Marketing indaba 2013

Marketing practices and the Consumer Protection Act – how business owners should safeguard themselves and their businesses

NICOLENE SCHOEMAN LLB cum laude (UFS) LLM (UFS)

t 021 425 5604 f 021 421 8913 e [email protected] w www.schoemanlaw.co.za

a 8th Floor, 80 on Strand Street, Cape Town, 8000 p PO Box 507, Cape Town, 8000

© Schoeman Attorneys 2013

Tailored. Entrepreneurial. Solutions.

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© NF Schoeman 2012 3

Legal structure

•Branding•Shareholders / investors•Stakeholders•Directors / management•Employees

•Maintaining the Brand•Wealth management•Tax planning• Insurance•Continuity planning

•Business Plan•Start / working capital•Budget•Cash flow management•Marketing

•Concept•Values

1. Idea 2. Money

3. Team - growth

4. Return on

investment


4

Economic and regulatory environment = CPA

Business


Who does it apply to?

• Law of general application – covers all transactions for goods / services in SA.

• Exemptions from CPA:

– Supply to government;– Consumer that is a juristic person whose asset value or annual turnover at

the time of the transaction is more than or equal to the threshold value determined by the Minister;

– Specific transactions that have been exempted by the Minister;– Transactions that constitute credit agreements under the National Credit Act

34 of 2005;– Services under an employment contract or a collective bargaining

agreement;

– Advice or related service - Financial Advisory and Intermediary Services Act or the Long-term Insurance Act or Short-term Insurance Act.



The CPA does NOT apply to

you as a supplier but

you have rights as a consumer

CPA applies to you

NO Do you only supply big

business or government?

NOYESYES

Are you a club, trade

union, association,

society, government department

or municipality?

Do you supply goods

and/or services to consumers?

NO

YES

Who does it apply to?Supplier a) “in relation to goods, includes sell, rent, exchange and hire in the ordinary course of business for

consideration; or b) in relation to services, means to sell the services, or to perform or cause them to be performed or

provided, or to grant access to any premises, event, activity or facility in the ordinary course of business for consideration.”

Consumera) “a person to whom those particular goods or services are marketed in the ordinary course of the

supplier's business;b) a person who has entered into a transaction with a supplier in the ordinary course of the supplier's

business, unless the transaction is exempt from the application of this Act by section 5(2) or in terms of section 5(3);

c) if the context so requires or permits, a user of those particular goods or a recipient or beneficiary of those particular services, irrespective of whether that user, recipient or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and

d) a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5(6)(b) to (e).”



CONSUMER

Goods/ services are marketed to

in normal course of business

Transaction entered into

in normal course of business

Recipient of goods / services regardless of whether he /she

was party to the transaction

A franchisee in terms of franchise

agreement


Supplier

or

Goods

Services

Markets


Market(s)

Supply

Advertise, display or offer to supply any goods or services.

Ordinary course of business. To the public for consideration.

Any representation in the ordinary course of business =

reasonably willing to supply any goods or services for

consideration.

Any other conduct in ordinary course of business =

reasonable inducement or attempted inducement to

engage in transaction.

Promote

GOODS: sell, rent, exchange and hire in the ordinary course of business for

consideration.

SERVICES: sell , or to perform or cause them be performed or provided, or to grant access to any premises, event,

activity or facility in the ordinary course of business for consideration.

OR

OR

Cooling offIn terms of section 16 the consumer may cancel without penalty any transaction within 5 business days after the agreement was concluded or goods delivered. Direct marketing“approach a person, either in person or by mail or electronic communication, for the direct or indirect purpose of- a) promoting or offering to supply, in the ordinary course of business, any goods or

services to the person; or b) requesting the person to make a donation of any kind for any reason.” Promoting“a) advertise, display or offer to supply any goods or services in the ordinary course of

business, to all or part of the public for consideration; b) make any representation in the ordinary course of business that could reasonably be

inferred as expressing a willingness to supply any goods or services for consideration; or

c) engage in any other conduct in the ordinary course of business that may reasonably be construed to be an inducement or attempted inducement to a person to engage in a transaction.”


Marketing practices - general• No false or misleading or deceptive representations or bait marketing (availability)• No misleading trade descriptions• No unfair, unreasonable or unjust price, marketing or negotiation – broadly no

‘exaggerated’ puffery• No unconscionable conduct / fraudulent schemes and offers• Do not offer customer loyalty where no intention to actually offer it

= GREAT emphasis on honesty

• No overselling or over booking – supplier must refund + interest + compensation, defence where supplier arranges comparable substitutes

• No negative option marketing – not legally binding• Referral selling – may not offer a discount where the consumer agrees to refer other

customers• Unsolicited goods - deliver a product and force sale• Promotional competitions• Direct marketing


Promotional competitions


No one may inform another that he/she has won a competition if:

• No competition conducted• The person has not actually won the competition or prize• Prize was made generally available• Prize for a competition subject to previously undisclosed

condition• Required to buy something or pay something for the

prize

Promotional competitions


Certain persons may not participate in a competition:

• Directors, members, partners, employees or agents of the promoter or similarly connected person

• Supplier in connection with that competition

The promoter of the competition must:

• Prepare competition rules before the beginning of the competition

• Make the competition rules available to the Commission and to any participant, on request and without cost

• Keep a copy of the competition rules

Direct marketing


• Customer has the right to refuse being approached by any person

• Onus rests on supplier to prove consent to direct market to customer

• Opt out and stop compulsory

• Only contact during business hours

• Must inform the customer of the right to cooling off

Conclusion


• Business owners and marketers should ensure that their marketing practices align with the CPA

• Limit risk and add the additional cost of compliance to costing / mark - up

• In terms of the cooling off period – costing/mark – up or practices should be revised to accommodate compliance with this provision

• Align T&Cs with CPA so that transactions are compliant (when leads from marketing are converted)

Thank you!


Direct email: [email protected]: 021 425 5604

Website: www.schoemanlaw.co.za

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** See the Marketing Indaba 2013’s dvd for additional material on the CPA ranging from 2010

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