Many business owners were concerned about the impact the Consumer Protection Act (CPA) would have on their companies, but the Act holds some benefits for SMEs too. Certain of the Act’s provisions actually prevent competitors from undermining your business through unfair or dishonest marketing or business practices.
The CPA’s definition of consumers includes corporations with an asset value or annual turnover of less than R3 million. This means small businesses purchasing goods or services from their suppliers have the same rights and protection as ordinary consumers.
Key implications of the Consumer Protection Act
More importantly, entrepreneurs need to be aware of the impact the Act has on the way they operate their businesses. They should ensure that they comply with the legislation. Here are some of the practical implications of the Act. It is advisable that you seek legal advice to ensure that your company complies with the CPA.
1. Terms and conditions
Many businesses protect themselves by having customers sign standard terms and conditions. This is in order to prevent future disputes and give the business essential protection against non-payment, product or service liability.
The Act makes many of the terms previously included illegal or unenforceable, so businesses need to obtain a new document to properly protect their business interests and avoid administrative fines.
2. Fixed-term consumer agreements
The maximum period for fixed-term consumer agreements is 24 months from the date of signature by the consumer, unless otherwise specified. Longer periods are only permitted if the consumer agrees and there is a demonstrable financial benefit to the consumer.
3. Competition entries
The cost for consumers to submit and entry to a competition should not exceed R1,50. This includes the total cost for all subsequent electronic communication to the consumer regarding that entry.
4. Contacting customers
Companies are prohibited from contacting customers at certain times, including Sundays or public holidays, Saturdays before 9am and after 1pm, and between 8pm and 8am the following day during the week. Direct marketers can’t send material to consumers unless they have confirmed (in writing) that no pre-emptive block was registered.
5. Defective products
The Act stipulates that a consumer is no longer required to prove negligence against the importer, producer, distributor or retailer of a product when claiming damages arising out of defective products. This includes a product failure, defect in any goods or even inadequate instructions or warning provided to the consumer. This will affect the level of indemnity insurance required by businesses.
6. Money-back guarantees
All goods sold are subject to an automatic warranty that they are suitable for the intended purposes, are of good quality and free of defects. If a product does not live up to these standards, the consumer is entitled to return the product for a refund, replacement or repair, within six months of the transaction. Companies that in the past agreed to exchanges but not refunds can no longer do so. A sale is only really a sale after six months. There is also a ten-business-day window for consumers to return goods which they have not had the opportunity to examine beforehand.
7. Delivering goods
Products must be delivered within a reasonable time after the agreement is entered into or as agreed between the parties. If there is going to be a delay in the delivery, the supplier needs to inform the consumer and arrange a new date. The consumer is, however, entitles to cancel the deal and go elsewhere. If goods are incorrectly delivered, the supplier runs the risk of the goods being declared ‘unsolicited’, in which case their ownership can pass to the person to whom they were delivered.
8. In plain language
The Act states that everything must be in plain language – all agreements must be easily understandable. Suppliers may not use false, misleading or deceptive representations to win over consumers to their products. They must also make full and honest disclosure about products, including their price. Sales that advertise goods ‘while stocks last’ can no longer use the same tactics, for example, if a TV is advertised for R1 000 and the consumer arrives to buy the TV as advertised, the supplier cannot offer a different TV for a different price in its stead.
Protect your business
While the bulk of the Consumer Protection Act is common sense and good business practice, complying to the Act does require a little work by business owners who should ensure they have a strong risk management system in place. You can start by double checking all interaction and points of correspondence between your business and clients, including emails, calls, adverts, SMSs, websites and how walk-in customers are treated by staff.
You can also mitigate risk by creating templates for all correspondence. Ensure that the words ‘All Terms and Conditions Apply’ appear on everything. To ensure that your agreements use plain language, get someone else to read through all the business’s documents with a critical eye.
3 Phases of Compliance
Neville Melville, advocate and author of The Consumer Protection Act Made Easy unpacks a three-phase approach to compliance:
Phase 1:
Establish whether the provisions of the Act apply to your business.
Phase 2:
Determine which areas of the Act apply to your business. If your business is multi-departmental, decide which areas of the Act apply to which departments. The departments will need to communicate with each other, however. The Act calls for a transformation in how business is conducted, and this requires transparency – within and beyond an organisation.
Phase 3:
Undertake a compliance audit: You should seek expert legal advice to assist you with the audit, as well as to correct any areas highlighted through the audit. The audit will comprise the following:
- What does the Consumer Protection Act require?
- What is the existing position in your organisation or department in this regard?
- If you fall short, in what respects?
- What action needs to be taken to ensure that compliance will be achieved?
- Who will be responsible for carrying out the change?
- By when must the change be brought about?
- Compliance must be checked by the responsible party and signed off.
Useful resources
- South Africa Government online: www.info.gov.za
- The Consumer Protection Act Made Easy: www.madeasy.co.za
- The Department of Trade and Industry: www.dti.gov.za
