1 PRESENTATION ON CONSUMER PROTECTION DATE : VENUE :

1

PRESENTATION ON CONSUMER PROTECTION

DATE :

VENUE :

2

Presenter

• Presentation by Ms

Director: Education and Compliance

Office Consumer Protection,

Consumer and Corporate Regulation Division

Department of Trade and Industry

Contacts :

Tel 012 394

Fax 012 394

Email

3

Purpose:

To provide a broad overview of the Office of Consumer Protection, the legislation we administer and the key prohibitions.

Role of Compliance:

•To encourage, facilitate and monitor voluntary compliance•To minimize financial and legal risk to business and consumers

Tools/ processes used to achieve the above:

Presentations/ WorkshopsAdvisory opinions/ ClarificationsInformation/ business contacts and meetingsNational Education Campaigns

Introduction

4

The National Office of Consumer Protection (OCP) is a Chief Directorate within the Consumer and Corporate Regulation Division of the department of Trade and Industry.

The OCP:

• Administers the Unfair Business Practices Act 71 of 1988 as amended;

•Protects consumers against unfair business practices;

•Promotes the spirit of fair trade between the consumer and supplier;

•Educates consumers about their rights and responsibilities; and

•Investigates and resolves mattes relating to unfair business practices.

Note: There are 9 Provincial Consumer Affairs offices that have jurisdiction within their respective provinces.

OCP

5

Education and Compliance

•Outreach & Campaigns

•Consumer enquires/ complaints

•Business education

OCP (cont’d)

Complaint Resolution

•Alternative Dispute Resolution

•Referrals

Legal Support and Prosecution

•Provides legal advice

•Prosecutions and court matters

Investigations

•Informal and Formal investigations on behalf of the Consumer Affairs Committee

6

UBP Act

The purpose of the Unfair Business Practices Act (No 71 of 1988) as Amended

To provide for the prohibition or control of certain unfair/ harmful business practices; and for matters connected therewith.

CAFCOM

•The Act establishes a Consumer Affairs Committee (CAFCOM), which serves as an advisory body to the Minister of Trade and Industry

•CAFCOM makes recommendations to the Minister to prohibit unfair business practices.

•Contraventions of these prohibitions will result in a fine of up to R200 000 or 5 years imprisonment.

•Regulations prohibiting or prescribing specific criteria for business conduct are published in the Government Gazette and can be accessed on the dti website.

7

Investigative Process

The OCP is responsible for all investigations into matters that may be defined as; or alleged to be unfair business practices.

• Investigators receive complaints and refer matters to CAFCOM for approval to conduct either section 4 or section 8 investigations.

- Section 4 (1) (c) investigation - preliminary - Section 8 investigation - formal (Sec 8 (1)(a) - specific and Sec 8 (1)(b) - general investigation)

•Cafcom submits reports to the Minister and the Minister may gazette a notice to suspend a practice until finalisation of the investigation to prevent further damage.

•The Minister may further direct any person to refrain from perpetuating the practice directly or indirectly, e.g. advertising, becoming a party to arrangements, deriving interest or income, etc.

8

Investigative Process (cont’d)

•A person or entity aggrieved by the decision of the Minister may appeal.

•If the Minister, on receipt and consideration of the report by the Committee is of the opinion that the investigated matter is an unfair business practice or is not in the public interest, he may declare the practice unlawful and therefore prohibited.

•Prohibitions contravened are referred to enforcement agencies such as SAPS and NPA for criminal prosecution.

9

Prohibition Notices

Herewith some of the key prohibition notices administered by the OCP:

•Parallel/ Grey Goods

•Work from Home Schemes

•Inertia Selling

•Quasi Legal Documents

•Transport Contracts

•Public Property Syndication

•Money Making schemes (including Pyramid Schemes)

•Speculative Software

•Mail Order Entities

10

Parallel/ Grey Goods

Definition/s: Parallel importing: refers to a business practice where goods which were intended for sale in one national market(UK) are exported from their original destination to another country(SA) Parallel import products: are goods which are imported and sold without the express authorisation of the trademark ownerAdvertised: includes lessorSellers: includes promoters, displayers

Conduct Prohibited:

The Regulation prohibits the advertisement/ promotion/ offering for sale of parallel goods without disclosing to consumers that:

•The sellers are not authorised distributors by the Trade Mark Owner

•The authorised distributor has no obligation to honour warranties/ guarantees and/ or after-sales services.

11

Parallel Goods (cont’d)

Compliance

Sellers must include in all forms of advertising or promotion the below wording in conspicuous size and without change:

“ the authorized South African distributor of this product is under no obligation to honour the manufacturer’s guarantees/warrantees or to provide after-sales services”

Penalties and Fines

Any person who fails to comply may be prosecuted and upon conviction shall be liable to a fine not exceeding R200.000 and/or to imprisonment not exceeding 2 years.

Promulgated on 9 February 2007 in GG No 29600, Notice No 107 of 2007

12

Work from Home Schemes

Definition: refers to any advertisement in which a work from home opportunity is offered in any media, either print, electronic or any other method of advertising.

Conduct Prohibited

Advertisements of an opportunity to work from home, example:

•Addressing/filling of envelopes

•Gathering of names and addresses for labels

•Compiling of data

Exclusions: the following are not considered work from home opportunity:

•Typing work ( provided)

•Direct selling (provided)

13

Work from Home Schemes

Compliance: in order to comply, individuals or entities should refrain from advertising work from home opportunities.

Penalties and Fines:Any person who fails to comply may be prosecuted and upon conviction shall be liable to a fine not exceeding R200.000 and/or to imprisonment not exceeding 2 years.

Promulgated on 20 April 2007 in GG No 29823, Notice No of 2007

14

Inertia Selling

Definition: refers to a business practice whereby goods and services are supplied to consumers without their explicit consent and the supplier subsequently demands or effect payment.

Inertia selling manifest itself in two forms, namely:

•Negative option marketing (existing client)•Unsolicited marketing( unknown)

Conduct Prohibited: it is unlawful for supplier to charge/demand payment for goods or services that were unsolicited and not consented to by consumers.

15

Inertia Selling

Compliance: suppliers must always ensure that goods or services supplied are beforehand consented to by the consumer.



16

Quasi Legal Documents

Definition: refers to a business practice whereby attorneys and collecting agents use communication method that purports that there is legal process when collecting their claims.

Conduct Prohibited: simulation or creation of impression that there is legal process whilst the situation is that there is not.

17

Quasi Legal Documents

Compliance: the attorneys and collecting agents should only send genuine letters of demand or summons to consumers when collecting claims that are due and payable.


Promulgated on 30 March 2006 in GG No 28686, Notice No 455 of 2006

18

Transport Contracts

Definition: refers to an agreement for the use of a vehicle where the intermediary receives payment for the arrangement of the contract.

Conduct Prohibited: to include provision in the transport contract to the effect that the intermediary will be entitled to cancel the contract on the grounds of the breach of contract by the client.

Compliance: the intermediary not to include the provision mentioned above.


Promulgated on 04 November 1994 in GG No 16052, Notice No 1180 of 1994

19

Public Property Syndication

Definition: refers to a group of people who come together to invest in assets and they share in profits and losses.

Conduct Prohibited: the regulation requires the promoters of the syndication to disclose certain matters to the prospective investors. See the notice and check list provided.

20

Property Syndication


Promulgated on 30 March 2006 in GG No 28686, Notice No 459 of 2006

21

Money Making Schemes

Introduction:

• money making schemes are schemes designed to swindle consumers of their money.

• The schemes are characterized by only a few investors benefiting at the expense of others.

• In terms of the regulations there are three kinds of money making schemes, namely:1. Multiplication schemes2. Chain letter schemes3. Pyramid promotional schemes

22


Definitions:• Multiplication scheme refers to a participation in a scheme that offers the

investors an effective annual interest rate of 20% and more above the repo rate determined by the south African Reserve Bank on the capital invested.

• Chain letter scheme refers to a scheme whereby a investor is invited to enter into agreement with the promoter of the scheme and by payment of money, the investor is bound to recruit others and he/she will be compensated based on recruitment of others.

• Pyramid promotional scheme refers to a scheme by which investors pays money for the opportunity to receive compensation which is derived primarily from the recruitment of others and not from the sale of products by the investor.

23


Conduct prohibited: it is against the law for any person to establish or participate in these schemes.

Compliance: the promoters and participant must ensure that the schemes they establish or participate in involves compensation from the provision of services or sales of products. The promoters must further ensure that interest afforded by the scheme does not exceed 20% above the repo rate.


Promulgated on 9 June 1999 in GG No 20169, Notice No 1135 of 1999

24

Speculative Software

Definition: software which claims to assist consumers to understand securities and exchanges, enabling them to trade profitably in these and/ or software which claims to predict the outcome of horse races.

Prohibition Notice:The notice set certain conditions:

• that the buyer is entitled to cancel the contract within five days of signature,• that the buyer pays a once off payment by cash, cheque or credit card • undertaking by the seller that he/she has not made any verbal promises which are not printed in official literature of the firm; and• the terms, conditions and cost involved were explained to the buyer and the buyer has a copy of the contract.

25

Speculative Software

Compliance: the conditions mentioned above should be incorporated into the contract and must be adhered to by the supplier.



26

Mail order selling is defined as: the business practice whereby mail‑order entities, inform consumers or potential consumers, by any means whatsoever, that they have won a sum of money or any other prize.

•The mail order entity may require a consumer to send a sum of money to claim a prize; or •Consumers receive junk mail to the effect that they have won a prize or money;•The conditions attached are not mentioned in the headline or in readable font.

Prohibited conduct:

• the consumer does not win any prize unless he/she fulfils a condition; •such money or prize is subject to suspensive conditions prior to entitlement, and •the suspensive conditions are not clearly printed or spelt out to the consumer; •consumers are required to send a sum of money in order to claim the prize.

Mail Order Selling

27

Compliance: in order to comply with the regulation, the retailers should refrain from the following:•Allege that the consumer has won a prize, whilst it is not the case;•Insist that the prize is subject to a condition, whilst the condition was not disclosed upfront;•Claiming money from the consumers in order to receive a prize.



Mail Order Selling

28

Legislative Authority:

•Merchandise Marks Act No 17 of 1941 (Sections 10 and 11)•General Notice 1831 of 2006 (14 December 2006)•Code of practice – Care-labelling of textiles and clothing (SABS 011)•Code of practice – Fibre-content labelling of textiles and textile products (SABS 0235)•Customs and Excise Act (Section 113 (8))

Purpose:

•Import restriction (Applicable to South Africa only)•To inform consumers about the products they buy –Country of Original•To promote the buying of local goods•Labelling will also apply to locally manufactured products, including products made from imported fabrics.

Merchandise Marks Act

29

What is covered by Labelling? Why is it important?

•Country of origin: Where does the product come from?

•Care-labelling: How to care for the product after you have bought it?

•Fibre-content labelling: What materials / fibres are the product made of?

•Reconditioned, rebuilt or remade: Is this a used product that have been reworked?

Investigative powers:

Section 3 - subject to the laws governing the public service, the Minister may appoint such officers as he or she may deem necessary for carrying out the provisions of this Act.

Country of Origin Labelling

30

The Notice is in terms of sections 10 and 11 of the Merchandise Marks Act 17 of 1941.

Requirements:

The notice prohibits the importation and or sale of goods specified in in the schedule, irrespective of whether the goods were made in South Africa unless:•The product states the country of origin.

•That a locally manufactured product using imported materials must state made in South Africa from imported materials.

•They conform to the South African national standards for fibre content and care labeling in accordance with Notice 2410 of 2000.

•There shall, if after they have been reconditioned, rebuilt or remade whether in the Republic or elsewhere, be applied to them in a conspicuous and easily legible manner, the words stating clearly that they have been reconditioned, rebuilt or remade, as the case may be.

COOL Requirements

31

Exclusion:

•Imported goods cleared prior to 14 April 2007•Warehouse for export (WE)•Cleared in transit to destination outside SACU (RIT)

Exemptions•There will be no exemptions from labelling requirements

Application

•Will apply to new and second-hand goods for domestic sale•Re-imported goods for domestic sale•Goods cleared ex-warehouse•Locally manufactured goods

Exclusions, exemptions

32

The dti•Is responsible for the enforcement of the Merchandise Marks Act •Inspectors appointed by the dti will be responsible to verify compliance in the domestic market.

SARS Customs•While goods are under customs control, i.e. at the time of first clearance and goods cleared from storage warehouses, Customs will verify, detect, detain, notify and act on instructions from the dti.•Dispose of goods as directed

Responsibilities

33

How must labels be applied?

In respect of country of origin: •Directly on the fabric, i.e. printed on the goods•On a label securely attached, i.e. sewn-in label on the goods

In respect of fibre content•On packing or on a label attached to the packing•On a non-permanent label attached to the goods, i.e. a swing or adhesive label•A note contained in or on a document accompanying the goods, i.e. brochure, pamphlet, etc.•Sets need only have a label on one item provided it is of the same fibre-content

•One giving brand name/ manufacturer, the size, the country of origin and the fibre-content•The other giving the care instructions

•Could also be any combination China, Produced in China, Manufactured in China

Application of Labels

34

•Pants: Sewn on the back pocket sleeve on the inside

•Jackets: Sewn in the inside of the right hand pocket

•Shoes: Sewn under the tongue, printed / sewn on the inner side wall

•Undergarments: At the back in the centre on the ribbing

•Shirts: Sewn into the inside of the side seam

Examples

35

Non-compliance with the Notice is a criminal offence and any person found guilty of an offence in terms of the Act, except section 5, shall be liable to:

•in the case of a first conviction to a fine not exceeding R5 000 for each article to which the offence relates, or imprisonment for a period not exceeding three years or to both a fine and imprisonment;

•in the case of repeat offenders to a fine not exceeding R10 000 for each article to which the offence relates, or to imprisonment for a period not exceeding five years or to both the fine and imprisonment.

Any person convicted of an offence in terms of section 5 shall be liable to a fine or to imprisonment for a period not exceeding six months.

The court may in addition to any penalty, which it may impose, order the confiscation of all or any part of the goods of which the offence was committed, and such goods shall be disposed of in a manner prescribed by the Minister.

Penalties and Fines

36

70% of the contents of the CPA are not new and derives from the repeal, consolidation and re-enactment of useful provisions in existing legislation. Proposed full and partial repeals are:

Consumer Affairs (Unfair Business Practices) Act, 1988 (Act No. 71 of 1988), the Trade Practices Act, 1976 (Act No. 76 of 1976), the Sales and Service Matters Act, 1964 (Act No. 25 of 1964), the Business Names Act, 1960 (Act No. 27 of 1960), the Price Control Act, 1964 (Act No. 25 of 1964), Merchandise Marks Act, 1941 (Act No. 17 of 1941); (Partial repeal)Lotteries Act (Section 54 and regulations only)

Harmonization with existing legislation – Electronic Communications and Transactions ActInsurance LawsMedical Schemes ActStandards ActHealth and Agricultural laws

Consumer Protection Act

37

The Act has 7 chapters and 2 schedulesChapter 1: Interpretation, purpose, policy & application, Chapter 2: Fundamental Consumer Rights (equality, privacy, choice, disclosure, information, responsible marketing, honest dealing, fair value, good quality and safety, accountabilityChapter 3: Protection of consumer rights and consumer’s voice (right to be heard and obtain redress, investigations, redress by the courts, role of civil society)Chapter 4: Business names and Industry Codes of ConductChapter 5: National Consumer Protection Institutions (National and Provincial Cooperation, Establishment of National Consumer Commission, Functions of National Consumer Commission)Chapter 6: Enforcement of the Act (Enforcement by Commission,investigative powers, Offences & penalties)Chapter 7: General ProvisionsSchedule 1: Consequential AmendmentsSchedule 2: Transitional Provisions Explanatory Memorandum

Consumer Protection Act

38

PART A: Definitions and Interpretation:

Act expands on the conventional definition of “consumer” by:•Including users, beneficiaries or recipients of goods and services so as to extend redress to third parties especially with regards to product liability; and

•Including franchisees who currently have very limited protection through a voluntary industry code of conduct.

Definition of supplier not limited to retailers only but to any public or private

entity that promotes or supplies goods and services to consumers.

Chapter 1

39

Part B: Purpose and Policy of the Act

To promote and advance the social and economic welfare of consumers in South Africa by:

•Establishing a legal framework for the achievement of a fair, accessible, responsible and sustainable market;•Reducing any disadvantages experienced in accessing the supply of goods and services by low income, low literacy, rural and vulnerable consumers;•Promoting fair business practices;•Protecting consumers from unfair and deceptive conduct;•Improving consumer awareness;•Providing for an accessible, efficient and effective system of redress;

Chapter 1

40

Part C: Application:The Act will apply to:• Suppliers (For profit or non profit) that promote or supply supply goods or

services to consumers across all sectors of the economy unless exempted; • Government institutions or any entity contracted by the state to provide goods

or services to consumers; and• Franchise offers, solicitations and agreements• Any business to business transaction subject to a threshold to be set through

regulation

The Act will not apply to: • Instances where the state is the consumer;• Transactions exceeding a threshold value set by the Minister and where the

goods or services are supplied to a person in the supply chain who in the ordinary course of business markets the goods for resale or applies or uses them to produce other goods

• Advisory Services regulated by FAIS (Financial Advisory and Intermediary Services) and other financial services regulated by the short and long term insurance Acts;

Chapter 1

41

Exemptions:Limited or general exemptions may be granted under the following circumstances:• On application by a regulatory authority;• If the provisions of the CPA overlap or duplicate an existing law or treaty,

international law, convention or protocol that SA has accented to;• If the provisions of the other law ensures consumer protection as well as the

CPA;• If the applicant accepts the conditions of exemption set by the Minister in order

to achieve the purposes of the CPA.

Note: Transactions with the state as the consumer will not be exempted from sections 61

and 62 that deal with product safety and liability. All other qualifying transactions will need to comply with section 61 (product

liability) irrespective their exemption status.

Chapter 1

42

New set of rights based on internationally accepted and UN adopted consumer rights.

Part A: Right of equality to consumer market: prohibit any form of unfair discrimination in line with the Equality Act and the

Constitution. The Equality Court has jurisdiction to adjudicate cases on referral from the Consumer Commission.

Part B: Right to privacy: Limits unfettered use of consumer’s personal information for unsolicited direct

marketing campaigns by requiring all direct marketers to provide consumers with an “Opt out” option for unsolicited marketing communication. Consumers can also register a pre emptive block on a register to be operated by government or industry.

Part C: Right to Choose Prohibits automatic renewal of fixed term agreementsRequires quotes for maintenance and repair servicesProvides for 5 day cooling off for direct marketing Provides for right to return goods and receive refunds within fifteen days

Chapter 2

43

Part D: Disclosure and information: Facilitates access to simple and transparent contracts and improves disclosure

by:Giving consumers the right to information in plain and understandable languageRequiring the compulsory display of prices and provision of transaction recordsRequiring product labels and trade descriptions not to be misleading;

Part E: Fair and responsible advertising, marketing and promotion: Prohibits unfair marketing practices (bait, referral, negative option.)Regulates promotional competitionsSets standards for customer loyalty programs

Part F: Fair and honest dealings Prohibits false, misleading and deceptive representations;Prohibits overselling and overbooking;Prohibits unconscionable conduct

Chapter 2

44

Part G: Right to Fair, just and reasonable terms and conditions

Prohibits unfair, unreasonable or unjust contract termsRequires consumers to be given free copies of contractsOutlaws unilateral changes to contractsOutlaws certain types of agreements (minors, negative option, etc)Outlaws any form of contracting out

Part H: Right to Fair Value, Good Quality and safety:

Facilitates access to quality service, safe goods and services and redress by:

Providing statutory warranties for safety and qualityIntroducing a general product safety monitoring and recall regimeExtending strict liability to retailers for illness, injury, damage to property and

death as a result of defective goods or improper labeling

Chapter 2

45

Protection of Consumer Rights and Consumer’s Voice

Part A: Consumer’s right to be heard and obtain redress• Prevents suppliers from discriminating, intimidating or penalizing consumers

who seek to enforce their rights;• Provides for various access points for consumers to lodge complaints

(accredited ombudsman, provincial structures, the Commission and Tribunal)• Provides for alternative dispute resolution and for agreements reached through

this process to be recorded as consent orders that can be confirmed by the courts

• Consumers can at all times approach the Commission, which can refer to the relevant institutions

Part B: Commission Investigations• Commission provided with powers to engage in proactive & reactive

investigations• Commission can negotiate consent orders that may include the award of

damages to a complainant• Introduces system of administrative enforcement through compliance orders

Chapter 3

46

Part C: Redress by the Courts• Courts have the power to order suppliers to alter or discontinue any

conduct that is inconsistent with the Act;• Award damages against a supplier for collective injury to all or a class of

consumers and also decide on the just and equitable distribution of such damages.

Part D: Support of Consumer Protection Groups• Provides for the Commission to co-operate with, facilitate or support

various activities by consumer protection groups (education, research, market monitoring, advocacy and alternative dispute resolution)

• Provides for accredited consumer groups to take up matters on behalf of consumers through the Commission, Tribunal and the Courts. They can also initiate complaints.

• Consumer Groups have to meet specified criteria in order to be accredited and the Commission plays a monitoring role.

Chapter 3

47

Business Names and Industry Codes of Conduct

Part A: Business Names• Repeals the Business Names Act and incorporates its provisions into the

CPB• It decriminalizes some of the conduct related to Business names• It provides for “trading as” names to be registered with CIPRO

Part B: Industry Codes of Conduct • Recognizes self regulation and gives it statutory backing by:• Providing for the Minister, on the advice of the Commission, Minister can

prescribe, approve or withdraw an industry code• Accrediting dispute resolution schemes like Ombudsman. This excludes

those already accredited in terms of the FISOS (Financial Services Ombudsman Schemes) Act

• Providing the Commission with monitoring and evaluation powers in relation to the effectiveness of industry dispute resolution schemes and codes of conduct

Chapter 4

48

Regulatory Agencies and Administration of the Act

National Consumer Commission (Currently Office of Consumer Protection within dti) • education, enforcement, market surveillance and coordination

National Consumer Tribunal (established in the National Credit Act)• adjudication of cases referred by Commission, and• appeal of administrative decisions by Commission

Offences and Penalties

• Decriminalizes conduct and deals with it through a system of administrative enforcement through compliance notices

• Introduces administrative penalties through the Consumer Tribunal• The Courts can impose penalties for offenses and have sole jurisdiction over

contractual issues

Chapter 5 & 6

49

Services offered by OCP

The Education and Compliance directorate is mandated to assist consumers and business with education and compliance with legislation and notices administered by the division through offering the following:

• Clarifications & Advisory opinions

• Presentations & workshops

• Self help advice and assistance

•Escalation of consumer complaints to the office.

To request Compliance related services:

•Contact Mr Aubrey Mathope at 012 3941553 or [email protected] or Ms Bulelwa Hewu at 012 394 3873 or [email protected]

•Write to: The Chief Director, Office of Consumer Protection, Consumer and Corporate Regulation Division, Private Bax X84, Pretoria, 0001.

50

THANK YOU

QUESTIONS?