The Consumer Protection Act 68 of 2008 (CPA) applies to the supply of all goods and services (including all role-players in the supply chain), as well as to the promotion and marketing of these goods and services. There are several implications of the CPA critical to entrepreneurs to avoid non-compliance and possible penalties, but also to take advantage of the benefits the CPA affords them.
The CPA entitles consumers to access to a fair, accessible and sustainable marketplace to trade in goods or services; protection when trading in goods or services; access to information on goods or services; fair marketing and business practices and higher standards of general responsible behavior by both suppliers and consumers.
The CPA’s definition of “consumer” includes juristic persons (company, close corporation, body corporate, partnership, association, trust) with an asset value or annual turnover of less than R2 million. This means that the protection provided by the CPA will also apply to small businesses purchasing goods or services from their suppliers.
Seven Vital Implications of the CPA for Entrepreneurs
Entrepreneurs are entering into numerous transactions on a regular basis, whether as a supplier or as a consumer, potentially amounting to millions of rands, where one party is relying on the representations and promises of the other. It therefore becomes essential for entrepreneurs to be aware of the impact the CPA has on their business operations. Some practical implications of the CPA include :
1. 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.
Consumers have the right to cancel the fixed-term agreement at any time before expiration, by giving the supplier 20 days’ notice in writing or other recorded manner and form, without reason. The supplier may impose a reasonable cancellation penalty with respect to any goods supplied, services provided or discounts granted to the consumer.
2. Cooling off period - Businesses are obliged to offer a consumer a “cooling off” period wherein a consumer may cancel a transaction resulting from direct marketing without reason or penalty, by notice to the supplier in writing, including by email or fax.
Cancellation must occur within 5 days after conclusion of the transaction or agreement, or delivery of the goods. The supplier will then have 15 days to pay the consumer back in full. If goods have already been delivered, the consumer will have to return them before getting his money back.
3. Terms and conditions - It is common practice for businesses to have their customers sign standard terms and conditions in order to protect themselves against risks such as non-payment and product or service liability. The CPA now gives consumers the right to protection against unfair, unreasonable or unjust contract terms.
Many contractual terms previously included in these standard terms and conditions, for example, terms which limit or exempt suppliers from liability for any loss, directly or indirectly attributable to the gross negligence of the supplier, have therefore become illegal and unenforceable. This necessitated the need for businesses to obtain a new terms and conditions document to avoid penalties and protect their business interests.
4. Contacting customers – Businesses may not contact customers during certain times, including Sundays and public holidays, Saturdays before 9:00 and after 13:00, and between 20:00 and 8:00 the following day during the week. If the consumer has expressly or implicitly requested or agreed to being contacted during the prohibited times, it is however allowed. Consumers further have the right to opt out of receiving unsolicited direct marketing services or material by blocking the relevant supplier or marketer.
5. Product liability - A consumer is no longer required to prove negligence on the side of the importer, producer, distributor or retailer of a product when claiming damages arising out of defective products. This includes a product failure, unsafe products, defective or hazardous goods or inadequate instructions or warning provided to the consumer. Business therefore require a higher level of indemnity insurance to protect themselves.
6. Implied warranty of quality - All goods sold are subject to an automatic warranty that they comply with the requirements and standards of being safe, of good quality, free of defects, durable, and suitable for the intended purposes. If a product does not live up to these standards, the consumer is entitled to return the goods for a refund, replacement or repair, within 6 months of delivery. Businesses can therefore no longer agree to exchanges but not refunds.
7. Disclosure of information - Consumers are entitled to information in plain and understandable language. Businesses may not use false, misleading or deceptive representations to convince consumers to buy their products. The obligation to use plain language applies to agreements with consumers, 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.
Monisha Prem (BA, LLB, MBA) is the director of M. Prem Incorporated. She is an admitted attorney with over 14 years post article experience. Monisha litigated for several years before joining an investment banking firm specialising in mergers and acquisitions. Monisha has owned and operated several businesses, is passionate about business development, commercial and corporate law.
Lesya Pansegrouw (B.Com, LLB, LLM (current)) is an Associate at M Prem Inc, specialising in contract drafting and general commercial and corporate law. Lesya is currently completing her Master’s Degree in commercial law, is passionate about commercial contracts and has a deep understanding of regulatory requirements.