The Consumer Protection Act: What about Suppliers? – Part 1

As we are all consumers, in one way or another, the new Consumer Protection Act (CPA) has a bearing on each and every individual in this country. But what does the new legislation mean for suppliers, who represent the other side of the coin?

Helaine Leggat, founder and owner of Legate ICT Consulting, is an Information Communication Technology lawyer specialising in information security, governance and privacy, disciplines which require, among others, a working knowledge of Records and Information Management (RIM). Leggat gives advice, inter alia, to both consumers and suppliers when it comes to achieving compliance in relation to the changing consumer protection legislative landscape in South Africa.

The Act, which came into full force and effect in April 2011, replaces the provisions of five previous Acts in a new and simplified manner. There are nine basic consumer rights, all of which have important implications not only for the consumer, but also the supplier. .

In a bid to dispel any confusion surrounding the new legislation, this first in a series of articles aims to explain exactly how the new legislation will impact businesses and suppliers of goods and services in South Africa.

What is the CPA?

The aim of the new CPA is to promote a fair, accessible and sustainable marketplace for consumer products and services. It is there to establish national norms and standards to ensure consumer protection, to improve standards of information and to prohibit unfair marketing and business practices. In a nutshell, the act is there to promote a consistent legislative and enforcement framework related to all consumer transactions and agreements.

Who Does the CPA Apply to?

As the name implies, the CPA is designed to protect the consumer. But first of all, who is a consumer? “Consumers are persons to whom goods or services are marketed, who have entered into transactions with suppliers and are users of particular goods or recipients or beneficiaries of services,” says Leggat. She goes on to explain that the CPA applies to every transaction occurring within South Africa, as well as the promotion or supply of any goods and services occurring within the country. The CPA thus has broad application, and has important implications for both the consumer and the supplier of goods and services to the consumer.

The Nine Rights of Consumers

There are nine key consumer rights provided for in the CPA, namely the:

1. Right to Equality in the Consumer Market and Protection Against Discriminatory Marketing Practices;

2. Right to Privacy;

3. Right to Choose;

4. Right to Disclosure of Information;

5. Right to Fair and Responsible Marketing;

6. Right to Fair and Honest Dealing;

7. Right to Fair, Just and Reasonable Terms and Conditions;

8. Right to Fair Value, Good Quality and Safety;

9. Right to Accountability by Suppliers.

In this first article in the second series of articles in which we take a closer look at what the CPA means for the supplier, we will discuss rights numbers 1,2 and 3.

Supplier Obligations in response to Consumer Right No.1: Right to Equality in the Consumer Market and Protection Against Discriminatory Marketing Practices

While this means that the consumer has a right to free and unlimited access to goods and services, and that suppliers are not permitted to prioritise any consumer groups over others when marketing, selling or distributing their goods and services, it does not mean that there is no discrimination.

On the contrary, there are times when suppliers must discriminate. They may not for example sell cigarettes or alcohol to persons under the age of 18. Online service providers must make similar distinctions and do indeed treat certain consumers differently, for example by requiring the bill payer’s consent in the case of children’s services.

What this consumer right seeks to prevent, is unfair discrimination. Fair or reasonable discrimination is perfectly acceptable and often necessary. Unfair discrimination is not. If, for example, suppliers were to charge unfair (different and discriminatory) prices for the same goods and services, and treat consumers differently based on gender, race, socio-economic status or geographic location, such behaviour would amount to a contravention of this consumer right and also, be unconstitutional.

Suppliers should understand that neither the Consumer Protection Act nor the Constitution seek to limit differentiated marketing. Were that the case, we would not have organisations such as those that market their services purely to women, an apparent contravention of the provision not to discriminate on the basis of gender.

Supplier Obligations in response to Consumer Right No.2: Right to Privacy

Consumers have the right to protect their privacy and confidentiality in respect of unwanted or unsolicited correspondence. It is helpful to understand that the right to privacy can among others, be interpreted as the right to be left alone.

To enforce the right to privacy, consumers can pre-emptively block all or any approach from suppliers to direct marketing by registering on the statutory Do Not Contact Registry (’Do Not Contact’ or ’DNC Registry‘ means the Registry contemplated in section 11 of CPA and section 4 of the CPA Regulations, Vol. 550 No 34180).

Furthermore, in the event where a consumer has given initial consent to marketing, they may at any time withdraw this consent and refuse to receive further sms’s, telephone calls, letters, ‘spam’ email or junk mail in their post boxes or by electronic communicatons.

In practical terms, what this means for suppliers is that they will need to keep accurate records of consumer choices supported by consistent internal administrative procedures.

Suppliers should clearly advise consumers of their rights, for example by publishing privacy policies on their websites and through links on email and other forms of communications such as SMS to mobile devices which easily allow consumers to ‘opt-out’ from continued communications. Once a consumer opts-out, suppliers should record these consumer choices in their own internal databases.

Prior to commencing any direct marketing campaign, suppliers are required firstly to check the names on their consumer databases against their own internal ‘Do Not Contact’ records and secondly, against the statutory ‘Do Not Contact’ database. Given that fines can be as high as 10% of supplier turnover, this is not a matter to be taken lightly by suppliers.

Supplier Obligations in response to Consumer Right No.3: Right to Choose

The nine consumer rights in the Consumer Protection Act are closely related and serve to support one another. The right to choose, for example, is closely related to the right to privacy: the right to choose to be left alone.

The consumer’s right to choose extends further; and in its simplest form means that suppliers may not force consumers to do certain things. ‘

Bundling’ is an example of a prohibited practice because it seeks to restrict the consumer’s right to choose. Bundling is the practice of forcing consumers to take certain goods and or services as a result of choosing others.

Similarly, suppliers may not attempt to force consumers to enter into further agreements, extended term agreements (over 24 months) or agreements with various third parties as a condition of supplying certain goods and services.

In terms of fixed-term agreements, consumers have the right to cancel such agreements upon expiry of the contract period, without penalty or charge. Consumers are obliged to provide suppliers with 20 business days’ notice, in writing or other recorded means, of cancellation of fixed-term agreements. Suppliers must extend fixed-term agreements on a month-to-month basis, if the consumer failed to request the cancellation of such agreements.

With regards to repairs or maintenance services, suppliers are not permitted to charge consumers for drawing up any cost estimates/quotations. Consumers are not liable to pay for any repairs or maintenance services done without their prior approval.

Suppliers are not permitted to charge consumers for any diagnostic work/inspections required in compiling cost estimates/quotations unless there was a prior agreement.

How Does a Supplier Ensure Compliance?

Global technology and mailstream company Pitney Bowes South Africa, in consultation with legal experts in the field such as Leggat, is at the forefront of thought leadership and operational practice, in the field of Records and Information Management (RIM). The company is thus in a good position to provide insight into the best ways to ensure compliance to the CPA.

“Being in a position to prove compliance with the CPA will most often boil down to correct management of records and information, both on the part of consumers and suppliers,” says Michael Springer, MD of Pitney Bowes South Africa.

“It has become increasingly imperative for suppliers and marketers to manage their digital and paper information, not least because of the changing legislative environment in South Africa, because organisations must keep records as required by law, for operational and evidentiary purposes.”

He continues: “The onus is on both the supplier and the consumer involved in a transaction to know and understand their rights and obligations, including the obligation to keep records and the need to mitigate risk attached to transacting business.. The ability of a supplier to defend itself in the event of a complaint is highly dependent on the ability to prove that facts at issue.”

Springer asserts that RIM has also become a complex area in recent years, one that involves all aspects of a business: “RIM is not only about keeping records. It is about business opportunity also. It needs to be viewed holistically by the business owner, because the management of records involves all business processes, all services or products, and all staff within an organisation.”

For more information on how to ensure best RIM practice, please contact Michael Springer at Pitney Bowes on 011-516-9400 or email Michaels@pitneybowes.co.za.

Ends

About Pitney Bowes

Pitney Bowes is a $5.6 billion global technology leader whose products, services and solutions deliver value within the mailstream and beyond. Founded in 1920, the company’s 33,000 employees deliver technology, service and innovation to more than two million customers worldwide. For more information about Pitney Bowes, its products, services and solutions, visit www.pb.com.

Editorial Contact:
Kendal Hunt Managing
Director Kendal Hunt Communications PR and Media Liaison
Agency 011 462 6188 : 082 823 6533

kendal@kendalhunt.co.za