CONSUMER AFFAIRS COMMITTEE (CAFCOM)

1. CONSUMER AFFAIRS COMMITTEE (CAFCOM)

2. INTRODUCTION • The Consumer Affairs (Unfair Business Practices) Act, 71 of 1988 (the Act), is administered by the Consumer Affairs Committee, (Cafcom) a statutory body in the Department of Trade and Industry and resorts under the Directorate: Consumer and Corporate Regulatory Division, Consumer Investigations.

3. PURPOSE OF THE ACT • The purpose of the act is to provide for the prohibition or control of certain business practices.

4. FUNCTIONS OF THE COMMITTEE • shall make known information on current policy in relation to certain business practices in general and unfair business practices in particular, to serve as general guidelines for persons affected thereby.

5. shall receive and dispose of representations in relation to any matter with which it may deal in terms of the act.

6. may make such preliminary investigation as it may consider necessary into, or confer with any interested party in connection with any unfair business practice which allegedly exists or may come into existence.

7. shall on the directions of the Minister, or on its own initiative make such investigation as it may consider necessary into any unfair business practice which the Cafcom or the Minister has reason to believe exists or may come into existence.

8. Cafcom can recommend to the Minister to prescribe by notice in the gazette such action to stay or prevent any unfair business practice which the committee has reason to believe exists or may come into existence.

9. Cafcom shall report to the Minister on the result of any formal investigation made by them in terms of the act.

10. BUSINESS PRACTICE • any agreement, arrangement or understanding, whether legally enforceable or not, between two or more persons; • any scheme, practice or method of trading, including any method of marketing or distribution;

11. any advertising, type of advertising or any other manner of soliciting business; • any act or omission on the part of any person, whether acting independently or in concert with any other person;

12. any situation arising out of the activities of any person or class or group of persons excludes a practice regulated by competition law

13. UNFAIR BUSINESS PRACTICE The definition of an unfair business practice is extremely wide. It is any business practice which, directly or indirectly, has or is likely to have the effect of:

14. harming the relations between businesses and consumers, • unreasonably prejudicing any consumer, • deceiving any consumer or • unfairly affecting any consumer

15. Sporadic allegations were and are made that the definition of an unfair business practice, is “void for vagueness” and simply unconstitutional. His Honourable J van Dijkhorst found that the definition is not vague.

16. It is important to note that the legislator did not consider it important to distinguish between unfair business practices that come about by accident and those that come about by design.

17. CONSUMER • The definition of an unfair business practice contains four references to the word “consumer’. The raison d'être of the Committee, and the Act for that matter, is thus the interest of the consumer and specifically the consumer who is or is likely to be faced by an unfair business practice.

18. A consumer means any natural person to whom any commodity is offered, supplied or made available or from whom any investment is solicited or who supplies or makes available any investment, and any other person who the Minister, with the concurrence of theCommittee, declares to be a consumer

19. THE ENABLING NATURE OF THE ACT • The Act is an enabling act and not prescriptive. It prohibits nothing, although its message to businesses is clear - do not to get involved with unfair business practices.

20. The main body of the Act is devoted to various administrative procedures to be followed, the investigative powers of its investigating officers, the types of investigations the Committee could undertake and the powers of the Minister.

21. The order of the Minister is published in the Government Gazette. An infringement of an order by the Minister, published in the Government Gazette, is a criminal offence, punishable by a fine of R200 000 • or five years imprisonment or both the fine and the imprisonment.

22. It was said earlier that the legislator did not consider it important to distinguish between unfair business practices that come about by accident and those come about by design. • The Committee often finds that businesses are involved in unfair business practices that appear to come about by accident. • This applies particularly to the text in advertisements. In such cases it is usually relatively easy to convince the advertiser that the text of the advertisement must be amended.

23. THE POWERS OF THE MINISTER • If the Minister, after consideration of a report by the Committee in relation to an investigation in terms of section 8(1)(a), is of the opinion that an unfair business practice exists or may come into existence, the Minister has far-reaching powers to ensure the discontinuance of the unfair business practice.

24. The Minister may also, if money was accepted from consumers and he deems it necessary to limit or prevent financial losses by those consumers, appoint a curator, with the concurrence of a special court, in order to realize the assets of the person involved in an unfair business practice and to distribute them between the consumers concerned and to take control or and manage the whole or any part of the business of such a person.

25. CONSUMER CODES OF CONDUCT • In an effort to improve the relations between businesses and consumers, the Committee developed a policy of self regulation. This self regulation is manifested in consumer codes of conduct for various industries.

26. The former Committee known as the Business Practices Committee developed a number of consumer codes in co-operation with industry associations. Industries could approach the Cafcom to develop a code for a particular industry or the Cafcom could, on its own initiative, decide to develop a consumer code. The usual procedure is that an association would approach the Cafcom and request that the Cafcom recognise a code for the particular industry.

27. The reasoning behind the codes is that industry should be given the opportunity to regulate themselves. These codes are intended to govern the conduct of all firms involved in the particular industry. The codes normally embody principles which have or should have been observed by the majority of members of the industry for many years. The codes have no legal status whatsoever.

28. Should the Cafcom receive a complaint concerning a business in an industry for which it had developed a code, the Cafcom would, if the business is a member of the association, refer the complaint to the association. It is then expected of the association to keep that member in line with the provisions of the code. Should the association be unable to solve the complaint, it is referred back to the Cafcom.

29. The complaint is then handled by the Cafcom applying the same investigative procedures as set out under Cafcom.

30. When considering complaints where a code is in place the Cafcom will take the provisions of the code into account in determining whether the conduct complained about constitutes an unfair business practice, as defined in the Act.

31. This applies irrespectively of whether the business complained about is a member of the particular association. In this respect the codes are therefore more than a voluntary code of conduct

32. The terms of these codes are not enforceable as such. They could, however, become enforceable should the Minister, after recommendation from the Cafcom, declare any particular infringement thereof as an unfair business practice, whether in a specific case [section 8(1)(a) investigation in terms of the Act or in general [section 8(1)(b) investigation].

33. The Cafcom is currently busy with two investigations with regard to advertising practices in terms of section 8(1)(b) of the Act. These general investigations focus on the advertising practices of “inertia selling “ and the practice of using the word “free” and “prize” to mislead consumers when advertising.

34. The Consumer Code for Advertising was one of the first Codes of conduct and Report No 15 published on 12 May 1995 outlines the background to codes in general and to the Advertising Code in particular. The report also sets out the reasons for the codes and the policy guidelines for codes. A copy of Report 15 and a copy of the Consumer Code for Advertising is available on request

35. REPORT NO 15 • In 1990 then Committee, on the instruction of the Minister of Trade and Industry, undertook a general investigation which resulted in the publication of Report No 15 on Consumer codes / self regulation

36. The committee consulted very widely, also internationally, before submitting its report to the minister • There are limits to the role self-regulation can play, just as there are limits to the roles of the press, government, legislation, the courts, the market and competition and administrative bodies like the Cafcom

37. The various means of consumer protection should, however, be regarded as supplementary to one another and not as mutually exclusive alternatives • In its report, the committee outlined the guidelines on consumer codes

38. Organisational • The Trade Association should have a significant influence on the sector • Compliance with the code must be mandatory on members of the associations • The Trade Associations must have the resources and disciplinary sanctions available to deal effectively with the cases of non-compliance

39. Preparation of the code • trade association must demonstrate that its members are prepared to observe its provisions • organisations representing consumer, enforcement bodies and advisory services must have been adequately consulted throughout the preparation of the code • the competition commission must be consulted when application for support is made

40. Cafcom is likely to satisfy itself that the terms and conditions to be adhered to by members of trade association - • are reasonably fair between parties • are not likely to mislead those who use them • do not exclude variations to meet special circumstances

41. Content of the code • code must offer specific and worthwhile benefits beyond those which might be expected as a result of legal requirements and normal practice in the industry • code should require high standards reflecting the legitimate expectations of reasonable consumers • code should normally include measures directed at the elimination or alleviation of consumer concerns and undesirable practices

42. specific measures should be aimed at ensuring that consumers are supplied with adequate information • standards or requirements laid down by the code should be clear, precise and unambiguous and should be measurable • code should include requirement that members indicate compliance with the code • code should include a requirement that staff or complying organisations have access to a copy of the code and be aware of the code's requirements

43. Complaints • Adequate machinery should be available for dealing with complaints from the consumers, to include: • procedures for dealing with complaints • members should offer maximum co-operation to other bodies consulted by the consumer • availability of effective conciliation services • availability of a low-cost, independent scheme of redress as an alternative to action in the courts

44. Monitoring and publicity • the operation of the code must be regularly monitored as follows: • trade association must publish an annual report on the operation of the code including the number and type of complaints referred for conciliation and to independent redress system • copies of reports must be submitted to the committee

45. Association will recommend and require its members to take action based on the information in the reports to improve their service to customers • Copies of the code should be available without charge to customers, consumer advisers and to others with legitimate interest • Trade associations should publicise the code so that relevant members of the public are adequately aware of it

46. Enforcement • Compliance with the code and procedures for handling of complaints should be mandatory on members • The code of articles or constitution of the trade association should establish a procedure for handling of complaints of non-compliance with the code. The procedure should include time limits for dealing with these complaints

47. The code or constitution of the trade association should also set out the penalties for non-compliance up to an including dismissal from the association • Where appropriate the trade association should ensure that mechanisms are in place to ensure the trade association meets judgements made by courts against that member.

48. OTHER CODES ENDORCED BY THE COMMITTEE ARE THE FOLLOWING:

49. Motor Vehicles • Advertising • Vehicle Recovery Services • Furniture • Portland Cements • Time-Sharing Industry • Debt Recovery Agents

50. Home Construction • Mail-order Marketing • Credit Bureaus • Travel Agents • Electronics Equipment • Public Property Syndication • Direct Selling