Marketing practices regulated by the CPA

“The Consumer Protection Act (‘CPA’) will have a significant impact on direct and indirect marketing practices used by businesses, affecting how they can promote the supply of goods and services to consumers” says Maadian Botha, PricewaterhouseCoopers Associate Director: Risk Advisory Services – Regulatory Compliance.

“The overarching general rule of the CPA with regards to marketing is that it may not be misleading, fraudulent or deceptive – and this includes the use of exaggeration, innuendo or ambiguity about a material fact or failure to disclose a material fact.”

Botha details how this general rule has practical application. “A business may not misrepresent the characteristics of its goods and services; it may not misrepresent their particular standard, quality, grade, style or model and whether they are new or used; and whether these goods and services are available or can be delivered or performed within a specified time. Furthermore, a business may not misrepresent that it acts on behalf of a supplier.”

The CPA is very specific on the direct marketing practices that businesses may engage in. “In protecting the right to privacy, the CPA gives the consumer the right to pre-emptively block any impersonal approach or communication from direct marketers, and authoritative registries will be established for such purposes,” says Botha. “A consumer may demand that a business stops initiating any further communication. Another protection is that by placing a ‘no junk mail’ or other sign on the consumer’s post box, no direct marketing materials may then be placed in or near the consumer’s post box or premises.”

Botha highlights the cooling off period/right that applies to transactions concluded as a result of direct marketing. “These transactions may be cancelled without reason or penalty within five days after delivery of goods or the conclusion of an agreement, whichever is the later date. If the consumer chooses to cancel, suppliers must return payments received from consumers within 15 business days of receiving the cancellation notice. However, these conditions do not apply to transactions arising from direct marketing if section 44 of the Electronic Communications and Transactions Act applies, which specifically deals with cooling off under that Act.”

The CPA also regulates several other forms of marketing practices, methods and channels. “Negative option marketing is prohibited” says Botha. “This is when an agreement or transaction is deemed to have been initiated if the consumer fails to do something, for example, return goods that were unilaterally sent by the supplier, or the consumer fails to decline an agreement or modification to an agreement initiated by the supplier.”

Bait marketing, which occurs in the form of misleading advertising, which entices a consumer to contact or visit a supplier, is also prohibited. “A supplier may not advertise goods or services at a specified price in a way that may mislead consumers as to the actual availability of those goods or services at that advertised price” says Botha.

“Also, businesses may not engage in unfair discriminatory marketing practices. These include excluding persons from access to goods and services, prioritising which groups of persons may access offerings, or supplying a different quality or charging a different price according to categories of persons. These principles are already entrenched in the Constitution and the Promotion of Equality and Prevention of Unfair Discrimination Act.”

The CPA regulates catalogue marketing, in which the consumer does not have the opportunity to inspect the goods before concluding the agreement. “Before concluding an agreement or transaction arising from catalogue marketing, a supplier must disclose the prescribed information to a consumer,” says Botha. “These details include the supplier’s name and licence or registration number; address of the supplier’s physical business premises and related contact details; sales record information; the currency in which amounts are payable; and delivery arrangements.”  However, these conditions do not apply to transactions arising from direct marketing if section 44 (cooling off) of the Electronic Communications and Transactions Act applies.

The regulation of promotional competitions will offer consumers some protection from nuisance and expensive practices. For example, a business may not inform a person that he or she has won a competition, if no competition has in fact been conducted or that person has not in fact won the competition. Also, the Regulations state that the cost of entering promotional competitions electronically must not exceed R1.50 (this would apply to competitions entered into via SMS, MMS, etc). The CPA also regulates the marketing practices of trade coupons and other promotional offers, as well as those relating to alternative work or ‘work-from-home’ schemes.

“The risk of non-compliance with the marketing provisions of the CPA can be costly” cautions Botha,  “not only with regards to financial penalties, but also in relation to the potential damage that non-compliance poses to a company’s brand and image in the market place.”