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.