THE RESPONSIBILITY OF A SUPPLIER TO CONDUCT A CONSUMER PRODUCT SAFETY RECALL

THE RESPONSIBILITY OF A SUPPLIER TO CONDUCT A CONSUMER PRODUCT SAFETY RECALL

Introduction

The Consumer Protection Act 68 of 2008 (“CPA” or “the Act“) establishes certain rights applicable to all consumers when purchasing goods (and services) for their personal use. The Act sets out, amongst others, that consumers have the right to fair value, good quality and safety as well as an implied warranty of quality.

The implied warranty of quality warrants that the goods comply with the requirements of being of good quality, durable, and safe for the use as advertised or designed. Where goods are of inferior quality, unsafe or defective, the consumer may return the product and the supplier is obliged to repair, refund or replace the failed, defective or unsafe product.

Consumers have a further right to have goods monitored for safety and recalled when such goods or components of such goods are hazardous, unsafe or defective. The Consumer Product Safety Recall Guidelines (“Recall Guidelines“) have been drafted in terms of the CPA to provide further detail for such instances and set out the procedure to be followed where products are to be recalled.

Hazardous products

Whilst suppliers would take necessary steps to ensure that their product is manufactured or produced in line with the required design and/or material specification, the reality is that there may be some unforeseen occurrences where manufacturing/production lines may deviate from such design or material specifications. In such cases, a product may be identified as unsafe where it presents health or safety hazards to the public. However, in some instances, a consumer product may also be identified as unsafe to consumers irrespective of whether there was a manufacturing or production error. The deciding factor is whether the product poses health or safety hazards to the public.

The CPA doesn’t clearly unpack the term “hazard”, but generally, a supplier’s product may be identified as presenting health or safety hazard where such product has the potential to cause the following:

  • injury;
  • illness;
  • death;
  • loss of, or physical damage to, any property; or
  • any economic loss as a result of any of the above.

Product safety recalls

In terms of the CPA and the Recall Guidelines, a supplier is required to, among other things, conduct a consumer product safety recall where a product poses a health or safety hazard. In essence, a consumer product safety recall is a process whereby a supplier is required to remove all affected product(s) from production, supply chain and any point of sale.  In terms of section 5(5) of the CPA, these Recall Guidelines apply to all goods supplied in South Africa, regardless of whether the transaction for the supply of such goods is subject to the CPA or not.

In 2012, the National Consumer Commission (“NCC“) published the Recall Guidelines detailing, among other things, procedural steps required to be followed by suppliers when conducting a product recall. In terms of the Recall Guidelines, a supplier may voluntarily initiate a safety recall. Where a supplier fails to voluntarily conduct a safety recall, the NCC may issue a written notice to the relevant supplier ordering it to conduct such safety recall.

Irrespective of whether a supplier voluntarily conducts the safety recall or is ordered to do so, a supplier is required to ensure that the procedural steps, as briefly set out below, are followed:

  • assess the risk;
  • cease distribution of the product;
  • notify the NCC;
  • notify consumers;
  • facilitate returns; and
  • facilitate returns.

In order to comply with the above mentioned procedural steps and to avoid any penal sanctions, a supplier may be required to prepare and put in place some form of a policy document(s) in anticipation of a product recall becoming necessary in the future.

Conclusion

Like with non-compliance with the provisions of the CPA in general, non-compliance with sections 60 and 61 of the CPA and the Recall Guidelines may have dire consequences. Suppliers may be declared to have engaged in prohibited conduct and an administrative fine of up to R1 million or 10% of its annual turn-over for the preceding financial year may be imposed.

Closely linked to the topic of safety recall, our next article on the CPA will be dealing with a discussion around the concept of “product liability”. For any further details on this topic, please do not hesitate to contact us.

Customers returning goods – what should you know as a supplier?

Customers returning goods – what should you know as a supplier?

You are a supplier of goods to customers – whether through a retail outlet at your business premises or online. The customer wants to return the goods purchased. Do you have an obligation in law to always allow the customer to return goods or are there exceptions? And what about the refund – should it be in full or can you deduct a “handling fee”? For defective goods, are you allowed to rather replace the goods? Can a customer return goods several months after the purchase date? These are all frequently asked questions in the industry which every new (or established) business should consider.

 The Consumer Protection Act 68 of 2008 (“CPA”) provides for a right to return goods only in specific circumstances. There is no such thing as an unlimited or “blanket” return right, even though customers often may think this is the case. Be careful though – the situation changes when it comes to online purchases.

The first thing to remember is that customers indeed have a “cooling off” right, but only in the following circumstances:

  • If not an online sale, a 5 day cooling off period for sales resulting from direct marketing applies (this means that the supplier directly approached the customer to sell him/her the goods and the customer bought the goods as a result of the marketing) – cooling off right in terms of the CPA.
  • If an online sale, a 7 day cooling off period applies in general (no marketing requirement as per the CPA) but note that some exceptions apply and not all goods can be returned in terms of this right – cooling off right in terms of the Electronic Communications and Transactions Act 25 of 2002 (“ECTA”).

During the cooling off period, the customer has the right to a full refund when returning the goods and does not need to give a reason why the goods have been returned. However, the customer will have to pay the costs associated with returning the goods to the supplier. With all the other return rights in terms of the CPA discussed below, the cost of the return will be on the supplier.

In addition to the cooling-off periods, customers may return defective goods in accordance with the so-called CPA implied warranty of quality (the “CPA warranty”). This means, that if there are any defects in the goods within the first 6 months after purchase or delivery (the later date), the customer can return the goods based on the CPA warranty. Whether a customer can return goods within the 6 month period or not will, however, have to be assessed on a case by case basis and there are certain exceptions that could apply. The supplier is entitled to first investigate the complaint and run tests to determine whether a defect is indeed present. If the customer caused the damage to the goods, it goes without saying that the supplier should not be liable and the customer should not be able to rely on the CPA warranty.

In the case of a return of defective goods, the CPA does not give a supplier a first right to repair or replace and provides the customer with the right to return the goods that does not meet the quality requirements for a (i) refund, (ii) replacement or (iii) repair – at the customer’s choice, not the supplier’s. However, the customer’s right to return goods in terms of the CPA warranty will not apply where the goods have been altered, contrary to the instructions of the supplier.

Customers may also return goods if the customer indicated the purpose for which it wanted to use the goods at the time of purchase and the supplier confirmed that the goods will be suitable for that purpose, but it then turns out that the goods cannot be used for the purpose initially intended.

Make sure you know your rights as a supplier and exercise all options when a customer cries “Consumer Protection Act”!

Lastly, suppliers often offer more return rights than the rights afforded to customers in terms of the law. These are regulated through “Returns Policies”. Next time we will do a post on “What should your Returns Policy look like?”.

POPI: First meeting for the Information Regulator

POPI: First meeting for the Information Regulator

In our blog post on 7 November 2016 we referred you to the appointment of the members of the Information Regulator – which is an independent juristic person in terms of the Protection of Personal Information Act – commonly referred to as “POPI”. The Information Regulator will be responsible for monitoring and enforcing compliance with both POPI and the Promotion of Access to Information Act 2000 (PAIA).

The 5 members of the Information Regulator (Chairperson, 2 full-time and 2 part-time) have been appointed for a 5 year period that commenced the beginning of the month and according to a media statement issued by Adv. Tlakula (the Chairperson) on 2 December 2016, the Information Regulator held a meeting on 1 December 2016 to commence their function and duties. It has been confirmed that the full time member responsible for PAIA is Adv. Stroom-Nzama and the full time member responsible for POPI is Adv. Weapond.

The POPI commencement date has not been confirmed yet, but the general view in the industry is that 24 May 2017 is the likely day – as this will mean that compliance with POPI will be required as from the 25th of May 2018, which is also the date for compliance with the European Union’s General Data Protection Regulation.

In practice we are starting to see more clients focussing on POPI requirements and starting to create POPI awareness through training sessions and implementation of amended policies and practices. It would probably be unrealistic to think that POPI will mean a “quick fix” for all data concerns, but POPI will certainly play a big role to regulate the way in which companies manage data in future.

Are Consumers Protected?

Are Consumers Protected?

Introduction

In recent years we have seen quite a few new pieces of legislation specifically aimed at providing consumers with certain rights in their relationships with suppliers. This is a new concept to our law in that historically the position was mainly that the contracting party with the most bargaining power – usually the supplier – was the one that could call the shots. Litigation is expensive and consumers who wanted to take on suppliers had to think twice before incurring those kind of costs.

Consumer legislation in general

Examples of legislation that aim to provide protection to consumers include the Electronic Communications and Transactions Act (ECTA), the National Credit Act (NCA), the Consumer Protection Act (CPA) and most recently the new Protection of Personal Information Act (POPI).

Whilst the NCA and POPI have more specific application, in that they specifically regulate rights when it comes to credit agreements (in the case of the NCA) or rights when it comes to the handling of a consumer’s personal information (in the case of POPI), both ECTA and the CPA apply more generally to regulate all electronic communications and transactions (ECTA generally regulates online contracting and electronic transactions) and consumer rights when it comes to goods and services provided by suppliers (the CPA provides for various rights to consumers in their relationships with suppliers).

What does ECTA and CPA mean for suppliers of goods?

Suppliers need to carefully consider the provisions of both ECTA and CPA in their supply of goods and services and also when drafting their contracts and specifically their returns policies. Even though the CPA is seen to be the “general law” that provides for consumer rights and supplier obligations, it is important to understand that a number of sections in the CPA will in actual fact not apply when contracting online or through any electronic means. In these cases some ECTA provisions may take preference and the CPA rights may not apply.

Summary of ECTA v CPA rights and obligations

Certain sections of the CPA will not apply to electronic transactions if ECTA applies to them or if the CPA specifically refers to ECTA.

Section 16 of the CPA addresses the cooling-off period after direct marketing, however, the CPA will not apply if section 44 of ECTA applies to the transaction. ECTA will apply where the transaction is electronic (as determined by section 42 of ECTA).

Section 19 of the CPA will not apply to a transaction when section 46 of ECTA applies to the transaction. These sections refer to the delivery of goods and supply of services to the consumer within a reasonable time. ECTA gives the supplier 30 days in which to effect delivery or supply where the CPA requires delivery or supply within a reasonable time.

The price of goods and services must be disclosed in accordance with section 23 of the CPA unless the transaction is electronic in which case the disclosure of the price must be in accordance with section 43 of ECTA. ECTA is more stringent regarding the information to be disclosed and provides a comprehensive list in the Act.

Catalogue marketing is regulated by section 33 of the CPA. However, where a transaction is entered into through catalogue marketing but the transaction is not concluded in person, then chapter 7 of ECTA applies. Chapter 7’s sections are the following: section 42 Scope of application, section 43 Information to be provided, section 44 Cooling-off period, section 45 Unsolicited goods, services or communications, section 46 Performance, section 47 Applicability of foreign law, section 48 Non-exclusion, and section 49 Complaints to Consumer Affairs Committee.

Direct marketing is regulated by BOTH the CPA and ECTA. Section 11 of the CPA applies in conjunction with section 45 of ECTA. These sections provide the consumer with the right to restrict unwanted direct marketing.

Conclusion

Consumers have a vast arsenal of rights which can be relied on for protection when concluding a variety of agreements, whether face-to-face, telephonically or online. Gone are the days where the supplier has all the power. Suppliers should therefore consider carefully which legislation will apply to their business operations and ensure that they adhere to the applicable Acts in order to avoid the serious consequences that come with contravening the acts.

Automotive Industry Code Of Conduct In Terms Of The Consumer Protection Act

For the first time ever in South African legal history the status of a “private” document is being elevated and given the status of law. The Consumer Protection Act 68 of 2008 (CPA) makes this possible by providing for “Industry Codes of Conduct” to regulate the application of the Act within a specific industry once so published as an Industry Code of Conduct. After a number of drafts, the legislature finally published the South African Automotive Code of Conduct (the Code) in the government gazette. The Code will have the same legal effect as the CPA itself or its accompanying Regulations.

The main objective of this Code is to give effect to the Consumer Protection Act, regulate the relationships between the role players conducting business within the Automotive Industry and, most importantly, to provide for a scheme of alternative dispute resolution between consumers and industry role players. The Automotive Industry will include importers, distributors, manufacturers, retailers, franchisors, franchisees; suppliers, and intermediaries who import, distribute, produce, retail or supply any of the goods listed in the Code. These goods include, for example, passenger -, recreational -, agricultural -, industrial -, or commercial vehicles. It furthermore includes trucks, motor cycles, quad cycles, and many more.

In broad terms, the Code will bring significant changes to the manner in which the Automotive Industry handled consumer complaints in the past. The Motor Industry Ombudsman of South Africa (MIOSA) has been established to assist in resolving disputes that arise in terms of the CPA when it comes to any goods or services provided by a role player within the Automotive Industry. MIOSA is an independent non-statutory body that has been afforded recognition under section 82 (6) of the CPA, meaning that MIOSA is an “accredited industry ombud” for the Automotive Industry. The objective is for MIOSA to consider and dispose of complaints in a manner that is procedurally fair, informal, and economical.

Once a complaint has been successfully lodged with MIOSA, MIOSA would first play a passive role mediating between the two parties in an attempt to facilitate resolution of the dispute.

Cutting to the chase, all suppliers will be obliged to establish internal complaints handling processes (including an internal complaints handling department, as well as the procedure a consumer could follow when lodging a complaint with the Ombud) coupled with the training of, or at the very least informing, their entire staff about the Act, its Regulations and the Code. Suppliers will also have to adhere to other requirements such as notices that need to be displayed at their premises.

For more information on how this industry code may affect you in your business operations, you can contact Jandré Robbertze at jandre@dommisseattorneys.co.za.

Consumer rights in terms of the CPA

The Consumer Protection Act 68 of 2008 (CPA) provides for extensive protection of consumer rights. In preceding legislation we have seen provisions that also relate to consumer rights – these include for example the National Credit Act 38 of 2005 (NCA) and the Electronic Communications and Transactions Act 25 of 2002 (ECT Act).

The big difference however is that the consumer protection provisions of the NCA and ECT Act only apply in very specific instances – for example the NCA only applies to credit transactions and the ECT Act only applies to electronic transactions. The CPA on the other hand is different: the default position is that the CPA will apply (allowing consumers to rely on the CPA rights), unless an applicable exception exists. These exceptions are limited.

Generally speaking consumers have the following rights in terms of the CPA:

1. Right to equality
This right provides that consumers cannot be discriminated against on one of the discrimination grounds listed in the Constitution.

2. Right to privacy
The Constitution makes provision for the right to privacy in section 14 of the Constitution. The CPA gives effect to this right by providing for some privacy protection when it comes to direct marketing.

3. Right to choose
The CPA provision of the consumer’s right to choose extends to the consumer’s right to return goods.

4. Right to disclosure of information
The CPA aims to assist consumers by forcing suppliers to provide consumers with adequate information in order for them to make informed decisions.

5. Right to fair and responsible marketing
The CPA places a lot of emphasize on marketing activities. Suppliers must be fair in their marketing material and may not mislead consumers.

6. Right to fair and honest dealing
In terms of the CPA, a consumer can expected to be treated fairly and honestly.

7. Right to fair, just and reasonable terms and conditions
Similar to the NCA, the CPA provides for a list of terms that

8. Right to fair value, good quality and safety
Consumers are entitled to receive goods or services that are of good quality, in good working order and free of any defects.

Consumer rights will not mean much if they cannot be enforced. The CPA therefore makes provision for various forums through which the consumer can address alleged breach of the CPA – without necessarily going to court. Not all of these forums are operative as yet, however the National Consumer Commissioner has been appointed and the National Consumer Commission have received complaints from unsatisfied consumers as from 1 April 2011.

Be sure that you know your consumers’ rights. And be sure that you know when an opportunistic consumer is using the CPA to try to enforce rights that he or she does not have in terms of the CPA.

Strip the legal jargon from your documents – your consumer does not understand it!

‘Plain language’ or ‘easy speak’- call it what you want, but you need to use it: the Consumer Protection Act (CPA) requires all ‘suppliers’ to draft their customer facing documentation in a manner that their average consumer will understand. Some love this idea and others (lawyers
especially) hate it.

But what does this mean to you in your relationship with your consumer? Can the consumer demand to receive documentation in his or her home language? Does it mean that each and every consumer who enters your outlet must understand every clause in all of your agreements? The CPA deals with “plain language” in section 22 of the Act where it sets out that documentation must be provided in “plain language”, meaning that “an ordinary consumer of the class of persons for whom the notice, document or visual representation is intended, with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand the content, significance and import of the notice, document or visual representation without undue effort”.

From this it follows that if your documentation is reasonable, in that your average consumer will understand it, then it will pass the test even if not every individual consumer understands all clauses 100%. It is a given that your average consumer is unlikely to understand Latin terms, so don’t use them. The same goes for technical terms or warranty terms – explain these in a simple way so that your consumer will understand them.

It is interesting to note that the CPA does not require suppliers to translate their documents into more than one of the official languages. This approach differs from the approach in the National Credit Act (NCA), which requires credit providers to draft and adhere to a language policy – sometimes requiring that documentation be made available not only in English.

BUT: even if your documentation is written in plain language, if it was clear to you that the consumer did not understand the agreement at all, and you nevertheless continued to enter into the agreement, this will not comply with the CPA. In terms of section 40 it is unconscionable for a supplier knowingly to take advantage of the fact that a consumer was substantially unable to protect his own interests because of physical or mental disability, illiteracy, ignorance, or inability to understand the language of an agreement.

If you are in doubt about the language used in your customer facing agreements or terms and conditions, we can help you to translate your documentation from “pre – CPA” to “plain language as required by the CPA” (and NCA).

The Consumer Protection Act (CPA) regulates your marketing activities

I have previously heard someone saying: “Now that the CPA is in effect, it will be almost impossible to be creative in one’s marketing material – future marketing will be boring!”

Whether this is true or not is debatable, but the bottom line is that marketers need to be careful: the CPA provides for some clear rules when it comes to marketing. Some marketing practices are being prohibited outright whereas other marketing practices are allowed, but regulated strictly. There are in addition some general rules that apply to all types of marketing.

The intention of the CPA’s marketing provisions is clear: you may not mislead your consumer! This means that you will need to consider your marketing material and be sure that your average consumer will understand the message and not be misled.

There are a number of CPA sections dedicated to marketing. The reason is obvious: in our country there are a lot of uneducated and vulnerable people who may in the past have been lured into purchasing products or services for which they had no use. Because marketers were so clever and portrayed a convincing, but untrue, message about certain products which ultimately induced consumers to buy them, the legislator deemed it appropriate to provide some protection to these vulnerable members of society by creating rules that apply to marketing activities. The rationale of these rules is therefore that people should not be persuaded to spend their hard-earned money on products or services that do not have the qualities being portrayed in the marketing material.

We will discuss the various different marketing provisions in more detail in future posts. For now it is important to take note of the following:

  • The general rule is that your marketing material may not be “false, misleading, or deceptive” in any way – whether direct or indirect;
  • Some forms of marketing are prohibited. These include bait marketing (where you “bait” potential consumers into your stores while you know that you do not have stock of the ‘bait item’ to sell to them) and negative option marketing (where the consumer will be deemed to enter into an agreement if the consumer does not clearly decline a particular offer);
  • Promotional competitions, loyalty schemes, promotions and catalogue marketing all have a lot of rules that apply to them and each time that you run any of these types of campaigns, you need to consider the rules very carefully to ensure that your campaign will comply with the CPA requirements;
  • Direct marketing is not prohibited by the CPA as some people may believe. BUT a lot of rules apply, and once the Protection of Personal Information Bill comes into effect, even more rules will apply.

About Dommisse Attorneys
Dommisse Attorneys can assist you with your marketing campaigns to ensure compliance in terms of the CPA. For more information you can contact us by sending an email to info@dommisseattorneys.co.za

Promotional Competitions: The Do’s and The Dont’s

We have all received the phone call or sms to say: “Congratulations, you have won!” (Often some exotic holiday), only to find out that you have not won any prize! You are no winner! Oh no! Now you need to attend some meeting, or purchase “points” in terms of some kind of scheme. So where is the so called prize?

This recently happened to someone I know. He received a sms – informing him that he had won R950 000. So we phoned… and what a surprise, after some questions and statements from our side (including of course a reference to the CPA), the person on the other side hung up. And hung up again when we tried to phone again. And again.

So what does the law say?

Before the Consumer Protection Act 68 of 2008 (“CPA”) came into effect, promotional competitions were governed by the Lotteries Act 57 of 1997 and Regulations. These pieces of legislation were difficult to interpret, which resulted in a lot of confusion and difficulty in compliance with the requirements. Since the enactment of the CPA, promotional competitions are regulated by section 36 and regulation 11 of this Act. The CPA does not outlaw promotional competitions. BUT: it regulates promotional competitions – meaning that a lot of rules apply.

A few of the DO’s:

  1. Check your “offer” to participate (your marketing material) – you need to specify some information during this process (participants should know what they are in for);
  2. Compile competition rules in accordance with the CPA requirements;
  3. Instruct an independent party to oversee and certify the conducting of the competition;
  4. Retain some specified documentation for a period of 3 years.
  5. A few of the DON’TS
  6. Don’t tell anyone that they have won a competition if they have not actually won it;
  7. Don’t charge an entry fee (a requirement that a participant must purchase goods or services to enter will be allowed in certain circumstances);
  8. Don’t force the winner to be present at the prize draw;
  9. Don’t force the winner to participate in marketing activities;
  10. Don’t charge more than R 1.50 for an electronic entry.

We are geared to assist promoters with the review and drafting of their customer facing documentation for promotions, competitions and similar campaigns. We can also assist with the actual prize draw (or oversee the process) and report on your compliance with the provisions of the CPA.