Consumer Protection Act

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Chapter 1: Interpretation, Purpose and Application

 

Part A: Interpretation

 

Definitions

 

Section 1 contains certain key definitions that are essential in understanding the Act. Key definitions in my respectful opinion are the following:

  • Consumer:

 

in respect of any particular goods or services, means- 

  1. a person to whom those particular goods or services are marketed in the ordinary course of the supplier's business;
  2. a person who has entered into a transaction with a supplier in the ordinary course of the supplier's business, unless the transaction is exempt from the application of this Act by section 5(2) or in terms of section 5(3);
  3. if the context so requires or permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether that user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and
  4. a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5(6)(b) to (e);”

A consumer is therefore the ‘person’ to whom the goods and services are marketed, or who has entered into a transaction with the supplier, all in the ordinary course of the supplier’s business. Paragraph (c) also includes if the context permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether that user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and paragraph (d) also includes a franchisee in terms of a franchise agreement.

A person also includes a juristic person. Note however the exclusion with regard to juristic persons and the applicable threshold provisions as contained in section 6.

  • Market, promote and supply:

 

Market" when used as a verb, means to promote or supply any goods or services:

"Promote" means to-

  1. advertise, display or offer to supply any goods or services in the ordinary course or business, to all or part of the public for consideration;
  2. make any representation in the ordinary course of business that could reasonably be inferred as expressing a willingness to supply any goods or services for consideration; or
  3. engage in any other conduct in the ordinary course of business that may reasonably be construed to be an inducement or attempted inducement to a person to engage in a transaction;

"Supply" when used as a verb-

  1. in relation to goods, includes sell, rent, exchange and hire in the ordinary course of business for consideration; or
  2. in relation to services, means to sell the services, or to perform or cause them to be performed or provided, or to grant access to any premises, event, activity or facility in the ordinary course of business for consideration.
  • Goods and services:

 

"Goods"

includes-

  1. anything marketed for human consumption;
  2. any tangible object not otherwise contemplated in paragraph (a), including any medium on which anything is or may he written or encoded;
  3. any literature, music, photograph, motion picture, game, information, data, software, code or other intangible product written or encoded on any medium, or a license to use any such intangible product;
  4. a legal interest in land or any other immovable property, other than an interest that falls within the definition of 'service' in this section; and
  5. gas, water and electricity;

"Service"

includes, but is not limited to-

  1. any work or undertaking performed by one person for the direct or indirect benefit of another;
  2. the provision of any education, information, advice or consultation, except advice that is subject to regulation in terms of the Financial Advisory and lntermediary Services Act, 2002 (Act No.37 of 2002);
  3. any banking services, or related or similar financial services, or the undertaking, underwriting or assumption of any risk by one person on behalf of another, except to the extent that any such service-
  4. the transportation of an individual or any goods;
  5. the provision of-
  1.  
    1. constitutes advice or intermediary services that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); or
    2. is regulated in terms of the Long-term Insurance Act, 1998 (Act No. 52 of 1998), or the Short-term Insurance Act, 1998 (Act No. 53 of 1998);

                      i.        any accommodation or sustenance;

                    ii.        any entertainment or similar intangible product or access to any such entertainment or intangible product;

                   iii.        access to any electronic communication infrastructure;

                   iv.        access, or of a right of access, to an event or to any premises, activity or facility; or

                    v.        access to or use of any premises or other property in terms of a rental;

  1. a right of occupancy of, or power or privilege over or in connection with, any land or other immovable property, other than in terms of a rental; and
  2. rights of a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5(6)(b) to (e),
  3. irrespective of whether the person promoting, offering or providing the services participates in, supervises or engages directly or indirectly in the service;
  • Supplier and Business:

 

"Supplier" means a person who markets any goods or services;

"Service provider” means a person who promotes, supplies or offers to supply any service;

"Business" means the continual marketing of any goods or services.

A supplier accordingly refers to a person who markets goods and services. Goods and services are supplied to consumers via a variety of transaction types, like lease, sale, and also by agreements for the rendering of services.

  • The Supply chain: producers, distributors, importers, retailers, service providers and intermediaries:

 

"Supply chain" with respect to any particular goods or services, means the collectivity of all suppliers who directly or indirectly contribute in turn to the ultimate supply of those goods or services to a consumer, whether as a producer, importer, distributor or retailer of goods, or as a service provider;

"Producer" with respect to any particular goods, means a person who-

  1. grows, nurtures, harvests, mines, generates, refines, creates, manufactures or otherwise produces the goods within the Republic, or causes any of those things to be done, with the intention of making them available for supply in the ordinary course of business; or
  2. by applying a personal or business name, trade mark, trade description or other visual representation on or in relation to the goods, has created or established a reasonable expectation that the person is a person contemplated in paragraph (a);

           

"Distributor" in relation to any particular goods, means a person who, in the ordinary course of business-

  1. is supplied with those goods by a producer, importer or other distributor; and
  2. in turn, supplies those goods to either another distributor or to a retailer;

            

"Importer" with respect to any particular goods, means a person who brings those goods, or causes them to be brought, from outside the Republic into the Republic, with the intention of making them available for supply in the ordinary course of business;

"Retailer" with respect to any particular goods, means a person who, in the ordinary course of business, supplies those goods to a consumer;

"Service provider" means a person who promotes, supplies or offers to supply any service;

See also the definition of promote above.

            

An “Intermediary” means a person who, in the ordinary course of business and for remuneration or gain, engages in the business of—

  1. representing another person with respect to the actual or potential supply of any goods or services;
  2. accepting possession of any goods or other property from a person for the purpose of offering the property for sale; or
  3. 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,

           

but does not include a person whose activities as an intermediary are regulated in terms of any other national legislation.

  • Transactions:

 

"Transaction" means-

  1. in respect of a person acting in the ordinary course of business-

                      i.        an agreement between or among that person and one or more other persons for the supply or potential supply of any goods or services in exchange for consideration; or

                    ii.        the supply by that person of any goods to or at the direction of a consumer for consideration; or

                   iii.        the performance by, or at the direction of, that person of any services for or at the direction of a consumer for consideration; or

  1. an interaction contemplated in section 5(6), irrespective of whether it falls within paragraph (a);

          

"Consideration"

means anything of value given and accepted in exchange for goods or services, including-

  1. money, property, a cheque or other negotiable instrument, a token, a ticket,       electronic credit, credit, debit or electronic chip or similar object;
  2. labour, barter or other goods or services;
  3. loyalty credit or award, coupon or other right to assert a claim; or
  4. any other thing, undertaking, promise, agreement or assurance,

irrespective of its apparent or intrinsic value, or whether it is transferred directly or indirectly, or involves only the supplier and consumer or other parties in addition to the supplier and consumer;

The Act applies to every transaction within the Republic, unless it is exempted by section 5. Most entities supplying goods and services in South Africa and the transactions they enter into with consumers will be covered by the Act. A transaction between a supplier and a consumer also includes the supply of any goods and services in the ordinary course of business to any of its members by a club, trade union, association, society or other collectivity of persons, voluntarily associated and organised for a common purpose. This is the case irrespective of whether a charge or contribution is required in order to become or to remain a member of such an entity.

  • Agreements, consumer agreements and franchise agreements

 

"Agreement"

means an arrangement or understanding between or among two or more parties that purports to establish a relationship in law between or among them;

"Consumer agreement"

means an agreement between a supplier and a consumer other than a franchise agreement;

"Franchise agreement"

means an agreement between two parties, being the franchisor and franchisee, respectively-

  1. in which, for consideration paid, or to be paid, by the franchisee to the franchisor, the franchisor grants the franchisee the right to carry on business within all or a specific part of the Republic under a system or marketing plan substantially determined or controlled by the franchisor or an associate of the franchisor;
  2. under which the operation of the business of the franchisee will be substantially or materially associated with advertising schemes or programmes or one or more trademarks, commercial symbols or logos or any similar marketing, branding, labeling or devices, or any combination of such schemes, programmes or devices, that are conducted, owned, used or licensed by the franchisor or an associate of the franchisor; and
  3. that governs the business relationship between the franchisor and the franchisee, including the relationship between them with respect to the goods or services to be supplied to the franchisee by or at the direction of the franchisor or an associate of the franchisor;

           

Section 2 contains interpretation guidelines. Sub section (1) states that the Act must be interpreted in a manner that gives effect to the purposes set out in section 3.       When interpreting or applying this Act, a person, court or Tribunal or the Commission may consider-

  1. appropriate foreign and international law;
  2. appropriate international conventions, declarations or protocols relating to consumer protection; and
  3. any decision of a consumer court, ombud or arbitrator in terms of this Act, to the extent that such a decision has not been set aside, reversed or overruled by the High Court, the Supreme Court of Appeal or the Constitutional Court.

 

Sub section (4) states that the supplier must take reasonable measures to prevent the use of a consumer's electronic signature for any purpose other than the signing or initialing of the particular document that the consumer intended to sign or initial. Sub section 10) states that no provision of this Act must be interpreted so as to preclude a consumer from exercising any rights afforded in terms of the common law.

          

Section 4(3) also states that if any provision of this Act, read in its context, can reasonably be construed to have more than one meaning, the Tribunal or court must prefer the meaning that best promotes the spirit and purposes of this Act, and will best improve the realisation and enjoyment of consumer rights generally. Any ambiguity that allows for more than one reasonable interpretation of a part of such a document must be resolved to the benefit of the consumer.

 

Part B: Purpose, policy and application of Act

 

3. Purpose and policy of Act

 

The purposes of this Act are to promote and advance the social and economic welfare of consumers in South Africa by:

  • establishing a legal framework for the achievement and maintenance of a consumer market that is fair, accessible, efficient, sustainable and responsible for the benefit of consumers generally;
  • reducing and ameliorating any disadvantages experienced in accessing any supply of goods or services by consumers:
  • who are low-income persons or persons comprising low-income communities;
  • who live in remote, isolated or low-density population areas or communities;
  • who are minors, seniors or other similarly vulnerable consumers; or
  • whose ability to read and comprehend any advertisement, agreement, mark, instruction, label, warning, notice or other visual representation is limited by reason of low literacy, vision impairment or limited fluency in the language in which the representation is produced, published or presented;
  • promoting fair business practices;
  • protecting consumers from unconscionable, unfair, unreasonable, unjust or otherwise improper trade practices; and deceptive, misleading, unfair or fraudulent conduct;
  • improving consumer awareness and information and encouraging responsible and informed consumer choice and behaviour;
  • promoting consumer confidence, empowerment, and the development of a culture of consumer responsibility, through individual and group education, vigilance, advocacy and activism;
  • providing for a consistent, accessible and efficient system of consensual resolution of disputes arising from consumer transactions; and
  • providing for an accessible, consistent, harmonised, effective and efficient system of redress for consumers.

 

To better ensure the realisation of the purposes of this Act, and the enjoyment of the consumer rights recognised or conferred by this Act, the Commission, in addition to its responsibilities set out elsewhere in this Act, is responsible to:

  • take reasonable and practical measures to promote the purposes of this Act and to protect and advance the interests of all consumers, and in particular those consumers contemplated in subsection (1)( b);
  • monitor and report each year to the Minister on the following matters:
  • The availability of goods and services to persons contemplated in subsection (1)(b), including price and market conditions, conduct and trends affecting their consumer rights;
  • access to the supply of goods and services by small businesses and persons contemplated in subsection (1)(b); and
  • any other matter relating to the supply of goods and services; and
  • conduct research and propose policies to the Minister in relation to any matter affecting the supply of goods and services, including proposals for legislative, regulatory or policy initiatives that would improve the realization and full enjoyment of their consumer rights by persons contemplated in subsection (1)(b).

 

Section 4(2) and 4(3) makes it quite clear that the National Consumer Tribunal (NCT) or court must promote the spirit and purposes of the Act. The court must develop the common law as necessary to improve the realisation and enjoyment of consumer rights generally.

 

4. Realisation of consumer rights

Any of the following persons may, in the manner provided for in this Act, approach a court, the Tribunal or the Commission alleging that a consumer's rights in terms of this Act have been infringed, impaired or threatened, or that prohibited conduct has occurred or is occurring:

  • A person acting on his or her own behalf;
  • An authorised person acting on behalf of another person who cannot act in his or her own name;
  • A person acting as a member of, or in the interest of, a group or class of affected persons;
  • A person acting in the public interest, with leave of the Tribunal or court, as the case may be; and
  • An association acting in the interest of its members.

 

These are the so called locus standi clauses.

Section 4(5) makes it clear that in any dealings with a consumer in the ordinary course of business, a person is not allowed to:

  • engage in any conduct contrary to, or calculated to frustrate or defeat the purposes and policy of the Act;
  • engage in any conduct that is unconscionable, misleading or deceptive, or that is reasonably likely to mislead or deceive; or
  • make any representation about a supplier or any goods or services, or a related matter, unless the person has reasonable grounds for believing that the representation is true.

 

5 The Application and Scope of the Act

 

The Consumer Protection Act affects a wide range of consumers and transactions. The definition of a “consumer” includes not only the person (either a natural or juristic person) to whom goods or services are promoted or supplied, but also the actual user of the goods or the recipients or beneficiary of the services. In other words, a consumer may be a person other than the person who entered into an agreement with a supplier and paid for the goods or services. In practice this would mean that if you are given a spa treatment as a birthday present, you will be entitled to the consumer protection measures set out in the Act, even though you never entered into an agreement with the spa.

            

With regard to juristic persons, the Act will only provide protection to small businesses (in other words, where the consumer is a juristic persons with an asset value or annual turnover below a threshold determined by the Minister). This approach is in line with the approach in the National Credit Act. The Act applies to every transaction occurring within the Republic, unless it is exempted. It also applies to the promotion and/or supply of any goods or services within the Republic, unless those goods or services could not reasonably be the subject to a transaction to which the Act applies, or those goods or services have been exempted.

                 

The Act also applies to the supply of any goods or services in the ordinary course of business to any of its members by a club, trade union, association, society or other voluntary organisation sharing a common purpose. This is true irrespective of whether there is a charge or economic contribution demanded or expected in order to become or remain a member of that entity; Section 5(6) also include franchise agreements, irrespective of whether the size of the juristic person falls above or below the threshold determined by the Minister.

          

Excluded transactions are the following:

  • Any transaction in terms of which goods and services are promoted or supplied to the state; 
  • Any credit agreement under the National Credit Act. Take note that the goods and services that forms part of such an agreement are covered by the Act; 
  • Any transaction in terms of which the consumer is a juristic person whose asset value or annual turnover at the time of the transaction equals or exceeds the threshold value determined by the Minister in terms of section 6. This will likely be R5 million initially; 
  • Any transaction which falls within an exemption granted by the Minister in terms of subsections (3) and (4); 
  • Any transaction giving effect to a collective bargaining agreement within the meaning of section 23 of the Constitution and the Labour Relations Act, 1995 (Act No. 66 of 1995); or
  • Any transaction giving effect to a collective agreement as defined in section 213 of the Labour Relations Act, 1995 (Act No. 66 of 1995); 
  • Any transaction pertaining to services to be supplied under an employment contract;  
  • The Act also does not apply to the provision of any education, information, advice or consultation, that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act; 
  • Any banking services, or related or similar financial services, or the undertaking, underwriting or assumption of any risk by one person on behalf of another to the extent that any such service:

 

  • Constitutes advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act;
  • Is regulated in terms of the Long-term Insurance Act, or the Short-term Insurance Act. The Short- and Long-term Insurance Acts are only excluded for a period of 18 months from the commencement of the Act for them to align themselves with the Consumer Protection Act.

 

The Act further provides for a mechanism in terms of which a regulatory authority may apply to the Minister of Trade and Industry (the Minister) for an industry wide exemption from certain provisions of the Act. The application for such an exemption must be based on the fact that there is an overlap between the provisions of the Act and the regulatory scheme administered by the relevant regulatory authority. The Minister may only grant an exemption if the applicable regulatory scheme provides better, or at least similar, consumer protection than the protection provided for in the Act.

                

6. Threshold determination

The Act will not apply to transactions where the consumer is a juristic person with an asset value or annual turnover of more than a threshold value determined by the Minister (section 6). In terms of the National Credit Act the threshold is set at one million rand. However, we'll have to wait and see exactly what the threshold will be for purposes of the Consumer Protection Act.

          

7. Requirements of franchise agreements

A franchise agreement must:

  • be in writing and signed by or on behalf of the franchisee;
  • include any prescribed information, or address any prescribed categories of information; and
  • comply with the requirements of section 22.

A franchisee may cancel a franchise agreement without cost or penalty within 10 business days after signing such agreement, by giving written notice to the franchisor.

 

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