The Consumer Protection Act (CPA) is a complex, technical document that even lawyers are struggling to get to grips with. We called in the expert help of Prof. Angela Itzikowitz - senior executive at Africa’s largest law firm, Edward Nathan Sonnenbergs - to have her lead the way through the legal fog. 

Quirk: A lot of marketers and business people have been panicking about the CPA. Is there reason to be worried?

Angela: The Act is here to protect all natural persons and small companies and partnerships. The general purpose of the CPA is to protect consumers and to promote and advance their social and economic welfare. It has been called a "Bill of Rights" for the consumer. The Act aims, amongst other things, to establish a legal framework for a consumer market that is fair, accessible, efficient, sustainable and responsible for the benefit of consumers; to promote fair business practices; and to protect consumers from unconscionable, unjust or unreasonable business practices.

Provided that marketers and business people have treated consumers fairly in the past, there is no need to be unduly worried by the CPA. But as is to be expected, given its novelty, the Act does introduce uncertainty into the business environment and care must be taken to ensure that one's business complies with the CPA. 

Quirk: Although the CPA is now 'in effect', there's still a lot of ambiguity that even lawyers are still trying to work out. What does this mean for business people? Should we keep doing what we're doing until there's clarity? 

Angela: Businesses must comply with the CPA, even if certain provisions are ambiguous. It is important that a business can show that it took reasonable steps to comply with the Act, even if their understanding of the CPA is later found to be wrong. It should be noted that while aspects of the CPA are ambiguous, the Act is clear enough in most aspects to allow businesses to alter their business practices to comply with the Act. Where there is ambiguity, a business should approach a legal practitioner for guidance. 

Quirk: What's being done to inform the average consumer of their new rights under the Act? If there's a lot of misunderstanding, as there seems to be, isn't there a danger of consumers wasting businesses' and their own time by bringing pointless cases to the consumer commission? 

Angela: There certainly are many misconceptions about the Act in the public domain. Much of this has been fuelled by extensive public scrutiny of the draft regulations which have been subsequently been extensively amended in the final regulations.

For instance the draft regulations provided that a consumer could effectively walk away from a fixed term agreement by giving notice and paying a 10% penalty. Such a regulation would have had major ramifications for companies who provide goods as part of a fixed term contract. When the final regulations were published, they were changed to provide that the supplier can charge a reasonable cancellation charge where a consumer cancels a fixed term agreement taking into account a number of factors including the value of the goods returned to the supplier and the value of the goods which remain in the possession of the consumer, making it far less attractive for a consumer to cancel a fixed term agreement. 

Quirk: Are there any major changes in terms of online marketing? 

Angela: The Act lays down requirements for marketing in general. Discriminatory marketing is prohibited (i.e. excluding persons from accessing any goods or services or targeting particular communities for exclusive supply of goods or services is prohibited). 

Furthermore, the producer, importer, distributor, retailer or service provider must not market any goods or services in a manner that is reasonably likely to imply a false or misleading representation concerning those goods or services which are being marketed to the consumer.

The Act significantly, provides for a cooling-off period resulting from direct marketing. Consumers are afforded a period of 5 business days to cancel a transaction resulting from direct marketing (including promotional emails, pamphlets and SMSes sent to consumers) and without reason or penalty by notifying the supplier in writing or in another recorded manner and form.

The supplier must also not (by words or conduct) make false, misleading or deceptive representations concerning material facts to consumers. 

Quirk: What about small businesses; they can't always afford to hire a lawyer. Do they count as suppliers under the CPA, and what should they do to make sure they don't get in trouble? 

Angela: They certainly count as suppliers and are regulated by the CPA just as much as large businesses are. The best thing a small business owner can do is to get a copy of the CPA and its regulations (they are available online) and to read it and apply it to their business. Where a glaring concern presents itself it may be cheaper in the long run to consult a lawyer. 

Quirk: Can you tell us in a nutshell what strict liability means for business owners, and what they should do to ensure they're protected?  

Angela: In terms of the common law, liability was fault based and the consumer had to prove negligence on the part of the supplier or manufacturer when instituting a claim for loss resulting from the use of defective goods.

The CPA introduces far-reaching changes to the law of product liability and introduces the concept of strict liability into South African law. 

In terms of section 61 of the CPA, a producer, importer, distributor or retailer of goods is liable subject to certain “special” and “general” defences, for any harm or damage caused wholly or partly as a result of the supply of unsafe goods, a product failure, defect or hazard in the goods, inadequate instructions or warnings provided to the consumer pertaining to any risk associated with the use of the goods regardless of whether the harm resulted from any negligence on the part of the producer, importer, distributor or retailer.

The harm compensated for includes death, injury or illness to a natural person, loss of or physical damage to movable and immovable property, and economic loss in respect of any of the above, irrespective of whether the harm resulted from any negligence on the part of the producer or importer, distributor and/or retailer.

This liability is joint and several, which means that a consumer can elect to take action against any one of the parties in the supply chain - even if they don't have a contract with that party and even where they are unable to establish negligence. Furthermore, suppliers, manufacturers and distributors may not contract out of this strict liability.

The Act significantly shifts the burden of proof from the consumer to the relevant parties in the supply chain.

It is interesting to note that, even if a transaction is exempt from the Act, the strict liability provision applies to the goods themselves. 

Quirk: What are some of the online marketing techniques that are affected by the Act? 

Angela: There are several issues that must be considered, including:

Email and SMS marketing

Consumers have a right to privacy and can refuse to receive direct marketing material (be it a letter, email or SMS). This means that every form of direct marketing must have an unsubscribe (opt out) link and marketers must keep a record of the consumer’s decision to opt out. 

Consumers also have the right to pre-emptively block all direct marketing communication by signing up to a national registry established in terms of the Act. Any organisation embarking on direct marketing, including online marketers, must check this registry and refrain from contacting listed recipients.

Plain and understandable language

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". 

This means legal jargon and archaic terms few people understand should be removed and replaced with more straightforward language that the average person can understand.

Competitions and promotions

If a competition satisfies the requirements set out in the Act and the prize offered exceeds a prescribed threshold of R1.00, the competition will qualify as a promotional competition and will be regulated by the Act. 

The Act contains a number of requirements with regard to promotional competitions (for example making the rules of the competition available at no cost and ensuring that no director or employee of a company wins the prize).

Referral marketing

Marketers will no longer be allowed to award a benefit to a consumer based on the consumer’s referral of further clients to the marketer. A consumer may still be invited to refer a friend, but a benefit cannot be held as a “dangling carrot” in return for such referral.

Prof. Angela Itzikowitz specialises in finance and regulatory reform, as well as banking and financial market regulation. She has over 20 years of legal experience in banking and finance and is an executive at ENS. She’s also a professor at Wits University and has co-authored a number of books. Era Gunning and Matthew Gibson from ENS also contributed to the interview.

Also check out:

• 8 Legal Do's and Don'ts for Email and SMS Marketing
• The Consumer Protection Act: When and How Does it Apply?