing that traders have committed these practices. 2] We will further explore the adequacy of Singapore’s consumer protection in these four major areas. 1. 1 Right to be safe It would be highly unethical of a seller to endorse a product that would ultimately harm the consumer. Conversely, no consumer would want to buy an item which is unsafe for use or consumption. In Singapore, an agency which provide quality assurance for products and services and promote industry use of Singapore and international standards would be SPRING Singapore (Standards, Productivity and Innovation Board), a national standards and conformance body.

One unique tool that SPRING Singapore came up with to ensure that household appliances and accessories designated as controlled goods meet specified safety standards and are safe for use is the SAFETY mark under the Consumer Protection (Safety Requirements) Registration Scheme[3]. 1. 2 Right to free choice The right to free choice states that consumers should have a variety of options provided by different companies to choose from. Locally, this right is imbedded in our economy. The Singapore government has prevented monopolies and promoted fair competition among firms, indicating their ersistent belief in consumers’ right to choice. A clear example is the Infocomm Development Authority of Singapore (IDA), whose main objective is to encourage effective competition in the telecommunications market in Singapore. To endure this in a multi-operator, multi-network environment, IDA formulates and develops short- and medium-term infocomm-related policies, as well as standards, codes of practices and advisory guidelines – all of which are enforceable by IDA – pertaining to issues such as licensing, interconnection, resource and competition management[4]. 1. Right to be heard The right to be heard asserts the ability of consumers to voice complaints and concerns about a product in order to have the issue handled efficiently and responsibly. National Trades Union Congress (NTUC) which is run by the government, founded Consumer Association of Singapore (CASE) in 1971 to be the consumer watchdog to champion consumer issues. CASE works towards hearing consumers’ concerns and redressing their grievances. Aggrieved consumers can seek CASE’s help in resolving their disputes with traders through mediation, for a fee from $15 to $400.

Should mediation fails, consumers can file at the Small Claims Tribunal, which will minimize legal cost for all concerned. Besides this, many consumers who suffered injustice from traders also can voice their grievances on the Straits’ Times forum. These various avenues can adequately protect consumers’ right to be heard. 1. 4 Right to be informed [pic] The right to be informed holds that businesses should always provide consumers with adequate and truthful information for them to make informed product choices. From our survey of 100 people, we have found that an appalling 72. % felt that their rights to be informed are not adequately protected. While there is no main body championing for this right, this right is already integrated into our legal structure through certain acts like the Sale of Goods Act (SGA) and the Misrepresentation act. Advertisements, the common tool that firms adopt to market their product, must also contain accurate information about the product. Misleading advertising is a serious offence especially since it unfairly affects the consumers’ free choice. We will illustrate this with an example in the following paragraph. . 41 Advertisements According to our survey, a huge 60% of our surveyors feel that advertisements are not informative, citing reasons that advertisements are mere puffs, containing only the good points and relying on irrelevant appeals on emotions. Advertisements are pervasive and run the risk of the overloading of information, making it hard for the average consumer to discern between the mere puff and facts. M1, a leading mobile communications provider in Singapore, has introduced SMS 2. 0 which is an application that brings together messaging, content and advertising.

Jim Goh, Regional Managing Director of M1’s media agency, said, “We recognized the changing consumer lifestyles and evolution of the communication channels and the need to adopt new ways of reaching the consumers[5]. This shows how businesses are innovating more ways to advertise and get to the consumers and there is no running away. In Australia, global drugs company GlaxoSmithKline was fined NZ$217,000 in New Zealand for misleading advertising. They face charges alleging 15 breaches of the Fair Trading Act.

GlaxoSmithKline produces the drink Ribena, which they claimed blackcurrants to have 4 time the Vitamin C as compared to oranges. These drinks were produced in New Zealand and Australia. Channel 8 News reported the story, but added by saying that the Ribena sold here were made in Malaysia & Philippine. This brings about the question that if GlaxoSmithKline produces Ribena with no detectable Vitamin C in pro-consumer countries like New Zealand and Australia, why should it adhere to its advertisement claims and produce better quality drinks in Malaysia and Philippines? 2.

Consumer protection Law Singapore is racing to break into the league of industrial and commercial nations in the realm of consumer protection; hence Singapore has too put in place a relatively comprehensive regime of consumer protection laws. Consumer law relates essentially to the prescription of safety, labeling, advertising, service standards and the provision of redress in cases where business fail to meet those standards. For instance, SGA made provisions for the protection of consumers by requiring the sellers to take on board certain obligations as to description, quality and title.

To prevent any likelihood of the seller maneuvering himself out of these obligations towards consumers imposed by the SGA, the introduction of the Unfair Contract Terms Act 1977 (UCTA) stipulates that the liability of the seller for lack of title, merchantability or fitness for purpose cannot be excluded or restricted. The most important piece of legislation of interest to consumers in Singapore is the Consumer Protection (Trade Description and Safety Requirements) Act 1975 which prohibits the use of misleading trade descriptions and false representations about goods.

Incorporating the consumers’ right to be informed, it would be an offence to either apply false trade descriptions to any goods or supply those to which such description has been applied. Furthermore, it would also be an offence to use a false representation as to the supply or approval of goods (by any person including government departments or international bodies). 2. 1 Inadequacy of law When we inspect the existing law in Singapore, we found that Singapore has no any comprehensive statute.

The sales law in Singapore does not include the general rights and remedies available to the parties, which belong to Common law[6]. Therefore, if a consumer wants to determine his rights or the remedies, he has to refer to various rules under general contract law. The sales of land and building, intangibles such as shares or copyright are governed by other specific laws except the sales law. It is really an obstacle for consumers to understand their rights and protection. Secondly, Consumer Protection (Trade Description and Safety Requirements) Act and SGA all cover only tangible goods.

Meanwhile, services have not been embraced within other laws[7]. Since Singapore aims to be a tourism hub, the lack of legal protection in services is worrying especially when the conflicts in customer services appear. 2. 2 Enhancing the legal framework The Government can improve the sales law by including the general rights and remedies for consumers should their rights be violated. In this way, the consumers will not have to refer to other rules which are etched in the general contract law to determine their rights and remedies if they face injustice.

In addition, the CPFTA can include services as part of their protection area. Singapore is aiming to become a top-notch service hub in the region, and with the building of the Integrated Resorts, we anticipate an augmented number of aggrieved consumers in the service sector. Thus this inclusion would leverage the CPFTA in terms of consumer protection in Singapore. 2. 3 Learning from Canada, Ontario The Consumer Protection Act in Ontario has in place, under Chapter 30, Part IV, protection for consumers in personal development services.

It includes for example, Requirements for personal development services agreements:  Every personal development services agreement shall be in writing shall be delivered to the consumer and shall be made in accordance with the prescribed requirements, and Payments not required or accepted:  No supplier shall require or accept payment for personal development services from a consumer with whom the supplier does not have an agreement that meets the requirements established under subsection (1). 8] These regulations in Ontario protect consumers from unlawful merchants in the service sector, and Singapore may include these laws in the CPFTA to make it a more comprehensive framework. 3. Limitation of CASE . As mentioned earlier, CASE champions the cause of the consumer to achieve a caring and consumer-friendly community. [9] Its possession of independent status both from the government and businesses allows it to offer advice, education and guidance to the general public and to represent consumer concerns to the government. 10] While CASE has greatly improved the scene for consumerism locally, inadequate consumer protection is still evident as CASE faces certain limitations in the fight for its cause. 3. 1 Lack of power to enforce regulations The biggest limitation of CASE is it does not have strong legal power to force retailers to comply with regulations. The main powers CASE has own presently are entering into Voluntary Compliance Agreement (VCA) with retailers whereby retailer can agree to stop an unfair practice and taking injunction or declaration proceedings[11].

However, CASE still faces difficulties when carrying out this power. Firstly, CASE has to turn to other avenues for help when retailers refuse to sign a VCA. The President of CASE, Mr Yeo Guat Kwang expressed his concerns and said that: “We need to enhance the enforcement because at the moment, we’re only able to propose to the traders to sign a VCA. In most cases, we find that there are a small number who will make use of these loopholes to drag on the case and continue to mislead or make misrepresentation. “[12]

For instance, Global Europe (Asia) in 2007, and Orion’s Belt Network (OBN) in 2006, both timeshare companies, rejected the requirement of CASE to sign a VCA to stop their unfair practices towards customers, so the consumer watchdog had no chice but to take them to court. Although in August 2007, OBN has agreed an out-of-court settlement; the time taken to reach the agreement was considerably long, and it will take another one year before the customers get their refunds. Secondly, under the CPFTA, CASE has been designated as one of the bodies to apply to court for injunction against a supplier engaging in unfair practices[13].

However, CASE needs the approval of up to 2 of its committees and also the endorsement of the Injunction Proposals Review Panel before taking up injunction proceedings. [14] This law bestowed upon them is only worth as much as the paper it was written on because of the lengthy injunction proceeding processes. Before CASE can effectively take injunction, the supplier would have transferred his assets and business elsewhere or would have ceased the business altogether, in bid of escaping liability, thus rendering the injunction useless.

In our interview with Mr T. Pillay, Assistant Director, Legal, of CASE, he mentioned that CASE lacks the enforcement power mainly because the government refuses to include criminal sanctions, unlike that of Australia’s, making their consumer watchdog a powerful voice of consumers. 3. 1. 1 Increasing the leverage of CASE One of the ways to increase the leverage of CASE is to grant more power to CASE by introducing business and criminal sanctions so as to enable CASE to carry out their functions more effectively.

With the criminal sanctions in place, should the corrupted merchants try to evade getting caught by changing companies or erasing their past records, they will be dealt with by criminal sanctions. This would greatly strengthen the position of CASE as consumers’ representative in taking merchants to task, and the efforts and money spent on filing an injunction against the merchants will not go to waste. Moreover, the business sanctions will also serve as a greater deterrence for businesses to engage in unlawful practices. 3. 1. 2 Learning from Britain The consumer watchdog in Britain has full authority over consumer protection issues.

The ‘Big Four’ supermarkets in Britain came under the scrutiny of the public and the consumer watchdog after officials decided that their recent expansion could affect consumers, and if Britain’s most powerful consumer watchdog finds the firms acting unconstructively against free competition, it could order them to close down some stores. [15] This exhibits the very power and authority that CASE lacks, allowing the Britain’s consumer watchdog to come down hard on uncompetitive acts by merchants and other issues of consumer protection at its own discretion. 3. CASE is dependent on the government for funds In our interview with Mr. T Pillay, he mentioned that although CASE is an independent association on paper, it is still dependent on government for funds, and this may prove to be an obstacle for CASE to develop as a true consumer protection body. It is widely known that NTUC, being an organization that is linked to the government, founded CASE. Furthermore, three quarters of CASE’s annual budget is from a government body, the Ministry of Trade and Industry, and another rough sum of about $100,000 comes from NTUC[16].

Because CASE is a non-profitable organisation, it would be unable to operate without these government funding. Moreover, the Singapore government itself is the biggest trader and seller of goods and service in the nation. It is questionable that such a major “retailer” should be funding the main consumer watchdog in Singapore. This relationship undermines the credibility of CASE as the representative of consumers, especially since our group has found out that several consumers has challenged the credibility of CASE on the Straits Times discussion board during the uproar of NETS’ price hike.

The dependence of CASE on government and its sponsors had, and will continue to restrain it from protecting consumer rights effectively. 3. 2. 1 True independence of CASE The government should allow more independence in the functions of CASE so that they will be able to enforce their regulations more firmly. With more power, CASE will then be able to develop a fairer trading legislation to promote a fairer and more equitable marketplace, thus create a fair trading environment for consumers and businesses alike.

Though CASE is considered an independent organization, it still depends on a considerable amount of government funding. Thus to be a truly independent organization, CASE should aim to gain more recognition in Singapore so that other bigger multinational companies will possibly sponsor it as this will goes to show that the companies do recognize consumers as an important priority while at the same time gain more publicity. With more private sponsorships and funding, CASE will then be able to break away from the government fully and operate independently.

However, it is to be noted that the private funding should come without any strings attached to enable CASE to function impartially and not be biased towards any of its sponsors, particularly when sponsors are usually the merchants themselves. Hence, transparency of CASE and the sponsor is of utmost importance. 3. 2. 2 Learning from Britain In Britain, a train firm, First Great Western, was slammed for unclear and exorbitant pricing for tickets. After years of campaigning by independent consumer watchdog, Passenger Focus, the firm finally took steps to tackle the issue. 17] We can learn a few things from this example. Firstly, more than one consumer watchdog is required to protect the rights of consumer, especially in cases where long-term campaigning is the only solution; Secondly, firms related to key infrastructures in Singapore are most likely to be governed by the State and it is in the best interest of consumers to have an independent consumer body to represent them instead of CASE for its relations to the government. Hence there might be a need for independent consumer watchdogs to complement CASE in bid to safeguard the rights of the consumers.

Although Singapore may be too small to contain more than one consumer watchdog, it is our group’s suggestion for Singapore to have either CASE truly independent of the government, or another independent consumer watchdog to champion consumers’ cause. 4. Presence of monopolies in Singapore Although the government tries to prevent the formation of monopolies in the market, some monopolies are inevitably formed because of the lifestyle and habits of Singaporeans. Hence, the presence of monopolies prevents consumers from opposing freely issues that dissatisfy them.

In order to illustrate this point, we will look at a NETS case study. 4. 1 NETS akin to monopoly NETS raised its transaction fees for retailers from 0. 35-0. 55% of purchases to 1. 5-1. 9% and this represents a three-fold increase in the amount merchants will have to pay for each transaction. [18] Some merchants passed on this increase in cost to consumers despite being clearly told it was illegal, thereby causing the public’s disappointment at the incompetence of CASE. ‘What other alternative do they (the consumers) have? It’s like a monopoly; retailers have no choice but to accept it,’ Mr.

Yeo said. There are six million Nets users, 13000 Nets merchants and 30000 Nets transaction points nationwide. Eight of 10 neighborhood retailers offer Nets as their only form of cashless payment. [19] From this, we can see that NETS’s control over the cashless market is akin to a monopoly. In the event that this system is abandoned, it will most likely cause a huge disruption concerning electronic transactions since majority of the public especially the low income earners do not have access to alternative modes of cashless payment, i. e. credit cards.

Although opposition was aplenty, the consumers could not defend their rights and are at the mercy of NETS and unlawful merchants who increased the price of their goods as boycotts are not feasible actions. Due to this unfeasibility, consumers may choose to give up their rights instead of pursuing remedies. 4. 2 Enhance consumer protection against monopolies Even though regulations are in place to prevent the retailers from passing on the extra costs to consumers, there is no solid enforcement by any regulatory bodies to prevent the retailers from doing so; this is partly due to the limited power of CASE as illustrated earlier.

The government could pass a regulation stating that the prices of all products are to remain the same as it was before the announcement of the NETS hike thus ensuring that the cost increase is not passed onto the consumers. This will thereby ensure the rights of the consumers. The enforcement of this regulation may not be necessarily done solely by CASE as it may be too cumbersome for CASE to check on every single retail outlet. Therefore, we suggest that the consumers should be the whistleblowers instead and take the matters into their own hands.

Consumers could possibly report the retailers who increase the prices of their products without any valid reason to CASE. With consumers acting as eyes and ears of CASE, we are certain that this would be a major deterrent for retailers. 5. Education of Consumers on their rights It has always been one of the missions of CASE: to educate consumers. Knowing when they have been treated unfairly and knowing the means of recourse will empower these consumers to take responsibility for their own welfare, as well as seek recourse should these rights be encroached upon.

CASE introduces on their website several articles on consumer issues, publishes a magazine, The Consumer, which brings consumers the latest issues and trends in consumer matters, empowering them with the information to make wise purchase decisions and to be a smart consumer, and it also includes exclusive research reports, commentaries, saving tips, readers’ letters, CASE event updates. [20] Also, CASE frequently holds talks, seminars and forums to educate consumers on their rights, such as the CASE-ACISS joint forum, just to name one.

As good as this sounds, it should be noted that this magazine is only published four times a year, and subjected to the subscription of consumers, and also, registration for talks is voluntary which means a large group of consumers who do not take the initiative will be left out of this education process, most particularly, the youngsters. 6. 1 Enhancing the education process With regards to the above, one of the ways in which CASE can further spread their reputation is to collaborate with magazines like Lifestyle to publicize the workings of CASE in order to let the public have a greater nderstating about them as well as reach a greater spectrum of consumers as Lifestyle is posted for free to more than 60% of the entire Singapore population. CASE can also hold seminar talks in schools. This plans to target the young adults, people who are susceptible to consumer pressure and these are the people who will have substantial purchasing power. To reach out to the older population, newspapers advertisements may be considered as a medium.

For example, the Central Provident Fund Board transmits information about their new policies through print ads on newspapers, using colourful and entertaining cartoon strips to bring the point across. Even better, television commercials will reach out to the heartland consumers, the population that needs this education the most. 6. 2 Learning from the European Union The EU has in place three major branches of consumer education for its member countries: (1) The training course for staff of consumer organizations, (2) the Inter-active Consumer Education Project and (3) European Consumer Diary.

The one that may apply to Singapore would be the third branch. The European Consumer Diary is an education tool which covers a range of their specific concerns: e. g. travel, drugs, shopping, money matters, sustainable consumption, etc, and is accompanied by a teacher’s kit which contains background information on different consumer topics[21], and suggested classroom activities – worksheets, discussions, role-playing etc. [22] This allows the teachers to touch on important consumer issues in an interactive way.

Children and adolescents are a priority target group, since young people are particularly susceptible to consumer pressure, have substantial spending power and are able to greatly influence their parents’ purchases. Giving them the skills to act as responsible consumers is even more important in view of their role as tomorrow’s parents. [23] This is a great example for Singapore to follow as mentioned earlier in our report, consumers in Singapore do not know of their rights. Conclusion After the analysis of several consumer issues in Singapore, and the informative interview session with assistant director of CASE, Mr.

T. Pillay, our group feels that Singapore’s consumer protection is not infallible. Although there is plenty of evidence for the relative comprehensiveness of consumer protection laws in Singapore[24], there is still much to be done in the area of consumer protection. We feel that the power of CASE in taking merchants to task is integral and criminal sanctions should be considered carefully by the government instead of brushing it off with the reason of maintaining a pro-business environment in Singapore.

We believe that once better regulations are in place, together with the increased leverage of CASE and more educated consumers, consumers in Singapore will be more completely protected from pernicious merchant practices. (4052 words) ———————– [1] Consumer Bill of Rights (www. bookrags. com) [2] CASE official website http://www. case. org. sg/cpfta. htm [3] Record 15,000 Products Registered with SAFETY Mark SPRING and CASE sign MOU to enhance Product Safety Awareness http://www. spring. gov. sg/Content/ModulePage. aspx? group=nw&id=72be4173-e949-4da4-8fc9-82e22eb83823 [4] IDA Singapore http://www. da. gov. sg/About%20us/20060406102431. aspx [5] M1 brings mobile advertising to Singapore with next-generation SMS by Affle Successful SMS2. 0 trial sets stage for mobile messaging revolution [6] Marketing and consumer law in Singapore by Assafa Endeshaw and Erin Goh [7] Markeing and consumer law in Singapore by Assafa Endeshaw and Erin Goh [8] Consumer Protection Act, 2002 (http://www. e-laws. gov. on. ca/html/statutes/english/elaws_statutes_02c30_e. htm) [9] http://www. case. org. sg/case. htm [10] An overview of Consumer Protection Law in Singapore by Assafa Endeshaw [11] Fair Trading & You CASE published 12] ‘Complaints to CASE pass record 20, 000 mark last year. ’ By Ng Lian Cheong and Julian Ng http://www. todayonline. com/articles/167234. asp [13] Fair Trading & You CASE published [14] Fair Trading & You CASE published [15] ‘Big Four Stores Battle Watchdog’ by Ross Kaniuk, Daily Star [16] ‘A new protection law’ (http://www. littlespeck. com/content/economy/CTrendsEconomy-021223. htm) [17] ‘Train firm slammed for complexity and price of tickets. ’ Express and Echo 12 October 2007 [18] CASE concerned about impending NETS fee hike by Wong Siew Ying From: http://www. channelnewsasia. com/stories/singaporelocalnews/view/280223/1/. tml. [19] Case slams Nets fee hike as a ‘great disservice’ by Lim Wei Chean From: http://www. straitstimes. com/Free/Story/STIStory_126022. html [20] http://www. case. org. sg/central4. htm [21] Europa – Consumer Affairs (http://ec. europa. eu/consumers/cons_info/consumer_diary_en. htm) [22] Europa Diary Final Report (http://ec. europa. eu/consumers/cons_info/cons_diary2007-2008/Europa_diary_Final_Report_2006-2007. pdf) Pg 12 [23] Consumer Education Fact sheet (http://ec. europa. eu/consumers/publications/consedu_en. pdf) [24] http://www. ntu. edu. sg/nbs/sabre/working_papers/01-98. pdf ———————– [pic] [pic]


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