Consumer protection law mechanisms before the enactment of the CPA

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CHAPTER 3 ENFORCEMENT MECHANISMS AFFORDED TO CONSUMERS IN TERMS OF THE CONSUMER PROTECTION ACT

Introduction

The CPA has repealed much of the fragmented legislation that was in effect prior to its coming into operation and attempts to act as the umbrella legislation in the field of consumer protection law.162 From 2000 onwards, South Africa started to see the development of comprehensive consumer protection legislation in the form of the Electronic Communications and Transactions Act,163 the National Credit Act,164 and finally, the CPA.165
The CPA appears to be multidisciplinary in nature, as it spans law, economics, and social welfare.166 The CPA affords consumers certain fundamental rights that are listed in Parts A to I of its Chapter 2. These rights include the right of equality in the consumer market,167 the consumer’s right to privacy,168 the consumer’s right to choose,169 the right to disclosure and information,170 the right to fair and responsible marketing,171 the right to fair and honest dealing,172 the right to fair, just, and reasonable terms and conditions,173 the right to fair value, good quality, and safety,174 and the supplier’s accountability to consumers.175
Considering the wide definition of a ‘consumer’,176 the application of the CPA is far-reaching and it regulates a wide range of matters affecting consumer relations, including the law of contract in general,177 specific contracts,178 franchising,179 and marketing.180 Section 5 of the CPA, however, carves out the statute’s specific field of application and provides for certain exclusions from its application.181
Van Heerden correctly submits that in order to allow consumers fully to enjoy their rights, it is essential that we have an “efficient system of redress that is not too costly or dilatory”.182 If this is not the case, the realisation of consumer rights remains merely a ‘lofty ideal’ that does not lead to the improvement of the life of a consumer.183 The importance of access to redress was also emphasised in the matter of Ngoza v Roque Quality Cars where the National Consumer Tribunal (the Tribunal)184 indicated that:
An extremely important aim of consumer protection legislation is access to justice. The improvement of access to justice is regarded as one of the ‘over-arching goals of consumer protection legislation’. In the policy document setting out the reasons why the South African legislature deemed it necessary to introduce consumer protection legislation, the drafters highlighted in particular the difficulties that South African consumers face when it comes to accessing justice. This includes having to approach the normal civil courts if suppliers fail to deal with legitimate complaints. Even when claims are sufficiently large to be of some serious concern to consumers, approaching the civil courts is notoriously expensive. Litigation is also very intimidating and most consumers have no idea about how to launch civil proceedings. Consumers who do take the time to complain often find that their complaints are ignored and they do not know who to turn to next. In the case of Imperial Group (Pty) Ltd t/a Cargo Motors Klerksdorp v Dipico and another the court pointed out that “the purposes of the CPA are to promote and advance the social and economic welfare of consumers in South Africa by, amongst others, providing a consistent, accessible and efficient system of consensual resolution of disputes arising from consumer transactions; and an accessible, consistent, harmonised, effective and efficient system of redress for consumers.185
This chapter critically examines the current consumer protection framework in South Africa, with a particular focus on the redress mechanisms introduced by the CPA. This critical examination is followed by a comparative analysis involving two foreign jurisdictions: India and the United Kingdom.186 Thereafter, having regard to the enforcement frameworks in place in these foreign jurisdictions, the successes and shortcomings of the current enforcement mechanisms under the CPA are highlighted and recommendations made on how the realisation of rights under the CPA can be improved.187

Scope of application: A brief overview

There are some key definitions that ought to be considered for purposes of determining the scope of application of the CPA.188 The first is the definition of a ‘consumer’. A ‘consumer’ is defined in section 1 of the CPA to refer to: (i) a person to whom goods or services are marketed in the supplier’s ordinary course of the business; (ii) a person who has entered into a transaction with a supplier in the ordinary course of such supplier’s business (save for instances where the transaction is exempt from the CPA’s application in terms of s 5(2) or (3) of the CPA);189 (iii) a user of those goods or a recipient or beneficiary of services, regardless of whether such user, recipient, or beneficiary was a party to a transaction concerning the supply of those particular goods or services; and (iv) a franchisee in terms of a franchise agreement, in accordance with section 5(6)(b) to (e) of the CPA.
Related to the definition of a consumer is that of a ‘person’, which is defined to include a juristic person.191 A ‘juristic person’, in this regard, is defined to include: (i) a body corporate; (ii) a partnership or association; or (iii) a trust as defined in the Trust Property Control Act 57 of 1988.192 Another definition used to give meaning to the term ‘consumer’, and relevant in considering the scope of application of the CPA is the term ‘transaction’, which is defined as follows:
In respect of a person acting in the ordinary course of business—
an agreement between or among that person and one or more other persons for the supply or potential supply of any goods or services in exchange for consideration; or
the supply by that person of any goods to or services at the direction of a consumer for consideration; or the performance by, or at the direction of, that person of any service for or at the direction of a consumer for consideration; or an interaction contemplated in section 5(6), irrespective of whether it falls within paragraph (a).193
As Sharrock correctly points out, it is possible for a transaction as contemplated in the CPA to occur in multiple locations.194 As such, even where an agreement is concluded outside of South Africa, should the delivery of such goods or services take place in South Africa, the transaction will be regarded as having occurred in South Africa and the CPA will apply.195
Another relevant definition is that of ‘supplier’, which refers to “a person who markets any goods or services”.196 In this regard, ‘market’, when used as a verb, is defined in the CPA to refer to the promotion or supply of any goods or services.197 ‘Supply’, when used as a verb, is defined to include the sale, rental, exchange, and hire of goods in the ordinary course of business for consideration; or, in relation to services,refers to the sale or performance of services, or the granting of access to any premises, event, activity, or facility in the ordinary course of business for consideration.198 For the sake of completeness, it is noted further that ‘supply chain’ refers collectively to all the suppliers who contribute to the ultimate supply of goods or services, either directly or indirectly, and includes a producer, an importer, a distributor, a retailer, or a service provider.199 Importantly, suppliers who reside or whose places of business are located outside of South Africa, may still be caught by the application of the CPA as per the provisions of section 5(8)(a) of the CPA.200
The phrase ‘in the ordinary course of business’ is referred to in the definition of a ‘consumer’, as well as the definitions of ‘supply’ and ‘transaction’. However, this phrase is not defined in the CPA.201 The use of this phrase may undoubtedly restrict the scope of application of the CPA. Questions around the interpretation of this phrase have also been raised by Jacobs, Stoop and Van Niekerk where they ask whether it can be said that a private seller of a home sells it in the ordinary course of his/her business, and that such a seller is therefore a ‘retailer’ for purposes of that agreement? Or does ‘ordinary course of business’ require the seller to be in the business of selling homes, for example, a developer, before he/she will qualify as a retailer, if at all?202
Sharrock submits that there is room to argue that in order for the supply of goods and services to be in the ordinary course of business, there ought to be a certain degree of regularity if such a supply is to be considered ‘ordinary’ or ‘commonplace’.203 This argument is based on the definition of a ‘business’ as contemplated in the CPA where the term is defined to mean “the continual marketing of goods or services”, suggesting an activity that is repeated.204 However, Sharrock submits further that a wide interpretation of this phrase may be preferred for purposes of protecting consumers – with the implication that even a ‘once-off’ transaction would be considered as being in the ordinary course of business.205
In the matter of Doyle v Killeen and Others,206 the Tribunal was of the view that an objective test ought be applied, and that the following considerations need to be taken into account when determining whether a person has acted ‘in the ordinary course of business’:
Whether the person has a registered business;
The nature of the business that the person engages in;
The nature of the goods normally sold by the person;
The frequency with which the goods are sold by the person; and
Whether the person advertises or markets his goods or services.207
Given that no evidence or arguments were put before the Tribunal indicating that the party concerned had sold the property in the ordinary course of business; and, further, the available evidence indicated that the party concerned had sold her property as a once-off transaction (and was not in any way involved in the business of selling properties), the Tribunal found that the CPA did not apply to the sale of the property concerned.208 The Tribunal, therefore, interpreted this phrase narrowly.209
Although, in theory, there is arguably room for two schools of thought regarding the interpretation of this phrase – one that favours commercial certainty, and another that is particularly consumer-centric210 – it is submitted that the former school of thought is to be preferred and is also aligned with one of the aims of the CPA, namely the promotion of fair business practices.211 Accordingly, the narrow interpretation applied by the Tribunal when considering this phrase is also preferred.
Put into perspective, it would be unreasonable to expect Ms Radebe, who is registered as a full-time LLB student and decides to sell her textbooks at the end of her third year (in order to raise funds to purchase her final year textbooks), to be regarded as acting in the ‘ordinary course of business’. This could not have been the intention of the legislature. It may, however, be worthwhile for the legislature to consider including a definition for this phrase in the CPA for greater clarity.212
Section 1 of the CPA proceeds to define ‘goods’ as:
anything marketed for human consumption;
any tangible object not otherwise contemplated in paragraph (a), including any medium on which anything is or may be written or encoded;
any literature, music, photograph, motion picture, game, information, data software, code or other intangible product written or encoded on any medium or a licence to use any such intangible product;
a legal interest in land or any other immovable property, other than an interest that falls within the definition of ‘service’ in this section; and
gas, water and electricity.
It is worth noting that the term ‘used goods’ is also defined in the CPA and refers to goods previously supplied to a consumer, but does not extend to goods that have been returned to the supplier in accordance with any right of return provided for under the CPA.213 However, this term is not used anywhere else in the CPA.214 This appears to have been an oversight on the part of the legislature, and it is submitted that the failure by the legislature to use the term should not be taken to imply that second-hand goods do not fall within the scope of the CPA. This would undoubtedly be prejudicial to the vulnerable members of society to whom the CPA intends to extend its protection as was confirmed in the matter of Vousvoukis v Queen Ace CC t/a Ace Motors.215 For legal and commercial certainty on this point, it may be useful for the legislature to consider including the term ‘used goods’ in the definition of goods.216
Lastly, ‘services’ are defined as including but not being limited to:
any work or undertaking performed by one person for the direct or indirect benefit of another;
the provision of any education, information, advice or consultation, except advice that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002);
any banking services, or related or similar financial services, or the undertaking, underwriting or assumption of any risk by one person on behalf of another, except to the extent that any such service—
constitutes advice or intermediary services that is subject to regulation in terms of the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); or
is regulated in terms of the Long-term Insurance Act, 1998 (Act No. 52 of 1998), or the Short-term Insurance Act, 1998 (Act No. 53 of 1998);
the transportation of an individual or any goods;
the provision of—
any accommodation or sustenance;
any entertainment or similar intangible product or access to any such entertainment or intangible product;
access to any electronic communication infrastructure;
access, or of a right of access, to an event or to any premises, activity or facility; or
access to or use of any premises or other property in terms of a rental;
a right of occupancy of or power or privilege over or in connection with, any land or other immovable property, other than in terms of a rental; and rights of a franchisee in terms of a franchise agreement, to the extent applicable in terms of section 5(6)(b) to (e) irrespective of whether the person promoting, offering or providing the services participates in, supervises or engages directly or indirectly in the service.217
The key definitions set out above indicate that the scope of application of the CPA is intended to be wide, subject to the qualifications to its application in terms of section
In this regard, section 5 provides that the CPA applies to every transaction that takes place within South Africa, unless that transaction is exempted in terms of subsections (2), (3) or (4).218 The CPA also applies to the promotion or supply of any goods or services within South Africa, unless such goods or services could not reasonably be the subject of a transaction to which the CPA applies, or the promotion of those goods or services has been exempted in terms of subsections (3)
and (4).219 Furthermore, the CPA applies to goods or services that are supplied or performed in terms of a transaction to which it applies (irrespective of whether any of those goods or services are offered or supplied in conjunction with any other goods or services, or separate from any other goods or services).220 Finally, the CPA applies to goods that are supplied in terms of a transaction that is exempt from the application of the CPA, but only to the extent provided for in subsection (5).221

The realisation of consumer rights

The realisation of consumer rights in terms of the CPA is addressed in: (i) Chapter 3, which provides for the protection of consumer rights and the consumer’s voice;222 (ii) Chapter 5, which provides for national consumer protection institutions;223 and (iii) Chapter 6, which provides for the enforcement of the CPA.224 Various sections from these chapters are critically discussed in this chapter in order to establish the enforcement mechanisms that have been introduced by the CPA, and whether these mechanisms are effective and adequate.
Section 68 of the CPA includes a protection mechanism which seeks to ensure that consumers who raise their voices, or seek to assert their rights, are not penalised by the supplier for doing so.225 This is a very important provision because consumers should not be afraid to voice their concerns for fear of being subjected to prejudicial conduct for doing so.226
Section 4 of the CPA is titled ‘The realisation of consumer rights’ and provides for a closed list of persons who have locus standi to approach the forums established in terms of, and empowered by, the CPA for redress.227 In this regard, section 4(1) of the CPA provides that the forums established for the enforcement of consumer rights, as contemplated in the CPA, may be approached by: (i) persons acting on their own behalf;228 (ii) authorised persons acting on behalf of another person who cannot act in her own name;229 (iii) a person acting as a member or in the interest of an affected group;230 (iv) persons acting in the public interest with either the leave of the Tribunal or the court;231 and (v) an association acting in the interest of its own members.232 The provisions of the CPA are strongly reminiscent of section 38 of the Constitution in so far as locus standi is concerned.233 Van Heerden submits that the rationale behind the wide locus standi provisions, is to ensure that access to redress is not restricted, particularly as regards low-income consumers who would not be able to approach the courts without the group-litigation mechanisms contemplated in section 4(1) of the CPA.234
Part A of Chapter 2 of the CPA (which protects the consumer’s right equality in the consumer market) is a unique and original provision that points to a further alignment of the CPA with the Constitution.235 Barnard and Kok highlight, and correctly so, that this is
the first time in the history of consumer protection law in South Africa that the right to equality entrenched in section 9 of the Bill of Rights… is now also a specific fundamental consumer right available to consumers in terms of the CPA.236
The uniqueness of Chapter 2, Part A of the CPA is carried through to its enforcement mechanisms in that the Equality Court exercises exclusive jurisdiction in respect of matters falling within this Part.237 This forum is discussed in further detail below.238

Consumer advocacy

The CPA makes provision for accredited consumer protection groups,239 with which the National Consumer Commission (the Commission)240 may cooperate in terms of:
(i) providing consumer advice and education activities and consumer-related
(ii) undertaking research, market monitoring, surveillance, and (iii) promoting consumer rights and the advocacy of consumer interests;243 (iv) representing consumers in court, either specifically or generally;244
providing alternative dispute resolution through mediation or conciliation;245 and
participating in national and international associations, conferences, or forums concerned with consumer protection matters.246
The CPA caters for the accreditation of consumer protection groups and gives the Commission the power to accredit such groups where the person or association concerned, promotes the interests of all or a particular category of consumers;247 is committed to realising the purposes of the Act;248 and is involved in actions to promote and advance the consumer interests of vulnerable persons.249 Accredited consumer protection groups are also authorised to initiate actions in order to protect the interests of consumers, and to intervene in any matter before any forum contemplated in the Act, if the interests of the consumer are not adequately represented in that forum.250
Where it is necessary to further the purposes of the Act, it is within the discretion of the Commission to impose reasonable conditions on the accreditation of consumer protection groups.251 The CPA envisages consumer protection groups as fulfilling a very important function in civil society. This is emphasised by the provisions of section 77 which allow for the Commission’s support in respect of specified activities carried out by consumer protection groups.252 There is a further duty on the Commission to monitor the effectiveness of any accredited consumer protection group in light of the purposes and policies of the CPA.253
The Minister254 is authorised to prescribe standards, procedures and related matters for the Commission to follow when assessing whether an applicant for accreditation meets the requirements of section 78 of the CPA.255 In this regard, the Minister256 has prescribed certain standards and procedures regarding accredited consumer protection groups in the CPA Regulations.257 These Regulations provide that once a consumer protection group has been accredited, the Commission must, inter alia, add the name of the consumer protection group to its website in a list of all accredited consumer protection groups.258 At the time of submitting this thesis, no such list was available on the Commission’s website, and it thus appears as if no consumer protection groups have been accredited at this stage.

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION
1.1 Problem statement
1.2 Research aims
1.3 Motivation
1.4 Hypotheses / assumptions
1.5 Methodology / approach
1.6 Chapter overview
CHAPTER 2: A BRIEF BACKGROUND TO THE CONSUMER PROTECTION ACT
2.1 Introduction
2.2 Underlying principles and theories of enforcement
2.3 Consumer protection law mechanisms before the enactment of the CPA
2.4 The need for the CPA
2.5 Conclusion
CHAPTER 3: ENFORCEMENT MECHANISMS AFFORDED TO CONSUMERS IN TERMS OF THE CONSUMER PROTECTION ACT
3.1 Introduction
3.2 Scope of application: A brief overview
3.3 The realisation of consumer rights
3.4 Consumer advocacy
3.5 Enforcement procedure under the CPA
3.6 Enforcement bodies contemplated by the CPA to facilitate the realisation of consumer rights
3.7 Offences and penalties under the CPA: A general summary
3.8 Observations on the CPA’s enforcement regime
3.9 Conclusion
CHAPTER 4: ENFORCEMENT OF CONSUMER RIGHTS IN FOREIGN JURISDICTIONS: A COMPARATIVE ANALYSIS
4.1 Introduction
4.2 India
4.3 United Kingdom
4.4 Conclusion from comparative study
CHAPTER 5: CONSUMER PROTECTION ENFORCEMENT REGIME IN SOUTH AFRICA: SUCCESSES, SHORTCOMINGS, AND RECOMMENDATIONS
5.1 Introduction
5.2 The ombud system
5.3 The provincial system
5.4 The national system
5.5 Absence of a clear hierarchy and suggested solution
5.6 Consumer awareness
CHAPTER 6: CONCLUSION
6 Conclusion
CHAPTER 7: BIBLIOGRAPHY
7 Bibliography
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