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Marketing Activities Under The Consumer Protection Act October 2011

Since the coming into effect of the Consumer Protection Act, Act 68 of 2008 (“CPA”) on the 31 March 2011, a number of fundamental consumer rights impact strongly on marketing practices. They are set out in chapter 2 of the CPA and consumers have been given the means of enforcing them through the National Consumer Commission, Tribunal or the courts. Financial penalties may be imposed on non-compliant suppliers and they are onerous indeed.

When planning marketing activities, suppliers will do well to respect the fundamental consumer rights laid down in the CPA. The reason for this is that if called upon to evaluate a consumer’s complaint, the interests of the consumer will be the pre-eminent consideration of any commission, tribunal or court of law.

The era of “let the buyer beware” is over

An important requirement of the CPA is that marketing activities should not be misleading, deceptive or fraudulent in any way. Suppliers should refrain from the use of exaggeration, innuendo or ambiguity when it comes to the disclosure of material facts. Indeed, the CPA places the onus firmly on the supplier to ensure that its marketing message does not misrepresent the characteristics or the nature of the goods or services. This includes pricing, quality, grade, suitability, model or style. Suppliers must also disclose whether goods are new or grey market or reconditioned goods and in certain instances indicate availability.

Equality

The CPA entrenches the principles of equality, as reflected in the Constitution and the Promotion of Equality and Prevention of Unfair Discrimination Act, by avoiding discriminatory marketing practices. Consumers have the right to free and unlimited access to goods and services, and suppliers are not permitted to prioritize one consumer group over another when marketing their goods or services. This requirement for equality reaches beyond the normal ambit of race and gender and extends to the socio-economic and geographical location of consumers as well.

Direct Marketing

Direct Marketing is defined, as the approach to any person, either in person or by mail or electronic communication, for the direct or indirect purpose of:

(a) Promoting or offering to supply, in the ordinary course of business, any goods or services to the person; or

(b) Requesting the person to make a donation of any kind for any reason.

Section 11 of the CPA empowers consumers, under their right to privacy, to refuse to accept any such direct marketing approach and to require the supplier to immediately desist from any such approaches in the future. Consumers may also pre-emptively block any electronic approach.

Suppliers wishing to conduct any form of direct marketing must first approach their customer (consumer) base to establish open channels of communication and encourage them to “opt in” to receiving any such marketing approach. The marketing gurus see this as an opportunity to develop a communication strategy whereby the supplier can draw its consumers into its communication plan.

Once consumers have “opted in”, suppliers can communicate with them with as much creativity and flair as they can muster but bearing in mind that consumers are entitled to “opt out” at any time without incurring any cost.

Section 12 of the CPA, through the regulations, sets out the times of the week including weekends and public holidays, during which a supplier may contact a consumer for purposes of direct marketing.

Section 16 of the CPA entitles the consumer to a 5 business day cooling-off period following any transaction resulting from a direct marketing approach and the supplier is obliged to advise the consumer of this right. It follows that a consumer may within 5 business days after having entered into the agreement or having received the goods or services (whichever is the later date) cancel the agreement without having to provide any reason or incurring any financial penalty.

The supplier must refund, in full, any payments that the consumer may have made, within 15 businessdays of the cancellation. Furthermore, the supplier must arrange to have any goods that may have been delivered collected from the consumer at the supplier’s own cost and risk.

Bait Marketing

A supplier which advertises goods or services at a special price in such a way that it misleads a consumer as to the actual availability of those specific items at the advertised price with the intention of enticing a consumer to visit or contact the supplier practises bait marketing. This practice is prohibited under section 30 of the CPA.

Negative Option Marketing

The practice whereby an agreement is deemed to have been concluded unless the consumer acts to cancel the transaction or return the goods which the supplier may have unilaterally sent to the consumer is now prohibited. Section 31 of the CPA defines these goods as unsolicited goods. In such an instance the consumer may retain the goods should the supplier fail to arrange the collection thereof at its own cost and risk, and shall have no obligation to pay for them.

Catalogue Marketing

Section 33 of the CPA deals with catalogue marketing. The very nature of catalogue marketing precludes the consumer from being able to inspect the goods or services being purchased; this has the effect of curtailing the consumer’s right to choose. It states that the supplier is required to disclose prescribed information to the consumer which includes: details of the supplier’s name, registration number, address and contact details, pricing and currency information, delivery arrangements including the name of the shipper, mode of transportation and the place of delivery to the customer. The supplier must also deal with the terms of cancellation, return and exchange and outline its refund policies and complaints handling procedure, if any.

Trade coupons and Promotional Offers

Section 34 of the CPA regulates the use of trade coupons or similar promotional offers. In terms of this section, suppliers must ensure that they are able to fulfil the offer as made. They must clearly set out exactly what is being offered and how and where the consumer can accept or receive the offer. The onus is on suppliers to ensure that they are able to meet reasonably anticipated demand for the offer. They must also refrain from discriminating between different groups of consumers in making the offer available.

Customer Loyalty Programmes

In terms of section 35 of the CPA, the supplier must clearly state the nature of the benefit being offered under these types of programmes. The goods or services to which the offer relates must be specified as well as what the consumer must do in order to receive the benefits. Full contact details where a consumer may join the programme and/or obtain the benefits must be given.

The supplier may impose certain restrictions or limitations on redeeming benefits, for example by restricting the use of travel rewards during peak season times. The supplier may not, however, offer goods or services of a lower quality or standard against the redemption of any such loyalty rewards than if the goods or services were being paid for normally. Nor may the supplier charge any fee for the administration or use of such rewards if the consumer pays a periodic fee to remain a member of the programme.

Promotional Competitions

The regulation of promotional competitions in section 36 of the CPA prohibits unscrupulous marketing activities.

More specifically, the CPA prohibits a supplier informing a consumer that they have won a competition when no competition took place or the consumer hasn’t in fact won, or where there are previously undisclosed conditions to receiving the prize, or if the consumer will be required to offer further consideration before receiving the prize.

The CPA sets out, through the regulations, specific requirements for operating a legitimate competition.

Alternative Work Schemes and Referral Selling

The marketing of alternative work schemes is addressed in section 37 of the CPA. The marketing of any such activity must be accompanied by a cautionary statement setting out the extent of uncertainty regarding the potential work, activity, income or other benefits to be derived from such activities.

Section 38 of the CPA preclude marketers from offering rebates, commissions or other benefits to consumers in return for the giving of names or of assistance to the supplier in concluding similar transactions with other consumers.

International implications

The CPA applies to all transactions concluded in the South African consumer market. A local consumer may sue an internationally based supplier should it fail to comply with the CPA. It follows that foreign suppliers who are selling goods and/or services in South Africa must comply with the requirements of the CPA. Should they fail to do so, they may be held accountable.

In conclusion

All suppliers, foreign and local, who deal with the South African consumer market, must comply with the marketing provisions of the CPA. Failure to do so could not only be catastrophic in terms of financial penalties that may be imposed, but may also be extremely damaging to the brand, trademark and corporate image of the offending supplier.

To sum up, the intention of the CPA is to create a South African consumer market that is fair, accessible, efficient, sustainable and responsible. It is a recipe for the ultimate customer experience.

Disclaimer

This article has been compiled for information purposes only and does not constitute legal advice. It is generally accepted that to be meaningful, legal advice needs to be tailored to the specific needs and circumstances of the case on hand. It follows that neither Maria D’Amico nor D’Amico Incorporated can accept liability for any loss or damage caused to any individual or entity that has acted or omitted to act on the basis of this information.