Your Business October/November 2011
Know your customers' rights, and protect your business...
The new Consumer Protection Act aims to protect consumers and has implications for all players in the supply chain, from manufacturers to end users. For small business owners it is important to note that the Act impacts on both the direct and indirect marketing practices you use to "promote" your goods and services.
The general rule
The general rule is that your marketing may not be misleading, fraudulent and/or deceptive. This extends to the nature and price of the goods or services, how you supply your goods and the sponsoring of events. Among other things, the Act introduces very specific requirements relating to catalogue marketing, bait marketing, negative option marketing and discriminatory marketing. Promotional competitions, auctions and trade coupons are also all affected.
Specific marketing practices
Read on to find out how the Act will impact your various marketing activities:
- Direct marketing includes any approach to a customer in person, by mail or electronic communication that is unsolicited. It also covers all transactions concluded at a place other than your offices, showroom or place of business.
- Customers can now ask you to stop communicating with them directly.
- The Act creates a "cooling off" period during which your customers can cancel a transaction made via direct marketing without incurring any penalties. This must be done within five days of delivery of the goods or conclusion of the agreement.
The maximum charge for a promotional competition has been capped at R1.50. Prize winners also can't be expected to appear in future marketing related to the promotion. And, you must get their permission if you plan to use their personal information or pictures in future.
Negative option marketing
This approach - where a sale is considered made if a customer fails to perform a required action, for example when goods are sent via the post to consumers - is now prohibited. There is no longer room for agreements that come into existence purely on the basis of not being declined by the consumer.
You can't advertise and conclude deals if the goods or services or advertised prices are not available. Also, if you advertise goods or services at a specific price, and limit the number available, you must make sure that you have enough to cover your undertaking.
Customers who buy off catalogues can't inspect the goods before purchasing. But the Act does protect them in some way by setting out the information that must be disclosed to the purchaser.
You can't target a specific person or group of persons in a discriminatory manner.
The Act is very specific about the information that must be included on your packaging. For instance, information must be provided in language that the ordinary consumer with the average literacy skills and minimal experience of relevant goods or services can understand.
Product labelling and packing material must be in plain and understandable language, and must contain warnings and instructions detailing the risks associated with a particular good or service. The Act says that all suppliers in the supply chain will be held jointly and severally liable for any harm suffered if warnings or instructions are inadequate.
If you haven't already done an audit of your current marketing practices, it's time to do one to ensure that your advertising is not misleading and deceptive or even fraudulent. The Consumer Commission monitor and ensure compliance with this Act and non-compliance opens you up to fines or worse.
Finally, because of the wholesale changes introduced by the Act, expect to see its provisions tested against case law. So watch out for rulings or practice directives issued by the Consumer Commission and/or the Consumer Tribunal. In the meantime, work on your compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.