HEAD FOR SUCCESS

Business Studies Grade 12

TERM 1

Topic 1: Impact of recent legislation on business – response to demands for redress and equity

CONSUMER PROTECTION ACT (NR 68 of 2008)

(The National Consumer Protection Act was introduced to create awareness of consumer rights and to protect consumer rights)

CONSUMER PROTECTION ACT (NR 68 of 2008)

NATURE of the CPA:  This Act came into force in April 2011 and granted rights and methods to consumers / buyers within which providers can be held liable for misleading and exploitable behaviour.

 In the past, consumers were exploited by businesses because of poverty, illiteracy, inability to read and understand contracts / advertisements / warnings, etc. when agreements were signed with these consumers. This type of consumer is known as vulnerable consumers. The CPA wants to prevent this.

   Historically disadvantaged persons were not allowed to enjoy full participation as consumers. The CPA wants to give an equal opportunity to them as consumers.

Elimination of previous discriminating Acts that did not allow all consumers full participation in the economy which also contributed to the exploitation of consumers.

This Act makes the application of the NCA more praktical.

CONSUMER PROTECTION ACT (NR 68 of 2008)

PURPOSE of the CPA:  Protect consumers / buyers against fraudulent / misleading marketers.

  Provide consumer protection as it is the case in First World Countries. Assist previously disadvantaged people to know their rights and to be treated fairly as consumers.

     Promote the social and economic welfare of consumers.

Consumer organisations can be established to promote the collective interests of consumers. This gives consumers the opportunity to participate in decision making processes concerning the marketplace and consumer interests.

Promote and protect the interests of consumers by providing access to information.

To improve consumer awareness.

To improve and encourage responsible and informed consumer choice.

 To promote fair business practices.

CONSUMER PROTECTION ACT (NR 68 of 2008)

PURPOSE of the CPA:  The Act introduces a formal set of consumer rights into law by referring to eight specific consumer rights, namely :  equality in the consumer market  privacy  choice  disclosure and information  fair and responsible marketing  fair and honest dealing  fair, just and reasonable terms and conditions  fair value, good quality and safety

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business: 

Marketing:

 The Act prohibits discriminatory marketing (i.e. excluding persons from accessing any goods or services or targeting particular communities for exclusive supply of goods or services).

  It also deals extensively with general marketing standards, bait marketing, negative option marketing, direct marketing, catalogue marketing, trade coupons and similar promotions, customer loyalty programmes, alternative work schemes and referral selling.

The consumer’s choice:

 The Act deals with:  the consumer’s right to select suppliers;  the expiry and renewal of fixed-term agreements;  pre-authorisation of repair or maintenance services;  providing consumers with estimates;  the right to choose or examine goods;  the right to return goods and so-called unwanted goods.

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business: 

Cancellation of advance reservations, bookings or orders :

 Consumers are allowed, subject to a reasonable cancellation charge, to cancel advance reservations, bookings and orders.   However, no cancellation charge may be imposed if a consumer is unable to honour the booking because of death or hospitalisation.

Disclosure and information:

   Consumers are entitled to information in plain and understandable language.

This is defined with reference to what “an ordinary consumer with average literacy skills and minimal experience as a consumer of the relevant goods or services, could be expected to understand without undue effort”.

The Act also requires:  the display of the price of goods or services;  product labelling and trade descriptions in certain circumstances;  disclosure of reconditioned or grey market goods;  written sales records; and  proper identification of deliverers and installers of goods

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business: 

Fair and honest dealing with consumers:

  The Act deals extensively with:  so-called unacceptable conduct;  false or misleading representations;  fraudulent schemes and offers, pyramid schemes and auctions.

Over-booking and over-selling:

 A supplier must not accept payment for goods / services it he / she (the supplier) has no intention of supplying such goods / services or intends to supply goods / services that are materially different from those for which payment was accepted.

 In instances where a supplier is unable to honour a commitment to the consumer, the consumer will be entitled to a refund of any amount paid to the supplier, as well as to resulting damages sustained by the consumer.

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business: 

Fair value, good quality and safety:

 The Act deals with the right to demand:  quality service;  the right to safe, good quality goods;  implied warranties of quality;  warranties on repaired goods and warnings concerning the fact and nature of risks relating to the use of the product or service.

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business: 

Liability for damage caused by goods:

 The imposition of strict liability for damage caused by goods is one of the most controversial provisions contained in the Act.

 It provides that the producer or importer, distributor or retailer of any goods is liable for any harm caused wholly or partly as a consequence of the following:  Supplying any unsafe goods;  a product failure, defect or hazard in any goods;  or inadequate instructions or warnings provided to a consumer pertaining to any hazard arising form or associated with the use of any goods – irrespective of whether the harm resulted form any negligence on the part of the producer, importer, distributer or retailer.

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business: 

Business names:

 The Act determines that a person must not:  carry on business;  advertise;  offer to supply or supply goods or services;   or enter into an agreement with a consumer in any name other than  the person’s full name as per identification book for natural persons;  and registered name for juristic persons;   or a registered business name.

The rationale for requiring business names to be registered is to enable the consumer to know the legal identity of the party he / she is dealing with.

 When engaging in any business activities, a business person is required to include certain information on all trade catalogues, circulars, letter, orders, sales records and statements of account.

CONSUMER PROTECTION ACT (NR 68 of 2008)

THE IMPACT OF THE ACT ON DIFFERENT ASPECTS OF BUSINESS: The following are examples of the impact the Act may have on different aspects of doing business:  

Class actions:

 The Act allows for class actions in the form of accredited consumer protection groups, which may act to protect the interests of a consumer individually or of consumers collectively.

 The Act determines that these groups may approach a court, the National Consumer Commission on the basis that a consumer’s rights in terms of the Act have been infringed.

Promotional competitions:

 The Act contains a number of requirements with regard to promotional competitions (e.g. making the rules of the competition available at no cost, etc.).

  The promoters of these competitions will have to ensure that they comply with the Act.

A cooling-off period:

 The Act protects consumers when goods are marketed directly / by phone.

 Consumers have a period of five working days to revoke the agreement in writing.

CONSUMER PROTECTION ACT (NR 68 of 2008)

ADVANTAGES AND DISADVANTAGES:

ADVANTAGES:

Greater certainty about consumers’ rights.

Greater fairness in transactions.

DISADVANTAGES:

Staff members must be trained to learn the responsibilities of the business.

Consumers must be educated about their rights.

Some goods or services may cost more.

Better balance between the interest of suppliers and consumers More effective means of redress for consumers.

Promote and protect the economic interests of consumers by improving access to information, enabling them to make informed decisions relating to their individual needs.

Businesses have to reveal much more information about their products and processes.

The CPA encourages consumers to complain about businesses.

CONSUMER PROTECTION ACT (NR 68 of 2008)

ADVANTAGES AND DISADVANTAGES:

ADVANTAGES:

Protects consumers from dangerous situations with regard to their welfare and safety.

Forcing businesses to provide consumer education and promotion.

Promote a fair, accessible and sustainable marketplace for consumers’ needs for products and services.

Make it compulsory for consumers to make informed and responsible decisions

DISADVANTAGES:

Unfair action on complaints can harm the businesses’ public image.

It places an extra financial and administrative burden on businesses.

Some businesses feel that the act put too much strain on them, while the consumer is always right.

CONSUMER PROTECTION ACT (NR 68 of 2008)

RIGHTS AND RESPONSIBILITIES OF CONSUMERS AND BUSINESSES:

RIGHTS OF THE BUSINESS:

A supplier may cancel a fixed-term agreement 20 days after giving the consumer notice of a material failure by the consumer.

Except on public holidays and Sundays, a supplier may approach the consumer for direct marketing purposes between 08:00 and 20:00 on weekdays and between 09:00 and 13:00 on Saturdays.

Suppliers can only enforce consumer agreements if the agreement was in plain understandable language.

• • • • •

RIGHTS OF CONSUMERS:

• Consumers’ rights include the following: The right to privacy The right to choice The right to information The right to accountability from suppliers The right to fair and responsible marketing The right to fair and reasonable terms and conditions.

In the case of direct marketing, the consumer may cancel a contract within 5 business days after concluding the contract or receiving the goods.

The consumer may retain unsolicited goods without payment.

CONSUMER PROTECTION ACT (NR 68 of 2008)

RIGHTS AND RESPONSIBILITIES OF CONSUMERS AND BUSINESSES:

RIGHTS OF THE BUSINESS:

A supplier can enforce consumer agreements that are in writing even if the agreement has not been signed by the consumer.

RIGHTS OF CONSUMERS:

The consumer may retain unsolicited goods without payment.

May cancel an advance booking, reservations or order, subject

CONSUMER PROTECTION ACT (NR 68 of 2008)

RIGHTS AND RESPONSIBILITIES OF CONSUMERS AND BUSINESSES:

RESPONSIBILITIES OF BUSINESSES:

Contracts must be in plain and understandable language.

Contractual terms must not be unfair, unreasonable or unjust.

Some contractual terms are prohibited.

Suppliers may not make false or misleading representations.

Prices of goods or services must be displayed.

Sales records must be kept.

Customer loyalty programmes and promotional competitions are regulated.

Especially vulnerable consumers are protected.

The supplier must perform according to their contracts.

RESPONSIBILITIES OF CONSUMERS:

The consumer must perform according to the contract.

CONSUMER PROTECTION ACT (NR 68 of 2008)

REMEDIES:  The consumer can refer a complaint to the National Consumer Commission.

  The consumer and the supplier have access to alternative dispute resolution mechanisms.

Suppliers are subject to administrative fines.

 The National Consumer Commission can investigate market practices of suppliers.

CONSUMER PROTECTION ACT (NR 68 of 2008)

COMPLIANCE WITH THE PROVISIONS IN THE LAW AND PENALTIES IF THE BUSINESS FAILS TO COMPLY:  The CPA describes certain conduct as prohibited conduct.

 The National Consumer Commission (NCC) has powers of investigation, involving inspections and interrogation.

   The NCC may issue compliance notices – failure to comply with a compliance notice constitutes a criminal offense.

The NCC may monitor the consumer market to detect and prevent prohibited conduct.

The National Consumer Tribunal (NCT) may:   hold hearings.

 declare conduct as prohibited conduct.

 Interdict prohibited conduct (i.e. order such conduct to cease).

 grant an order for interim relief.

 grant an order imposing an administrative fine.

Businesses that are guilty of violating the provisions of the CPA, can be imposed to a fine of up to R1 million or 10 % of their turnover.