The Consumer Protection Act (CPA) is a South African law that was passed in 2008 to promote and protect consumers' economic interests. This act improves access to and the quality of information that consumers need to make informed decisions, protect their well-being and safety, and provide for increased awareness and education about the social and economic consequences of their marketplace choices. This blog post delves deeper into what marketers should know about the Act.
Covered in this article:
What is the Consumer Protection Act?
Commonly referred to as the CPA, the Consumer Protection Act establishes norms and standards relating to consumer protection, provides for improved standards of consumer information, prohibits unfair marketing and business practices and aims to promote responsible consumer behaviour. The CPA also establishes the National Consumer Commission and Consumer Tribunal to enforce the act and provide for dispute resolution.
Ever-changing technologies, trading methods, and variations in consumer behaviours and agreements will continue to bring new benefits, opportunities and challenges for consumers in South Africa. In response, the Act seeks to promote an economic environment supportive of consumer rights and responsibilities (including those of previously disadvantaged individuals), business innovation and improved performance.
It should be noted that the act has a wide application – it covers every transaction and the promotion of any goods and services, or of the supplier of goods and services within South Africa, unless specifically exempted. The act protects all individuals as well as juristic persons, like small businesses, with assets and turnover of less than R2 million. The act further protects juristic persons with assets and turnover greater than R2 million in limited circumstances.
What Fundamental Consumer Rights Should Marketers Be Aware of?
The CPA affords the consumer the following fundamental rights:
- The right to equality in the consumer market
- The right to privacy
- The right to choose
- The right to disclosure and information
- The right to fair and responsible marketing
- The right to fair and honest dealing
- The right to fair, just and reasonable terms and conditions
- The right to fair value, good quality and safety
- Supplier's accountability to consumers.
Some of these rights have a direct impact on marketers and the work they do. We explore these a bit further in the sections that follow.
Right of equality in the consumer market
This right is particularly important when marketers draft ad campaigns. Suppliers may not unfairly discriminate against consumers of different categories, communities, districts, populations or market segments when offering or making available goods or services, although reasonable grounds for differential treatment may exist in specific circumstances. For example, a supplier may refuse to supply goods or services to a minor or require parental consent before making such a supply.
Consumer's Right to Privacy
The CPA is very clear on how consumers can deal with unwanted direct marketing and when consumers may be contacted. A consumer may refuse to accept or may require another person to discontinue any approach or communication which is primarily for the purposes of direct marketing. The consumer may also pre-emptively block any communication made for direct marketing.
In this instance, marketers need to be aware that they have the duty to implement appropriate procedures to facilitate receipt of the consumers' demands (opt-out) and must refrain from continuing communication where the consumer has refused or blocked such approaches. You may also not charge a consumer a fee for exercising their right to opt-out.
The act also stipulates that suppliers and direct marketers have to stick to specific timeframes for contacting customers for any promotional purposes unless the consumer has expressly agreed otherwise. So, unless the consumer has expressly consented otherwise, you may not engage in any direct marketing aimed at a consumer at home on:
- Sundays or public holidays
- Saturdays before 9 am and after 1 pm or
- On all other days before 8 am and after 8 pm.
Consumer's right to choose
The CPA provides the consumer with the right of choice. Apart from being able to select the supplier they want to transact with, the act affords the customer a right to a cooling-off period after any direct marketing. The consumer can choose to rescind a transaction resulting from any direct marketing without reason or penalty, by giving the supplier notice in writing, within five business days after the date on which the transaction was concluded or the goods delivered, whichever is the latter. In turn, the supplier then has to refund the consumer for any payment received, within 15 business days thereafter.
A consumer may also cancel any advance reservation, booking or order for any goods or services, subject to certain criteria. The supplier may require a deposit in advance for such bookings. In addition, the supplier may impose a reasonable charge for cancellation of the order or reservation, except in the event of death or hospitalisation of the person for whom, or for whose benefit the booking, reservation or order was made. This section does not extend to franchise agreements or any special-order goods.
Unsolicited goods and services include instances where during any direct marketing of goods or services, a supplier or person acting on behalf of the supplier, has left any goods with or performed any service for a consumer without requiring payment in return. If any goods have been delivered to, or services performed for a consumer, by a supplier or on behalf of a supplier without the express consent/request of the consumer, such goods and services are regarded as unsolicited. The supplier needs to recover the goods within 10 business days after delivery and the consumer to whom the goods were delivered should not frustrate any attempts by the supplier to recover the goods.
Right to disclosure and information
The consumer has the right to information in plain and understandable language. Specific criteria apply in respect of the disclosure of the price of goods or services. When it comes to product labelling and trade descriptions, a person must not knowingly apply to any goods a trade description that may be misleading to the consumer. One may also not alter, deface, remove or obscure a trade description or trademark applied to any goods in a manner intended to deceive consumers.
In respect of reconditioned or grey market goods, the act specifically requires the marketer of such goods that bear a trademark, but have been imported without the approval or license of the registered owner of that trademark, to apply a conspicuous notice to those goods in the prescribed manner and form.
The CPA also covers the duties of an intermediary (a person who in the ordinary course of business and for remuneration or gain, engages in the business of amongst others, offering to sell to a consumer, soliciting offers for or selling to a consumer any goods or property that belongs to a third person, or service to be supplied by a third person). Section 27 of the act requires the intermediary to disclose the prescribed information to suppliers and consumers they may deal with and keep records of all relationships and transactions entered into.
Furthermore, any person engaged in direct marketing and at the premises of a consumer or performing services for a consumer at such premises, delivering or installing any goods at such premises, must visibly wear a badge or identification device that satisfies prescribed standards or provide suitable identification upon request by the consumer.
Right to fair and responsible marketing
Consumers are afforded further protection through the general standards set for marketing of goods and services – no false or misleading representations concerning these goods and services may be made. A supplier may further not advertise goods or services being available at a specified price in a manner that may mislead consumers. If the advertisement expressly states a limitation on the availability of the goods or services from the supplier at a particular price, the supplier must provide the goods or services at that specified price to the extent of the expressed limits.
Negative option marketing is where a supplier promotes goods or services, enters into an agreement to provide such goods or services or induces a consumer to accept such goods or services on the basis that the agreement will automatically come into existence unless the consumer expressly declines such offer or inducement. The CPA prohibits negative option marketing and any agreement entered into arising from such an offer will be regarded as void.
Direct marketers must inform the consumer of their right to rescind an agreement for goods and services so marketed. In the event of catalogue marketing, where the consumer procures the goods via telephonic of other agreement not entered into in person, specific information must be disclosed to the consumer, including the supplier's cancellation, return, exchange and refund policies, if any.
With regards to trade coupons and similar promotions, no person may make a promotional offer with the intention of either not fulfilling it, or fulfilling it other than as offered. The promotional offer must be clearly documented and disclose specific particulars as set out in Section 34 of the act. The same applies to offers made through loyalty programmes.
Many businesses attempt to attract more customers through the use of promotional competitions. There are multiple requirements and provisions set out in Section 36 of the act and its regulations which marketers need to consider before launching such competitions.
Right to fair and honest dealing
The CPA aims to protect the consumer from any unconscionable conduct of suppliers or their agents. No physical force, undue influence, pressure or harassment or other unfair tactics may be applied in connection with the marketing, supply, negotiation or demand for payment or recovery of goods and services to a consumer. A supplier (and their marketer) may not knowingly take advantage of a consumer who is unable to protect their own interests by reason of illiteracy, ignorance, mental or physical disability, inability to understand the language of the agreement or any similar factor.
No false, misleading or deceptive representations may be made – either in words or in conduct – when marketing goods and services by or on behalf of a supplier. This includes not falsely representing that the supplier has any sponsorship, approval or affiliation. In addition, the act prohibits initiation, sponsorship, promotion or distribution of any communications pertaining to fraudulent schemes and offers (including fraudulent currency schemes, financial transactions and transfer of property or legal rights). The promotion of pyramid and related schemes is also prohibited.
Consumers should lodge complaints with suppliers, preferably in writing. If the complaint is not resolved by the supplier within a reasonable time period, the consumer may lodge a complaint, with the relevant ombud, industry ombud, Consumer Goods and Service Ombud, National Consumer Commission, National Consumer Tribunal, an alternative dispute resolution agent, consumer court or civil court, depending on the type of complaint. The consumer must lodge the complaint within 3 years of it occurring. Failing to do so will result in the prescription of the right.
Consequences of Non-Compliance with the CPA
The Act makes it clear in terms of Section 5, that in any dealings with a consumer in the ordinary course of business, a person must not:
- Engage in conduct that defeats the purposes of the CPA
- Engage in conduct that goes against one's good conscience, is misleading or deceptive or reasonably likely to mislead or deceive the consumer
- Make any representation about a supplier, goods or services, or any related matter, unless the person making the representation has reasonable grounds for believing such representation to be true.
In terms of Section 107, it is an offence to disclose any personal or confidential information concerning the affairs of any person obtained (a) in carrying out any functions in terms of the act; or (b) as a result of initiating a complaint or participating in any proceedings in terms of the act.
Furthermore, the act indicates that is an offence to hinder, oppose, obstruct or unduly influence any person who is exercising a power or performing a duty imposed on the person by the CPA.
Section 109 sets out instances which are regarded as offences relating to the Commission and Tribunal, including:
- Contravention or failure to comply with an order of the Tribunal
- Any attempts to improperly influence the Tribunal or a regulator concerning any matter connected with an investigation, or to influence the proceedings or findings arising from such an investigation
- Any actions pertaining to the investigation that would have been seen as contempt of court, had the proceedings occurred in a court of law
- Knowingly providing false information to a regulator
- Defamation of the Tribunal or a member thereof
- Willfully interrupting proceedings of a hearing or misbehaving during such a hearing
- Acting contrary to a warrant to enter and search or
- Acting without authority, but claiming to have such authority, in entering or searching premises or attaching and removing articles or documents.
Any person altering, obscuring, falsifying, removing or omitting a displayed price, labelling or trade description without authority is guilty of an offence. Failing to act in accordance with a compliance notice issued by the Commission is also an offence.
Penalties and fines
Penalties and administrative fines may be imposed on any person convicted of an offence in terms of the CPA. A person contravening section 107(1), relating to the disclosure of personal or confidential information, may be liable to a fine or imprisonment for a period not exceeding 10 years, or both a fine and imprisonment. Other contraventions may result in a fine, imprisonment for a period not exceeding 12 months, or both a fine and imprisonment.
Administrative fines may not exceed the greater of: (a) 10 percent of the respondent's annual turnover during the preceding financial year; or (b) R1 million. The annual turnover of a supplier in this instance is the total income of that supplier during the immediately preceding year, as determined in the prescribed manner.
In determining the appropriateness of the fine, the Tribunal will consider:
- Nature, duration, gravity and extent of the contravention
- Any loss or damage suffered as a result of the contravention
- The behaviour of the respondent
- Market circumstances in which the contravention took place
- Level of profit derived from the contravention
- The degree to which the respondent has cooperated with the Commission and the Tribunal and
- Whether the respondent has previously been found in contravention of the CPA.
We recommend that when it comes to legislative matters, you always seek professional legal advice.